ArcBest® Announces Fourth Quarter 2018 And Full Year 2018 Results

FORT SMITH, Ark., Jan. 30, 2019 /PRNewswire/ -- ArcBest^® (Nasdaq: ARCB), a leading logistics company with creative problem solvers who deliver integrated solutions, today reported fourth quarter 2018 revenue of $774.3 million compared to fourth quarter 2017 revenue of $710.7 million.  Fourth quarter 2018 operating income was $37.2 million compared to operating income of $18.7 million last year.  Net income of $15.3 million, or $0.57 per diluted share compared to fourth quarter 2017 net income of $36.6 million, or $1.37 per diluted share.

Excluding certain items in both periods as identified in the attached reconciliation tables, non-GAAP operating income was $38.1 million in fourth quarter 2018 compared to fourth quarter 2017 operating income of $19.0 million.  On a non-GAAP basis, net income was $26.9 million, or $1.01 per diluted share, in fourth quarter 2018 compared to fourth quarter 2017 net income of $11.2 million, or $0.42 per diluted share.

"Strong fourth quarter results capped a year of significant achievements and financial performance at ArcBest including revenue topping $3 billion and the highest non-GAAP earnings per share in our history," said Chairman, President & CEO Judy McReynolds.  "A thriving U.S. economy provided an excellent backdrop for us to proactively solve more of our customers' supply chain needs through comprehensive logistics solutions. Careful account management and pricing initiatives to ensure we are compensated for the value we provide resulted in solid revenue growth and better account profitability in our Asset-Based business, and our Asset-Light business posted solid improvements in operating income."

McReynolds stated that efforts to return to historic margins in the Asset-Based business gained momentum despite a tight labor market, even as U.S. unemployment reached record lows and driver shortages were the norm across the industry. "One of the major achievements of the year, a new five-year collective bargaining agreement with the International Brotherhood of Teamsters, provides us stability, low cost inflation and a strong foundation upon which to continue innovating on behalf of customers, and we are excited about the substantial growth opportunities that remain available to us across the organization," McReynolds said.

Asset-Based

Results of Operations

Fourth Quarter 2018 Versus Fourth Quarter 2017

• Revenue of $548.9 million compared to $497.0 million, a per-day increase of 10.4 percent.
• Tonnage per day increase of 2.8 percent, with a high-single digit percentage increase in LTL-rated freight.
• Shipments per day increase of 4.2 percent. Though total average weight per shipment declined, the average LTL-rated weight per shipment increased.
• Total billed revenue per hundredweight increased 7.9 percent and was positively impacted by higher fuel surcharges. Excluding fuel surcharge, the percentage increase on LTL-rated freight was in the mid-single digits.
• Operating income of $36.9 million and an operating ratio of 93.3 percent compared to operating income of $19.6 million and an operating ratio of 96.1 percent.

During the fourth quarter, ArcBest's Asset-Based business continued to benefit from the positive effects of improved pricing combined with prudent management of costs.  Increases in revenue per hundredweight and average revenue per shipment continued to highlight the benefits of yield management initiatives implemented throughout the year.  Higher fuel surcharges also positively impacted quarterly revenue totals.  For the first time in 2018, both shipments and freight tonnage moving through the Asset-Based network increased versus the prior period.  This improved business trend contributed to freight handling efficiencies and higher operating income.   Average length of haul was below the previous fourth quarter due to changes in freight mix.                     

Asset-Light^‡

Results of Operations

Fourth Quarter 2018 Versus Fourth Quarter 2017

• Revenue of $243.8 million compared to $222.2 million, a per-day increase of 9.7 percent.
• Operating income of $7.5 million compared to operating income of $5.5 million. On a non-GAAP basis, operating income of $7.8 million compared to $5.5 million.
• Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") of $11.3 million compared to Adjusted EBITDA of $9.3 million.

In the Asset-Light ArcBest segment, an increase in average revenue per shipment and significant growth in the offering of managed logistics solutions contributed to higher fourth quarter revenue.  Despite a reduction in shipment levels, improved operating income resulted from cost control combined with higher net revenue associated with yield management of truckload brokerage shipments and continued success in offering managed transportation solutions to ArcBest customers.  At FleetNet, while total events increased, operating income was flat versus the prior year quarter reflecting the impact of changes in customer mix on margin per event.

Full Year 2018 Results 

ArcBest's revenue totaled $3.1 billion, the first time in history that consolidated revenue exceeded the $3 billion level, compared to $2.8 billion in 2017.  Net income was $67.3 million, or $2.51 per diluted share, compared to net income of $59.7 million, or $2.25 per diluted share in 2017.  On a non-GAAP basis, ArcBest had 2018 net income of $103.0 million, or $3.86 per diluted share compared to net income of $35.5 million, or $1.34 per diluted share in 2017. 

During 2018, ArcBest increased shareholder returns through payment of an eight cent per share quarterly dividend and purchase of ArcBest shares valued at approximately $9.4 million.

Asset-Based

Results of Operations

Full Year 2018 Versus Full Year 2017

• Revenue of $2.2 billion, compared to $2.0 billion in 2017, an average daily increase of 8.9 percent.
• Tonnage per day was flat with 2017.
• Shipments per day decrease of 3.2 percent related to pricing initiatives that began in late 2017.
• Total billed revenue per hundredweight increased 9.2 percent and was impacted by pricing initiatives and higher fuel surcharges in 2018. Excluding fuel surcharge, the percentage increase on LTL-rated freight was in the mid-single digits.
• Operating income of $103.9 million and an operating ratio of 95.2 percent compared to $57.9 million and an operating ratio of 97.1 percent in 2017. On a non-GAAP basis, operating income of $141.8 million and an operating ratio of 93.5 percent compared to operating income of $58.2 million and an operating ratio of 97.1 percent in 2017.

Asset-Light^‡

Results of Operations

Full Year 2018 Versus Full Year 2017

• Revenue of $976.2 million compared to $863.0 million in 2017, an average daily increase of 12.9 percent.
• Operating income of $28.0 million compared to $23.0 million in 2017. On a non-GAAP basis, operating income of $26.5 million compared to $23.7 million in 2017.
• Adjusted EBITDA of $43.4 million compared to $38.1 million in 2017.

Capital Expenditures

In 2018, total net capital expenditures, including equipment financed, equaled $134 million which was below previous expectations.  This included $90 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 $104 million.

For 2019, total net capital expenditures are estimated to range from $170 million to $180 million. This includes revenue equipment purchases of approximately $90 million primarily for ArcBest's Asset-Based operation.  The increase in the 2019 capital expenditure estimate is primarily associated with real estate projects, dock equipment, including forklifts, and technology investments.  ArcBest's depreciation and amortization costs on property, plant and equipment in 2019 are estimated to range from $110 million to $115 million.

Closing Comments

"We entered 2018 anticipating a strong operating environment and for the most part, economic activity exceeded our expectations," McReynolds said. "Tighter capacity persisted throughout the year, leading customers to turn to ArcBest for the assured capacity we have available through our own assets, owner operators and contract carriers. Our strategy to meet all types of supply chain needs through a combination of offerings helped us significantly grow revenue and profitability."

McReynolds added that many initiatives to improve operations and offer a best-in-class customer experience are continuing and accelerating in 2019 and will benefit the company in all environments.

"Investing in technology, people and processes to best meet our customer needs in a changing marketplace remains a top priority," McReynolds said. "As trusted supply chain experts, we have seen more and more customers turn to us for managed transportation solutions, an encouraging development that reinforces the strategic decisions we have made to enhance our approach to the market as a fully integrated logistics company."

Conference Call

ArcBest will host a conference call with company executives to discuss the 2018 fourth quarter and full year results. The call will be on Thursday, January 31st at 10:30 a.m. ET (9:30 a.m. CT). Interested parties are invited to listen by calling (877) 256-8248. Following the call, a recorded playback will be available through the end of the day on March 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 21913746. The conference call and playback can also be accessed, through March 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 [email protected].  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 and twelve months ended December 31, 2018 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; 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 loss or reduction of business from large customers; the cost, timing, and performance of growth initiatives; competitive initiatives and pricing pressures; 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; greater than expected funding requirements for our nonunion defined benefit pension plan; 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; governmental regulations; environmental laws and regulations, including emissions-control regulations; the cost, integration, and performance of any recent or future acquisitions; 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; union and nonunion 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; 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 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. The use of certain non-GAAP 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. Other companies may calculate non-GAAP measures differently; therefore, our calculation 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.

ARCBEST CORPORATION
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES – Continued

Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (Adjusted EBITDA)
Management uses Adjusted EBITDA as a key measure of performance and for business planning. The measure is particularly meaningful for analysis of operating performance, because it excludes amortization of acquired intangibles and software of the Asset-Light businesses, 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 credit agreement.

ARCBEST CORPORATION
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES – Continued

Non-GAAP Net Revenue
Management uses net revenue, defined as revenues less purchased transportation costs, as a key performance measure of our ArcBest segment which primarily sources transportation services from third-party providers. Non-GAAP net revenue margin for the ArcBest segment is calculated as net revenue divided by revenues.

SOURCE ArcBest

Related Links

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