ArcBest® Announces Fourth Quarter 2017 And Full Year 2017 Results

FORT SMITH, Ark., Jan. 31, 2018 /PRNewswire/ -- 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."

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
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.

SOURCE ArcBest

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