ABF Freight System Inc. expects contract negotiations with the International Brotherhood of Teamsters to be resolved by a March 31 deadline, but the CEO of its parent company said Wednesday that the firm is exploring options in case a new agreement can't be reached.
Judy McReynolds, CEO of Arkansas Best Corp. of Fort Smith (Nasdaq: ABFS), said Wednesday during the trucking and logistics company's fourth-quarter earnings call that without a new contract, ABF would consider closing terminals and distribution centers as a cost-cutting measure.
ABF is seeking a single contract to help "lower expenses" through uniformity in cost structure, time off, scheduling, benefits and other areas related to the company's 7,500 Teamster employees across the United States.
"We're very focused on having this accomplished by the end of March," McReynolds said "… But there are options."
McReynolds declined to give specifics on the number of terminals or distribution centers that ABF would consider closing. But she said a plan is in place if ABF isn't satisfied with the end result of negotiations.
McReynolds' comments came the same day the firm reported a fourth-quarter net loss of $7.9 million compared to a profit of $1.4 million during the same quarter last year, and a full-year net loss of $7.7 million compared to a profit of $6.2 million in 2011. In the company's earnings release, McReynolds said the loss was troubling given that revenue remained roughly the same and said she hopes the labor negotiations will result in savings for the company.
In all, the company's preference is to replace an operating structure with the Teamsters that McReynolds described as "outdated and cumbersome." Beyond the National Master Freight Agreement, there are as many as 15 supplemental contracts that make operating more difficult and costly, she said.
Last month the two parties exchanged initial contracts. ABF's position is that a uniform deal will help lower costs and provide more flexibility in operations. The two sides were reportedly "far apart," following the initial meeting. They met Jan. 7 in Kansas City and are on schedule to meet every other week, McReynolds said.
ABF is handling contract talks with the Teamsters on its own for the first time. Previously, the company has been part of group negotiations.
Teamster's negotiating committee co-chair Gordon Sweeton released a statement earlier this month and said ABF's proposal seeks "to destroy the NMFA standards that have been in effect for decades and served ABF well. We hope the company will bargain in a traditional manner so that we can make progress on the important issues from the start."
Eliminating terminals and distribution centers — thereby cutting jobs — is just one of the options on the table, McReynolds stressed.
"We're prepared for any of the paths to occur," McReynolds said before later adding, "We really don't need to have a discussion at this point about potential outcomes. Obviously you have to plan for things. We do have a plan."
4Q, Yearly Losses
Arkansas Best's fourth-quarter net loss of $7.9 million, or 31 cents per share, came after profit of $1.4 million, or 5 cents per share, during the same quarter last year.
The company said the loss came amid "generally flat," year-over-year revenue, tonnage and pricing at its ABF Freight unit were offset by higher costs. For the quarter, revenue was rose slightly to $537 million from $463.2 million during the same quarter last year.
It noted that in the same period, its non-asset-based businesses, including freight brokerage and vehicle roadside and preventative maintenance, were profitable and posted higher revenue.
"We are pleased with revenue growth and improving profitability at our emerging businesses as they added up to more than 20 percent of our total company fourth quarter revenue," McReynolds said in a news release.
"Expanding our portfolio of expedited and premium logistics services was a major initiative in 2012 as our customers' supply chains grow ever more complex. We are encouraged by the trends we have seen in these businesses," she said. "Among other things, we added key sales and customer service personnel and invested in service-enhancing technologies, all of which were well- received in the marketplace."
Quarterly results include an after-tax charge of $2.4 million, or 9 cents per share, related to an actuarial adjustment to ABF's workers' compensation expense.
For full year of 2012, Arkansas Best had a net loss of $7.7 million, 31 cents per share, including the workers' compensation expense increase. This compares to profit of $6.2 million, or 23 cents per share, in 2011.
Arkansas Best's full year revenue was $2.1 billion compared to revenue of $1.9 billion in 2011.