ArcBest Announces Fourth Quarter 2017 And Full Year 2017 Results

View as PDF

Investor Relations Contact: David Humphrey
Title: Vice President – Investor Relations
Phone: 479-785-6200 
Email: dhumphrey@arcb.com

Media Contact: Kathy Fieweger
Phone: 479-719-4358
Email: kfieweger@arcb.com

ArcBest® Announces Fourth Quarter 2017 And Full Year 2017 Results 

  • Fourth quarter 2017 revenue of $710.7 million, and net income of $36.6 million, or $1.37 per diluted share, include the impact of the Tax Reform Act1.  On a non-GAAP2 basis, fourth quarter 2017 net income was $11.2 million, or $0.42 per diluted share.
  • Improved fourth quarter Asset-Based revenue and operating income associated with yield management initiatives.
  • ArcBest full year 2017 consolidated revenue of $2.8 billion.
     

FORT SMITH, Arkansas, January 31, 2018 — ArcBest® (Nasdaq: ARCB) today reported fourth quarter 2017 revenue of $710.7 million compared to fourth quarter 2016 revenue of $688.2 million.  Fourth quarter 2017 operating income was $16.7 million compared to operating income of $1.2 million last year.  Net income of $36.6 million, or $1.37 per diluted share compared to fourth quarter 2016 net income of $1.6 million, or $0.06 per diluted share.  Due to the lower corporate tax rate under the Tax Reform Act, fourth quarter 2017 net income reflects the impact of a $24.5 million reduction of income tax liabilities related to deferred income taxes established under GAAP. While GAAP requires the recognition of the Tax Reform Act impact on deferred taxes in 2017, the realization of those benefits are spread over many future years.

Excluding certain items in both periods as identified in the attached reconciliation tables, non-GAAP net income was $11.2 million, or $0.42 per diluted share, in fourth quarter 2017 compared to the fourth quarter 2016 amount of $7.3 million, or $0.28 per diluted share. On a non-GAAP basis, operating income was $18.5 million in fourth quarter 2017 compared to fourth quarter 2016 operating income of $12.1 million.  Cost controls resulting from the enhanced market approach implemented at the beginning of the year continue to be in-line with expectations.

“We began 2017 with an aggressive plan to implement our enhanced market approach,” said Chairman, President & CEO Judy McReynolds.  “Our customers have been asking for full logistics solutions from us and more manageable points of contact. By responding with a unified sales force, customer service and capacity sourcing, we more expertly answer their total supply chain needs and position the company for growth.”

 

“In addition,” said McReynolds, “we undertook a number of significant actions to improve our pricing and ensure that we are adequately compensated for the value we provide customers, particularly in our Asset-Based business.  We are pleased with the results of these actions to date, which are in line with our expectations, and are confident we have the right pricing strategy going forward.”

  1. Tax Cuts and Jobs Act of 2017
  2. U.S. Generally Accepted Accounting Principles

Asset-Based

Results of Operations

Fourth Quarter 2017 Versus Fourth Quarter 2016

  • Revenue of $497.0 million compared to $482.1 million, a per-day increase of 2.3 percent.
  • Tonnage per day decrease of 4.7 percent.
  • Shipments per day decrease 8.1 percent.
  • Total billed revenue per hundredweight increased 7.6 percent and was positively impacted by Asset-Based pricing initiatives and higher fuel surcharges.  Excluding fuel surcharge, the percentage increase on ArcBest’s Asset-Based LTL freight was in the mid-single digits.
  • Operating income of $18.0 million and an operating ratio of 96.4 percent compared to operating income of $7.1 million and an operating ratio of 98.5 percent.  On a non-GAAP basis, operating income of $19.4 million and an operating ratio of 96.1 percent compared to operating income of $8.7 million and an operating ratio of 98.2 percent.

 

Continued focus on yield management initiatives was reflected in solid increases in revenue per hundredweight and revenue per shipment.  This was the most significant factor contributing to the improvement in fourth quarter Asset-Based profitability versus the same period last year.  The fourth quarter emphasis on securing compensatory pricing contributed to reductions in shipment and tonnage levels despite a healthy economic environment and tightened industry capacity.  Impacted positively by account pricing activities, the recent trend of increasing weight and revenue per shipment continued throughout the fourth quarter.  Cost controls and focused workforce management contributed to overall operational labor savings that were somewhat offset by higher union health, welfare and pension expense.  Reduced costs for outside resources including city cartage and local rental equipment also contributed positively to fourth quarter results.

Asset-Light

Results of Operations

Fourth Quarter 2017 Versus Fourth Quarter 2016

  • Revenue of $222.2 million compared to $211.2 million.
  • Operating income of $5.2 million compared to an operating loss of $0.9 million. On a non-GAAP basis, operating income of $5.4 million compared to $7.4 million.
  • Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) of $9.1 million compared to Adjusted EBITDA of $10.8 million.
     

ArcBest’s Asset-Light revenue increased primarily as a result of strong revenue per shipment growth in expedite and truckload related to higher customer demand and tightened capacity in the marketplace.  The revenue growth in these portions of the Asset-Light business occurred despite shipment count reductions.  The fourth quarter operating income decline was related to several factors that included: lower net revenue margins related to rising purchased transportation costs and the difficulty of obtaining commensurate rate increases from Asset-Light shippers; reductions in the military moving business and the handling of fewer consumer moving loads requiring out-of-network resources; and the costs, and related business loss, associated with customer bankruptcies.  At FleetNet, a slight increase in total events and improved pricing contributed to revenue growth.

Full Year 2017 Results

ArcBest’s revenue totaled $2.8 billion, compared to $2.7 billion in 2016.  Net income was $59.7 million, or $2.25 per diluted share, compared to net income of $18.7 million, or $0.71 per diluted share in 2016.  Net income in 2017 was impacted by the Tax Reform Act, as previously described.  On a non-GAAP basis, ArcBest had 2017 net income of $35.6 million, or $1.33 per diluted share compared to net income of $24.3 million, or $0.92 per diluted share in 2016. 

During 2017, ArcBest increased shareholder returns through payment of an eight cent per share quarterly dividend and purchase of ArcBest shares valued at approximately $6.0 million.

Asset-Based

Results of Operations

Full Year 2017 Versus Full Year 2016

  • Revenue of $2.0 billion, compared to $1.9 billion in 2016.
  • Tonnage per day decrease of 2.1 percent.
  • Shipments per day were flat. 
  • Total billed revenue per hundredweight increased 6.5 percent and was impacted by Asset-Based pricing initiatives and higher fuel surcharges in 2017.  Excluding fuel surcharge, the percentage increase on ArcBest’s Asset-Based traditional LTL freight was in the mid-single digits.
  • Operating income of $51.9 million and an operating ratio of 97.4 percent compared to $33.6 million and an operating ratio of 98.2 percent.  On a non-GAAP basis, an operating ratio of 97.2 percent compared to an operating ratio of 98.0 percent.

Asset-Light

Results of Operations

Full Year 2017 Versus Full Year 2016

  • Revenue of $863.0 million compared to $803.4 million, an increase of 7.4 percent.
  • Operating income of $22.1 million compared to $9.3 million.  On a non-GAAP basis, operating income of $23.6 million compared to $17.7 million.
  • Adjusted EBITDA of $37.2 million compared to $32.4 million.

Capital Expenditures

In 2017, total net capital expenditures equaled $146 million which was somewhat below previous expectations.  This included $95 million of revenue equipment, the majority of which was for ArcBest’s Asset-Based operation.  Depreciation and amortization costs on property, plant and equipment were $99 million.

For 2018, total net capital expenditures are estimated to range from $155 million to $165 million. This includes revenue equipment purchases of approximately $100 million primarily for ArcBest’s Asset-Based operation.  Because ABF Freight’s union labor negotiations are in progress, the timing and actual amount of these capital investments are highly dependent on the outcome of the union labor contract.  ArcBest’s depreciation and amortization costs on property, plant and equipment in 2018 are estimated to be in a range of $100 million to $105 million.

Closing Comments

McReynolds said 2017 presented challenging conditions with tighter capacity resulting from an improving economy, and impacts from the damaging hurricanes in August and September. ”We expect tighter capacity will continue in 2018 as the Electronic Logging Device mandate took effect last December,” McReynolds said. “I am confident that our assets, owner operators and relationships with contract carriers will continue to provide comprehensive and valued options for our customers.”

“As we go forward, the operating results of our Asset-Based and Asset-Light segments should reflect the investments we are making today,” McReynolds said. “We continue to have a great opportunity to grow our company, while also keeping our costs under control. In order to profitably grow our Asset-Based business, we must have the appropriate cost structure and work rules to do so, and we will continue to work on these areas in 2018. We also have a large opportunity to grow Asset-Light revenues thanks to our expanded range of logistics solutions and great relationships with our providers. The future for ArcBest is promising.”

 

Conference Call

ArcBest will host a conference call with company executives to discuss the 2017 fourth quarter results. The call will be today, Wednesday, January 31, at 9:30 a.m. ET (8:30 a.m. CT). Interested parties are invited to listen by calling (888) 223-4953. Following the call, a recorded playback will be available through the end of the day on March 15, 2018. To listen to the playback, dial (800) 633-8284 or (402) 977-9140 (for international callers). The conference call ID for the playback is 21877801. The conference call and playback can also be accessed, through March 15, 2018, on ArcBest’s website at arcb.com.

 

About ArcBest

ArcBest® (Nasdaq: ARCB) is a logistics company with creative problem solvers who have The Skill and the Will® to deliver integrated logistics solutions.  At ArcBest, We'll Find a Way to deliver knowledge, expertise and a can-do attitude with every shipment and supply chain solution, household move or vehicle repair.  For more information, visit arcb.com.

Forward-Looking Statements

Certain statements and information in this press release concerning results for the three and twelve months ended December 31, 2017 may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “foresee,” “intend,” “may,” “plan,” “predict,” “project,” “scheduled,” “should,” “would,” and similar expressions and the negatives of such terms are intended to identify forward-looking statements. These statements are based on management’s beliefs, assumptions, and expectations based on currently available information, are not guarantees of future performance, and involve certain risks and uncertainties (some of which are beyond our control). Although we believe that the expectations reflected in these forward-looking statements are reasonable as and when made, we cannot provide assurance that our expectations will prove to be correct. Actual outcomes and results could materially differ from what is expressed, implied, or forecasted in these statements due to a number of factors, including, but not limited to: a failure of our information systems, including disruptions or failures of services essential to our operations or upon which our information technology platforms rely, data breach, and/or cybersecurity incidents; not achieving some or all of the expected financial and operating benefits of our corporate restructuring or incurring additional costs or operational inefficiencies as a result of the restructuring; relationships with employees, including unions, and our ability to attract and retain employees; unfavorable terms of, or the inability to reach agreement on, future collective bargaining agreements or a workforce stoppage by our employees covered under ABF Freight’s collective bargaining agreement; competitive initiatives and pricing pressures; union and nonunion employee wages and benefits, including changes in required contributions to multiemployer plans; the cost, integration, and performance of any recent or future acquisitions; general economic conditions and related shifts in market demand that impact the performance and needs of industries we serve and/or limit our customers’ access to adequate financial resources; governmental regulations; environmental laws and regulations, including emissions-control regulations; the loss or reduction of business from large customers; litigation or claims asserted against us; the cost, timing, and performance of growth initiatives; the loss of key employees or the inability to execute succession planning strategies; availability and cost of reliable third-party services; our ability to secure independent owner operators and/or operational or regulatory issues related to our use of their services; default on covenants of financing arrangements and the availability and terms of future financing arrangements; timing and amount of capital expenditures; self-insurance claims and insurance premium costs; availability of fuel, the effect of volatility in fuel prices and the associated changes in fuel surcharges on securing increases in base freight rates, and the inability to collect fuel surcharges; increased prices for and decreased availability of new revenue equipment, decreases in value of used revenue equipment, and higher costs of equipment-related operating expenses such as maintenance and fuel and related taxes; potential impairment of goodwill and intangible assets; maintaining our intellectual property rights, brand, and corporate reputation; seasonal fluctuations and adverse weather conditions; regulatory, economic, and other risks arising from our international business;  antiterrorism and safety measures; and other financial, operational, and legal risks and uncertainties detailed from time to time in ArcBest’s public filings with the Securities and Exchange Commission (“SEC”).

 

For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see our filings with SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

 

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events, or otherwise.

NOTE

 ‡ - The ArcBest and FleetNet reportable segments, combined, represent Asset-Light operations.

Financial Data and Operating Statistics

The following tables show financial data and operating statistics on ArcBest® and its reportable segments.

ARCBEST CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended 

 

Year Ended 

 

 

 

December 31

 

December 31

 

 

    

2017

    

2016

    

2017

    

2016

 

 

 

(Unaudited)

 

 

 

($ thousands, except share and per share data)

 

REVENUES

 

$

 710,721

 

$

 688,214

 

$

 2,826,457

 

$

 2,700,219

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 694,041

 

 

 687,003

 

 

 2,772,947

 

 

 2,671,249

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING INCOME

 

 

 16,680

 

 

 1,211

 

 

 53,510

 

 

 28,970

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (COSTS)

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and dividend income

 

 

 388

 

 

 345

 

 

 1,293

 

 

 1,523

 

Interest and other related financing costs

 

 

 (1,932)

 

 

 (1,376)

 

 

 (6,342)

 

 

 (5,150)

 

Other, net

 

 

 884

 

 

 916

 

 

 3,115

 

 

 2,944

 

 

 

 

 (660)

 

 

 (115)

 

 

 (1,934)

 

 

 (683)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE INCOME TAXES

 

 

 16,020

 

 

 1,096

 

 

 51,576

 

 

 28,287

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME TAX PROVISION (BENEFIT)

 

 

 (20,548)

 

 

 (488)

 

 

 (8,150)

 

 

 9,635

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

$

 36,568

 

$

 1,584

 

$

 59,726

 

$

 18,652

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER COMMON SHARE(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

 1.42

 

$

 0.06

 

$

 2.32

 

$

 0.72

 

Diluted

 

$

 1.37

 

$

 0.06

 

$

 2.25

 

$

 0.71

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AVERAGE COMMON SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 25,637,568

 

 

 25,669,280

 

 

 25,683,745

 

 

 25,751,544

 

Diluted

 

 

 26,540,716

 

 

 26,272,487

 

 

 26,424,389

 

 

 26,256,570

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH DIVIDENDS DECLARED PER COMMON SHARE

 

$

 0.08

 

$

 0.08

 

$

 0.32

 

$

 0.32

 


  1. ArcBest uses the two-class method for calculating earnings per share. This method requires an allocation of dividends paid and a portion of undistributed net income (but not losses) to unvested restricted stock for calculating per share amounts.

 

ARCBEST CORPORATION

CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

 

December 31

 

December 31

 

 

    

2017

    

2016

 

 

 

(Unaudited)

 

Note

 

 

 

($ thousands, except share data)

 

ASSETS

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 120,772

 

$

 114,280

 

Short-term investments

 

 

 56,401

 

 

 56,838

 

Restricted cash

 

 

 —

 

 

 962

 

   Accounts receivable, less allowances (2017 - $7,657; 2016 - $5,437)

 

 

 279,074

 

 

 260,643

 

   Other accounts receivable, less allowances (2017 - $921; 2016 - $849)             

 

 

 19,491

 

 

 22,041

 

Prepaid expenses

 

 

 22,183

 

 

 22,124

 

Prepaid and refundable income taxes

 

 

 12,296

 

 

 9,909

 

Other

 

 

 12,132

 

 

 4,300

 

TOTAL CURRENT ASSETS

 

 

 522,349

 

 

 491,097

 

 

 

 

 

 

 

 

 

PROPERTY, PLANT AND EQUIPMENT

 

 

 

 

 

 

 

Land and structures

 

 

 344,224

 

 

 324,086

 

Revenue equipment

 

 

 793,523

 

 

 743,860

 

Service, office, and other equipment

 

 

 179,950

 

 

 154,119

 

Software

 

 

 129,589

 

 

 120,877

 

Leasehold improvements

 

 

 8,888

 

 

 8,758

 

 

 

 

 1,456,174

 

 

 1,351,700

 

Less allowances for depreciation and amortization

 

 

 865,010

 

 

 819,174

 

 

 

 

 591,164

 

 

 532,526

 

 

 

 

 

 

 

 

 

GOODWILL

 

 

 108,320

 

 

 108,875

 

INTANGIBLE ASSETS, NET

 

 

 73,469

 

 

 80,507

 

DEFERRED INCOME TAXES

 

 

 5,965

 

 

 2,978

 

OTHER LONG-TERM ASSETS

 

 

 64,374

 

 

 66,095

 

 

 

$

 1,365,641

 

$

 1,282,078

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

Accounts payable

 

$

 129,099

 

$

 133,301

 

Income taxes payable

 

 

 324

 

 

 —

 

Accrued expenses

 

 

 211,237

 

 

 198,731

 

Current portion of long-term debt

 

 

 61,930

 

 

 64,143

 

TOTAL CURRENT LIABILITIES

 

 

 402,590

 

 

 396,175

 

 

 

 

 

 

 

 

 

LONG-TERM DEBT, less current portion

 

 

 206,989

 

 

 179,530

 

PENSION AND POSTRETIREMENT LIABILITIES

 

 

 39,827

 

 

 35,848

 

OTHER LONG-TERM LIABILITIES

 

 

 15,616

 

 

 16,790

 

DEFERRED INCOME TAXES

 

 

 49,157

 

 

 54,680

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Common stock, $0.01 par value, authorized 70,000,000 shares;
issued 2017: 28,495,628 shares; 2016: 28,174,424 shares

 

 

 285

 

 

 282

 

Additional paid-in capital

 

 

 319,436

 

 

 315,318

 

Retained earnings

 

 

 438,379

 

 

 386,917

 

   Treasury stock, at cost, 2017: 2,851,578 shares; 2016: 2,565,399 shares

 

 

 (86,064)

 

 

 (80,045)

 

Accumulated other comprehensive loss

 

 

 (20,574)

 

 

 (23,417)

 

TOTAL STOCKHOLDERS’ EQUITY

 

 

 651,462

 

 

 599,055

 

 

 

$

 1,365,641

 

$

 1,282,078

 

 

Note:  The balance sheet at December 31, 2016 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

 

ARCBEST CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

 

 

 

 

 

Year Ended 

 

 

 

December 31

 

 

    

2017

    

2016

 

 

 

Unaudited

 

 

 

($ thousands)

 

 OPERATING ACTIVITIES

 

 

 

 

 

 

 

Net income

 

$

 59,726

 

$

 18,652

 

Adjustments to reconcile net income

 

 

 

 

 

 

 

to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 98,530

 

 

 98,814

 

Amortization of intangibles

 

 

 4,538

 

 

 4,239

 

Impairment of long-lived assets

 

 

 —

 

 

 6,244

 

Pension settlement expense

 

 

 4,156

 

 

 3,229

 

Share-based compensation expense

 

 

 6,958

 

 

 7,588

 

Provision for losses on accounts receivable

 

 

 4,081

 

 

 1,643

 

Deferred income tax provision

 

 

 (10,213)

 

 

 9,522

 

Gain on sale of property and equipment

 

 

 (227)

 

 

 (3,335)

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Receivables

 

 

 (19,588)

 

 

 (23,809)

 

Prepaid expenses

 

 

 (64)

 

 

 (1,393)

 

Other assets

 

 

 (4,231)

 

 

 (4,355)

 

Income taxes

 

 

 (2,144)

 

 

 6,236

 

Accounts payable, accrued expenses, and other liabilities

 

 

 10,393

 

 

 (11,335)

 

 NET CASH PROVIDED BY OPERATING ACTIVITIES

 

 

 151,915

 

 

 111,940

 

 

 

 

 

 

 

 

 

 INVESTING ACTIVITIES

 

 

 

 

 

 

 

Purchases of property, plant and equipment, net of financings

 

 

 (65,781)

 

 

 (68,271)

 

Proceeds from sale of property and equipment

 

 

 4,279

 

 

 8,804

 

Purchases of short-term investments

 

 

 (73,459)

 

 

 (69,400)

 

Proceeds from sale of short-term investments

 

 

 73,842

 

 

 74,167

 

Business acquisitions, net of cash acquired

 

 

 —

 

 

 (24,780)

 

Proceeds from sale of subsidiaries

 

 

 2,490

 

 

 2,780

 

Capitalization of internally developed software

 

 

 (9,840)

 

 

 (10,472)

 

 NET CASH USED IN INVESTING ACTIVITIES

 

 

 (68,469)

 

 

 (87,172)

 

 

 

 

 

 

 

 

 

 FINANCING ACTIVITIES

 

 

 

 

 

 

 

Borrowings under accounts receivable securitization program

 

 

 10,000

 

 

 —

 

Payments on long-term debt

 

 

 (68,924)

 

 

 (52,202)

 

Net change in book overdrafts

 

 

 (502)

 

 

 (4,171)

 

Deferred financing costs

 

 

 (937)

 

 

 —

 

Payment of common stock dividends

 

 

 (8,264)

 

 

 (8,318)

 

Purchases of treasury stock

 

 

 (6,019)

 

 

 (9,510)

 

Payments for tax withheld on share-based compensation

 

 

 (3,270)

 

 

 (1,682)

 

 NET CASH USED IN FINANCING ACTIVITIES

 

 

 (77,916)

 

 

 (75,883)

 

 

 

 

 

 

 

 

 

 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

 

 

 5,530

 

 

 (51,115)

 

Cash and cash equivalents and restricted cash at beginning of period

 

 

 115,242

 

 

 166,357

 

 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

 

$

 120,772

 

$

 115,242

 

 

 

 

 

 

 

 

 

 NONCASH INVESTING ACTIVITIES

 

 

 

 

 

 

 

Equipment financed

 

$

 84,170

 

$

 83,366

 

Accruals for equipment received

 

$

 1,734

 

$

 397

 

 

ARCBEST CORPORATION

FINANCIAL STATEMENT OPERATING SEGMENT DATA AND OPERATING RATIOS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended 

 

 

Year Ended 

 

 

 

December 31

 

 

December 31

 

 

    

2017

    

 

2016

    

 

2017

    

 

2016

 

 

 

Unaudited

 

 

 

($ thousands, except percentages)

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset-Based

 

$

 497,004

 

 

 

 

$

 482,079

 

 

 

 

$

 1,993,314

 

 

 

 

$

 1,916,394

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ArcBest(1)

 

 

 182,144

 

 

 

 

 

 172,999

 

 

 

 

 

 706,698

 

 

 

 

 

 640,734

 

 

 

FleetNet

 

 

 40,034

 

 

 

 

 

 38,212

 

 

 

 

 

 156,341

 

 

 

 

 

 162,629

 

 

 

Total Asset-Light

 

 

 222,178

 

 

 

 

 

 211,211

 

 

 

 

 

 863,039

 

 

 

 

 

 803,363

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other and eliminations

 

 

 (8,461)

 

 

 

 

 

 (5,076)

 

 

 

 

 

 (29,896)

 

 

 

 

 

 (19,538)

 

 

 

Total consolidated revenues

 

$

 710,721

 

 

 

 

$

 688,214

 

 

 

 

$

 2,826,457

 

 

 

 

$

 2,700,219

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset-Based

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages, and benefits

 

$

 271,712

 

 54.7

%

 

$

 274,571

 

 56.9

%

 

$

 1,125,186

 

 56.5

%

 

$

 1,103,883

 

 57.6

%

Fuel, supplies, and expenses

 

 

 59,680

 

 12.0

 

 

 

 55,731

 

 11.6

 

 

 

 234,006

 

 11.7

 

 

 

 216,263

 

 11.3

 

Operating taxes and licenses

 

 

 12,041

 

 2.4

 

 

 

 11,941

 

 2.5

 

 

 

 47,767

 

 2.4

 

 

 

 48,180

 

 2.5

 

Insurance

 

 

 7,693

 

 1.5

 

 

 

 6,686

 

 1.4

 

 

 

 30,761

 

 1.5

 

 

 

 29,178

 

 1.5

 

Communications and utilities

 

 

 4,113

 

 0.8

 

 

 

 4,334

 

 0.9

 

 

 

 17,373

 

 0.9

 

 

 

 16,181

 

 0.8

 

Depreciation and amortization

 

 

 20,730

 

 4.2

 

 

 

 20,717

 

 4.3

 

 

 

 82,507

 

 4.1

 

 

 

 80,331

 

 4.2

 

Rents and purchased transportation

 

 

 51,462

 

 10.4

 

 

 

 53,155

 

 11.0

 

 

 

 206,457

 

 10.4

 

 

 

 198,594

 

 10.4

 

Shared services(2)

 

 

 47,706

 

 9.6

 

 

 

 45,368

 

 9.4

 

 

 

 186,406

 

 9.4

 

 

 

 184,817

 

 9.6

 

Gain on sale of property and equipment

 

 

 (96)

 

 —

 

 

 

 (529)

 

 (0.1)

 

 

 

 (695)

 

 —

 

 

 

 (2,979)

 

 (0.2)

 

Nonunion pension expense, including settlement(3)

 

 

 1,325

 

 0.3

 

 

 

 384

 

 0.1

 

 

 

 4,799

 

 0.2

 

 

 

 2,313

 

 0.1

 

Other

 

 

 2,589

 

 0.5

 

 

 

 1,400

 

 0.3

 

 

 

 6,525

 

 0.3

 

 

 

 4,889

 

 0.3

 

Restructuring costs(4)

 

 

 76

 

 —

 

 

 

 1,173

 

 0.2

 

 

 

 344

 

 —

 

 

 

 1,173

 

 0.1

 

Total Asset-Based

 

 

 479,031

 

 96.4

%

 

 

 474,931

 

 98.5

%

 

 

 1,941,436

 

 97.4

%

 

 

 1,882,823

 

 98.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ArcBest(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchased transportation

 

 

 146,184

 

 80.2

%

 

 

 135,813

 

 78.5

%

 

 

 563,497

 

 79.7

%

 

 

 502,159

 

 78.4

%

Supplies and expenses

 

 

 3,822

 

 2.1

 

 

 

 3,863

 

 2.2

 

 

 

 15,087

 

 2.1

 

 

 

 13,145

 

 2.1

 

Depreciation and amortization(5)

 

 

 3,579

 

 2.0

 

 

 

 3,115

 

 1.8

 

 

 

 13,090

 

 1.9

 

 

 

 13,612

 

 2.1

 

Shared services(2)(3)

 

 

 21,044

 

 11.5

 

 

 

 20,310

 

 11.8

 

 

 

 84,159

 

 11.9

 

 

 

 85,238

 

 13.3

 

Other

 

 

 3,034

 

 1.7

 

 

 

 3,446

 

 2.0

 

 

 

 11,189

 

 1.6

 

 

 

 11,678

 

 1.8

 

Restructuring costs(4)

 

 

 —

 

 —

 

 

 

 8,038

 

 4.6

 

 

 

 875

 

 0.1

 

 

 

 8,038

 

 1.2

 

 

 

 

 177,663

 

 97.5

%

 

 

 174,585

 

 100.9

%

 

 

 687,897

 

 97.3

%

 

 

 633,870

 

 98.9

%

FleetNet(3)

 

 

 39,287

 

 98.1

%

 

 

 37,488

 

 98.1

%

 

 

 153,017

 

 97.9

%

 

 

 160,204

 

 98.5

%

Total Asset-Light

 

 

 216,950

 

 

 

 

 

 212,073

 

 

 

 

 

 840,914

 

 

 

 

 

 794,074

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other and eliminations(3)

 

 

 (1,940)

 

 

 

 

 

 (1)

 

 

 

 

 

 (9,403)

 

 

 

 

 

 (5,648)

 

 

 

Total consolidated operating expenses

 

$

 694,041

 

 97.7

%

 

$

 687,003

 

 99.8

%

 

$

 2,772,947

 

 98.1

%

 

$

 2,671,249

 

 98.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset-Based

 

$

 17,973

 

 

 

 

$

 7,148

 

 

 

 

 

 51,878

 

 

 

 

 

 33,571

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ArcBest(1)

 

 

 4,481

 

 

 

 

 

 (1,586)

 

 

 

 

 

 18,801

 

 

 

 

 

 6,864

 

 

 

FleetNet

 

 

 747

 

 

 

 

 

 724

 

 

 

 

 

 3,324

 

 

 

 

 

 2,425

 

 

 

Total Asset-Light

 

 

 5,228

 

 

 

 

 

 (862)

 

 

 

 

 

 22,125

 

 

 

 

 

 9,289

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other and eliminations(6)

 

 

 (6,521)

 

 

 

 

 

 (5,075)

 

 

 

 

 

 (20,493)

 

 

 

 

 

 (13,890)

 

 

 

Total consolidated operating income

 

$

 16,680

 

 

 

 

$

 1,211

 

 

 

 

$

 53,510

 

 

 

 

$

 28,970

 

 

 


  1. Includes the operations of Logistics & Distribution Services, LLC (“LDS”) since the September 2016 acquisition date.
  2. The presentation of segment expenses allocated from shared services was modified during third quarter 2017 and reclassifications have been made to the prior period operating segment expenses to conform to the current year presentation. Previously, expenses allocated from company-wide functions were categorized in individual segment expense line items by type of expense. Allocated expense is now presented on a single “Shared services” line within the Company’s operating segment disclosures. There was no impact on each segment’s total expenses as a result of the reclassifications.
  3. Consolidated and segment operating results for all periods presented were impacted by nonunion pension expense, including settlement. (See ArcBest Corporation - Consolidated and Segment Operating Income Reconciliations of GAAP to Non-GAAP Financial Measures tables.)
  4. Restructuring charges relate to the realignment of the Company’s organizational structure as announced on November 3, 2016.
  5. Depreciation and amortization consists primarily of amortization of intangibles, including customer relationships, and software associated with acquired businesses.
  6. “Other” corporate costs include $0.2 million and $1.8 million of restructuring charges for the three months and year ended December 31, 2017, respectively, and $0.9 million for the three months and year ended December 31, 2016. (See Segment Operating Income Reconciliations of GAAP to Non-GAAP Financial Measures table.) Other corporate costs also include additional investments to provide an improved platform for revenue growth and for offering ArcBest services across multiple operating segments.

ARCBEST CORPORATION

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES

 

Non-GAAP Financial Measures. We report our financial results in accordance with generally accepted accounting principles (“GAAP”). However, management believes that certain non-GAAP performance measures and ratios, such as Adjusted EBITDA, utilized for internal analysis provide analysts, investors, and others the same information that we use internally for purposes of assessing our core operating performance and provides meaningful comparisons between current and prior period results, as well as important information regarding performance trends. Accordingly, using these measures improves comparability in analyzing our performance because it removes the impact of items from operating results that, in management's opinion, do not reflect our core operating performance. Management uses Adjusted EBITDA as a key measure of performance and for business planning. The measure is particularly meaningful for analysis of the Asset-Light businesses, because they exclude amortization of acquired intangibles and software, which are significant expenses resulting from strategic decisions rather than core daily operations. Additionally, Adjusted EBITDA is a primary component of the financial covenants contained in our Second Amended and Restated Credit Agreement. Other companies may calculate EBITDA differently; therefore, our calculation of Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Certain information discussed in the scheduled conference call could be considered non-GAAP measures. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results. These financial measures should not be construed as better measurements than operating income, operating cash flow, net income or earnings per share, as determined under GAAP.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended 

 

Year Ended 

 

 

December 31

 

 

December 31

 

 

    

2017

 

2016

    

  

2017

 

 

2016

 

 

 

(Unaudited)

 

 

($ thousands, except per share data)

ArcBest Corporation - Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts on GAAP basis

 

$

 16,680

 

$

 1,211

 

$

 53,510

 

$

 28,970

 

Restructuring charges, pre-tax(1)

 

 

 232

 

 

 10,313

 

 

 2,963

 

 

 10,313

 

Nonunion pension expense, including settlement, pre-tax(2)

 

 

 1,622

 

 

 511

 

 

 6,090

 

 

 3,075

 

Transaction costs, pre-tax(3)

 

 

 —

 

 

 39

 

 

 —

 

 

 601

 

Non-GAAP amounts

 

$

 18,534

 

$

 12,074

 

$

 62,563

 

$

 42,959

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts on GAAP basis

 

$

 36,568

 

$

 1,584

 

$

 59,726

 

$

 18,652

 

Deferred tax adjustment for 2017 Tax Reform Act(4)

 

 

 (24,542)

 

 

 —

 

 

 (24,542)

 

 

 —

 

Impact of 2017 Tax Reform Act on current tax expense(4)

 

 

 (1,288)

 

 

 —

 

 

 (1,288)

 

 

 —

 

Restructuring charges, after-tax(1)

 

 

 142

 

 

 6,273

 

 

 1,810

 

 

 6,273

 

Nonunion pension expense, including settlement, after-tax(2)

 

 

 991

 

 

 312

 

 

 3,721

 

 

 1,878

 

Life insurance proceeds and changes in cash surrender value

 

 

 (699)

 

 

 (884)

 

 

 (2,642)

 

 

 (2,864)

 

Tax expense (benefit) from vested RSUs(5)

 

 

 14

 

 

 —

 

 

 (1,215)

 

 

 —

 

Transaction costs, after-tax(3)

 

 

 —

 

 

 24

 

 

 —

 

 

 365

 

Non-GAAP amounts

 

$

 11,186

 

$

 7,309

 

$

 35,570

 

$

 24,304

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts on GAAP basis

 

$

 1.37

 

$

 0.06

 

$

 2.25

 

$

 0.71

 

Deferred tax adjustment for 2017 Tax Reform Act(4)

 

 

 (0.92)

 

 

 —

 

 

 (0.93)

 

 

 —

 

Impact of 2017 Tax Reform Act on current tax expense(4)

 

 

 (0.05)

 

 

 —

 

 

 (0.05)

 

 

 —

 

Restructuring charges, after-tax(1)

 

 

 0.01

 

 

 0.24

 

 

 0.07

 

 

 0.24

 

Nonunion pension expense, including settlement, after-tax(2)

 

 

 0.04

 

 

 0.01

 

 

 0.14

 

 

 0.07

 

Life insurance proceeds and changes in cash surrender value

 

 

 (0.03)

 

 

 (0.03)

 

 

 (0.10)

 

 

 (0.11)

 

Tax expense (benefit) from vested RSUs(5)

 

 

 —

 

 

 —

 

 

 (0.05)

 

 

 —

 

Transaction costs, after-tax(3)

 

 

 —

 

 

 —

 

 

 —

 

 

 0.01

 

Non-GAAP amounts

 

$

 0.42

 

$

 0.28

 

$

 1.33

 

$

 0.92

 


  1. Restructuring charges relate to the realignment of the Company’s organizational structure as announced on November 3, 2016.
  2. Nonunion pension expense is presented as a non-GAAP adjustment with pension settlement expense, for all periods presented, because expenses related to the plan have been excluded from the financial information management uses to make operating decisions, as an amendment to terminate the nonunion defined benefit pension plan with a termination date of December 31, 2017 was executed in November 2017. Plan participants will have an election window in which they can choose any form of payment allowed by the plan for immediate commencement of payment or defer payment until a later date with pension settlements related to the plan termination likely to occur in the second half of 2018.
  3. Transaction costs for the year ended December  31, 2016 are associated with the September 2, 2016 acquisition of Logistics & Distribution Services, LLC.
  4. Impact on current and deferred income tax expense as a result of recognizing a reasonable estimate of the tax effects of the Tax Cuts and Jobs Act (“2017 Tax Reform Act”) that was signed into law on December 22, 2017.
  5. The Company recognized the tax impact for the vesting of share-based compensation resulting in excess tax expense during the three months ended December 31, 2017 and excess tax benefit during the year ended December 31, 2017.

ARCBEST CORPORATION

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES – Continued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective Tax Rate Reconciliation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ArcBest Corporation - Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ thousands, except percentages)

 

Three Months Ended December 31, 2017

 

 

 

 

 

 

 

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Before

 

Income

 

 

 

 

 

 

 

 

Operating

 

Other

 

Income

 

Tax

 

Net

 

Effective

 

 

Income

 

Income

 

Taxes

 

Provision

 

Income

 

Tax Rate

Amounts on GAAP basis

 

$

 16,680

 

$

 (660)

 

$

 16,020

 

$

 (20,548)

 

$

 36,568

 

 (128.3)

%  

Deferred tax adjustment for 2017 Tax Reform Act(1)

 

 

 —

 

 

 —

 

 

 —

 

 

 24,542

 

 

 (24,542)

 

 —

 

Impact of 2017 Tax Reform Act on current tax expense(1)

 

 

 —

 

 

 —

 

 

 —

 

 

 1,288

 

 

 (1,288)

 

 —

 

Restructuring charges(2)

 

 

 232

 

 

 —

 

 

 232

 

 

 90

 

 

 142

 

 38.8

 

Nonunion pension expense, including settlement(3)

 

 

 1,622

 

 

 —

 

 

 1,622

 

 

 631

 

 

 991

 

 38.9

 

Life insurance proceeds and changes in cash surrender value

 

 

 —

 

 

 (699)

 

 

 (699)

 

 

 —

 

 

 (699)

 

 —

 

Tax expense from vested RSUs(4)

 

 

 —

 

 

 —

 

 

 —

 

 

 (14)

 

 

 14

 

 —

 

Non-GAAP amounts

 

$

 18,534

 

$

 (1,359)

 

$

 17,175

 

$

 5,989

 

$

 11,186

 

 34.9

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 2016

 

 

 

 

 

 

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Before

 

Income

 

 

 

 

 

 

 

 

Operating