ArcBest Announces Third Quarter 2019 Results

FORT SMITH, Arkansas, October 31, 2019 — ArcBest^® (Nasdaq: ARCB), a leading logistics company with creative problem solvers who deliver innovative solutions, today reported third quarter 2019 revenue of $787.6 million compared to third quarter 2018 revenue of $826.2 million.  Third quarter 2019 operating income was $31.2 million compared to operating income of $56.1 million in third quarter last year.  Third quarter net income was $16.3 million, or $0.62 per diluted share compared to third quarter 2018 net income of $40.8 million, or $1.52 per diluted share.

Excluding certain items in both periods, as identified in the attached reconciliation tables, including final nonunion pension charges of $6.0 million, or $0.23 per diluted share, eliminating any further nonunion pension expense, non‑GAAP net income was $27.0 million, or $1.02 per diluted share, in third quarter 2019 compared to third quarter 2018 net income of $40.0 million, or $1.49 per diluted share. 

“While below last year’s record-setting levels, the third quarter represented one of the best performances achieved for that period in recent history as we continued to see rational pricing amid softer demand compared with last year,” said Chairman, President & CEO Judy R. McReynolds. “Revenue for expedite and truckload brokerage services declined as available capacity increased, which has been the case throughout the year, while our managed transportation solutions revenue continued to grow as a result of our team’s ability to provide valued expertise.”

 

Asset-Based

Results of Operations

Third Quarter 2019 Versus Third Quarter 2018

• Revenue of $565.6 million compared to $585.3 million, a per-day decrease of 4.1 percent.
• Tonnage per day decrease of 4.6 percent, with a ten percent decrease in LTL‑rated freight offset by a double digit percentage increase in truckload‑rated freight.
• Shipments per day decrease of 3.9 percent. 
• Total weight per shipment decreased 0.7 percent with a decrease in the average LTL‑rated weight per shipment of approximately 6 percent.
• Total billed revenue per hundredweight increased 1.5 percent.  Excluding fuel surcharge, the percentage increase on LTL‑rated freight was in the high‑single digits.
• Operating income of $31.7 million and an operating ratio of 94.4 percent compared to operating income of $50.2 million and an operating ratio of 91.4 percent.  On a non-GAAP basis, operating income of        $38.5 million and an operating ratio of 93.2 percent compared to operating income of $51.2 million and an operating ratio of 91.2 percent.

 

 

1. U.S. Generally Accepted Accounting Principles

Reduced customer demand during a more moderate economic period resulted in fewer third quarter shipments and lower total freight tonnage in the Asset‑Based operating segment compared to the same period last year.  The lower business levels experienced during the third quarter reflect a reduction in LTL‑rated tonnage partially offset by an increase in TL‑rated, spot shipments.  This Asset‑Based business mix, combined with a decrease in the size of the average LTL‑rated shipment, contributed to a reduction in total third quarter Asset‑Based revenue.  Yield management initiatives continue to generate positive results.  The improvement in third quarter total revenue per hundredweight included additional, solid increases in average LTL pricing above a strong pricing period in 2018.

Lower freight levels adversely impacted productivity in city pickup, dock handling and final shipment delivery contributing to cost increases in these operational areas.  Despite a reduction in fuel expense, increased repair and parts costs contributed to higher third quarter equipment maintenance costs.  Third quarter linehaul costs were below the prior year due to improved utilization of owned equipment combined with reductions in the use of rail and other outside carrier resources.

Asset-Light²

Results of Operations

Third Quarter 2019 Versus Third Quarter 2018

• Revenue of $253.7 million compared to $255.9 million.
• Operating income of $3.6 million compared to operating income of $11.1 million.  On a non-GAAP basis, operating income of $3.7 million compared to operating income of $9.1 million.
• Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) of $6.6 million compared to Adjusted EBITDA of $14.9 million.

A reduction in both total shipments and average revenue per shipment associated with lower market demand resulted in a third quarter revenue decline in the Asset-Light ArcBest segment compared to last year.  As seen throughout this year relative to 2018, expedite and truckload brokerage services were the primary reasons for the overall reduction in revenue.  Current market conditions have impacted customer pricing and freight mix.  This, combined with purchased transportation costs that were comparable to those experienced in last year’s higher revenue environment, put pressure on third quarter margins and reduced Asset-Light operating income.  Managed transportation services were a significant positive contributor to Asset-Light results as the recent trend of solid demand for these value-added logistics services continued.  Household goods shipments handled within the Asset‑Light business increased and were another positive contributor to this segment’s revenue and profitability totals.  At FleetNet, total event growth resulted in improved third quarter operating income.

Closing Comments

“Results for the first nine months remained solid though below last year’s record-setting pace, as our customers’ need for complex supply chain solutions aligns well with the broad array of services and expertise we provide,” said McReynolds. “We expect the trends that began in the first quarter, including more available capacity and softer market demand, to remain prevalent for the rest of the year. We will work to reduce costs where prudent while still investing in innovative technology that enables a best-in-class customer experience and offers the optimum benefit and improved efficiency to ArcBest.”

 

 

 

 

 

 

 

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 third quarter results. The call will be on Friday, November 1st at 9:30 a.m. EDT (8:30 a.m. CDT). Interested parties are invited to listen by calling (800) 931‑4071. Following the call, a recorded playback will be available through the end of the day on        December 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 21930608. The conference call and playback can also be accessed, through December 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 September 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 or processes, including the pilot test program at ABF Freight; failure to realize potential benefits associated with new or enhanced technology or processes, including the pilot test program at ABF Freight, and any write-offs associated therewith; 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 the 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						Nine Months Ended
		September 30						September 30
		2019			2018			2019			2018
		(Unaudited)
		($ thousands, except share and per share data)
REVENUES		$	787,563		$	826,158		$	2,270,892		$	2,319,509
OPERATING EXPENSES(1)			756,355			770,103			2,195,893			2,247,573
OPERATING INCOME			31,208			56,055			74,999			71,936
OTHER INCOME (COSTS)
Interest and dividend income			1,768			1,120			4,862			2,360
Interest and other related financing costs			(2,900)			(2,470)			(8,593)			(6,542)
Other, net			(6,734)			(714)			(7,770)			(4,038)
			(7,866)			(2,064)			(11,501)			(8,220)
INCOME BEFORE INCOME TAXES			23,342			53,991			63,498			63,716
INCOME TAX PROVISION			7,072			13,215			17,964			11,753
NET INCOME		$	16,270		$	40,776		$	45,534		$	51,963
EARNINGS PER COMMON SHARE(2)
Basic		$	0.64		$	1.58		$	1.78		$	2.02
Diluted		$	0.62		$	1.52		$	1.72		$	1.94
AVERAGE COMMON SHARES OUTSTANDING
Basic			25,527,982			25,697,509			25,550,365			25,670,435
Diluted			26,416,595			26,795,659			26,461,668			26,708,259
CASH DIVIDENDS DECLARED PER COMMON SHARE		$	0.08		$	0.08		$	0.24		$	0.24

1. Includes a one-time charge of $37.9 million for the nine months ended September 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

 

		September 30			December 31
		2019			2018
		(Unaudited)			Note
		($ thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	183,838		$	190,186
Short-term investments			124,257			106,806
Accounts receivable, less allowances (2019 - $5,548; 2018 - $7,380)			292,935			297,051
Other accounts receivable, less allowances (2019 - $469; 2018 - $806)			18,122			19,146
Prepaid expenses			25,365			25,304
Prepaid and refundable income taxes			8,186			1,726
Other			5,285			9,007
TOTAL CURRENT ASSETS			657,988			649,226
PROPERTY, PLANT AND EQUIPMENT
Land and structures			339,298			339,640
Revenue equipment			902,289			858,251
Service, office, and other equipment			229,691			199,230
Software			146,789			138,517
Leasehold improvements			10,212			9,365
			1,628,279			1,545,003
Less allowances for depreciation and amortization			948,205			913,815
			680,074			631,188
GOODWILL			108,320			108,320
INTANGIBLE ASSETS, NET			65,583			68,949
OPERATING RIGHT-OF-USE ASSETS			67,404			—
DEFERRED INCOME TAXES			6,128			7,468
OTHER LONG-TERM ASSETS			85,135			74,080
		$	1,670,632		$	1,539,231
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable		$	160,054		$	143,785
Income taxes payable			198			1,688
Accrued expenses			234,863			243,111
Current portion of long-term debt			50,197			54,075
Current portion of operating lease liabilities			18,492			—
Current portion of pension and postretirement liabilities			1,921			8,659
TOTAL CURRENT LIABILITIES			465,725			451,318
LONG-TERM DEBT, less current portion			248,223			237,600
OPERATING LEASE LIABILITIES, less current portion			52,782			—
PENSION AND POSTRETIREMENT LIABILITIES, less current portion			32,059			31,504
OTHER LONG-TERM LIABILITIES			38,151			44,686
DEFERRED INCOME TAXES			70,066			56,441
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value, authorized 70,000,000 shares; issued 2019: 28,801,025 shares; 2018: 28,684,779 shares			288			287
Additional paid-in capital			331,773			325,712
Retained earnings			540,778			501,389
Treasury stock, at cost, 2019: 3,299,669 shares; 2018: 3,097,634 shares			(101,583)			(95,468)
Accumulated other comprehensive loss			(7,630)			(14,238)
TOTAL STOCKHOLDERS’ EQUITY			763,626			717,682
		$	1,670,632		$	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

 

		Nine Months Ended
		September 30
		2019			2018
		Unaudited
		($ thousands)
OPERATING ACTIVITIES
Net income		$	45,534		$	51,963
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			79,967			78,305
Amortization of intangibles			3,365			3,394
Pension settlement expense, including termination expense			8,135			1,603
Share-based compensation expense			7,268			6,185
Provision for losses on accounts receivable			832			1,937
Change in deferred income taxes			14,099			3,697
Gain on sale of property and equipment			(1,384)			(188)
Gain on sale of subsidiaries			—			(1,945)
Changes in operating assets and liabilities:
Receivables			4,216			(47,287)
Prepaid expenses			(265)			1,013
Other assets			(4,236)			(4,826)
Income taxes			(7,883)			5,675
Operating right-of-use assets and lease liabilities, net			526			—
Multiemployer pension fund withdrawal liability(1)			(435)			22,744
Accounts payable, accrued expenses, and other liabilities			(11,726)			51,309
NET CASH PROVIDED BY OPERATING ACTIVITIES			138,013			173,579
INVESTING ACTIVITIES
Purchases of property, plant and equipment, net of financings			(69,773)			(39,249)
Proceeds from sale of property and equipment			4,748			2,917
Proceeds from sale of subsidiaries			—			4,680
Purchases of short-term investments			(105,747)			(67,121)
Proceeds from sale of short-term investments			88,730			47,878
Capitalization of internally developed software			(8,500)			(7,411)
NET CASH USED IN INVESTING ACTIVITIES			(90,542)			(58,306)
FINANCING ACTIVITIES
Payments on long-term debt			(43,773)			(49,967)
Proceeds from notes payable			9,552			—
Net change in book overdrafts			(5,570)			(1,975)
Deferred financing costs			(562)			(202)
Payment of common stock dividends			(6,145)			(6,176)
Purchases of treasury stock			(6,115)			(201)
Payments for tax withheld on share-based compensation			(1,206)			(88)
NET CASH USED IN FINANCING ACTIVITIES			(53,819)			(58,609)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(6,348)			56,664
Cash and cash equivalents at beginning of period			190,186			120,772
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	183,838		$	177,436
NONCASH INVESTING ACTIVITIES
Equipment financed		$	40,966		$	71,575
Accruals for equipment received		$	18,949		$	438
Lease liabilities arising from obtaining right-of-use assets		$	26,810		$	—

 

1. The nine months ended September 30, 2018 includes a one-time charge related to the multiemployer pension plan withdrawal liability.

 

 

		Three Months Ended												Nine Months Ended
		September 30												September 30
		2019						2018						2019						2018
		Unaudited
		($ thousands, except percentages)
REVENUES
Asset-Based		$	565,621					$	585,290					$	1,631,348					$	1,626,644
ArcBest			199,758						205,449						554,135						587,369
FleetNet			53,976						50,494						158,957						145,045
Total Asset-Light			253,734						255,943						713,092						732,414
Other and eliminations			(31,792)						(15,075)						(73,548)						(39,549)
Total consolidated revenues		$	787,563					$	826,158					$	2,270,892					$	2,319,509
OPERATING EXPENSES
Asset-Based
Salaries, wages, and benefits		$	296,503		52.4	%		$	292,082		49.9	%		$	873,795		53.6	%		$	848,611		52.2	%
Fuel, supplies, and expenses(1)			65,738		11.6				63,936		10.9				195,502		12.0				191,163		11.7
Operating taxes and licenses			12,865		2.3				12,261		2.1				37,477		2.3				35,927		2.2
Insurance			7,646		1.4				9,448		1.6				23,235		1.4				24,055		1.5
Communications and utilities			5,064		0.9				4,308		0.7				14,181		0.9				12,964		0.8
Depreciation and amortization			23,776		4.2				22,200		3.8				66,370		4.0				64,492		4.0
Rents and purchased transportation			61,102		10.8				70,946		12.1				167,234		10.2				180,332		11.1
Shared services(1)			56,031		9.9				57,472		9.8				161,664		9.9				158,042		9.7
Multiemployer pension fund withdrawal liability charge(2)			—		—				—		—				—		—				37,922		2.3
Gain on sale of property and equipment			(82)		—				(123)		—				(1,703)		(0.1)				(522)		—
Innovative technology costs(1)(3)			4,664		0.8				1,080		0.2				9,200		0.6				2,947		0.2
Other(1)			592		0.1				1,530		0.3				2,878		0.2				3,778		0.2
Total Asset-Based			533,899		94.4	%			535,140		91.4	%			1,549,833		95.0	%			1,559,711		95.9	%
ArcBest
Purchased transportation			164,521		82.4	%			164,322		80.0	%			452,178		81.6	%			475,614		81.0	%
Supplies and expenses			2,780		1.4				3,522		1.7				8,412		1.5				10,290		1.7
Depreciation and amortization(4)			2,607		1.3				3,558		1.7				8,813		1.6				10,563		1.8
Shared services			25,032		12.5				23,453		11.4				71,204		12.9				68,857		11.7
Other			2,366		1.2				2,546		1.2				7,224		1.3				6,973		1.2
Restructuring costs			—		—				—		—				—		—				152		—
Gain on sale of subsidiaries(5)			—		—				(1,945)		(0.9)				—		—				(1,945)		(0.3)
			197,306		98.8	%			195,456		95.1	%			547,831		98.9	%			570,504		97.1	%
FleetNet			52,805		97.8	%			49,406		97.8	%			155,272		97.7	%			141,407		97.5	%
Total Asset-Light			250,111						244,862						703,103						711,911
Other and eliminations			(27,655)						(9,899)						(57,043)						(24,049)
Total consolidated operating expenses		$	756,355		96.0	%		$	770,103		93.2	%		$	2,195,893		96.7	%		$	2,247,573		96.9	%
OPERATING INCOME
Asset-Based		$	31,722					$	50,150					$	81,515					$	66,933
ArcBest			2,452						9,993						6,304						16,865
FleetNet			1,171						1,088						3,685						3,638
Total Asset-Light			3,623						11,081						9,989						20,503
Other and eliminations(6)			(4,137)						(5,176)						(16,505)						(15,500)
Total consolidated operating income		$	31,208					$	56,055					$	74,999					$	71,936

1. In third quarter 2019, the presentation of Asset-Based segment expenses was modified to present innovative technology costs as a separate operating expense line item. Previously, innovative technology costs incurred directly by the segment or allocated through shared services were categorized in individual segment expense line items. Certain reclassifications have been made to the prior period operating segment expenses to conform to the current year presentation. There was no impact on the segment’s total expenses as a result of the reclassifications.
2. The nine months ended September 30, 2018 includes a one-time charge for the multiemployer pension plan withdrawal liability.
3. Represents costs associated with the previously announced freight handling pilot test program at ABF Freight.
4. Depreciation and amortization consists primarily of amortization of intangibles, including customer relationships, and software associated with acquired businesses.
5. Gain recognized in the 2018 periods relates to the sale of the ArcBest segment’s military moving businesses in December 2017.
6. “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, including innovative technology costs.