ArcBest Announces Third Quarter 2017 Results

FORT SMITH, Ark., Nov. 3, 2017 /PRNewswire/ -- ArcBest^® (Nasdaq: ARCB) today reported third quarter 2017 revenue of $744.3 million compared to third quarter 2016 revenue of $713.9 million.  Third quarter 2017 operating income was $24.3 million compared to operating income of $20.4 million last year.  Net income of $14.8 million, or $0.56 per diluted share, compared to third quarter 2016 net income of $12.9 million, or $0.49 per diluted share.    

Excluding certain items in both periods as identified in the attached reconciliation tables, non-GAAP net income was $15.5 million, or $0.59 per diluted share, in third quarter 2017 compared to third quarter 2016 net income of $12.6 million, or $0.48 per diluted share. On a non-GAAP basis, operating income was $27.0 million in third quarter 2017 compared to third quarter 2016 operating income of $21.7 million.  Cost controls resulting from the enhanced market approach implemented at the beginning of the year continue to be in-line with expectations.  

"Our enhanced market approach, tighter capacity and a generally favorable pricing environment all contributed to improved third quarter results," said ArcBest Chairman, President and CEO Judy R. McReynolds. "Our expedited business was particularly strong, and on the asset-based side, we continue to make progress on the implementation of our space-based pricing initiative, which took effect August 1. While we experienced some negative effects in our asset-based business from hurricanes in the southern U.S. and Puerto Rico, customers seeking total logistics solutions and guaranteed capacity are increasingly looking to ArcBest to fulfill their supply chain needs."

Asset-Based

Results of Operations

Third Quarter 2017 Versus Third Quarter 2016

• Revenue of $517.4 million compared to $509.0 million, a per-day increase of 4.1 percent.
• Tonnage per day decrease of 3.0 percent.
• Shipments per day decrease 1.4 percent.
• Total billed revenue per hundredweight increased 6.6 percent that was positively impacted by changes in shipment profile 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 $21.8 million and an operating ratio of 95.8 percent compared to operating income of $18.1 million and an operating ratio of 96.5 percent.  On a non-GAAP basis, operating income of $23.5 million and an operating ratio of 95.5 percent compared to operating income of $18.6 million and an operating ratio of 96.4 percent.

In the midst of a solid LTL pricing environment, yield management actions implemented throughout 2017, including this quarter's space-based pricing initiative, resulted in higher revenue per hundredweight and improved revenue per shipment.  Though freight tonnage was lower, primarily due to purposeful reductions in asset-based truckload-rated shipments, monthly total weight per shipment trends improved throughout the quarter and LTL weight per shipment increased slightly.  In addition, one and a half fewer working days in the quarter impacted operating results and comparisons to previous periods.  On the expense side, costs were reduced in a number of areas through cost management efforts including lower linehaul costs influenced by our optimization technologies and reductions in purchased transportation.  However, these cost reductions were offset by reduced pickup and delivery productivity, higher rental costs and increased health, welfare and pension expenses for union employees.

Asset-Light^‡

Results of Operations

Third Quarter 2017 Versus Third Quarter 2016

• Revenue of $235.3 million compared to $210.1 million.
• Operating income of $8.5 million compared to operating income of $6.4 million. On a non-GAAP basis, operating income of $8.7 million compared to $6.4 million.
• Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") of $11.8 million compared to Adjusted EBITDA of $10.3 million.

The increase in ArcBest's Asset-Light revenue and operating income was driven by solid growth in expedite services and year-over-year business increases associated with the early September 2016 acquisition of a dedicated truckload company.  Combined with a slight increase in average daily expedite shipments, the increase in expedite revenue was the result of significant growth in average shipment revenue associated with positive changes in equipment mix and longer average length of haul.  Truckload revenue improved slightly as a result of increased revenue per shipment despite lower shipment counts.  Truckload net revenue margins were below the same period last year due to the challenges of implementing customer rate increases in line with rising purchased transportation costs associated with tighter capacity in the truckload marketplace.  Despite a reduction in total events associated with changes in customer mix, FleetNet's third quarter revenue and operating income improved as a result of focused cost controls and labor reductions.

Closing Comments

"As a logistics company with diverse, reliable and unique capacity options, ArcBest strives to offer a best-in-class experience for all of our supply chain solutions," said McReynolds. "The initiatives we have embarked on this year to optimize our structure and offer most services under the ArcBest brand have positioned us well as we are winning more business from existing customers and creating new relationships that were previously outside our reach. At the same time, we have worked hard to manage costs and ensure that the value we provide for our services is appropriately compensated."

Conference Call

ArcBest will host a conference call with company executives to discuss the 2017 third quarter results. The call will be today, Friday, November 3, at 9:30 a.m. ET (8:30 a.m. CT). Interested parties are invited to listen by calling (800) 771-6883. Following the call, a recorded playback will be available through the end of the day on December 15, 2017. To listen to the playback, dial (800) 633-8284 or (402) 977-9140 (for international callers). The conference call ID for the playback is 21860068. The conference call and playback can also be accessed, through December 15, 2017, 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 months ended September 30, 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.

Restructuring and Operating Segment Restatements and Reclassifications. Certain restatements have been made to the prior year's operating segment data to conform to the current year presentation, reflecting the realignment of the Company's organizational structure as announced on November 3, 2016. Under the new structure, the segments previously reported as Premium Logistics (Panther), Transportation Management (ABF Logistics), and Household Goods Moving Services (ABF Moving) are consolidated as a single asset-light logistics operation under ArcBest. Segment revenues and expenses were adjusted to eliminate certain intercompany charges consistent with the manner in which they are reported under the new corporate structure. Certain intercompany charges among the previously reported Panther, ABF Logistics, and ABF Moving segments which were previously eliminated in the "Other and eliminations" line, are now eliminated within the ArcBest segment. There was no impact on the Company's consolidated revenues, operating expenses, operating income or earnings per share as a result of the restatements. During the third quarter of 2017, the Company modified the presentation of segment expenses allocated from shared services. 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. Reclassifications have been made to the prior period operating segment expenses to conform to the current year presentation. There was no impact on each segment's total expenses as a result of the reclassifications.

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.