ArcBest® Announces Second Quarter 2018 Results

1.

U.S. Generally Accepted Accounting Principles

2.

As disclosed in Form 8-K filed July 11, 2018, ABF Freight's multiemployer pension plan obligation with the New England Teamsters and Trucking Industry Pension Fund (the "Fund") will be restructured, which results in ABF Freight withdrawing as a participating employer in the Fund and the one-time withdrawal liability charge recorded in second quarter 2018.

ARCBEST CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended 

Six Months Ended 

June 30

June 30

2018

2017

2018

2017

(Unaudited)

($ thousands, except share and per share data)

REVENUES

$

793,350

$

720,368

$

1,493,351

$

1,371,456

OPERATING EXPENSES (includes one-time charge)⁽¹⁾⁽²⁾

790,194

694,601

1,477,470

1,355,589

OPERATING INCOME⁽²⁾

3,156

25,767

15,881

15,867

OTHER INCOME (COSTS)

Interest and dividend income

714

285

1,240

559

Interest and other related financing costs

(2,013)

(1,389)

(4,072)

(2,704)

Other, net⁽²⁾

(1,123)

(528)

(3,324)

(2,234)

(2,422)

(1,632)

(6,156)

(4,379)

INCOME BEFORE INCOME TAXES

734

24,135

9,725

11,488

INCOME TAX PROVISION (BENEFIT)

(499)

8,358

(1,462)

3,118

NET INCOME

$

1,233

$

15,777

$

11,187

$

8,370

EARNINGS PER COMMON SHARE⁽³⁾

Basic

$

0.05

$

0.61

$

0.43

$

0.32

Diluted

$

0.05

$

0.60

$

0.42

$

0.32

AVERAGE COMMON SHARES OUTSTANDING

Basic

25,670,325

25,767,791

25,656,674

25,726,363

Diluted

26,699,549

26,291,641

26,653,282

26,378,436

CASH DIVIDENDS DECLARED PER COMMON SHARE

$

0.08

$

0.08

$

0.16

$

0.16

______________________

¹⁾

Includes a $37.9 million multiemployer pension fund withdrawal liability charge for the three and six months ended June 30, 2018.

²⁾

Effective January 1, 2018, the Company retrospectively adopted an amendment to ASC Topic 715, Compensation – Retirement Benefits, which requires changes to the financial statement presentation of certain components of net periodic benefit cost related to pension and other postretirement benefits accounted for under ASC Topic 715. As a result of adopting this amendment, the service cost component of net periodic benefit cost continues to be included in Operating Expenses, but the other components of net periodic benefit cost, including pension settlement expense, are presented in Other Income (Costs) for the three and six months ended June 30, 2018 and 2017.

³⁾

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

2018

2017

(Unaudited)

Note

($ thousands, except share data)

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

159,307

$

120,772

Short-term investments

68,013

56,401

   Accounts receivable, less allowances (2018 - $8,057; 2017 - $7,657)

309,112

279,074

   Other accounts receivable, less allowances (2018 - $952; 2017 - $921)             

19,548

19,491

Prepaid expenses

19,912

22,183

Prepaid and refundable income taxes

4,665

12,296

Other

9,509

12,132

  TOTAL CURRENT ASSETS

590,066

522,349

PROPERTY, PLANT AND EQUIPMENT

Land and structures

338,902

344,224

Revenue equipment

818,674

793,523

Service, office, and other equipment

190,109

179,950

Software

131,139

129,589

Leasehold improvements

9,131

8,888

1,487,955

1,456,174

Less allowances for depreciation and amortization

896,738

865,010

591,217

591,164

GOODWILL

108,320

108,320

INTANGIBLE ASSETS, NET

71,206

73,469

DEFERRED INCOME TAXES

6,226

5,965

OTHER LONG-TERM ASSETS

65,261

64,374

$

1,432,296

$

1,365,641

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable

$

176,034

$

129,099

Income taxes payable

511

324

Accrued expenses

221,880

211,237

Current portion of long-term debt

51,562

61,930

  TOTAL CURRENT LIABILITIES

449,987

402,590

LONG-TERM DEBT, less current portion

198,070

206,989

PENSION AND POSTRETIREMENT LIABILITIES

36,169

39,827

OTHER LONG-TERM LIABILITIES

38,456

15,616

DEFERRED INCOME TAXES

41,099

49,157

STOCKHOLDERS' EQUITY

Common stock, $0.01 par value, authorized 70,000,000 shares; issued 2018: 28,541,578 shares; 2017: 28,495,628 shares

285

285

Additional paid-in capital

322,895

319,436

Retained earnings

449,442

438,379

   Treasury stock, at cost, 2018: 2,857,460 shares; 2017: 2,851,578 shares

(86,265)

(86,064)

Accumulated other comprehensive loss

(17,842)

(20,574)

  TOTAL STOCKHOLDERS' EQUITY

668,515

651,462

$

1,432,296

$

1,365,641

Note:  The balance sheet at December 31, 2017 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

2018

2017

Unaudited

($ thousands)

 OPERATING ACTIVITIES

Net income

$

11,187

$

8,370

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

51,409

48,332

Amortization of intangibles

2,264

2,271

Pension settlement expense

1,085

2,701

Share-based compensation expense

3,544

3,599

Provision for losses on accounts receivable

1,069

1,053

Deferred income tax provision (benefit)

(10,818)

2,687

Gain on sale of property and equipment

(166)

(412)

Changes in operating assets and liabilities:

Receivables

(31,281)

(21,091)

Prepaid expenses

2,393

(2,549)

Other assets

2,018

(3,100)

Income taxes

8,024

458

Multiemployer pension fund withdrawal liability⁽¹⁾

37,922

—

Accounts payable, accrued expenses, and other liabilities

40,914

9,007

 NET CASH PROVIDED BY OPERATING ACTIVITIES

119,564

51,326

 INVESTING ACTIVITIES

Purchases of property, plant and equipment, net of financings

(24,763)

(27,123)

Proceeds from sale of property and equipment

2,074

2,751

Purchases of short-term investments

(26,006)

(6,223)

Proceeds from sale of short-term investments

14,647

9,065

Capitalization of internally developed software

(5,997)

(4,323)

 NET CASH USED IN INVESTING ACTIVITIES

(40,045)

(25,853)

 FINANCING ACTIVITIES

Borrowings under accounts receivable securitization program

—

10,000

Payments on long-term debt

(33,694)

(34,948)

Net change in book overdrafts

(2,888)

(2,478)

Deferred financing costs

—

(275)

Payment of common stock dividends

(4,116)

(4,144)

Purchases of treasury stock

(201)

(3,611)

Payments for tax withheld on share-based compensation

(85)

(2,690)

 NET CASH USED IN FINANCING ACTIVITIES

(40,984)

(38,146)

 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

38,535

(12,673)

Cash and cash equivalents and restricted cash at beginning of period

120,772

115,242

 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

$

159,307

$

102,569

 NONCASH INVESTING ACTIVITIES

Equipment financed

$

14,407

$

38,593

Accruals for equipment received

$

8,649

$

3,179

_________________________

1)

As previously discussed in this press release, ABF Freight, Inc. recorded a one-time charge in June 2018 for the multiemployer pension plan withdrawal liability resulting from the transition agreement it entered into with the New England Teamsters and Trucking Industry Pension Fund.

ARCBEST CORPORATION

FINANCIAL STATEMENT OPERATING SEGMENT DATA AND OPERATING RATIOS

Three Months Ended 

Six Months Ended 

June 30

June 30

2018

2017

2018

2017

Unaudited

($ thousands, except percentages)

REVENUES

Asset-Based

$

559,239

$

514,537

$

1,041,354

$

978,893

ArcBest

199,987

175,929

381,920

328,805

FleetNet

46,792

36,501

94,551

76,739

  Total Asset-Light

246,779

212,430

476,471

405,544

Other and eliminations

(12,668)

(6,599)

(24,474)

(12,981)

  Total consolidated revenues

$

793,350

$

720,368

$

1,493,351

$

1,371,456

OPERATING EXPENSES⁽¹⁾

Asset-Based⁽²⁾

Salaries, wages, and benefits

$

286,750

51.3

%

$

286,904

55.8

%

$

556,529

53.5

%

$

566,284

57.9

%

Fuel, supplies, and expenses

65,040

11.6

58,541

11.4

127,233

12.2

116,931

11.9

Operating taxes and licenses

11,910

2.1

12,191

2.4

23,666

2.3

24,014

2.5

Insurance

7,979

1.4

7,602

1.5

14,607

1.4

14,720

1.5

Communications and utilities

4,135

0.7

4,168

0.8

8,656

0.8

8,685

0.9

Depreciation and amortization

21,362

3.8

20,716

4.0

42,292

4.1

41,234

4.2

Rents and purchased transportation

63,253

11.3

53,189

10.3

109,386

10.5

99,615

10.2

Shared services⁽²⁾

56,825

10.2

46,600

9.1

102,432

9.8

90,104

9.2

Multiemployer pension fund withdrawal liability charge⁽³⁾

37,922

6.8

—

—

37,922

3.6

—

—

(Gain) loss on sale of property and equipment

(266)

—

25

—

(399)

—

(592)

(0.1)

Other

948

0.2

1,673

0.3

2,247

0.2

3,178

0.3

Restructuring costs⁽⁴⁾

—

—

33

—

—

—

173

—

Total Asset-Based

555,858

99.4

%

491,642

95.6

%

1,024,571

98.4

%

964,346

98.5

%

ArcBest⁽²⁾

Purchased transportation

162,920

81.5

%

139,432

79.3

%

311,292

81.5

%

261,419

79.5

%

Supplies and expenses

3,538

1.7

3,742

2.1

6,768

1.8

7,412

2.3

Depreciation and amortization⁽⁵⁾

3,597

1.8

3,230

1.8

7,005

1.8

6,496

2.0

Shared services⁽²⁾

23,536

11.7

20,658

11.7

45,404

11.9

40,244

12.2

Other

2,546

1.3

2,873

1.7

4,427

1.2

5,338

1.6

Restructuring costs⁽⁴⁾

143

0.1

65

—

152

—

875

0.3

196,280

98.1

%

170,000

96.6

%

375,048

98.2

%

321,784

97.9

%

FleetNet

45,763

97.8

%

35,754

98.0

%

92,001

97.3

%

74,971

97.7

%

  Total Asset-Light

242,043

205,754

467,049

396,755

Other and eliminations⁽⁶⁾

(7,707)

(2,795)

(14,150)

(5,512)

  Total consolidated operating expenses

$

790,194

99.6

%

$

694,601

96.4

%

$

1,477,470

98.9

%

$

1,355,589

98.8

%

OPERATING INCOME⁽¹⁾

Asset-Based

$

3,381

$

22,895

16,783

14,547

ArcBest

3,707

5,929

6,872

7,021

FleetNet

1,029

747

2,550

1,768

  Total Asset-Light

4,736

6,676

9,422

8,789

Other and eliminations⁽⁶⁾

(4,961)

(3,804)

(10,324)

(7,469)

  Total consolidated operating income

$

3,156

$

25,767

$

15,881

$

15,867

___________________________

¹⁾

In accordance with an amendment to ASC Topic 715, Compensation – Retirement Benefits, which the Company retrospectively adopted effective January 1, 2018, the components of net periodic benefit cost other than service cost are presented within Other Income (Costs) in the consolidated financial statements for all periods presented and, therefore, excluded from the presentation of operating segment data within this table. The detail of the Company's net periodic benefit costs are presented in Note F to the consolidated financial statements included in Part I, Item I of the Company's second quarter 2018 Quarterly Report on Form 10-Q.

²⁾

The presentation of segment expenses allocated from shared services was modified during third quarter 2017 and reclassifications have been made to the prior period operating segment expenses to conform to the current year presentation. Previously, expenses allocated from company-wide functions were categorized in individual segment expense line items by type of expense. Allocated expense is now presented on a single "Shared services" line within the Company's operating segment disclosures. There was no impact on each segment's total expenses as a result of the reclassifications.

³⁾

As previously discussed in this press release, ABF Freight, Inc. recorded a one-time charge in June 2018 for the multiemployer pension plan withdrawal liability resulting from the transition agreement it entered into with the New England Teamsters and Trucking Industry Pension Fund.

⁴⁾

Restructuring charges relate to the realignment of the Company's organizational structure as announced on November 3, 2016.

⁵⁾

Depreciation and amortization consists primarily of amortization of intangibles, including customer relationships, and software associated with acquired businesses.

⁶⁾

"Other" corporate costs include restructuring charges of $0.2 million and $0.3 million for the three months ended June 30, 2018 and 2017, respectively, and $0.6 million and $0.9 million for the six months ended June 30, 2018 and 2017, respectively. (See Segment Operating Income Reconciliations of GAAP to Non-GAAP Financial Measures table.) Other corporate costs also include additional investments to provide an improved platform for revenue growth and for offering ArcBest services across multiple operating segments.

Three Months Ended 

Six Months Ended 

June 30

June 30

2018

2017

2018

2017

(Unaudited)

($ thousands, except per share data)

ArcBest Corporation - Consolidated

Operating Income

Amounts on GAAP basis

$

3,156

$

25,767

$

15,881

$

15,867

Multiemployer pension fund withdrawal liability charge, pre-tax⁽¹⁾

37,922

—

37,922

—

Restructuring charges, pre-tax⁽²⁾

340

363

716

1,994

Non-GAAP amounts

$

41,418

$

26,130

$

54,519

$

17,861

Net Income

Amounts on GAAP basis

$

1,233

$

15,777

$

11,187

$

8,370

Multiemployer pension fund withdrawal liability charge, after-tax⁽¹⁾

28,161

—

28,161

—

Restructuring charges, after-tax⁽²⁾

252

220

529

1,209

Deferred tax adjustment for 2017 Tax Reform Act⁽³⁾

(50)

—

(2,641)

—

Impact of 2017 Tax Reform Act on current tax expense⁽³⁾

(9)

—

(69)

—

Nonunion pension expense, including settlement, after-tax⁽⁴⁾

1,301

364

2,821

1,535

Life insurance proceeds and changes in cash surrender value

(819)

(407)

(934)

(987)

Tax benefit from vested RSUs⁽⁵⁾

(282)

(1,170)

(301)

(1,245)

Alternative fuel tax credit⁽⁶⁾

—

—

(1,203)

—

Non-GAAP amounts

$

29,787

$

14,784

$

37,550

$

8,882

Diluted Earnings Per Share

Amounts on GAAP basis

$

0.05

$

0.60

$

0.42

$

0.32

Multiemployer pension fund withdrawal liability charge, after-tax⁽¹⁾

1.05

—

1.06

—

Restructuring charges, after-tax⁽²⁾

0.01

0.01

0.02

0.05

Deferred tax adjustment for 2017 Tax Reform Act⁽³⁾

—

—

(0.10)

—

Impact of 2017 Tax Reform Act on current tax expense⁽³⁾

—

—

—

—

Nonunion pension expense, including settlement, after-tax⁽⁴⁾

0.05

0.01

0.11

0.06

Life insurance proceeds and changes in cash surrender value

(0.03)

(0.02)

(0.04)

(0.04)

Tax benefit from vested RSUs⁽⁵⁾

(0.01)

(0.04)

(0.01)

(0.05)

Alternative fuel tax credit⁽⁶⁾

—

—

(0.05)

—

Non-GAAP amounts

$

1.12

$

0.56

$

1.41

$

0.34

_________________________

¹⁾

As previously discussed in this press release, ABF Freight, Inc. recorded a one-time charge in June 2018 for the multiemployer pension plan withdrawal liability resulting from the transition agreement it entered into with the New England Teamsters and Trucking Industry Pension Fund.

²⁾

Restructuring charges relate to the realignment of the Company's organizational structure as announced on November 3, 2016.

³⁾

Impact on current or deferred income tax expense as a result of recognizing a reasonable estimate of the tax effects of the Tax Cuts and Jobs Act ("2017 Tax Reform Act") that was signed into law on December 22, 2017.

⁴⁾

Nonunion pension expense is presented as a non-GAAP adjustment with pension settlement expense, for all periods presented, because expenses related to the plan have been excluded from the financial information management uses to make operating decisions, as an amendment to terminate the nonunion defined benefit pension plan with a termination date of December 31, 2017 was executed in November 2017. Plan participants will have an election window in which they can choose any form of payment allowed by the plan for immediate commencement of payment or defer payment until a later date with pension settlements related to the plan termination which may occur in 2018.

⁵⁾

The Company recognized the tax impact for the vesting of share-based compensation resulting in excess tax benefit during the three and six months ended June 30, 2018 and 2017.

⁶⁾

Represents the amount of the alternative fuel tax credit related to the year ended December 31, 2017 which was recorded in first quarter 2018 due to the February 2018 retroactive reinstatement.

ARCBEST CORPORATION

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES – Continued

Effective Tax Rate Reconciliation

ArcBest Corporation - Consolidated

(Unaudited)

($ thousands, except percentages)

Three Months Ended June 30, 2018

Income

Income

Other

Before

Tax

Operating

Income

Income

Provision

Net

Effective Tax

Income

(Costs)

Taxes

(Benefit)

Income

(Benefit) Rate

Amounts on GAAP basis

$

3,156

$

(2,422)

$

734

$

(499)

$

1,233

(68.0)

%

Multiemployer pension fund withdrawal liability charge⁽¹⁾

37,922

—

37,922

9,761

28,161

25.7

Restructuring charges⁽²⁾

340

—

340

88

252

25.9

Deferred tax adjustment for 2017 Tax Reform Act⁽³⁾

—

—

—

50

(50)

—

Impact of 2017 Tax Reform Act on current tax expense⁽³⁾

—

—

—

9

(9)

—

Nonunion pension expense, including settlement⁽⁴⁾

—

1,752

1,752

451

1,301

25.7

Life insurance proceeds and changes in cash surrender value

—

(819)

(819)

—

(819)

—

Tax benefit from vested RSUs⁽⁵⁾

—

—

—

282

(282)

—

Non-GAAP amounts

$

41,418

$

(1,489)

$

39,929

$

10,142

$

29,787

25.4

%

Three Months Ended June 30, 2017

Income

Other

Before

Income

Operating

Income

Income

Tax

Net

Effective Tax

Income

(Costs)

Taxes

Provision

Income

(Benefit) Rate

Amounts on GAAP basis