ArcBest® Announces Third Quarter 2018 Results

- Third quarter 2018 revenue of $826.2 million, and net income of $40.8 million, or $1.52 per diluted share. On a non-GAAP[1] basis, third quarter 2018 net income was $38.6 million, or $1.44 per diluted share, a 151 percent improvement over third quarter 2017.

- Third quarter Asset-Based revenue increase and operating income improvement associated with tonnage growth and greater pricing yields.

- Asset-Light net revenue increase resulting in improved profitability.

News provided by

ArcBest

Nov 01, 2018, 16:05 ET

FORT SMITH, Ark., Nov. 1, 2018 /PRNewswire/ -- ArcBest® (Nasdaq: ARCB), a leading logistics company with creative problem solvers who deliver integrated solutions, today reported third quarter 2018 revenue of $826.2 million compared to third quarter 2017 revenue of $744.3 million.  This represented another record level of quarterly consolidated revenue for ArcBest.  Third quarter 2018 operating income was $56.1 million compared to operating income of $26.7 million in the same quarter last year.  Net income was $40.8 million, or $1.52 per diluted share compared to third quarter 2017 net income of $14.8 million, or $0.56 per diluted share.  

Excluding certain items in both periods, as identified in the attached reconciliation tables, non-GAAP operating income was $54.2 million in third quarter 2018 compared to third quarter 2017 operating income of $27.3 million.  On a non-GAAP basis, net income was $38.6 million, or $1.44 per diluted share, in third quarter 2018 compared to third quarter 2017 net income of $15.4 million, or $0.58 per diluted share.     

"I am proud of our team for producing the third consecutive quarter of very positive results this year at ArcBest as we collaborate across the organization to provide customers the best solutions to their supply chain needs," said Chairman, President and CEO Judy R. McReynolds. "Our sales, yield and operations teams – supported by significant technology investments we have made over the last several years – are doing an excellent job helping our customers navigate the industry capacity shortage while ensuring that ArcBest receives the appropriate value for our services. Significantly, our asset-based business reported its best third quarter operating ratio since 2006, and we experienced a strong net revenue improvement in our asset-light business."

1.

U.S. Generally Accepted Accounting Principles

Asset-Based

Results of Operations

Third Quarter 2018 Versus Third Quarter 2017

  • Revenue of $585.3 million compared to $517.4 million, a per-day increase of 12.2 percent.
  • Tonnage per day increase of 1.6 percent.
  • Shipments per day decrease of 1.0 percent.
  • Total billed revenue per hundredweight increased 10.1 percent and was positively impacted by higher fuel surcharges.  Excluding fuel surcharge, the percentage increase on ArcBest's Asset-Based LTL freight was in the high-single digits.
  • Operating income of $50.2 million and an operating ratio of 91.4 percent compared to third quarter 2017 operating income of $23.7 million and an operating ratio of 95.4 percent.   

Third quarter results in ArcBest's Asset-Based business reflect continued strength in account pricing and the benefits of careful cost management in the midst of a steady freight environment. The strong improvement in both revenue per hundredweight and revenue per shipment versus the same period last year was driven by the benefits of pricing initiatives implemented throughout the year and an increase in fuel surcharge.  Increases in average shipment size and average length of haul were additional factors positively impacting revenue per shipment.  The rise in freight tonnage handled throughout the ABF Freight network reversed a trend seen in the first half of the year and contributed to improvement in several key productivity metrics, thus resulting in cost efficiencies and improved operating income.  Though the number of average daily Asset-Based shipments handled in the recent third quarter was slightly below the same period last year, the year-over-year change in this business metric has continually improved throughout each quarter of this year.                     

Asset-Light‡

Results of Operations

Third Quarter 2018 Versus Third Quarter 2017

  • Revenue of $255.9 million compared to $235.3 million, a per-day increase of 7.9 percent.
  • Operating income of $11.1 million compared to operating income of $8.8 million. On a non-GAAP basis, operating income of $9.1 million compared to $8.6 million.
  • Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") of $14.9 million compared to Adjusted EBITDA of $12.0 million.

Compared to last year's third quarter, total revenue growth in the Asset-Light ArcBest segment was the result of increased revenue per shipment associated with higher market rates, somewhat offset by a reduction in total shipments handled.  Though net revenue margins continued to be under pressure related to limited availability of competitively priced equipment capacity, the rate of margin compression in the third quarter was less than in the first half of this year.  The resulting increase in total net revenue and in average net revenue per shipment contributed to improved operating income.  Versus the prior year period, the Asset-Light ArcBest segment also experienced significant growth in managed transportation services that positively impacted both revenue and net revenue, and was another factor contributing to higher operating income.  At FleetNet, a strong increase in events contributed to growth in both total revenue and net revenue which, combined with efficient cost management, resulted in improved profitability.

Closing Comments

"Tight capacity and a favorable business environment this year have provided a strong foundation for ArcBest to execute on cross-selling and other growth initiatives," said McReynolds. "As unemployment reaches historic lows and other indicators we study look favorable, our outlook remains positive and we will monitor the environment closely for any changes. As we close out the year and look forward to 2019, we will continue our focus on growth, profitable account management, cost control and providing a best-in-class customer experience."

Conference Call

ArcBest will host a conference call with company executives to discuss the 2018 third quarter results. The call will be on Friday, November 2nd at 9:30 a.m. EDT (8:30 a.m. CDT). Interested parties are invited to listen by calling (800) 670-1536. Following the call, a recorded playback will be available through the end of the day on December 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 21897168. The conference call and playback can also be accessed, through December 15, 2018, 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 LogisticsSM.  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, 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

CONSOLIDATED STATEMENTS OF OPERATIONS
















Three Months Ended 

Nine Months Ended 


September 30

September 30


2018

2017

2018

2017


(Unaudited)


($ thousands, except share and per share data)

REVENUES

$

826,158

$

744,280

$

2,319,509

$

2,115,736














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

770,103

717,538

2,247,573

2,073,127














OPERATING INCOME

56,055

26,742

71,936

42,609














OTHER INCOME (COSTS)












Interest and dividend income

1,120

346

2,360

905

Interest and other related financing costs

(2,470)

(1,706)

(6,542)

(4,410)

Other, net(2)

(714)

(1,314)

(4,038)

(3,548)



(2,064)

(2,674)

(8,220)

(7,053)














INCOME BEFORE INCOME TAXES

53,991

24,068

63,716

35,556














INCOME TAX PROVISION

13,215

9,280

11,753

12,398














NET INCOME

$

40,776

$

14,788

$

51,963

$

23,158














EARNINGS PER COMMON SHARE(3)












Basic

$

1.58

$

0.57

$

2.02

$

0.90

Diluted

$

1.52

$

0.56

$

1.94

$

0.87














AVERAGE COMMON SHARES OUTSTANDING












Basic

25,697,509

25,671,535

25,670,435

25,699,306

Diluted

26,795,659

26,393,359

26,708,259

26,373,382














CASH DIVIDENDS DECLARED PER COMMON SHARE

$

0.08

$

0.08

$

0.24

$

0.24











1)

Includes a $37.9 million multiemployer pension fund withdrawal liability charge for the nine months ended September 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 nine months ended September 30, 2018 and 2017. The detail of the Company's net periodic benefit costs will be presented in Note F to the consolidated financial statements included in Part I, Item I of the Company's third quarter 2018 Quarterly Report on Form 10-Q.

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










September 30

December 31


2018

2017


(Unaudited)

Note


($ thousands, except share data)

ASSETS






CURRENT ASSETS






Cash and cash equivalents

$

177,436

$

120,772

Short-term investments

75,879

56,401

 Accounts receivable, less allowances (2018 - $7,475; 2017 - $7,657)

323,212

279,074

 Other accounts receivable, less allowances (2018 - $975; 2017 - $921)

17,992

19,491

Prepaid expenses

21,291

22,183

Prepaid and refundable income taxes

6,726

12,296

Other

9,038

12,132

  TOTAL CURRENT ASSETS

631,574

522,349








PROPERTY, PLANT AND EQUIPMENT






Land and structures

338,046

344,224

Revenue equipment

857,846

793,523

Service, office, and other equipment

192,241

179,950

Software

133,816

129,589

Leasehold improvements

9,177

8,888



1,531,126

1,456,174

Less allowances for depreciation and amortization

904,180

865,010



626,946

591,164








GOODWILL

108,320

108,320

INTANGIBLE ASSETS, NET

70,075

73,469

DEFERRED INCOME TAXES

5,967

5,965

OTHER LONG-TERM ASSETS

74,800

64,374


$

1,517,682

$

1,365,641








LIABILITIES AND STOCKHOLDERS' EQUITY














CURRENT LIABILITIES






Accounts payable

$

154,484

$

129,099

Income taxes payable

138

324

Accrued expenses

233,076

210,484

Current portion of long-term debt

54,556

61,930

Current portion of pension and postretirement liabilities

12,640

753

  TOTAL CURRENT LIABILITIES

454,894

402,590








LONG-TERM DEBT, less current portion

235,970

206,989

PENSION AND POSTRETIREMENT LIABILITIES, less current portion

27,614

39,827

OTHER LONG-TERM LIABILITIES

40,372

15,616

DEFERRED INCOME TAXES

53,741

49,157








STOCKHOLDERS' EQUITY






Common stock, $0.01 par value, authorized 70,000,000 shares;
issued 2018: 28,547,578 shares; 2017: 28,495,628 shares

285

285

Additional paid-in capital

325,533

319,436

Retained earnings

488,158

438,379

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

(86,265)

(86,064)

Accumulated other comprehensive loss

(22,620)

(20,574)

  TOTAL STOCKHOLDERS' EQUITY

705,091

651,462


$

1,517,682

$

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











Nine Months Ended 


September 30


2018

2017


Unaudited


($ thousands)

 OPERATING ACTIVITIES






Net income

$

51,963

$

23,158

Adjustments to reconcile net income






to net cash provided by operating activities:






Depreciation and amortization

78,305

73,417

Amortization of intangibles

3,394

3,404

Pension settlement expense

1,603

3,644

Share-based compensation expense

6,185

5,070

Provision for losses on accounts receivable

1,937

705

Deferred income tax provision

3,697

5,846

Gain on sale of property and equipment

(188)

(257)

Gain on sale of subsidiaries

(1,945)

(152)

Changes in operating assets and liabilities:






Receivables

(47,287)

(35,590)

Prepaid expenses

1,013

(37)

Other assets

(4,826)

(5,932)

Income taxes

5,675

5,180

Multiemployer pension fund withdrawal liability(1)

22,744

—

Accounts payable, accrued expenses, and other liabilities

51,309

17,915

NET CASH PROVIDED BY OPERATING ACTIVITIES

173,579

96,371








 INVESTING ACTIVITIES






Purchases of property, plant and equipment, net of financings

(39,249)

(44,377)

Proceeds from sale of property and equipment

2,917

3,585

Proceeds from sale of subsidiaries

4,680

1,970

Purchases of short-term investments

(67,121)

(50,274)

Proceeds from sale of short-term investments

47,878

49,980

Capitalization of internally developed software

(7,411)

(7,225)

NET CASH USED IN INVESTING ACTIVITIES

(58,306)

(46,341)








 FINANCING ACTIVITIES






Borrowings under accounts receivable securitization program

—

10,000

Payments on long-term debt

(49,967)

(52,262)

Net change in book overdrafts

(1,975)

2,289

Deferred financing costs

(202)

(959)

Payment of common stock dividends

(6,176)

(6,207)

Purchases of treasury stock

(201)

(6,019)

Payments for tax withheld on share-based compensation

(88)

(3,080)

NET CASH USED IN FINANCING ACTIVITIES

(58,609)

(56,238)








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

56,664

(6,208)

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

$

177,436

$

109,034








 NONCASH INVESTING ACTIVITIES






Equipment financed

$

71,575

$

61,607

Accruals for equipment received

$

438

$

851











1)

ABF Freight, Inc. recorded a one-time charge in second quarter 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 

Nine Months Ended 


September 30

September 30


2018

2017

2018

2017


Unaudited


($ thousands, except percentages)

REVENUES























Asset-Based

$

585,290



$

517,417



$

1,626,644



$

1,496,310



























ArcBest

205,449




195,749




587,369




524,554


FleetNet

50,494




39,568




145,045




116,307


Total Asset-Light



255,943




235,317




732,414




640,861



























Other and eliminations

(15,075)




(8,454)




(39,549)




(21,435)


Total consolidated revenues

$

826,158



$

744,280



$

2,319,509



$

2,115,736



























OPERATING EXPENSES(1)























Asset-Based























Salaries, wages, and benefits

$

292,082

49.9

%

$

287,270

55.5

%

$

848,611

52.2

%

$

853,554

57.0

%

Fuel, supplies, and expenses

64,133

10.9


57,395

11.1


191,366

11.7


174,326

11.6

Operating taxes and licenses

12,261

2.1


11,712

2.3


35,927

2.2


35,726

2.4

Insurance

9,448

1.6


8,348

1.6


24,055

1.5


23,068

1.5

Communications and utilities

4,308

0.7


4,575

0.9


12,964

0.8


13,260

0.9

Depreciation and amortization

22,200

3.8


20,543

4.0


64,492

4.0


61,777

4.1

Rents and purchased transportation

70,946

12.1


55,381

10.7


180,332

11.1


154,996

10.4

Shared services(2)

58,354

10.0


47,608

9.2


160,786

9.9


137,712

9.2

Multiemployer pension fund withdrawal liability
charge(3)

—

—


—

—


37,922

2.3


—

—

Gain on sale of property and equipment

(123)

—


(7)

—


(522)

—


(599)

—

Other

1,531

0.3


757

0.1


3,778

0.2


3,935

0.3

Restructuring costs(4)

—

—


95

—


—

—


268

—

Total Asset-Based

535,140

91.4

%

493,677

95.4

%

1,559,711

95.9

%

1,458,023

97.4

%

























ArcBest























Purchased transportation

164,322

80.0

%

155,894

79.6

%

475,614

81.0

%

417,313

79.6

%

Supplies and expenses

3,522

1.7


3,853

2.0


10,290

1.7


11,265

2.1

Depreciation and amortization(5)

3,558

1.7


3,015

1.5


10,563

1.8


9,511

1.8

Shared services(2)

23,453

11.4


22,447

11.5


68,857

11.7


62,691

11.9

Other

2,546

1.2


2,854

1.5


6,973

1.2


8,192

1.6

Restructuring costs(4)

—

—


—

—


152

—


875

0.2

Gain on sale of subsidiaries(6)

(1,945)

(0.9)


(152)

(0.1)


(1,945)

(0.3)


(152)

—



195,456

95.1

%

187,911

96.0

%

570,504

97.1

%

509,695

97.2

%

FleetNet

49,406

97.8

%

38,646

97.7

%

141,407

97.5

%

113,617

97.7

%

Total Asset-Light

244,862




226,557




711,911




623,312



























Other and eliminations(7)

(9,899)




(2,696)




(24,049)




(8,208)


Total consolidated operating expenses

$

770,103

93.2

%

$

717,538

96.4

%

$

2,247,573

96.9

%

$

2,073,127

98.0

%

























OPERATING INCOME(1)























Asset-Based

$

50,150



$

23,740




66,933




38,287



























ArcBest

9,993




7,838




16,865




14,859


FleetNet

1,088




922




3,638




2,690


Total Asset-Light

11,081




8,760




20,503




17,549



























Other and eliminations(7)

(5,176)




(5,758)




(15,500)




(13,227)


Total consolidated operating income

$

56,055



$

26,742



$

71,936



$

42,609













1)

As previously discussed in the Financial Data and Operating Statistics to this press release, 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.

2)

Shared services represent costs incurred to support all segments, including sales, pricing, customer service, marketing, capacity sourcing functions, human resources, financial services, information technology, legal, and other company-wide services.

3)

ABF Freight, Inc. recorded a one-time charge in second quarter 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)

Gains recognized in the 2018 and 2017 periods relate to the sale of the ArcBest segment's military moving businesses in December 2017 and 2016, respectively.

7)

"Other" corporate costs include restructuring charges of less than $0.1 million and $0.6 million for the three months ended September 30, 2018 and 2017, respectively, and $0.6 million and $1.6 million for the nine months ended September 30, 2018 and 2017, respectively. (See Segment Operating Income Reconciliations of GAAP to Non-GAAP Financial Measures table.) "Other" corporate costs also include certain unallocated shared service costs which are not attributable to any segment and additional investments to provide an improved platform for revenue growth and for offering ArcBest services across multiple operating 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.



Three Months Ended 

Nine Months Ended 


September 30

September 30


2018

2017

2018

2017


(Unaudited)


($ thousands, except per share data)

ArcBest Corporation - Consolidated


























Operating Income












Amounts on GAAP basis

$

56,055

$

26,742

$

71,936

$

42,609

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

—

—

37,922

—

Restructuring charges, pre-tax(2)

50

737

766

2,731

Gain on sale of subsidiaries(3)

(1,945)

(152)

(1,945)

(152)

Non-GAAP amounts

$

54,160

$

27,327

$

108,679

$

45,188














Net Income












Amounts on GAAP basis

$

40,776

$

14,788

$

51,963

$

23,158

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

—

—

28,161

—

Restructuring charges, after-tax(2)

37

447

566

1,656

Gain on sale of subsidiaries, after-tax(3)

(1,437)

(92)

(1,437)

(92)

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

1,325

1,195

4,146

2,730

Life insurance proceeds and changes in cash surrender value

(1,296)

(956)

(2,230)

(1,943)

Deferred tax adjustment for 2017 Tax Reform Act(5)

(825)

—

(3,466)

—

Impact of 2017 Tax Reform Act on current tax expense(5)

22

—

(47)

—

Tax expense (benefit) from vested RSUs(6)

(24)

16

(325)

(1,229)

Alternative fuel tax credit(7)

—

—

(1,203)

—

Non-GAAP amounts

$

38,578

$

15,398

$

76,128

$

24,280














Diluted Earnings Per Share












Amounts on GAAP basis

$

1.52

$

0.56

$

1.94

$

0.87

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

—

—

1.05

—

Restructuring charges, after-tax(2)

—

0.02

0.02

0.06

Gain on sale of subsidiaries, after-tax(3)

(0.05)

—

(0.05)

—

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

0.05

0.05

0.16

0.10

Life insurance proceeds and changes in cash surrender value

(0.05)

(0.04)

(0.08)

(0.07)

Deferred tax adjustment for 2017 Tax Reform Act(5)

(0.03)

—

(0.13)

—

Impact of 2017 Tax Reform Act on current tax expense(5)

—

—

—

—

Tax benefit from vested RSUs(6)

—

—

(0.01)

(0.05)

Alternative fuel tax credit(7)

—

—

(0.05)

—

Non-GAAP amounts(8)

$

1.44

$

0.58

$

2.85

$

0.92











1)

ABF Freight, Inc. recorded a one-time charge in second quarter 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)

Gains recognized in the 2018 and 2017 periods relate to the sale of the ArcBest segment's military moving businesses in December 2017 and 2016, respectively.

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 expected to occur in fourth quarter 2018 and first quarter 2019.

5)

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.

6)

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

7)

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.

8)

Non-GAAP EPS is calculated in total and may not foot due to rounding.

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 September 30, 2018





Other

Income Before

Income







Operating

Income

Income

Tax

Net

Effective


Income

(Costs)

Taxes

Provision

Income

Tax Rate

Amounts on GAAP basis

$

56,055

$

(2,064)

$

53,991

$

13,215

$

40,776

24.5

%

Restructuring charges(2)

50

—

50

13

37

26.0

Gain on sale of subsidiaries(3)

(1,945)

—

(1,945)

(508)

(1,437)

(26.1)

Nonunion pension expense, including settlement(4)

—

1,785

1,785

460

1,325

25.8

Life insurance proceeds and changes in cash surrender
value

—

(1,296)

(1,296)

—

(1,296)

—

Deferred tax adjustment for 2017 Tax Reform Act(5)

—

—

—

825

(825)

—

Impact of 2017 Tax Reform Act on current tax expense(5)

—

—

—

(22)

22

—

Tax benefit from vested RSUs(6)

—

—

—

24

(24)

—

Non-GAAP amounts

$

54,160

$

(1,575)

$

52,585

$

14,007

$

38,578

26.6

%





















Three Months Ended September 30, 2017




Other

Income Before

Income







Operating

Income

Income

Tax

Net

Effective


Income

(Costs)

Taxes

Provision

Income

Tax Rate

Amounts on GAAP basis

$

26,742

$

(2,674)

$

24,068

$

9,280

$

14,788

38.6

%

Restructuring charges(2)

737

—

737

290

447

39.3

Gain on sale of subsidiaries(3)

(152)

—

(152)

(60)

(92)

(39.5)

Nonunion pension expense, including settlement(4)

—

1,956

1,956

761

1,195

38.9

Life insurance proceeds and changes in cash surrender
value

—

(956)

(956)

—

(956)

—

Tax benefit from vested RSUs(6)

—

—

—

(16)

16

—

Non-GAAP amounts

$

27,327

$

(1,674)

$

25,653

$

10,255

$

15,398

40.0

%





















Nine Months Ended September 30, 2018




Other

Income Before

Income







Operating

Income

Income

Tax

Net

Effective


Income

(Costs)

Taxes

Provision

Income

Tax Rate

Amounts on GAAP basis

$

71,936

$

(8,220)

$

63,716

$

11,753

$

51,963

18.4

%

Multiemployer pension fund withdrawal liability charge(1)

37,922

—

37,922

9,761

28,161

25.7

Restructuring charges(2)

766

—

766

200

566

26.1

Gain on sale of subsidiaries(3)

(1,945)

—

(1,945)

(508)

(1,437)

(26.1)

Nonunion pension expense, including settlement(4)

—

5,584

5,584

1,438

4,146

25.8

Life insurance proceeds and changes in cash surrender
value

—

(2,230)

(2,230)

—

(2,230)

—

Deferred tax adjustment for 2017 Tax Reform Act(5)

—

—

—

3,466

(3,466)

—

Impact of 2017 Tax Reform Act on current tax expense(5)

—

—

—

47

(47)

—

Tax benefit from vested RSUs(6)

—

—

—

325

(325)

—

Alternative fuel tax credit(7)

—

—

—

1,203

(1,203)

—

Non-GAAP amounts

$

108,679

$

(4,866)

$

103,813

$

27,685

$

76,128

26.7

%





















Nine Months Ended September 30, 2017




Other

Income Before

Income







Operating

Income

Income

Tax

Net

Effective


Income

(Costs)

Taxes

Provision

Income

Tax Rate

Amounts on GAAP basis

$

42,609

$

(7,053)

$

35,556

$

12,398

$

23,158

34.9

%

Restructuring charges(2)

2,731

—

2,731

1,075

1,656

39.4

Gain on sale of subsidiaries(3)

(152)

—

(152)

(60)

(92)

(39.5)

Nonunion pension expense, including settlement(4)

—

4,468

4,468

1,738

2,730

38.9

Life insurance proceeds and changes in cash surrender
value

—

(1,943)

(1,943)

—

(1,943)

—

Tax benefit from vested RSUs(6)

—

—

—

1,229

(1,229)

—

Non-GAAP amounts

$

45,188

$

(4,528)

$

40,660

$

16,380

$

24,280

40.3

%











1)

ABF Freight, Inc. recorded a one-time charge in second quarter 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)

Gains recognized in the 2018 and 2017 periods relate to the sale of the ArcBest segment's military moving businesses in December 2017 and 2016, respectively.

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.

5)

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.

6)

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

7)

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




























Three Months Ended 

Nine Months Ended 


September 30

September 30


2018

2017

2018

2017

Segment Operating Income
Reconciliations

(Unaudited)


($ thousands, except percentages)

Asset-Based






Operating Income ($) and Operating Ratio (% of revenues)














Amounts on GAAP basis

$

50,150

91.4

%

$

23,740

95.4

%

$

66,933

95.9

%

$

38,287

97.4

%

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

—

—


—

—


37,922

(2.3)


—

—

Restructuring charges, pre-tax(2)

—

—


95

—


—

—


268

—

Non-GAAP amounts

$

50,150

91.4

%

$

23,835

95.4

%

$

104,855

93.6

%

$

38,555

97.4

%






Asset-Light










ArcBest




Operating Income ($) and Operating Ratio (% of revenues)














Amounts on GAAP basis

$

9,993

95.1

%

$

7,838

96.0

%

$

16,865

97.1

%

$

14,859

97.2

%

Restructuring charges, pre-tax(2)

—

—


—

—


152

—


875

(0.2)

Gain on sale of certain subsidiaries(3)

(1,945)

0.9


(152)

0.1


(1,945)

0.3


(152)

—

Non-GAAP amounts

$

8,048

96.0

%

$

7,686

96.1

%

$

15,072

97.4

%

$

15,582

97.0

%






FleetNet




Operating Income ($) and Operating Ratio (% of revenues)














Amounts on GAAP basis

$

1,088

97.8

%

$

922

97.7

%

$

3,638

97.5

%

$

2,690

97.7

%

Restructuring charges, pre-tax(2)

—

—


—

—


—

—


—

—

Non-GAAP amounts

$

1,088

97.8

%

$

922

97.7

%

$

3,638

97.5

%

$

2,690

97.7

%






Total Asset-Light




Operating Income ($) and Operating Ratio (% of revenues)














Amounts on GAAP basis

$

11,081

95.7

%

$

8,760

96.3

%

$

20,503

97.2

%

$

17,549

97.3

%

Restructuring charges, pre-tax(2)

—

—


—

—


152

—


875

(0.1)

Gain on sale of certain subsidiaries(3)

(1,945)

0.8


(152)

0.1


(1,945)

0.3


(152)

—

Non-GAAP amounts

$

9,136

96.5

%

$

8,608

96.4

%

$

18,710

97.5

%

$

18,272

97.2

%






Other and Eliminations




Operating Loss ($)














Amounts on GAAP basis

$

(5,176)



$

(5,758)



$

(15,500)



$

(13,227)



Restructuring charges, pre-tax(2)

50




642




614




1,588



Non-GAAP amounts

$

(5,126)



$

(5,116)



$

(14,886)



$

(11,639)














1)

ABF Freight, Inc. recorded a one-time charge in second quarter 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)

Gains recognized in the 2018 and 2017 periods relate to the sale of the ArcBest segment's military moving businesses in December 2017 and 2016, respectively.

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.

Three Months Ended 

Nine Months Ended 


September 30

September 30


2018

2017

2018

2017


(Unaudited)

ArcBest Corporation - Consolidated Adjusted EBITDA

($ thousands)



Net Income

$

40,776

$

14,788

$

51,963

$

23,158

Interest and other related financing costs

2,470

1,706

6,542

4,410

Income tax provision

13,215

9,280

11,753

12,398

Depreciation and amortization

28,026

26,218

81,699

76,821

Amortization of share-based compensation

2,641

1,471

6,185

5,070

Amortization of net actuarial losses of benefit plans and pension settlement expense

1,108

1,839

3,755

6,571

Multiemployer pension fund withdrawal liability charge(1)

—

—

37,922

—

Restructuring charges(2)

50

737

766

2,731

Consolidated Adjusted EBITDA

$

88,286

$

56,039

$

200,585

$

131,159











1)

ABF Freight, Inc. recorded a one-time charge in second quarter 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.






























Three Months Ended 

Nine Months Ended 


September 30

September 30


2018

2017

2018

2017

Asset-Light Adjusted EBITDA

(Unaudited)


($ thousands, except percentages)





ArcBest












Operating Income

$

9,993

$

7,838

$

16,865

$

14,859

Depreciation and amortization(3)

3,558

3,015

10,563

9,511

Restructuring charges(4)

—

—

152

875

Adjusted EBITDA

$

13,551

$

10,853

$

27,580

$

25,245





FleetNet



Operating Income

$

1,088

$

922

$

3,638

$

2,690

Depreciation and amortization

291

272

834

823

Restructuring charges(4)

—

—

—

—

Adjusted EBITDA

$

1,379

$

1,194

$

4,472

$

3,513





Total Asset-Light












Operating Income

$

11,081

$

8,760

$

20,503

$

17,549

Depreciation and amortization(3)

3,849

3,287

11,397

10,334

Restructuring charges(4)

—

—

152

875

Adjusted EBITDA

$

14,930

$

12,047

$

32,052

$

28,758











3)

Depreciation and amortization consists primarily of amortization of intangibles and software associated with acquired businesses.

4)

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


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.

Three Months Ended 

Nine Months Ended 


September 30

September 30


2018

2017

% Change

2018

2017

% Change


(Unaudited)

ArcBest Segment

($ thousands)



Revenues


$

205,449

$

195,749

5.0%

$

587,369

$

524,554

12.0%

Purchased transportation

164,322

155,894

5.4%

475,614

417,313

14.0%

Non-GAAP net revenue

$

41,127

$

39,855

3.2%

$

111,755

$

107,241

4.2%


















Non-GAAP Net Revenue Margin

20.0%

20.4%



19.0%

20.4%


ARCBEST CORPORATION

OPERATING STATISTICS




















Three Months Ended 

Nine Months Ended 


September 30

September 30


2018

2017

% Change

2018

2017

% Change


(Unaudited)

Asset-Based


































Workdays

63.0

62.5



190.5

190.0




















Billed Revenue(1) / CWT

$

35.83

$

32.53

10.1%

$

33.92

$

30.94

9.6%


















Billed Revenue(1) / Shipment

$

440.65

$

389.79

13.0%

$

430.34

$

374.65

14.9%


















Shipments

1,312,621

1,315,498

(0.2%)

3,793,276

4,002,913

(5.2%)


















Shipments / Day

20,835

21,048

(1.0%)

19,912

21,068

(5.5%)


















Tonnage (Tons)

807,110

788,228

2.4%

2,406,250

2,423,678

(0.7%)


















Tons / Day

12,811

12,612

1.6%

12,631

12,756

(1.0%)


















Average Length of Haul (Miles)

1,043

1,027

1.6%

1,042

1,032

1.0%





























1)

Revenue for undelivered freight is deferred for financial statement purposes in accordance with the Asset-Based segment revenue recognition policy. Billed revenue used for calculating revenue per hundredweight measurements has not been adjusted for the portion of revenue deferred for financial statement purposes.
















Year Over Year % Change


Three Months Ended 

Nine Months Ended 


September 30, 2018

September 30, 2018


(Unaudited)

ArcBest(2)












Revenue / Shipment

8.4%

15.6%







Shipments / Day

(7.4%)

(6.4%)











2)

Presentation of operating statistics for the ArcBest segment has been revised to reflect the segment's combined operations, including the expedite, truckload, and truckload-dedicated operations for which statistics were previously reported, as well as other service offerings of the segment.

Investor Relations Contact: David Humphrey

Media Contact: Kathy Fieweger

Title: Vice President – Investor Relations

Phone: 479-719-4358

Phone: 479-785-6200 

Email: [email protected]

Email: [email protected] 

SOURCE ArcBest

Related Links

http://www.arcb.com

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