by Jan Cottingham on Monday, Nov. 2, 2009 12:00 am
Judy McReynolds is set to become the only female CEO of an Arkansas-based publicly traded company on Jan. 1.
When Judy McReynolds becomes president and CEO of Arkansas Best Corp. on Jan. 1, she'll be heading a trucking company that reported $50 million in losses in the 12 months ending Sept. 30.
It's an economic climate the current president and CEO, Bob Davidson, calls "unprecedented in our company's history."
McReynolds says her goal, naturally, is to return the Fort Smith company to profitability.
But that's not all. Arkansas Best, which had revenue of $1.5 billion in the last 12 months, wants to double in size within the next five to 10 years and diversify in the transportation sector, McReynolds says. It already has added almost 50 salesmen within the last year.
"It's very ambitious," she says.
At the start of 2010, McReynolds, 47, will replace Davidson, who is retiring Dec. 31 after almost 38 years with Arkansas Best. Arkansas Best is the parent company of ABF Freight System Inc., the seventh-largest trucking company in the state based on revenue. ABF, a less-than-truckload carrier, accounts for about 95 percent of Arkansas Best's revenue.
Davidson will be 62 and says, "I want to climb pyramids while my knees will still allow me to do that."
McReynolds, now senior vice president, CFO and treasurer of Arkansas Best, will become the only female CEO of an Arkansas-based publicly traded company.
Rochelle Gorman leads the privately held CalArk International Inc. of Little Rock, a much smaller trucking company. The late Vida Lampkin, who once headed HCB Bancshares of Camden, the publicly traded holding company for Heartland Community Bank, is believed to have been the first female CEO of a publicly traded company in Arkansas. Heartland, however, was taken private in 2004 and was always minuscule compared with Arkansas Best, which had 10,968 employees as of Dec. 31, 2008. ABF serves all 50 states, Canada, Mexico, Guam and Puerto Rico and 250 ports in more than 130 countries.
McReynolds, a native of Norman, Okla., has another distinction. She worked her way up to the leadership role not from the operational side of the trucking industry, as is often the case, but from the financial side, the numbers side.
This, she says, is an advantage.
"One of the things that we've done at the company is to really involve the financial people in the analysis of the operations," McReynolds said.
"Every month and quarter, we are working through an understanding of what happened on the operation side and how it affected the numbers, what happened on the sales side and how it affected the numbers."
This approach leads to a big-picture view of the company, which in turn enhances the ability to solve problems.
At Arkansas Best, "we've always tried to dig in deep here and have a good understanding of how operational and sales affect the numbers."
A Long History
Math was always a strength of McReynolds. She began her studies at the University of Oklahoma planning to become a chemical engineer, "which is kind of funny because there's a lot of engineers around here."
But she decided engineering wasn't for her and changed her major to accounting. Graduating in 1985, she landed a job as a public accounting senior manager at Ernst & Young LLP in Little Rock in 1990.
Among the industries the firm focused on was transportation, and McReynolds, a certified public accountant, had several trucking company clients, including Arkansas Best.
In 1995, she went to work as director of financial reporting and taxation at P.A.M. Transportation Services Inc. of Tontitown. McReynolds left P.A.M. to join Arkansas Best in 1997 as director of corporate accounting.
She figures her accounting career has given her almost 20 years of experience with the trucking industry, and her affinity for math and engineering has proved useful at Arkansas Best and ABF.
"This company is fascinating in terms of its engineering and math problems," McReynolds says. "There's so much that goes into an LTL operation that involves lean operations, logistics, efficiency-type measures. If you have that interest, there's a lot to be looking at and managing here."
The economic downturn has given her a lot to look at and manage.
Although the national recession officially began in December 2007, according to the National Bureau of Economic Research, the trucking industry started seeing trouble in late 2006. ABF's tonnage slipped in the fourth quarter. Arkansas Best's income fell 20 percent that year compared with 2005.
The company wasn't alone.
"In October and continuing into November [of 2006], traditionally among the busiest months of the year, ABF experienced a sudden and dramatic reduction in business that mirrored conditions throughout the trucking industry," Davidson said at the time. "This year's sequential decline in total weight per day from September to October was the largest, by far, in over 20 years."
The trucking sector is notoriously sensitive to the state of the economy. When demand for goods - consumer, construction, manufacturing - dries up, so does tonnage. Revenue falls as does profit.
From October 2008 through September 2009, Arkansas Best experienced four consecutive down quarters, posting a $50 million loss on revenue of $1.5 billion. It cut 1,100 jobs in the fourth quarter of 2008 alone and reported 350 more layoffs in January. It has reduced fleet size, closed facilities and frozen wages for nonunion workers. Last year, McReynolds saw her own pay cut to $418,578 from $640,021 in 2007.
McReynolds' experience at Ernst & Young and P.A.M. taught her the cyclical nature of the trucking sector.
"This industry is very impacted by economic cycles," she says. "You have great prosperity when things are good, and when things are in a down cycle, you can have some very serious constraints on companies."
How to Deal
For ABF, one of those constraints is labor costs, which in 2008 accounted for about 60 percent of its revenue. It's hard to increase customers' prices during a recession so companies look to cut costs. But about 75 percent of ABF's employees are covered under a five-year contract with the International Brotherhood of Teamsters, ratified in 2008.
ABF has "a cost structure that's higher than other companies," McReynolds says, and it can't unilaterally decide to trim wages and benefits, including pension funding. That means it can't be as nimble as its nonunion competitors.
She adds, "At the same time we feel like we have the best employees in the industry, and so we always want to be fair to them."
ABF benefits from having much lower driver turnover than other trucking companies, she says. In addition, "We have one of the best cargo claims ratios in the industry, which means we have great results in not damaging customer freight."
All this contributes to superior customer service, McReynolds says, which gives ABF a leg up on its rivals.
The company is working to improve sales, she says, adding, "We're also looking forward to perhaps diversifying our company within the transportation sector and looking at ways that we can successfully do that."
Such diversification might take the form of "domestic transportation management" for other companies - serving, in effect, as an outsourced transportation division.
Davidson says Arkansas Best's biggest hurdle to returning to profitability is, obviously, the economy. "Fortunately we've got a very strong balance sheet," he says. The company has no debt and almost $200 million in cash. "That gives us a balance sheet that allows us to manage for the longer term.
"We've entered some new markets that even in the downturn we knew we needed to be there," Davidson says. "And it was the balance sheet that gave us the opportunity to proceed with those plans."
"We're just sticking to our knitting," says Davidson, whose only role at Arkansas Best after he retires will be as a stockholder.
Asked how she thinks she'll be accepted as chief of a major trucking firm in a male-dominated industry, McReynolds says her gender isn't an issue because her approach has been to not make it an issue.
"Whenever I go about my daily business, it's not a part of my thinking." She says "at this company, from the day that I walked in the door here, that has never been an issue.
"There's just no difference in the way that I've been treated in comparison to any of the male officers or employees of the company. Maybe part of that is because I have three boys to deal with at home, my husband and my two sons," McReynolds says, laughing.
Her husband, Lance, is director of Christian education and youth at First Christian Church in Fort Smith. The couple has two sons, Johnny, 17, and Brett, 15.
Zena Featherstone Marshall, director of communication for the Fort Smith Public Schools, has known McReynolds for about 10 years. "Judy is easy to talk to," Marshall says. "You might call that accessible in business language. She's just one of those folks that have a deep sense of purpose that some of us may never marshal."
"Judy is very involved with her boys and what they do and what they accomplish. She is there for them," Marshall says. "And I think when you see a woman who is as powerful as she is, you automatically assume that they don't have time to take care of the family. I think that's one of the flaws that we have in society - that we make judgments too quickly."
McReynolds "has a knack for knowing what needs to be done and gathering the resources for what you need to do," Marshall says. She adds, "Someone of Judy's caliber in the business world is a real role model for young women." Davidson says Arkansas Best's board of directors chose McReynolds for a simple reason: "She's the most qualified. ... I had no reservations recommending her highly."
"One of the ways that you succeed as a manager is to bring on good people and give them a lot of room to do their job," he says, adding that gender and skin color and such factors "just don't come into play."
Davidson adds, "ABF has a very competent president and chief operating officer in Wes Kemp, who works very closely with Judy."
McReynolds credits Davidson and Robert A. Young III, company chairman, for giving her a chance to prove herself.
"Robert and Bob have given me a great opportunity," she says. "And they've done that over the years - not just at once - by allowing me to be involved in strategy, being involved with our board of directors, being involved in so many things that matter. And that's how I think I find myself here."
Her proudest career achievement is being named CFO in 2006, which allowed her "to broaden my involvement in all aspects of the company. ... I think once I accomplished that, that really opened so many things up that I find interesting and I think are important for the company."
McReynolds' success as a CEO, however, depends on the success of Arkansas Best. And that, in turn, depends largely on something over which she has little control: the economy.
She thinks that an economic turnaround is "going to be slower rather than faster," primarily because of high unemployment. "I think that's difficult for people. I think they don't have the ability to go out and buy the goods that end up on ABF's trucks at this point. I think it's going to be something to wait for."
But she doesn't doubt that the economy will recover "because we always come out of these recessions one way or the other."
Almost exactly a week after McReynolds expressed these sentiments, the government reported that the economy grew 3.5 percent in the third quarter. Although federally funded programs pushing consumer spending on cars and homes bolstered the growth in Gross Domestic Product, the announcement was hailed by The Wall Street Journal as an "unofficial end to the recession."
Whether or not the worst downturn since the Great Depression has ended, McReynolds faces tough challenges at Arkansas Best. But she counts among her strengths a willingness to listen and "to work very hard for things that I think are important."
She thinks Arkansas Best and its people are important, she knows her numbers and "I think I am so fortunate to be asked to be the CEO of a company that is full of the best employees in the industry."
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