ArcBest Announces Third Quarter 2020 Results

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

ArcBest^® Announces Third Quarter 2020 Results

 •           Third quarter 2020 revenue of $795.0 million, and net income of $29.4 million, or $1.11 per diluted share.  On a non GAAP¹ basis, third quarter 2020 net income was $32.4 million, or $1.22 per diluted share.

•           Improving business trends contribute to increased Asset-Based and Asset-Light profitability

 FORT SMITH, Arkansas, November 3, 2020 — ArcBest^® (Nasdaq: ARCB), a leader in supply chain logistics, today reported third quarter 2020 revenue of $795.0 million compared to third quarter 2019 revenue of $787.6 million.  Third quarter 2020 operating income was $39.8 million compared to operating income of $31.2 million in the same period last year.  Net income was $29.4 million, or $1.11 per diluted share, compared to third quarter 2019 net income of $16.3 million, or $0.62 per diluted share.

Excluding certain items in both periods as identified in the attached reconciliation tables, non-GAAP operating income was $45.8 million in third quarter 2020 compared to third quarter 2019 non-GAAP operating income of $38.1 million.  On a non-GAAP basis, net income was $32.4 million, or $1.22 per diluted share, in third quarter 2020 compared to third quarter 2019 net income of $27.0 million, or $1.02 per diluted share.

At September 30, 2020, ArcBest’s consolidated cash and short-term investments, less debt, were $59 million net cash compared to the $41 million net cash position at June 30, 2020, reflecting an $18 million improvement during the third quarter.

“I am incredibly proud of our employees and how they have performed on behalf of customers as we navigate through the pandemic together,” said Judy R. McReynolds, chairman, president and CEO of ArcBest. “Throughout the third quarter and into October the ArcBest team, enabled by technology and assured capacity options, is providing much-needed flexibility to customer supply chains while also improving operational efficiency.  Our company was built on strong customer relationships and it is our goal to ensure those customers are positioned well to succeed.”

 

Third Quarter Results of Operations Comparisons

Asset-Based

Third Quarter 2020 Versus Third Quarter 2019

• Revenue of $561.9 million compared to $565.6 million, a per-day decrease of 1.4 percent.
• Total tonnage per day increase of 1.2 percent, with a mid-single-digit percentage increase in LTL-rated tonnage and a double-digit percentage decrease in TL-rated spot shipment tonnage moving in the Asset-Based network.
• Total shipments per day decrease of 3.0 percent.  Total weight per shipment increase of 4.4 percent and an increase of 7.4 percent in LTL-rated weight per shipment impacted by third quarter freight mix changes.
• Total billed revenue per hundredweight decreased 1.8 percent and was negatively impacted by freight mix changes and lower fuel surcharges versus prior year.  Excluding fuel surcharge, LTL-rated freight experienced a percentage decrease in the low-single digits.
• Operating income of $36.6 million and an operating ratio of 93.5 percent compared to the prior year quarter operating income of $31.7 million and an operating ratio of 94.4 percent.  On a non-GAAP basis, operating income of $42.8 million and an operating ratio of 92.4 percent compared to the prior year quarter operating income of $38.5 million and an operating ratio of 93.2 percent.

ArcBest’s Asset-Based business reflects the positive impact of an improving marketplace and sequential growth in shipments and tonnage compared to the second quarter.  As business levels improved, labor and freight handling resources were added to handle the additional freight in order to sufficiently serve our customers’ needs.  Operational costs were managed relative to growing freight levels.  The resulting improvement in operational efficiencies, reduction in empty miles and cost decreases contributed to improved profitability.  Throughout the quarter, customer shipments were strategically matched with available network capacity, resulting in improved resource utilization and better operational metrics.  In a continuing rational industry pricing environment, freight mix changes and reduced fuel surcharges contributed to lower third quarter revenue per hundredweight.  However, profitable growth resulted from optimal freight selection and enhanced matching of revenue and costs.

Asset-Light²

Third Quarter 2020 Versus Third Quarter 2019

• Revenue of $267.8 million compared to $253.7 million, a per-day increase of 4.7 percent.
• Operating income of $5.8 million compared to operating income of $3.6 million.
• Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) of $8.6 million compared to Adjusted EBITDA of $6.6 million.

Third quarter revenue in the Asset-Light ArcBest segment increased compared to the prior year period reflecting better customer business levels associated with an improving economic environment.  Significant revenue growth in managed transportation services was the biggest contributor to improved Asset-Light revenue totals while increases in international and ground expedite business were additional positive factors.  Increased customer shipping levels combined with limited equipment availability in the logistics marketplace positively impacted demand for ground expedite services.  Growth in these premium service asset-light offerings was a meaningful factor in the quarter’s improved profitability. Revenue associated with the truckload brokerage business positively contributed to third quarter totals, but increased mileage rates paid for equipment capacity related to current marketplace conditions contributed to higher purchased transportation expense as a percentage of total revenue.  However, cost management and reduced expenses in other areas of the asset-light business resulted in greater operating profit during the quarter.

At FleetNet, a decrease in total events contributed to lower total revenue and reduced operating income compared to the prior year period.

Closing Comments

“Tremendous opportunity exists for us to sustain the momentum of the third quarter and continue to profitably grow our company,” said McReynolds.  “As an innovative and integrated logistics company, I am excited about what the future holds and am confident in the strength and abilities of our workforce and leadership to seize the growth opportunity ahead of us.”

 

 

 

NOTES

1. U.S. Generally Accepted Accounting Principles
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 2020 third quarter results. The call will be today, Tuesday, November 3, at 9:30 a.m. ET (8:30 a.m. CT). Interested parties are invited to listen by calling (800) 268-2160. Following the call, a recorded playback will be available through the end of the day on December 15, 2020. To listen to the playback, dial (800) 633‑8284 or (402) 977‑9140 (for international callers). The conference call ID for the playback is 21970321. The conference call and playback can also be accessed, through December 15, 2020, on ArcBest’s website at arcb.com.

About ArcBest

ArcBest^® (Nasdaq: ARCB) is a leading logistics company with creative problem solvers who deliver innovative solutions for our customers’ supply chain needs.  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^®. For more information, visit arcb.com.

The following is a “safe harbor” statement under the Private Securities Litigation Reform Act of 1995:  Certain statements and information in this press release concerning results for the three months ended September 30, 2020 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; the ability to maintain third-party information technology systems or licenses; widespread outbreak of an illness or any other communicable disease and the effects of pandemics, including the COVID-19 pandemic, or any other public health crisis; regulatory measures that may be implemented in response to widespread illness, including the COVID-19 pandemic; ineffectiveness of our business continuity plans to meet our operational needs in the event of adverse external events or conditions; untimely or ineffective development and implementation of, or 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; general economic conditions and related shifts in market demand, including the impact of and uncertainties related to the COVID-19 pandemic, that impact the performance and needs of industries we serve and/or limit our customers’ access to adequate financial resources; the ability to manage our cost structure, and the timing and performance of growth initiatives; relationships with employees, including unions, and our ability to attract, retain, and develop 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; our ability to secure independent owner operators and/or operational or regulatory issues related to our use of their services; availability and cost of reliable third-party services; 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; governmental regulations; environmental laws and regulations, including emissions-control regulations; union employee wages and benefits, including changes in required contributions to multiemployer plans; litigation or claims asserted against us; the loss of key employees or the inability to execute succession planning strategies; maintaining our intellectual property rights, brand, and corporate reputation; 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; 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, fuel, and related taxes; potential impairment of goodwill and intangible assets; the cost, integration, and performance of any recent or future acquisitions; seasonal fluctuations and adverse weather conditions; regulatory, economic, and other risks arising from our international business; acts of terrorism or war, or the impact of 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
		2020			2019			2020			2019
		(Unaudited)
		($ thousands, except share and per share data)
REVENUES		$	794,980		$	787,563		$	2,123,749		$	2,270,892
OPERATING EXPENSES			755,198			756,355			2,055,723			2,195,893
OPERATING INCOME			39,782			31,208			68,026			74,999
OTHER INCOME (COSTS)
Interest and dividend income			756			1,768			3,122			4,862
Interest and other related financing costs			(2,860)			(2,900)			(9,185)			(8,593)
Other, net			1,500			(6,734)			334			(7,770)
			(604)			(7,866)			(5,729)			(11,501)
INCOME BEFORE INCOME TAXES			39,178			23,342			62,297			63,498
INCOME TAX PROVISION			9,774			7,072			15,111			17,964
NET INCOME		$	29,404		$	16,270		$	47,186		$	45,534
EARNINGS PER COMMON SHARE(1)
Basic		$	1.15		$	0.64		$	1.86		$	1.78
Diluted		$	1.11		$	0.62		$	1.79		$	1.72
AVERAGE COMMON SHARES OUTSTANDING
Basic			25,470,094			25,527,982			25,403,786			25,550,365
Diluted			26,592,457			26,416,595			26,289,946			26,461,668
CASH DIVIDENDS DECLARED PER COMMON SHARE		$	0.08		$	0.08		$	0.24		$	0.24

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

 

		September 30			December 31
		2020			2019
		(Unaudited)			Note
		($ thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	267,645		$	201,909
Short-term investments			83,411			116,579
Accounts receivable, less allowances (2020 - $7,343; 2019 - $5,448)			323,760			282,579
Other accounts receivable, less allowances (2020 - $665; 2019 - $476)			14,464			18,774
Prepaid expenses			29,562			30,377
Prepaid and refundable income taxes			6,163			9,439
Other			5,235			4,745
TOTAL CURRENT ASSETS			730,240			664,402
PROPERTY, PLANT AND EQUIPMENT
Land and structures			346,322			342,122
Revenue equipment			912,924			896,020
Service, office, and other equipment			233,689			233,354
Software			158,454			151,068
Leasehold improvements			14,064			10,383
			1,665,453			1,632,947
Less allowances for depreciation and amortization			987,396			949,355
			678,057			683,592
GOODWILL			88,320			88,320
INTANGIBLE ASSETS, NET			56,016			58,832
OPERATING RIGHT-OF-USE ASSETS			112,568			68,470
DEFERRED INCOME TAXES			6,975			7,725
OTHER LONG-TERM ASSETS			74,055			79,866
		$	1,746,231		$	1,651,207
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable		$	162,021		$	134,374
Income taxes payable			5			12
Accrued expenses			249,172			232,321
Current portion of long-term debt			65,887			57,305
Current portion of operating lease liabilities			20,431			20,265
TOTAL CURRENT LIABILITIES			497,516			444,277
LONG-TERM DEBT, less current portion			226,037			266,214
OPERATING LEASE LIABILITIES, less current portion			96,549			52,277
POSTRETIREMENT LIABILITIES, less current portion			20,486			20,294
OTHER LONG-TERM LIABILITIES			35,377			38,892
DEFERRED INCOME TAXES			67,627			66,210
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value, authorized 70,000,000 shares;       issued 2020: 29,039,994 shares; 2019: 28,810,902 shares			290			288
Additional paid-in capital			339,908			333,943
Retained earnings			574,053			533,187
Treasury stock, at cost, 2020: 3,632,099 shares; 2019: 3,404,639 shares			(110,245)			(104,578)
Accumulated other comprehensive income (loss)			(1,367)			203
TOTAL STOCKHOLDERS’ EQUITY			802,639			763,043
		$	1,746,231		$	1,651,207

 

Note:  The balance sheet at December 31, 2019 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
		2020			2019
		Unaudited
		($ thousands)
OPERATING ACTIVITIES
Net income		$	47,186		$	45,534
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			85,189			79,967
Amortization of intangibles			2,942			3,365
Pension settlement expense, including termination expense			89			8,135
Share-based compensation expense			7,956			7,268
Provision for losses on accounts receivable			2,170			832
Change in deferred income taxes			2,831			14,099
Gain on sale of property and equipment and lease termination			(3,280)			(1,384)
Changes in operating assets and liabilities:
Receivables			(38,905)			4,216
Prepaid expenses			809			(265)
Other assets			3,918			(4,236)
Income taxes			3,065			(7,883)
Operating right-of-use assets and lease liabilities, net			234			526
Accounts payable, accrued expenses, and other liabilities			37,062			(12,161)
NET CASH PROVIDED BY OPERATING ACTIVITIES			151,266			138,013
INVESTING ACTIVITIES
Purchases of property, plant and equipment, net of financings			(20,146)			(69,773)
Proceeds from sale of property and equipment			8,943			4,748
Purchases of short-term investments			(159,253)			(105,747)
Proceeds from sale of short-term investments			192,563			88,730
Capitalization of internally developed software			(9,568)			(8,500)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES			12,539			(90,542)
FINANCING ACTIVITIES
Borrowings under credit facilities			180,000			—
Borrowings under accounts receivable securitization program			45,000			—
Proceeds from notes payable			—			9,552
Payments on long-term debt			(309,640)			(43,773)
Net change in book overdrafts			349			(5,570)
Deferred financing costs			—			(562)
Payment of common stock dividends			(6,122)			(6,145)
Purchases of treasury stock			(5,667)			(6,115)
Payments for tax withheld on share-based compensation			(1,989)			(1,206)
NET CASH USED IN FINANCING ACTIVITIES			(98,069)			(53,819)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			65,736			(6,348)
Cash and cash equivalents at beginning of period			201,909			190,186
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	267,645		$	183,838
NONCASH INVESTING ACTIVITIES
Equipment financed		$	53,045		$	40,966
Accruals for equipment received		$	2,146		$	18,949
Lease liabilities arising from obtaining right-of-use assets		$	60,535		$	26,810

 

 

 

 

 

		Three Months Ended												Nine Months Ended
		September 30												September 30
		2020						2019						2020						2019
		Unaudited
		($ thousands, except percentages)
REVENUES
Asset-Based		$	561,856					$	565,621					$	1,537,639					$	1,631,348
ArcBest			217,294						199,758						533,536						554,135
FleetNet			50,545						53,976						149,424						158,957
Total Asset-Light			267,839						253,734						682,960						713,092
Other and eliminations			(34,715)						(31,792)						(96,850)						(73,548)
Total consolidated revenues		$	794,980					$	787,563					$	2,123,749					$	2,270,892
OPERATING EXPENSES
Asset-Based
Salaries, wages, and benefits		$	287,385		51.2	%		$	296,503		52.4	%		$	820,218		53.3	%		$	873,795		53.6	%
Fuel, supplies, and expenses			50,144		8.9				65,738		11.6				157,044		10.2				195,502		12.0
Operating taxes and licenses			12,296		2.2				12,865		2.3				36,719		2.4				37,477		2.3
Insurance			8,587		1.5				7,646		1.4				24,658		1.6				23,235		1.4
Communications and utilities			4,373		0.8				5,064		0.9				13,426		0.9				14,181		0.9
Depreciation and amortization			24,054		4.3				23,776		4.2				70,651		4.6				66,370		4.0
Rents and purchased transportation			69,442		12.4				61,102		10.8				171,364		11.2				167,234		10.2
Shared services			60,664		10.8				56,031		9.9				155,154		10.1				161,664		9.9
Gain on sale of property and equipment			133		—				(82)		—				(3,206)		(0.2)				(1,703)		(0.1)
Innovative technology costs(1)			6,199		1.1				4,664		0.8				15,521		1.0				9,200		0.6
Other			1,933		0.3				592		0.1				5,168		0.3				2,878		0.2
Total Asset-Based			525,210		93.5	%			533,899		94.4	%			1,466,717		95.4	%			1,549,833		95.0	%
ArcBest
Purchased transportation			181,129		83.4	%			164,521		82.4	%			443,401		83.1	%			452,178		81.6	%
Supplies and expenses			2,746		1.3				2,780		1.4				7,015		1.3				8,412		1.5
Depreciation and amortization(2)			2,413		1.1				2,607		1.3				7,332		1.4				8,813		1.6
Shared services			24,217		11.1				25,032		12.5				64,784		12.1				71,204		12.9
Other			1,958		0.9				2,366		1.2				6,279		1.2				7,224		1.3
			212,463		97.8	%			197,306		98.8	%			528,811		99.1	%			547,831		98.9	%
FleetNet			49,558		98.0	%			52,805		97.8	%			146,615		98.1	%			155,272		97.7	%
Total Asset-Light			262,021						250,111						675,426						703,103
Other and eliminations			(32,033)						(27,655)						(86,420)						(57,043)
Total consolidated operating expenses		$	755,198		95.0	%		$	756,355		96.0	%		$	2,055,723		96.8	%		$	2,195,893		96.7	%
OPERATING INCOME
Asset-Based		$	36,646					$	31,722					$	70,922					$	81,515
ArcBest			4,831						2,452						4,725						6,304
FleetNet			987						1,171						2,809						3,685
Total Asset-Light			5,818						3,623						7,534						9,989
Other and eliminations(3)			(2,682)						(4,137)						(10,430)						(16,505)
Total consolidated operating income		$	39,782					$	31,208					$	68,026					$	74,999

1. Represents costs associated with the freight handling pilot test program at ABF Freight.
2. Depreciation and amortization consists primarily of amortization of intangibles, including customer relationships, and software associated with acquired businesses.
3. “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.