ArcBest Corp (ARCB) 2009 Q4 法說會逐字稿

Good morning. I'll be your conference operator. At this time, I would like to welcome everyone to the fourth quarter 2009 earnings conference call. All lines have been placed on mute to present any background noise. After the speakers' remarks, there will be a question-and-answer suggestion. (Operator Instructions) Thank you. I will now turn the call over to David Humphrey, Vice President of Investor Relations and Corporate Communications.

Welcome to the Arkansas Best Corp. fourth quarter 2009 earnings conference call. We'll have a short discussion of fourth quarter results, and then we will open up for a question-and-answer period.

Our presentation is this morning will be done by Ms. Judy R. McReynolds, President and Chief Executive Officer of Arkansas Best Corp. As Ang Lee said, I am David Humphrey, Vice President of Investor Relations and Corporate Communications of Arkansas Best Corp. We thank you for joining us today.

In order to help you better understand Arkansas Best Corp. 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 on the Company's earnings press release in the Company's most recent SEC public filing.

We want to thank you for joining us this morning. Because of the continuation of a very challenging freight environment, and the adverse effects of accelerate price competition in our industry, we're reporting disappointing fourth quarter and full-year results. The current operating environment is extraordinary in its duration and magnitude. Our emphasis remains on cost control and disciplined pricing, but our traditional standards are more difficult to achieve in this economy. Nonetheless, we will remain focused on the anticipation of an improved environment. Later, Judy will give her thoughts and perspective on our recent performance and the factors that are affecting it. But now, I would like to cover the details of our results for the fourth quarter and full-year 2009.

Our fourth quarter 2009 revenue was $372 million, representing a decrease of about 6% per day compared to last year. As previously disclosed, in the fourth quarter we took a non-cash goodwill impairment charge of $64 million or $2.55 per share, thus this eliminating all of ABS goodwill. This impairment results from the unprecedented economic recession and the sustained impact on the LTL industry and on ABS.

Also in the fourth quarter, we had supplemental pension settlement accounting charges related to recent officer retirements. These amounted to $4.4 million or $0.11 per share. This plan was previously closed to new participants at the end of 2005. At the end of 2009, the benefits of the plan were frozen for all remaining participants. With this action, a significant additional portion of our executive officer compensation will now be performance-based.

Our net loss for the fourth quarter was $0.88 per share, excluding the goodwill impairment and the pension settlement charges, compared to a net loss of $0.44 per share last year. Including those charges, our fourth quarter 2009 net loss was $3.54 per share. For the full year of 2009, Arkansas Best had revenues of $1.47 billion, a decrease of about 19% per day compared to 2008 revenues. Our net loss for 2009 was $2.46 per share, excluding goodwill impairment and pension settlement charges, compared to net income of $1.18 per share last year. Due to the goodwill write off, which carries no tax benefit, our effective tax rate for 2009 will be a benefit of approximately 23% compared to an expense rate of 41.6% in 2008.

Without the goodwill write-off, our 2009 tax rate would have been about 37.5%. Our tax year ends in February, so based on the filing of the 2009 return, we expect to receive tax refunds of approximately $30 million in mid-2010. Beginning in March, the refund benefits of carrying back any losses we incur will be limited. As a result, if losses continue in 2010, tax benefits might be less than the full carry back benefit. Excluding the effects of potential tax valuation alliances, we would expect our 2010 effective tax rate to be at normal historical levels, in the high 30% range.

Arkansas Best operating cash flows for 2009 were $12 million, including depreciation and amortization of $75 million. Our net purchase of property and equipment totaled $43 million for the year. We did not purchase and Treasury stock in 2009. We continued paying our dividends of common stock of 416 million. Full details of our GAAP cash flow are included in our earnings press release.

In the last month, we have taken several actions to improve our financial flexibility and help preserve capital. We have previously announced many of these, but they're worth noting again. December 2009, we secured commitments for the issuance of letters of credit related to our workers' comp self-insurance program. These $51 million of LCs are secured by our cash. As a result, our balance sheet shows this as restrictive cash. At the end of 2009, we established a two-year, $75 million accounts receivable securitization program. We don't currently have any borrowings against that facility.

Also the end of 2009, ABS entered to into a three-year, capital lease to finance $15 million of our road tractors. In addition, in late January we finalized similar capital leases on another group of our road tractors. It brings the total capital lease amount to $26 million. These tractors will remain as assets on the books. The interest we pay on these leases will appear below the operating line. As a result of being able to make these various financial arrangements, we cancelled our $325 million credit agreement that was to be in place through May of 2012. Though we had no current borrowings under that agreement, at the end of the third quarter, our borrowing availability was only $23 million. Today, we also announced that our quarterly dividend has been reduced to $0.03 per share from $0.15 per share. This amounts to a reduction of about $12.4 million per year.

The culmination of our new financing arrangements gives you the availability and terms we need going forward. We were able to negotiate the arrangements because of our balance sheet and our favorable cash position. At year end, our unrestricted cash and short-term investments will total -- or did total $133 million. Our restricted cash totaled $51 million. We had debt of $17 million, primarily due to the $15 million capital lease I mentioned earlier. Our availability under our asset securitization was $75 million. At the end of the year, the stockholder's equity was $501 million.

In our third quarter 2009 disclosures and on our last call, we discussed the possibility of having to recognize the pension settlement charge related to recent distributions in our non-union pension plan. This expected event was tied to the level of lump sum distributions from the plan during 2009. We did have an increased amount of distributions from the plan, due to a higher number of employee terminations and retirements in 2009, but not to the level requiring settlement accounting. It is important to remember that this plan was closed to new participants at the end of 2005, and in 2006 we began providing benefits to new participants under a defined contribution plan.

Moving on to ABF's results for the quarter, ABF reported fourth quarter revenues of $348 million, which is a decrease of 8% per day compared to last year. ABF's tonnage declined 1.6% per day during the quarter, due to much easier comps from last year's fourth quarter. Excluding goodwill impairment and pension settlement charges, ABF's fourth quarter operating ratio was a 109.3 compared to a 104.0 in the fourth quarter of 2008. For the full year 2009, ABF reported revenues of $1.38 billion compared to $1.76 billion in 2008. In 2009, ABF's total tonnage per day decreased 11.4% versus last year. Excluding goodwill impairment and pension settlement charges, ABF's full-year operating ratio was a 107.2, compared to a 97.2 in 2008.

Now, I'll turn it over to Judy for her thoughts about our quarter.

Thank you, David, and good morning, everyone.

Our company's fourth quarter and full-year results reflect the ongoing impact of a freight recession that is one of the longest and deepest our industry's history. Though there are occasional positive signs that give us hope for future recovery, there is still significant economic and industry uncertainty. Our primary objectives are to stay focused on our customers' needs, to grow our business profitably, to maintain our flexibility, and to control our costs.

Despite the environment, we have initiated new service offerings and improved on existing services to customers. During 2009, we made further investments in ABF's sales team. We have hired numerous highly-talented sales professionals with industry experience. We took advantage of a unique opportunity to add to our existing talent pool, and strengthen our strategic solutions group. Going forward, we believe the strength of our sales force, the superior execution of our operations team, and our customer offerings position us well for 2010.

This type of investment in our customer relationships illustrates one of the traits that makes ABF successful. Throughout this freight recession, we have responded by reducing our employee count, our equipment, and a variety of corporate-wide costs. Employee reductions are never easy, but the alignments are necessary. Flexibility is paramount in this economy, so we continue to manage our resources daily and to look for ways to do things better. I'm proud to say that even in a difficult fourth quarter, the ABF team improved total dock, street and yard productivity, and increased linehaul efficiency and utilization, all while significantly improving on-time performance.

Because of some additional steps we have taken, as well as the positive effects from the financial market, we anticipate that our non-union fringe benefit costs will be lower in 2010. The expected annual savings associated with these modifications will be in a range of $15 million to $18 million on a pretax basis. The sacrifices made by our employees and officers in these benefit areas are noteworthy. We have anticipated the quarter when we could report our year-over-year tonnage was growing. As I mentioned before, ABF is offering customers the best LTL serves in our Company's history, and we're doing it with the sales team in the industry.

We did not see growth for the full quarter, we did see growth by the end of the quarter. ABF's fourth quarter tonnage declined 1.6% versus last year. In each month of the quarter, the year-over-year percentage change in our business levels improved, and December tonnage reflected a year-over-year increase of 2.6%. The main reason for this positive trend has to do with the weak tonnage comparisons, but our market share gains have continued as well. For our industry, 2009 was a year with historically weak tonnage levels. These lower freight levels have driven an aggressive price competition. Price competition at this level results in revenues that don't adequately covering our labor and other cost increases. This differential is a significant contributor to the increase in ABF's operating ratio for both the fourth quarter and the full year of 2009.

During the fourth quarter, ABF's total build revenue per hundred weight decreased by 6%, in part due to the year-over-year reduction of fuel surcharges. Without the effects of fuel surcharge and changes associated with shipment profile and freight mix, base pricing declined a few percentage points. ABF continues to adhere to its traditional discipline pricing approach; however, in order for margins to improve, the availability of freight must increase and our LTL competitors must resume a longer-term focus on pricing decisions.

Through Tuesday of this week, ABF's January total tonnage per day was above the same period of last year by about 2% to 2.5%. There are a few slightly positive signs in the tonnage trends we're currently seeing. We're hopeful about what this -- they might mean the rest of the year; however, it's important to remember that our tonnage is at a low level, the pricing environment remains challenging and, although we have the best employees in the industry, our contractual labor costs are high relative to our competition.

Before I close my comments, I want to identify some of the highlights ABF has achieved in the last year. For the second year in a row, ABF experienced historical improvement in its superior cargo claim ratio. ABF's yearly DOT accidents per mile statistics improved from last year, and they're the best in 17 years. For the eighth year in a row, ABF was named as one of the top U.S. companies to sell for by Selling Power magazine. ABS's information technology excellence was recognized by Information Week magazine for the fourth consecutive year, and ABF received the trucking industry's highest recognition for outstanding security for an unprecedented fifth time.

In this, one of the most difficult periods in our Company's history, our people find a way to make a positive difference for our customers and our shareholders. It's comforting to know that ABF's core values and work ethic remain intact, and that our people continue to form a strong foundation for the potential success in the future. Our financial strength and stability have been a valuable asset that have allowed us to endure the extended freight recession. We continue to carefully manage our balance sheet and to implement changes necessary to respond to the current environment. We feel the reduction of our dividend to a lower level is prudent and appropriate, given the uncertainties in the economic environment and in our industry. We look forward to an improving and more stable economy. Until then, we will remain flexible and well-positioned to address our opportunities, and the industry's uncertainties. At Arkansas Best Corp. we're focused on the long-term benefit of our shareholders.

I will let David finish up with some additional financial information.

I'll wrap things up with a few areas that will have an impact on our 2010 results -- cash flows. We anticipate our 2010 net capital expenditures to be within a range of approximately $45 million to $50 million, including road and city equipment replacements of about $35 million. This is about the same as our 2009 net CapEx, which was $43 million. We expect our 2010 depreciation and amortization to be in the $70 million to $75 million range. I think we're now ready for some questions, Ang Lee.

(Operator Instructions) Your first question comes from the line of Edward Wolfe of Wolfe Research.

Good morning, Ed.

Morning, Judy, hey, David.

Hey, Ed.

Can you take us through the tonnage trends in the quarter? Judy, you mentioned that January was up 2.5%. How did September through December look?

It -- October, if we're moving through fourth quarter, October was down about 5.3%, November was down 1.3% and December was up 2.6%. So the December is consistent with what Judy said about January. She said 2% to 2.5% for January through -- look we had -- I do not have September in front of me here.

That is okay. We have that. But can you get any sense from that tonnage how much of that is related to the economy? How much to easier comps and how much maybe to CW's struggles recently?

I think we have certainly contributors from the economy and from some market share gains. We have the information we gather on market share through December, and we definitely show signs of gaining share. The economy, you know, we look at all the indicators there, and I guess the ISM index has been above 50 for about five months in a row now, and typically, you know, there would be a correlation of that index through our business, and so we could be seeing something along those lines as well. But still, there is a great level of uncertainty about this stability of what we're seeing, and so we're remaining conservative on all fronts until we see more.

Ed, I see that I do have September, and it was down 6.8%, and as I look -- really beginning in June of last year, our tonnage has improved every month -- the change in tonnage has improved every month through December and now into January.

Thank you, David. If you think about the operating ratio of 109 on an ongoing basis, typically fourth quarter is the weak or seasonal year. But you're not going to get a wage increase again until April, and you're taking some of the non-union wages down a little bit and tonnage is getting a little bit better. Is it possible that the OR could be improved in the first quarter, or is that just too much to ask?

Certainly that is what what we're trying to accomplish but, you know, it's hard to say at this point. We just don't have a very long look at what the pricing environment will be for the quarter. We did put a GRI in, as the others in the industry did and so, you know, that should be something that helps us if we're able to hold it. We are seeing some stabilization, I think, in both the tonnage trends, and so far some slightly positive signs on the pricing side. So we have all of the opportunity there, but we certainly can't predict what the rest of the quarter is going to look like at this point.

What was your GRI, and when did you implement it?

It was 5.7%, implemented on the 11th of January.

That is a week later than what we did last year, Ed.

Sure and, obviously, you didn't get it last year, but -- it's early, but do you get a sense that you're getting it, and what percentage of your tonnage does it apply to roughly?

It's going to apply to less than half of our tonnage, and I think at this point it's really too early to tell how it's going to hold. We're not seeing any signs of any problems with it or anything like that, and it's very early -- really too early to comment on that. That.

Okay, thanks. I'll let someone else have it. I appreciate it.

Thanks, Ed.

Thanks, Ed.

Your next question comes from the line of Jon Langenfeld of Robert W. Baird.

Good morning.

Good morning, Jon.

How are you doing?

I'm doing well, thank you. On the cost take outside, does all of that pretty much hit the ground on January 1?

Yes, it does. There is one part of it that relates to the supplemental pension settlement charges which, you know, that is -- of the $15 million to $18 million, you know, that is going to be about $4.5 million of it or so, but the remainder that is there really should be as you move through the year.

I'm sorry, maybe if you can explain that $4.5 million.

Uh-huh.

Is that related to the fourth quarter here?

Yes. It's the charges we took in the fourth quarter.

Okay, so part of the $15 million to $18 million is not having that charge?

Right. That is exactly right.

Okay.

And the remainder is, as we listed in the release, related to costs that typically occur as you move through the year pretty evenly.

Right. Right, okay good. And on the Cap Ex side, so there is an additional roughly $10 million of capital leases that will come on the books here in the first quarter?.

Yes, it's about $12 million.

$12 million. And that is not included in the $45 million to $50 million you talked about?

No, it's not. Because that -- what that's doing is actually financing 2009 tractors.

Okay. Got it. Got it. And then, any updates on two things, I guess one, the pension, any news there from Congress in terms of how they're looking at that? And then secondly, any news in terms of the teamsters and your negotiations to maybe level the playing field on your expenses?

With respect to the pension issue and its movement through Congress, I think you probably aware of the Pomeroy/[T. Barry] bill that has been worked on on the House side. We know that that is still working its way, you know, through the process. The bill hasn't been introduced, but we see some paths to that happening, and I think we could say on a preliminary basis that that whole discussion is going to occur on the Senate side as well at some point. So that is still moving forward. I think, you know, as you know, whenever you get in this mode, things typically move slower rather than faster, and so we don't anticipate anything to happen in too big of a hurry there. But we are encouraged by the fact that the discussions are still ongoing.

With the respect to IBT, we have had continuing dialogue there. We do we have a meeting set with them to discuss our issues, and we really can't comment on the rest of the details there. But we share with them an interest in growing jobs, and for us that means growing revenue. They're aware of our issues, I think they aware that our cost structure is higher than both the non-union and the union competitors that we have out there, and this needs to be addressed. So we're looking forward to that meeting.

Great, thanks for the color, Judy.

Thanks, Jon.

Thanks, Jon.

Your next question comes from the line of Jason Seidl of Dahlman Rose.

Hi, everyone. How are you?

Good morning, Jason.

How are you doing?

Hanging in there. Hanging in there. A couple of quick questions, I will start with something the last caller talked about. You know, the pension bill, it it does pass, could you guys quantify the dollar impact that it would have on you?

Well, really, let me say this. I think the details of the bill are not finally determined, so we're not going to have a specific answer. But what we're trying to address is our portion of our pension costs that we pay into the multi-employer funds that represent orphans of companies have gone out of business. And what we're wanting to accomplish is to change the course of things so that we no longer have to pay for these benefits of retirees of companies that are no longer there, people who perhaps never worked for ABF. So we're encouraged by the fact that there is a focus on the unfairness of that.

I won't give you a history lesson on why that is the way that it is, but we know that it needs to change. Typically, when we look at the contributions we make to the pension fund, about half of those relate to these orphan retirees, and so it's a significant change. There is an additional step that has to occur in addition to the legislative solution. We would have to negotiate that change also with IBT. And so we have really some steps to take to get there, but it's significant and it's certainly worth spending time on.

How much right now in terms of dollar amount is paid for the orphans by you?

Well, if you looked at our whole pension contributions, it's somewhere in the neighborhood of $110 million to $120 million.

Oh.

And so it's going to be about half of that. That's again a rough estimate, and also we don't know what the bill is going to say. But that is the way we think about the costs that we're trying to address there.

Okay, fantastic. Next, Judy, I am going -- more of a conceptual thing. When I look at your balance sheet, I see about -- call it a little bit over $130 million of accessible cash and another $51 million in restricted. You guys really have no material debt to speak of. You've just implemented some cost controls that will save you, call it, you know, $14 million on the fringe side, I think is what you said. But -- and you cut your dividend, that said -- will save you $12 million year. I'm not sure I am following that. Are you guys just being conservative that you don't know what 2010 is going to bring you? Could you walk me through the process of the decision to cut dividend?

I think the dividend is something we have had in place for some time, and when we talk about the levels there, those conversations are ones that are very serious discussions by our management and the Board. But we felt like, you know, with the uncertainties in the industry and the economy, it was a prudent step at this point. We feel like that, you know, we need to ensure that we have the options and the flexibility to address the businesses that we have.

If you look at what we tried to do throughout this recession, it's to not back off on service, to not back off on sales people, and to make sure that we're doing things that provide a path to our Company's long-term future, and I think that is just a step in that same direction. And we feel like at this time, it's the prudent thing to do. Obviously, we're a company that we have paid a dividend since back to 2003, and we were serious about that. And, you know, whenever the time comes, when things are clearer and they're more stable, and we know more specifically the opportunities on the horizon, we will certainly be revisiting that decision. But at this point, we think it's the appropriate thing to do.

Okay, fair enough. One more question and I will let someone else have at it. You know, it's hard to predict, obviously, what is going to happen with the pricing and the GRI. But I asked this question on the Old Dominion call. When you look at a lot of carriers that have been significantly under-investing in their fleets for, call it almost the last two years, there is going to come a time in 2011 when they have to put money back into their networks, you know, and you're going to have to justify that by getting a compensatory rate. Now don't you think that, you know, all thinks being equal, should bode well for the industry pricing in 2011, the need to put back money into the networks?

I think, you know, there is a constant investment that has been occurring with new equipment. If you think about the cost -- the average cost of a tractor, you know, we have had more than the typical inflation increases on that for some time, you know, and we have also been dealing with the same thing in other cost categories as well. So when you focus on that that has been a constant throughout this period, there really hasn't been any deflation of equipment costs, I think that is right. I think the industry is going to need to recover that from customers, and when the opportunity is there to do that, I think you're right, that will occur. But I don't think it's because of really a need to put back on a bunch of equipment that is not there, because I think the industry has been pretty good about scaling the equipment to the levels needed. We have been able to do that as well, and I think when the time comes that we need to put that back on, the good thing about our business is the cash flows will typically be there when that happens, so it's a self-funding business.

Jason, we're going to move on, okay?

Fair enough, guys. Thanks a lot.

Thank you.

Your next question comes from the line of Jeff Kauffman of Sterne Agee.

Hi, Jeff.

What is going on?

Apparently quite a bit today.

(Laughter)

Let's talk about your contribution to my workflow. No, you know, all things considered, you had true-ups on goodwill and whatever, but a lot of things that were scary this quarter I think are more backward-looking than forward-looking, based on what you're saying about pricing, optimistically solidifying the GRI, optimistically going through what you're seeing in terms of your tonnage gains.

Let me ask the first question. As you look forward, you know, no one's asking you for commitment one way or another, but how do you feel about prices as we get into the busier season, when you typically see more of the rate discussions in the Spring, you know, heading toward Fall, heading toward peak, heading toward where you are? Are you optimistically cautious here that we should be able to recapture some of the effect of this price war?

We should -- I think we should know that fairly soon. I think if we can make it through the first quarter here with a hold on the GRI and a continuation of some ever so slight sequential improvements in pricing, I think that could bode well for the busier periods. But we're very cautious about the little slice that we have seen here, and don't really know, you know, what the future holds on that front.

We have been through a rough year. 2009 has been a rough year from a business volume standpoint, and that has created, as I mentioned, an aggressive price competition, and when you have been through that, I think you just tread cautiously on your future outlook and your commentary. We're going to continue to address our cost structure, and we're focused on doing that, and really the rest of it will be what the market holds for us, and we're going to be continuing to do the right thing for our Company on a, account-by-account basis.

Okay, looking at some of the other metrics, your weight per shipment was up almost 5%.

Yes.

And your tonnage is up as well. Now we know some is diversion, but it seems like you're getting better quality freight. It seems like capacity is coming out of the industry. I mean, can you talk a little bit about the dynamics of what is coming over in terms of the new business? Is it better or worse that what you have on the books, is it coming over at better or worse prices than what is on the books?

I think when we look at the business that we're bringing on the books, we're encouraged by what we see from the standpoint of the profile of the freight. We have seen some sort of erratic behavior there. You know, we used to think years ago that if you had to wait for shipment improvement for maybe two or three months in a row, and maybe you put a quarter or two together, that that meant something for the economy, and it would be nice if that was something that we knew to be true in this case, but we have seen ups and downs there so we're not certain.

One thing we have seen is an increase in the length of haul for the Company, and I think you -- when we sort through what market share we have gained, I think we're gaining share in the longer-haul markets, perhaps a little bit quicker than we are in the regional markets, even though we have greatly improved our service in the regional markets, as you know. So that is something that we're going continue to watch. It's not anything that we're doing that is, you know, targeting a certain kind of business. It's just I think the opportunities that are out there from a share gain standpoint perhaps are more in the long haul area than in other areas right now.

Okay.

You know, we have an award-winning sales group, and we have added some good folks, and so we're continuing to try to identify ways to meet needs of specific customers, and trying to deal with those kinds of things. So I think that also speaks to building to bring on some additional freight. Because it all comes down to what is important to a particular customer, and how to meet that need, and we think we have the tools to do that, and we think we have the folks to go through there and figure out what needs to be done there. So I think that is a part of it as well.

Okay, most of the trucking companies I have seen, when weight per shipment is up two straight quarters and length of haul is rising, that is a good thing, not a bad thing.

One final question, this has to do more with the dividend. I want to come back to in -- the signaling. I mean, you know, this isn't a knee-jerk solution to anything. It's -- obviously, you take a dividend away from people that owned your stock expecting yield. But I'm glad you signalled an intention to bring it back when you feel better, but I guess here's my question. If you're not putting $50 million of restricted cash on the books, and asking management to take the reductions in 401k and what have you, are you reducing the dividend?

Well, I think you do have to address the internal cost structure items, and the things you can address first. You have seen us go through a period since 2006 that has been very difficult for the industry and very difficult for us. And you can see that the steps that we have taken along the way were, you know, first to address the head count and equipment count and, honestly, we have further addressed our head count here in January by another 250 people. You know, those are things we know need to be done.

And the other things that you mentioned on the non-union fringe side, same thing there as well. A focus I have is on a flexible cost structure. I think when you face some uncertainty in the environment, that is what you have to have. I think what we're trying to is address those issues first, and I think what the dividend reduction does for us is allows us to continue to serve the market and to make decisions that we think are best for the long-term of the Company. Again, I think that when we get to the point where things are a little more certain or a little bit more clear, we'll revisit that decision.

We're going to move along.

Okay, that's fine. Thank you.

Thanks, Jeff.

Appreciate you.

The next question comes from the line of Todd Fowler of Keybanc National Markets.

Hi, Todd.

Hi, Judy, hi, David. I'm sure we could all probably use a drink at this point.

(Laughter)

A couple of questions here focusing on the balance sheet, maybe the cash flow. Judy at this point, so what is the total availability that you have? Is it just the $75 million on the AR facility or is there something else that you have as well you can tap into?

It is the $75 million on the AR facility. I think the way we think about it, if you look at the cash we had at the end of the year plus that, that we end up with $200 million, you know, that is available to us, a little bit more than $200 million

Okay, sure. And the cash refund that, David, you talked about in your prepared remarks. Is that pretty much a done deal, just a matter of the timing of the signing of the paperwork and getting that in the mail that you get that?

It is. We have to end -- our tax year is actually a February year-end rather than December year-end; that goes back years and years ago. So obviously, we have to wait for that tax year to close and then go through the process of getting that refund. I think, David, isn't it right that is going to be maybe some time in the summer that we would receive it?

Yes, probably mid-2010.

Okay.

Some time this summer.

Pension contributions for the Company's sponsor plan; do you think that you will have any required contributions, or are you planning on any contributions here this year?

We believe that we won't. We believe that we will be able to take advantage of the fact that our plan is so well funded. I guess on an cumulative benefit obligation basis, which kind of like a termination basis, we have about 90% funding there. So we are going to be able to take advantage of the fact that we've gotten to that point, and I think that is where we need to be with that plan, and we're glad we have the flexibility on that front.

Okay. Last one here, and this is on the cost reductions that you talked about. I guess first just to be clear, the $15 million to $18 million that you talked about on a year-over-year basis, that includes the $4.5 million or $5 million or so of pension settlement here in the fourth quarter?

Yes.

So if we excluded that from an earnings standpoint, kind of the adjusted savings would be $10 million to $13 million?

That is exactly right.

Okay, great. And Judy, if you could, can you walk through -- you called a couple of things in the press release. Can you put the 10 to 15 -- 10 to 13 or so into the buckets that that would -- you know, what makes up those savings?

On the 401k match, it's about $3.7 million on that, and we mentioned -- okay, you're excluding the 4.6 on the settlement charges, and then some of the other -- well, the non-union pension expense is about $3.5 million, and then there are savings to just the structure. We mentioned the structure of our healthcare -- some of our healthcare benefits that we changed. That was a $1 million, too. And the rest is some retirement, post-retirement executive things we talked about.

So the difference is the rest of that -- I guess what I'm trying to get at partially is the change on what your pension expense is going to be on your Company sponsored plan because of how the funding should have changed this year. I'm assuming that that is in there as well?

Yes. I think what David mentioned was, obviously, an estimate, but we do expect that with the market gains that we had in that plan for 2009, to have some relief there. It's not huge in and of itself, but it is a little bit of relief. We had a good increase, I think a double increase.

Double, yes.

In 2009, and so we really are happy to see that that is going to come back the other way.

Okay, sure. I will turn it over. Thanks for the time, guys.

Thanks, Todd. Appreciate it.

Thank you.

Your next question comes from the line of Tom Wadewitz of JPMorgan.

Hi, Tom. Good morning.

Good morning, it's actually Alex Johnson.

Hi, Alex.

So, Judy, in your prepared comments you talked about some sales people that you'd hired, and then David during the Q&A you circled back and commented on it a little bit further, but I wanted to give you an opportunity. Since you've mentioned it twice it seems pretty important; can give us some more detail about who you've hired, where you're hired them from, what specific customers they'll serve, et cetera?

Well, certainly, you know, we have had a focus on trying to continue and improve a really good sales group, and we continue to do that. Obviously, there are some folks that are available right now that we have had an opportunity to get, and we have added quite a few. It's been about 75 is what we've added, and many of those, most of those have experience in the industry and, you know, once again, it's just a focus. We're going through and doing all of these things to conserve cash and get some flexibility on the financial side, but we're also really trying to focus on the level of service that we're giving our customers, and our sales force is a big part of that, and so those are kind of things that we're doing. We had some strategic initiatives going on as far as within the sales groups and some just unique things that we do as far as providing additional services to our customers, there are many specific needs. So some of these folks are focused on that, and it's just all about trying to really beef up the things that are important to our customers, and on the other side trying to give ourselves some financial flexibility to get through an uncertain time.

I think when you look at our focus that has been in place throughout the last several years, it's one of growing the company profitably, and I think when you get the opportunity to add very experienced sales people, of which there have been some industry experts in some areas that are available to us, you know, we have really taken advantage of that, and I think it's going to be, you know, very beneficial to us in terms of an approach to the market, and in terms of, you know, opening doors to some additional opportunities, and we're very excited what we have in place there and we're very encouraged about what that group will do. Many of the additions that we've made were really in the later part of 2009, and haven't been in place -- you know, some of them haven't been in place for very many months, and I think when you step back and look at that and look at what ABF is all about, they're great additions, and very encouraged by the addition of them to our Company.

Okay. Thanks for that. I'll move on to another question. You talked about scaling equipment to the levels needed. Where would you peg the, you know, utilization rate for equipment and terminals and so forth at this point?

I think we have our road tractors reduced by about 17% or 18% over the period of time since the end of 2006, and that is at a level that is fairly well-scaled with our business volume declines. We did see this quarter an improvement in the utilization of our equipment. I mentioned also that we saw some improvement in our dock, street and yard productivity, and that is very difficult to do in this environment, and I'm excited about those kinds of improvements. And that is absolutely what we have to do, and I mentioned before that we have to continue to find ways to do things better, and I'm encouraged by the fact our group has continued to do that.

Alex, our trailers are down about 11% during the same time period, going back to the 2006 period.

So if there was a rapid consolidation in the industry, the dynamics changed a bit since December 31st, but if there was a rapid consolidation, would you be able to take on a lot of extra tonnage?

One of the things that's great about our industry and the business that we're in is you can actually wait and see the business come on before you have to add the permanent cost to your structure. I think we have about 300 tractors parked now that available for sale. Obviously, we don't have to sell those in any kind of fire sale mode, and so they going to be available to us if we need them. We also have the ability to upsize any orders that we have with our manufacturers, and as we bring new equipment on, you know, if we see that things are improving, we can just not trade in, you know, the equipment that we were intending to trade.

But we have the ability to use more rail. We have the ability to use rented equipment, and other third-party services such as [cartage] agents in the short time frame to be able to address the needs that we have, and we had that happen before. We look forward to it happening again, but we really feel like we're well-positioned for an improvement. And we also have about 3,200 people on layoff and we would be very pleased to be able to bring those people back.

Alex, I think we're going to move on.

Okay.

Give everyone a chance to get on.

Thank, Alex.

Thanks, Alex, appreciate you.

The next question comes from the line of Justin Yagerman from Deutsche Bank.

Good morning, Justin.

What is happening.

Nothing much, except for lots of earnings. I wanted to get a sense, you talked about the GRI and you have some color on pricing, but I was curious what this bid season is feeling like, and maybe if you could contrast it to the last couple of years, what shippers are talking to you guys about as you're going through? Are they trying to get their last licks in, or are they kind of starting to come around to the idea that pricing may be moving the other way in the next 12 months?

I think -- we don't see anything that I would characterize as a material change. I think we still approach customers in a way that, you know, we make sure that we are providing a high level of value and service to them. And so, you know, sometimes the discussion is more about that than it is just the pricing dynamics that are going on out there in the average market. So we continue those discussion.

I think I mentioned we're seeing slight improvements in the sequential trends, and that is somewhat unusual, I guess, coming into the beginning of the year and, you know, what I'm hearing from our pricing people is that the GRI is holding about as expected. Nothing out of the ordinary. You know, it's kind of too quick to be able to have a full assessment of that. But we have, in 2009, you know, quarter by quarter by quarter, there have been some really aggressive pricing competition out there, and I think that that has what created some of the results that you see for us, and we're looking forward to maybe a little bit longer-term thinking out there in the environment but, you know, it's really too early in 2010 to be able to tell.

And I think you've heard some folks in the industry talk about improving some of that viewpoint on pricing. So we're encouraged by that, and you have to see if it plays out, but we're very encouraged by what we hear from some folks in the industry.

Yes, no, that is fair. Just curious, maybe in conjunction with the dividend cut which, you know, I know you explained, but at the end of the day with the cash balance, you're carrying, I'm not sure exactly the reasoning for here, but also if that means and signals that at least for the time being, you guys had been talking about acquisitions, you know, or at least making a strategic acquisition at some point. Is that off the table as well at this point?

No, we think long-term here, and I think when we at our future, we still have the same plans in place that we did probably the last time that we talked to you. It's necessary and prudent to think about what we need to do with the core business, and what the needs and the opportunities might be there. And that is why we addressed the dividend at this point. It's certainly a change that we could have made at an earlier point, given what we have been through with this recession, but we waited to see, you know, how things were going to go, and again with the level of uncertainty, both to the good and to the bad, we feel like this is the right thing to do, and it will preserve our ability to do the things that we need to do for the core business, and it will also preserve the opportunity for our acquisitions strategy as we see things improve.

And I think we're going to move along. I want to make sure we get to everybody.

Okay.

Thank you, Justin.

How many people do we still have in queue?

Seven.

Okay, let's move along then.

Your next question comes from the line of Matt Brooklier of Piper Jaffray.

I'll be as quick as possible.

Sorry about that.

No worries. Looking at the purchase transportation line, it was up pretty significantly on a year-over-year basis, and also up sequentially. What is driving that? And aside from what is driving that, shall we think about that as being kind of ongoing costs going forward?

What is driving the quarter results on that line item is really a couple of things. One of those relates to some larger accounts that we had, a greater level of business on the West Coast with, so we have had some strength there. We have also had some strength on the West Coast, utilizing our logistics solutions, where we're managing the movement of product from China to the U.S., we have seen some strength there, and again, that is an impact in the West, and in the West we utilize more rail just to facilitate our business needs out there. And so it is somewhat customer-specific, somewhat, you know, related to this China and the U.S. movement, but it's hard to say exactly what that will be going forward, but we do anticipate you will see some higher levels than maybe some past history there.

Okay, but the purchase transportation line being up in the quarter, it's less to do your LTL network and more to do with some of the forwarding that you guys do? Is that fair?

It is -- it's really both, because the larger customers that I mentioned are in fact LTL customers. There's just a concentration of that business out West, where we utilize more rail.

Okay. If I look at your tonnage trends in December, I think you guys said you guys were up 2.5%, what contributed more there? Was it market share gains versus the -- or was it the economy? Kind of the same question for January, I think you guys said you were up 2% to 2.5%. I'm trying to get a feel for kind of the general freight economy, in terms of what is contributing to the tonnage growth that you guys are currently seeing. What is the economy and what is market share shifts currently?

Honestly, I think it's a little bit of both. We have seen the information that we obtained on market share for December, and we did grow market share I guess in every month of the fourth quarter. But we have also seen some signs that there might be -- it's maybe, I would characterize it more as stabilization of the economy.

Okay.

Than necessarily improvement. But, you know, we have seen some signs of that, and that is probably a part of the story as well.

Okay.

Matt, I think we're going to move on.

No problem.

Thanks a lot.

The next question comes from the line of Ken Hoexter of Merrill Lynch.

Hi, Ken.

Good afternoon.

Hi, Ken.

One quick number question; what was the length of haul for the quarter?

Length of haul?

It was up about 2.7% for the quarter.

It was 1,072 versus 1,044. Ken, I will tell you, we have changed how we're calculating that, and so anyone that has an interest in the history on that models for your models, I'll be able to give that to you offline. The methods we were using, there some things that -- well, the new method uses household goods miles, and we just thought that was probably a better way to do it, probably more reflective of our business and the way operates. So anyway, if you need some updates on that, I will be glad to give them to you offline.

Okay. Judy, maybe if you could just talk about it, I know you talked about how the bid season is going, but just looking backward for a second, at the end of the year there was a great scramble, it seemed like a lot of customers wanted to have discussions very quickly. How do you think those panned out? Are they still figuring out what they want to do as far as switching carriers? Does that calm down tremendously? I just want to understand what you think he environment is like, post that shakeup.

I think we did see, really throughout the fourth quarter, we saw some increased interest. As we mentioned, we have hired a good number of sales people that were available to us from the industry, and that's helped our situation. I have seen some commentary that there was an acceleration of, you know, movement and customer interest that really was concentrated at the very end of the year. I can tell you what we have seen is pretty steady as you go, it's not overly concentrated and you know we're seeing -- continuing to see opportunities in the first part of this year, but it's much like it's been throughout the fourth quarter.

And my last question is just how would you -- you talked a bit before about the Teamsters and discussed -- how would you classify discussions with them now? Is it non-existent, is it ongoing but no hope for an end? How would you classify the discussions?

I think what we have had is a continuing dialogue with them, and what I mentioned earlier was that we do have a meeting scheduled with them to discuss our mutual needs, and that is really all we have at this point. As you know, we have a cost structure issue that needs to be addressed, and we have emphasized that point, and I believe on the other side they've listened. We're going to continue that process, and I can't really comment on -- any further on timing.

Thanks a lot.

Thanks, Ken.

Ang Lee, go ahead.

The next question comes from the line of David Ross of Stifel Nicolaus.

Hi, Dave.

Good morning, Judy and David.

Hey, what is happening.

A couple of questions here on employees. How many employees did you end up with at the end of the fourth quarter versus the third quarter?

I think the number is, let's see here, 10,116 for ABF.

Yes.

And at the end of the third quarter, 10,165. And again, we have had some additional reductions in January of about 250.

What was that number at the end of 2008?

It was 10,961.

Okay. And if you look at the salary, wages and benefits line, it looks like about a $1 billion cost for the year. What percentage of that goes to union workers, and what percentage is non-union?

About 75% of our employees are union employees.

Okay. But in terms of the salary, wages and benefits costs, though, my guess would be that the union's comp expense is higher than the non-union comp expense?

Yes, I believe that would be right.

Yes.

And I don't have the math in front of me, but that makes sense.

Okay. Thank you.

Appreciate it, Dave. Thanks a lot.

Your next question comes from the line of Thomas Albrecht of BB&T.

Hey, Tom.

Hi, Tom.

Hi, David and Judy. Just a couple of questions, I may e-mail you a couple of others.

Sure.

On the restricted cash, that is the first time I recall seeing that on the balance sheet at almost $51 million. Before it was just cash equivalents and investments. Was there a reason why it's now listed as restricted?

Yes, it's being used to collateralize our LC arrangements that we have with four banks. Tom, it was part of the transition that we made away from our existing credit facility into some new arrangements. That being one of them and the other being entering into an accounts receivable securitization for about $75 million.

Okay, yes, I remember the release.

That is what that is about.

Then on -- you did have a little bit of data. It's still pretty nominal, but about $14 million, $13.4 million up from about $1.6 million. Just curious why you borrowed anything at all?

I think what we're trying to do is, again, revamp our financing arrangement, and we are moving away from our existing facilities, so we did the LC arrangement, the securitization, and we financed some of our road equipment under capital leases, and that is the debt that you see at the end of the year.

Okay. And then I guess on the pension post-retirement liabilities at $67.4 million, that was down from $81.4 million; is that all of the changes that you're talking about? I'm just surprised the liability itself would drop by about $14 million in three months?

No, Tom, I think the bigger part of the change relates to the year-end valuation on the pension plan. What you have is in a scenario where you've had investment gains, which off the top of the my head I think it's about 15%, that we had earnings in our pension plan. When you factor that in, you make adjustments at year-end for that, and so it actually reduces your effective funded level -- excuse me, I mean your funded level changes, and your liability will decrease if you've had an improvement in your asset side.

Right, right.

And I think I mentioned this a minute ago, on an accumulated benefit obligation basis, about 90% funded in our pension plan. And so, you know, we're in a better position there, because the market was more favorable in 2009.

Okay, good. That is the way I would have initially interpreted that, but I wasn't sure with the changes you discussed earlier --

Those are really going forward into 2010.

All right.

The changes that are described in the release.

Okay. So what percentage of your business is rail now?

In fourth quarter, we did 13.5% rail. That was versus 10.8% in the fourth quarter last year.

All right. I'll e-mail you the others.

Good deal.

Thanks, Tom.

The next question comes from the line of Jack Waldo of Stephens, Inc.

Hi, Jack.

Hi, Jack.

Can you talk about the status or the multi-employer pension plan? You can -- the funding status, can you talk about how much it's underfunded, and can you talk about [Wire C] not contributing to the fund, and what that might have on the dynamics of that pension -- of the multi-employer pension plan?

The numbers are not ever very current, but we have the number, through third quarter, and this is relative through Central State, which is the biggest one that we contribute to. They have had some good returns through the year, and their net assets have actually increased, I think, the numbers that we saw, they increased from about $15.7 billion in the first quarter to about $19 billion in the fourth quarter, so they have had some good returns throughout the year. Don't know what the funding status is at this point, but certainly the last time they reported those numbers they were down some.

I think, Jack, we don't get an update on that until probably 120 days into 2010.

Uh-huh. Right.

All we get is there is a filing that is done through a judge for Central States, and we'll be able to pick that about a quarter late on the asset side. But it's encouraging that they have improved the assets from a low point of close to $16 billion up to close $20 billion, I think.

Yes.

The last question, what is the -- and what do you guys contribute on a monthly basis to the multi-employer pension plan?

It ends up being about $10 million a month, so that is a rounded-up figure but -- and again, that is going to fluctuate with our head count.

Uh-huh. Okay, I guess one followup, does your liability increase at all because Wire C is just not paying their pension?

It has no impact on what we have to pay under our contract. You know, as we have discussed before, there is a long tail on those issues, and our hope is that there will be some legislative solutions to the bigger part of the that problem.

Thank you guys.

Thank you, Jack.

Appreciate it, Jack. I think we may take one final person, if there is anybody else in the queue.

Your next question comes from the line of Art Hatfield of Morgan Keegan.

Morning, Art.

How are you?

I'm going to let you go home before it starts snowing, I'm good.

They talking about us getting some of that.

I'm good.

Okay. Thank you, Art. Appreciate it. Good to talk to you.

Good to talk to you.

Okay, well I think that concludes our call, and we appreciate you joining us this morning. We appreciate your interest in Arkansas Best Corp. So that concludes our call.

This does conclude today's conference call. You may now disconnect.