ArcBest Announces Second Quarter 2019 Results

ArcBest^® Announces Second Quarter 2019 Results

 

• Second quarter 2019 revenue of $771.5 million, and net income of $24.4 million, or $0.92 per diluted share.  On a non-GAAP¹ basis, second quarter 2019 net income was $24.6 million, or $0.93 per diluted share.
• Asset-Based yield improvement in the midst of lower shipment and tonnage levels
• Asset-Light revenue and operating income impacted by lower market demand during a period that included resource investments for the future

FORT SMITH, Arkansas, July 30, 2019 — ArcBest^® (Nasdaq: ARCB), a leading logistics company with creative problem solvers who deliver integrated solutions, today reported second quarter 2019 revenue of $771.5 million compared to second quarter 2018 revenue of $793.4 million.  Second quarter 2019 operating income was $35.2 million compared to operating income of $3.2 million in second quarter last year.  Second quarter net income was $24.4 million, or $0.92 per diluted share compared to second quarter 2018 net income of $1.2 million, or $0.05 per diluted share.

Excluding certain items in both periods, as identified in the attached reconciliation tables, non-GAAP net income was $24.6 million, or $0.93 per diluted share, in second quarter 2019 compared to second quarter 2018 net income of $29.8 million, or $1.12 per diluted share.  Adjustments in the second quarter 2018 period included a one-time after-tax charge of $28.2 million, or $1.05 per diluted share, related to the restructure of ABF Freight’s obligation with one multiemployer pension plan.

“Once again we saw that business conditions, while still relatively healthy, moderated in the second quarter from last year’s record-setting levels but on an overall historical basis the quarter was solid with a rational underlying pricing environment,” said Chairman, President and CEO Judy R. McReynolds. “Revenue improved month to month for our asset-based business while our asset-light business continued to see softer expedited services conditions on increased available truckload capacity.”

 

Asset-Based

Results of Operations

Second Quarter 2019 Versus Second Quarter 2018

• Revenue of $559.6 million compared to $559.2 million, a per-day increase of 0.9 percent.
• Tonnage per day decrease of 3.4 percent, with a mid-single digit percentage decrease in LTL-rated freight.
• Shipments per day decrease of 1.2 percent.  Total weight per shipment decreased 2.2 percent and the decrease in the average LTL-rated weight per shipment was approximately 4 percent.
• Total billed revenue per hundredweight increased 4.1 percent, positively impacted by lower average weight per shipment.  Excluding fuel surcharge, the percentage increase on LTL-rated freight was in the high-single digits.
• Operating income of $36.2 million and an operating ratio of 93.5 percent compared to operating income of $3.4 million and an operating ratio of 99.4 percent.  On a non-GAAP basis, operating income of $36.2 million and an operating ratio of 93.5 percent compared to operating income of $41.3 million and an operating ratio of 92.6 percent.  Operating income adjustments in the second quarter 2018 period included a one-time charge of $37.9 million related to the previously mentioned restructure of ABF Freight’s obligation with one multiemployer pension plan.

 

1. U.S. Generally Accepted Accounting Principles

Continued improvement in yield management and customer pricing initiatives, despite fewer shipments and lower freight tonnage, resulted in a slight increase in second quarter, daily revenue versus last year.  The reduction in second quarter total tonnage per day reflected lower LTL-rated freight tonnage partially offset by increases in truckload-rated spot shipments moving in the asset-based network.  Though below last year’s second quarter, total average Asset-Based weight per shipment trends improved throughout the quarter, partially due to the growth in truckload-rated spot shipments. 

Increased costs associated with city pickup, dock handling and final shipment delivery impacted second quarter profitability as labor and other operational resources were somewhat elevated relative to decreasing LTL freight levels throughout the quarter.  An emphasis on customer service continues to be a focal point.  Linehaul costs were below prior year due, primarily, to reductions in the use of rail and outside carrier resources.

Asset-Light²

Results of Operations

Second Quarter 2019 Versus Second Quarter 2018

• Revenue of $232.9 million compared to $246.8 million.
• Operating income of $3.1 million compared to operating income of $4.7 million.
• Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) of $6.5 million compared to Adjusted EBITDA of $8.7 million.

Compared to last year’s second quarter, fewer shipments and lower average shipment revenue contributed to reduced total Asset-Light ArcBest segment revenue.  This year’s more available truckload capacity, compared to the tighter market last year, continued to be a factor impacting customer pricing and the ArcBest segment’s results.  Because of lower revenue per shipment related to changing market conditions versus the prior year, expedite and truckload brokerage were the main contributors to the reduction in total ArcBest segment revenue. Increased revenue and shipment levels in managed transportation services were consistent with the growth trend of that business in recent quarters.  Total second quarter ArcBest operating expenses improved versus 2018.  At FleetNet, event growth and cost controls contributed to the quarter’s operating income.

Closing Comments

“The first six months of 2019 saw moderated activity from the record-setting pace experienced in 2018,” McReynolds said. “Our team has executed well in this environment, providing innovative full supply chain solutions and trusted advice to customers for all of their logistics challenges, with managed transportation solutions increasingly in demand. Our outlook for the second half sees a continuation of the current trends and we will monitor for any changes to that view, particularly as it relates to federal tariff policies and developments in the manufacturing and industrial sectors of the economy.”

 

 

 

 

 

 

 

 

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

Conference Call

ArcBest will host a conference call with company executives to discuss the 2019 second quarter results. The call will be on Wednesday, July 31st at 9:30 a.m. EDT (8:30 a.m. CDT). Interested parties are invited to listen by calling (800) 897‑3679. Following the call, a recorded playback will be available through the end of the day on September 15, 2019. To listen to the playback, dial (800) 633-8284 or (402) 977-9140 (for international callers). The conference call ID for the playback is 21926462. The conference call and playback can also be accessed, through September 15, 2019, on ArcBest’s website at arcb.com.

 

Call participants can submit questions this afternoon prior to the conference call by emailing them to ir@arcb.com.  On the call, responses will be provided to as many questions as possible in the time available.

 

About ArcBest

ArcBest^® (Nasdaq: ARCB) is a leading logistics company with creative problem solvers who deliver integrated solutions.  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.  At ArcBest, we’re More Than Logistics^SM.  For more information, visit arcb.com.

Forward-Looking Statements

Certain statements and information in this press release concerning results for the three months ended June 30, 2019 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; untimely or ineffective development and implementation of new or enhanced technology; the loss or reduction of business from large customers; competitive initiatives and pricing pressures; 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; the cost, timing, and performance of growth initiatives; 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; availability and cost of reliable third-party services; governmental regulations; environmental laws and regulations, including emissions-control regulations; union and nonunion employee wages and benefits, including changes in required contributions to multiemployer plans; our ability to secure independent owner operators and/or operational or regulatory issues related to our use of their services; litigation or claims asserted against us; maintaining our intellectual property rights, brand, and corporate reputation; the loss of key employees or the inability to execute succession planning strategies; 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; the cost, integration, and performance of any recent or future acquisitions; 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; greater than anticipated funding requirements for our nonunion defined benefit pension plan; 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.

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						Six Months Ended
		June 30						June 30
		2019			2018			2019			2018
		(Unaudited)
		($ thousands, except share and per share data)
REVENUES		$	771,490		$	793,350		$	1,483,329		$	1,493,351
OPERATING EXPENSES(1)			736,290			790,194			1,439,538			1,477,470
OPERATING INCOME			35,200			3,156			43,791			15,881
OTHER INCOME (COSTS)
Interest and dividend income			1,616			714			3,094			1,240
Interest and other related financing costs			(2,811)			(2,013)			(5,693)			(4,072)
Other, net			(445)			(1,123)			(1,036)			(3,324)
			(1,640)			(2,422)			(3,635)			(6,156)
INCOME BEFORE INCOME TAXES			33,560			734			40,156			9,725
INCOME TAX PROVISION (BENEFIT)			9,184			(499)			10,892			(1,462)
NET INCOME		$	24,376		$	1,233		$	29,264		$	11,187
EARNINGS PER COMMON SHARE(2)
Basic		$	0.95		$	0.05		$	1.14		$	0.43
Diluted		$	0.92		$	0.05		$	1.10		$	0.42
AVERAGE COMMON SHARES OUTSTANDING
Basic			25,554,286			25,670,325			25,562,306			25,656,674
Diluted			26,431,592			26,699,549			26,483,011			26,653,282
CASH DIVIDENDS DECLARED PER COMMON SHARE		$	0.08		$	0.08		$	0.16		$	0.16

1. Includes a one-time charge of $37.9 million for the three and six months ended June 30, 2018 for the multiemployer pension fund withdrawal liability resulting from the transition agreement ABF Freight, Inc. entered into with the New England Teamsters and Trucking Industry Pension Fund.
2. 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

 

		June 30			December 31
		2019			2018
		(Unaudited)			Note
		($ thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	181,731		$	190,186
Short-term investments			117,657			106,806
Accounts receivable, less allowances (2019 - $6,238; 2018 - $7,380)			296,090			297,051
Other accounts receivable, less allowances (2019 - $463; 2018 - $806)			17,207			19,146
Prepaid expenses			28,546			25,304
Prepaid and refundable income taxes			5,237			1,726
Other			4,982			9,007
TOTAL CURRENT ASSETS			651,450			649,226
PROPERTY, PLANT AND EQUIPMENT
Land and structures			339,255			339,640
Revenue equipment			888,588			858,251
Service, office, and other equipment			218,131			199,230
Software			143,181			138,517
Leasehold improvements			10,058			9,365
			1,599,213			1,545,003
Less allowances for depreciation and amortization			947,264			913,815
			651,949			631,188
GOODWILL			108,320			108,320
INTANGIBLE ASSETS, NET			66,700			68,949
OPERATING RIGHT-OF-USE ASSETS			68,810			—
DEFERRED INCOME TAXES			6,296			7,468
OTHER LONG-TERM ASSETS			80,402			74,080
		$	1,633,927		$	1,539,231
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable		$	166,829		$	143,785
Income taxes payable			1,942			1,688
Accrued expenses			228,994			243,111
Current portion of long-term debt			47,205			54,075
Current portion of operating lease liabilities			18,273			—
Current portion of pension and postretirement liabilities			8,231			8,659
TOTAL CURRENT LIABILITIES			471,474			451,318
LONG-TERM DEBT, less current portion			235,001			237,600
OPERATING LEASE LIABILITIES, less current portion			54,040			—
PENSION AND POSTRETIREMENT LIABILITIES, less current portion			31,874			31,504
OTHER LONG-TERM LIABILITIES			37,268			44,686
DEFERRED INCOME TAXES			61,111			56,441
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value, authorized 70,000,000 shares; issued 2019: 28,786,473 shares; 2018: 28,684,779 shares			288			287
Additional paid-in capital			329,388			325,712
Retained earnings			526,551			501,389
Treasury stock, at cost, 2019: 3,266,169 shares; 2018: 3,097,634 shares			(100,639)			(95,468)
Accumulated other comprehensive loss			(12,429)			(14,238)
TOTAL STOCKHOLDERS’ EQUITY			743,159			717,682
		$	1,633,927		$	1,539,231

 

Note:  The balance sheet at December 31, 2018 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

 

		Six Months Ended
		June 30
		2019			2018
		Unaudited
		($ thousands)
OPERATING ACTIVITIES
Net income		$	29,264		$	11,187
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			51,722			51,409
Amortization of intangibles			2,249			2,264
Pension settlement expense			1,634			1,085
Share-based compensation expense			4,859			3,544
Provision for losses on accounts receivable			621			1,069
Change in deferred income taxes			5,124			(10,818)
Gain on sale of property and equipment			(1,469)			(166)
Changes in operating assets and liabilities:
Receivables			1,781			(31,281)
Prepaid expenses			(3,323)			2,393
Other assets			(2,798)			2,018
Income taxes			(3,042)			8,024
Operating right-of-use assets and lease liabilities, net			159			—
Multiemployer pension fund withdrawal liability(1)			(289)			37,922
Accounts payable, accrued expenses, and other liabilities			(6,021)			40,914
NET CASH PROVIDED BY OPERATING ACTIVITIES			80,471			119,564
INVESTING ACTIVITIES
Purchases of property, plant and equipment, net of financings			(41,909)			(24,763)
Proceeds from sale of property and equipment			3,798			2,074
Purchases of short-term investments			(43,327)			(26,006)
Proceeds from sale of short-term investments			33,332			14,647
Capitalization of internally developed software			(5,535)			(5,997)
NET CASH USED IN INVESTING ACTIVITIES			(53,641)			(40,045)
FINANCING ACTIVITIES
Payments on long-term debt			(29,984)			(33,694)
Proceeds from notes payable			9,552			—
Net change in book overdrafts			(4,398)			(2,888)
Payment of common stock dividends			(4,102)			(4,116)
Purchases of treasury stock			(5,171)			(201)
Payments for tax withheld on share-based compensation			(1,182)			(85)
NET CASH USED IN FINANCING ACTIVITIES			(35,285)			(40,984)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(8,455)			38,535
Cash and cash equivalents at beginning of period			190,186			120,772
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	181,731		$	159,307
NONCASH INVESTING ACTIVITIES
Equipment financed		$	10,964		$	14,407
Accruals for equipment received		$	19,402		$	8,649
Lease liabilities arising from obtaining right-of-use assets		$	23,049		$	—

1. The six months ended June 30, 2018 includes a one-time charge related to the multiemployer pension plan withdrawal liability previously discussed in this press release.

 

 

		Three Months Ended												Six Months Ended
		June 30												June 30
		2019						2018						2019						2018
		Unaudited
		($ thousands, except percentages)
REVENUES
Asset-Based		$	559,648					$	559,239					$	1,065,727					$	1,041,354
ArcBest			181,173						199,987						354,377						381,920
FleetNet			51,722						46,792						104,981						94,551
Total Asset-Light			232,895						246,779						459,358						476,471
Other and eliminations			(21,053)						(12,668)						(41,756)						(24,474)
Total consolidated revenues		$	771,490					$	793,350					$	1,483,329					$	1,493,351
OPERATING EXPENSES
Asset-Based
Salaries, wages, and benefits		$	297,016		53.1	%		$	286,750		51.3	%		$	577,292		54.2	%		$	556,529		53.5	%
Fuel, supplies, and expenses			66,853		11.9				65,040		11.6				131,580		12.3				127,233		12.2
Operating taxes and licenses			12,214		2.2				11,910		2.1				24,612		2.3				23,666		2.3
Insurance			7,598		1.4				7,979		1.4				15,589		1.5				14,607		1.4
Communications and utilities			4,529		0.8				4,135		0.7				9,149		0.9				8,656		0.8
Depreciation and amortization			21,743		3.9				21,362		3.8				42,723		4.0				42,292		4.1
Rents and purchased transportation			57,687		10.3				63,253		11.3				107,599		10.1				109,386		10.5
Shared services(1)			56,013		10.0				56,825		10.2				106,725		10.0				102,432		9.8
Multiemployer pension fund withdrawal liability charge(2)			—		—				37,922		6.8				—		—				37,922		3.6
Gain on sale of property and equipment			(1,587)		(0.3)				(266)		—				(1,621)		(0.2)				(399)		—
Other			1,404		0.2				948		0.2				2,286		0.2				2,247		0.2
Total Asset-Based			523,470		93.5	%			555,858		99.4	%			1,015,934		95.3	%			1,024,571		98.4	%
ArcBest
Purchased transportation			147,552		81.4	%			162,920		81.5	%			287,657		81.2	%			311,292		81.5	%
Supplies and expenses			2,858		1.6				3,538		1.7				5,632		1.6				6,768		1.8
Depreciation and amortization(3)			3,055		1.7				3,597		1.8				6,206		1.7				7,005		1.8
Shared services(1)			23,141		12.8				23,536		11.7				46,172		13.0				45,404		11.9
Other			2,445		1.3				2,546		1.3				4,858		1.4				4,427		1.2
Restructuring costs(4)			—		—				143		0.1				—		—				152		—
			179,051		98.8	%			196,280		98.1	%			350,525		98.9	%			375,048		98.2	%
FleetNet			50,696		98.0	%			45,763		97.8	%			102,467		97.6	%			92,001		97.3	%
Total Asset-Light			229,747						242,043						452,992						467,049
Other and eliminations			(16,927)						(7,707)						(29,388)						(14,150)
Total consolidated operating expenses		$	736,290		95.4	%		$	790,194		99.6	%		$	1,439,538		97.0	%		$	1,477,470		98.9	%
OPERATING INCOME
Asset-Based		$	36,178					$	3,381					$	49,793					$	16,783
ArcBest			2,122						3,707						3,852						6,872
FleetNet			1,026						1,029						2,514						2,550
Total Asset-Light			3,148						4,736						6,366						9,422
Other and eliminations(5)			(4,126)						(4,961)						(12,368)						(10,324)
Total consolidated operating income		$	35,200					$	3,156					$	43,791					$	15,881

1. Shared services represent costs incurred to support all segments, including sales, pricing, customer service, marketing, capacity sourcing functions, human resources, financial services, information technology, and other company-wide services.
2. The three and six months ended June 30, 2018 include a one-time charge for the multiemployer pension plan withdrawal liability previously discussed in this press release.
3. Depreciation and amortization consists primarily of amortization of intangibles, including customer relationships, and software associated with acquired businesses.
4. Restructuring charges relate to the realignment of the Company’s organizational structure as announced on November 3, 2016.
5. “Other and eliminations” includes corporate costs for certain unallocated shared service costs which are not attributable to any segment, additional investments to offer comprehensive transportation and logistics services across multiple operating segments, and other investments in ArcBest technology and innovations.