ArcBest® Announces Third Quarter 2019 Results

- Third quarter 2019 revenue of $787.6 million, and net income of $16.3 million, or $0.62 per diluted share. On a non‑GAAP(1) basis, third quarter 2019 net income was $27.0 million, or $1.02 per diluted share.

- Asset-Based yield improvement despite a decrease in shipment and tonnage levels

- Asset-Light revenue and operating income decreased due to lower demand

News provided by

ArcBest

Oct 31, 2019, 16:05 ET

FORT SMITH, Ark., Oct. 31, 2019 /PRNewswire/ -- ArcBest® (Nasdaq: ARCB), a leading logistics company with creative problem solvers who deliver innovative solutions, today reported third quarter 2019 revenue of $787.6 million compared to third quarter 2018 revenue of $826.2 million.  Third quarter 2019 operating income was $31.2 million compared to operating income of $56.1 million in third quarter last year.  Third quarter net income was $16.3 million, or $0.62 per diluted share compared to third quarter 2018 net income of $40.8 million, or $1.52 per diluted share.

Excluding certain items in both periods, as identified in the attached reconciliation tables, including final nonunion pension charges of $6.0 million, or $0.23 per diluted share, eliminating any further nonunion pension expense, non‑GAAP net income was $27.0 million, or $1.02 per diluted share, in third quarter 2019 compared to third quarter 2018 net income of $40.0 million, or $1.49 per diluted share. 

"While below last year's record-setting levels, the third quarter represented one of the best performances achieved for that period in recent history as we continued to see rational pricing amid softer demand compared with last year," said Chairman, President & CEO Judy R. McReynolds. "Revenue for expedite and truckload brokerage services declined as available capacity increased, which has been the case throughout the year, while our managed transportation solutions revenue continued to grow as a result of our team's ability to provide valued expertise."

Asset-Based

Results of Operations

Third Quarter 2019 Versus Third Quarter 2018

  • Revenue of $565.6 million compared to $585.3 million, a per-day decrease of 4.1 percent.
  • Tonnage per day decrease of 4.6 percent, with a ten percent decrease in LTL‑rated freight offset by a double digit percentage increase in truckload‑rated freight.
  • Shipments per day decrease of 3.9 percent.
  • Total weight per shipment decreased 0.7 percent with a decrease in the average LTL‑rated weight per shipment of approximately 6 percent.
  • Total billed revenue per hundredweight increased 1.5 percent. Excluding fuel surcharge, the percentage increase on LTL‑rated freight was in the high‑single digits.
  • Operating income of $31.7 million and an operating ratio of 94.4 percent compared to operating income of $50.2 million and an operating ratio of 91.4 percent. On a non-GAAP basis, operating income of $38.5 million and an operating ratio of 93.2 percent compared to operating income of $51.2 million and an operating ratio of 91.2 percent.

1.

U.S. Generally Accepted Accounting Principles

Reduced customer demand during a more moderate economic period resulted in fewer third quarter shipments and lower total freight tonnage in the Asset‑Based operating segment compared to the same period last year.  The lower business levels experienced during the third quarter reflect a reduction in LTL‑rated tonnage partially offset by an increase in TL‑rated, spot shipments.  This Asset‑Based business mix, combined with a decrease in the size of the average LTL‑rated shipment, contributed to a reduction in total third quarter Asset‑Based revenue.  Yield management initiatives continue to generate positive results.  The improvement in third quarter total revenue per hundredweight included additional, solid increases in average LTL pricing above a strong pricing period in 2018.

Lower freight levels adversely impacted productivity in city pickup, dock handling and final shipment delivery contributing to cost increases in these operational areas.  Despite a reduction in fuel expense, increased repair and parts costs contributed to higher third quarter equipment maintenance costs.  Third quarter linehaul costs were below the prior year due to improved utilization of owned equipment combined with reductions in the use of rail and other outside carrier resources.

Asset-Light2

Results of Operations

Third Quarter 2019 Versus Third Quarter 2018

  • Revenue of $253.7 million compared to $255.9 million.
  • Operating income of $3.6 million compared to operating income of $11.1 million. On a non-GAAP basis, operating income of $3.7 million compared to operating income of $9.1 million.
  • Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") of $6.6 million compared to Adjusted EBITDA of $14.9 million.

A reduction in both total shipments and average revenue per shipment associated with lower market demand resulted in a third quarter revenue decline in the Asset-Light ArcBest segment compared to last year.  As seen throughout this year relative to 2018, expedite and truckload brokerage services were the primary reasons for the overall reduction in revenue.  Current market conditions have impacted customer pricing and freight mix.  This, combined with purchased transportation costs that were comparable to those experienced in last year's higher revenue environment, put pressure on third quarter margins and reduced Asset-Light operating income.  Managed transportation services were a significant positive contributor to Asset-Light results as the recent trend of solid demand for these value-added logistics services continued.  Household goods shipments handled within the Asset‑Light business increased and were another positive contributor to this segment's revenue and profitability totals.  At FleetNet, total event growth resulted in improved third quarter operating income.

Closing Comments

"Results for the first nine months remained solid though below last year's record-setting pace, as our customers' need for complex supply chain solutions aligns well with the broad array of services and expertise we provide," said McReynolds. "We expect the trends that began in the first quarter, including more available capacity and softer market demand, to remain prevalent for the rest of the year. We will work to reduce costs where prudent while still investing in innovative technology that enables a best-in-class customer experience and offers the optimum benefit and improved efficiency to ArcBest."

2.

The ArcBest and FleetNet reportable segments, combined, represent Asset-Light operations.

Conference Call

ArcBest will host a conference call with company executives to discuss the 2019 third quarter results. The call will be on Friday, November 1st at 9:30 a.m. EDT (8:30 a.m. CDT). Interested parties are invited to listen by calling (800) 931‑4071. Following the call, a recorded playback will be available through the end of the day on December 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 21930608. The conference call and playback can also be accessed, through December 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 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, 2019 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; untimely or ineffective development and implementation of new or enhanced technology or processes, including the pilot test program at ABF Freight; failure to realize potential benefits associated with new or enhanced technology or processes, including the pilot test program at ABF Freight, and any write-offs associated therewith; the loss or reduction of business from large customers; competitive initiatives and pricing pressures; 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 cost, timing, and performance of growth initiatives; 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; availability and cost of reliable third-party services; governmental regulations; environmental laws and regulations, including emissions-control regulations; union and nonunion employee wages and benefits, including changes in required contributions to multiemployer plans; our ability to secure independent owner operators and/or operational or regulatory issues related to our use of their services; litigation or claims asserted against us; maintaining our intellectual property rights, brand, and corporate reputation; 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; the cost, integration, and performance of any recent or future acquisitions; 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; greater than anticipated funding requirements for our nonunion defined benefit pension plan; 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 the 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.

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


2019

2018

2019

2018


(Unaudited)


($ thousands, except share and per share data)

REVENUES

$

787,563

$

826,158

$

2,270,892

$

2,319,509














OPERATING EXPENSES(1)

756,355

770,103

2,195,893

2,247,573














OPERATING INCOME

31,208

56,055

74,999

71,936














OTHER INCOME (COSTS)












Interest and dividend income

1,768

1,120

4,862

2,360

Interest and other related financing costs

(2,900)

(2,470)

(8,593)

(6,542)

Other, net

(6,734)

(714)

(7,770)

(4,038)



(7,866)

(2,064)

(11,501)

(8,220)














INCOME BEFORE INCOME TAXES

23,342

53,991

63,498

63,716














INCOME TAX PROVISION



7,072

13,215

17,964

11,753














NET INCOME

$

16,270

$

40,776

$

45,534

$

51,963














EARNINGS PER COMMON SHARE(2)












Basic

$

0.64

$

1.58

$

1.78

$

2.02

Diluted

$

0.62

$

1.52

$

1.72

$

1.94














AVERAGE COMMON SHARES OUTSTANDING












Basic

25,527,982

25,697,509

25,550,365

25,670,435

Diluted

26,416,595

26,795,659

26,461,668

26,708,259














CASH DIVIDENDS DECLARED PER COMMON SHARE

$

0.08

$

0.08

$

0.24

$

0.24

_______________________________

1) 

Includes a one-time charge of $37.9 million for the nine months ended September 30, 2018 for the multiemployer pension fund withdrawal liability resulting from the transition agreement ABF Freight, Inc. entered into with the New England Teamsters and Trucking Industry Pension Fund.

2) 

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


2019

2018


(Unaudited)

Note


($ thousands, except share data)

ASSETS






CURRENT ASSETS






Cash and cash equivalents

$

183,838

$

190,186

Short-term investments

124,257

106,806

Accounts receivable, less allowances (2019 - $5,548; 2018 - $7,380)

292,935

297,051

Other accounts receivable, less allowances (2019 - $469; 2018 - $806)

18,122

19,146

Prepaid expenses

25,365

25,304

Prepaid and refundable income taxes

8,186

1,726

Other

5,285

9,007

TOTAL CURRENT ASSETS

657,988

649,226








PROPERTY, PLANT AND EQUIPMENT






Land and structures

339,298

339,640

Revenue equipment

902,289

858,251

Service, office, and other equipment

229,691

199,230

Software

146,789

138,517

Leasehold improvements

10,212

9,365



1,628,279

1,545,003

Less allowances for depreciation and amortization

948,205

913,815



680,074

631,188








GOODWILL

108,320

108,320

INTANGIBLE ASSETS, NET

65,583

68,949

OPERATING RIGHT-OF-USE ASSETS

67,404

—

DEFERRED INCOME TAXES

6,128

7,468

OTHER LONG-TERM ASSETS

85,135

74,080


$

1,670,632

$

1,539,231








LIABILITIES AND STOCKHOLDERS' EQUITY














CURRENT LIABILITIES






Accounts payable

$

160,054

$

143,785

Income taxes payable

198

1,688

Accrued expenses

234,863

243,111

Current portion of long-term debt

50,197

54,075

Current portion of operating lease liabilities

18,492

—

Current portion of pension and postretirement liabilities

1,921

8,659

TOTAL CURRENT LIABILITIES

465,725

451,318








LONG-TERM DEBT, less current portion

248,223

237,600

OPERATING LEASE LIABILITIES, less current portion

52,782

—

PENSION AND POSTRETIREMENT LIABILITIES, less current portion

32,059

31,504

OTHER LONG-TERM LIABILITIES

38,151

44,686

DEFERRED INCOME TAXES

70,066

56,441








STOCKHOLDERS' EQUITY






Common stock, $0.01 par value, authorized 70,000,000 shares;
issued 2019: 28,801,025 shares; 2018: 28,684,779 shares

288

287

Additional paid-in capital

331,773

325,712

Retained earnings

540,778

501,389

   Treasury stock, at cost, 2019: 3,299,669 shares; 2018: 3,097,634 shares

(101,583)

(95,468)

Accumulated other comprehensive loss

(7,630)

(14,238)

TOTAL STOCKHOLDERS' EQUITY

763,626

717,682


$

1,670,632

$

1,539,231

Note:  The balance sheet at December 31, 2018 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


2019

2018


Unaudited


($ thousands)

 OPERATING ACTIVITIES






Net income

$

45,534

$

51,963

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






Depreciation and amortization

79,967

78,305

Amortization of intangibles

3,365

3,394

Pension settlement expense, including termination expense

8,135

1,603

Share-based compensation expense

7,268

6,185

Provision for losses on accounts receivable

832

1,937

Change in deferred income taxes

14,099

3,697

Gain on sale of property and equipment

(1,384)

(188)

Gain on sale of subsidiaries

—

(1,945)

Changes in operating assets and liabilities:






Receivables

4,216

(47,287)

Prepaid expenses

(265)

1,013

Other assets

(4,236)

(4,826)

Income taxes

(7,883)

5,675

Operating right-of-use assets and lease liabilities, net

526

—

Multiemployer pension fund withdrawal liability(1)

(435)

22,744

Accounts payable, accrued expenses, and other liabilities

(11,726)

51,309

NET CASH PROVIDED BY OPERATING ACTIVITIES

138,013

173,579








 INVESTING ACTIVITIES






Purchases of property, plant and equipment, net of financings

(69,773)

(39,249)

Proceeds from sale of property and equipment

4,748

2,917

Proceeds from sale of subsidiaries

—

4,680

Purchases of short-term investments

(105,747)

(67,121)

Proceeds from sale of short-term investments

88,730

47,878

Capitalization of internally developed software

(8,500)

(7,411)

NET CASH USED IN INVESTING ACTIVITIES

(90,542)

(58,306)








 FINANCING ACTIVITIES






Payments on long-term debt

(43,773)

(49,967)

Proceeds from notes payable

9,552

—

Net change in book overdrafts

(5,570)

(1,975)

Deferred financing costs

(562)

(202)

Payment of common stock dividends

(6,145)

(6,176)

Purchases of treasury stock

(6,115)

(201)

Payments for tax withheld on share-based compensation

(1,206)

(88)

NET CASH USED IN FINANCING ACTIVITIES

(53,819)

(58,609)








NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(6,348)

56,664

Cash and cash equivalents at beginning of period

190,186

120,772

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

183,838

$

177,436








 NONCASH INVESTING ACTIVITIES






Equipment financed

$

40,966

$

71,575

Accruals for equipment received

$

18,949

$

438

Lease liabilities arising from obtaining right-of-use assets

$

26,810

$

—

_________________________

1)

The nine months ended September 30, 2018 includes a one-time charge related to the multiemployer pension plan withdrawal liability.

ARCBEST CORPORATION

FINANCIAL STATEMENT OPERATING SEGMENT DATA AND OPERATING RATIOS



























Three Months Ended 

Nine Months Ended 


September 30

September 30


2019

2018

2019

2018


Unaudited


($ thousands, except percentages)

REVENUES























Asset-Based

$

565,621



$

585,290



$

1,631,348



$

1,626,644



























ArcBest

199,758




205,449




554,135




587,369


FleetNet

53,976




50,494




158,957




145,045


Total Asset-Light



253,734




255,943




713,092




732,414



























Other and eliminations

(31,792)




(15,075)




(73,548)




(39,549)


Total consolidated revenues

$

787,563



$

826,158



$

2,270,892



$

2,319,509



























OPERATING EXPENSES























Asset-Based























Salaries, wages, and benefits

$

296,503

52.4

%

$

292,082

49.9

%

$

873,795

53.6

%

$

848,611

52.2

%

Fuel, supplies, and expenses(1)

65,738

11.6


63,936

10.9


195,502

12.0


191,163

11.7

Operating taxes and licenses

12,865

2.3


12,261

2.1


37,477

2.3


35,927

2.2

Insurance

7,646

1.4


9,448

1.6


23,235

1.4


24,055

1.5

Communications and utilities

5,064

0.9


4,308

0.7


14,181

0.9


12,964

0.8

Depreciation and amortization

23,776

4.2


22,200

3.8


66,370

4.0


64,492

4.0

Rents and purchased transportation

61,102

10.8


70,946

12.1


167,234

10.2


180,332

11.1

Shared services(1)

56,031

9.9


57,472

9.8


161,664

9.9


158,042

9.7

Multiemployer pension fund withdrawal liability charge(2)

—

—


—

—


—

—


37,922

2.3

Gain on sale of property and equipment

(82)

—


(123)

—


(1,703)

(0.1)


(522)

—

Innovative technology costs(1)(3)

4,664

0.8


1,080

0.2


9,200

0.6


2,947

0.2

Other(1)

592

0.1


1,530

0.3


2,878

0.2


3,778

0.2

Total Asset-Based

533,899

94.4

%

535,140

91.4

%

1,549,833

95.0

%

1,559,711

95.9

%

























ArcBest























Purchased transportation

164,521

82.4

%

164,322

80.0

%

452,178

81.6

%

475,614

81.0

%

Supplies and expenses

2,780

1.4


3,522

1.7


8,412

1.5


10,290

1.7

Depreciation and amortization(4)

2,607

1.3


3,558

1.7


8,813

1.6


10,563

1.8

Shared services

25,032

12.5


23,453

11.4


71,204

12.9


68,857

11.7

Other

2,366

1.2


2,546

1.2


7,224

1.3


6,973

1.2

Restructuring costs

—

—


—

—


—

—


152

—

Gain on sale of subsidiaries(5)

—

—


(1,945)

(0.9)


—

—


(1,945)

(0.3)



197,306

98.8

%

195,456

95.1

%

547,831

98.9

%

570,504

97.1

%

FleetNet

52,805

97.8

%

49,406

97.8

%

155,272

97.7

%

141,407

97.5

%

Total Asset-Light

250,111




244,862




703,103




711,911



























Other and eliminations

(27,655)




(9,899)




(57,043)




(24,049)


Total consolidated operating expenses

$

756,355

96.0

%

$

770,103

93.2

%

$

2,195,893

96.7

%

$

2,247,573

96.9

%

























OPERATING INCOME























Asset-Based

$

31,722



$

50,150



$

81,515



$

66,933



























ArcBest

2,452




9,993




6,304




16,865


FleetNet

1,171




1,088




3,685




3,638


Total Asset-Light

3,623




11,081




9,989




20,503



























Other and eliminations(6)

(4,137)




(5,176)




(16,505)




(15,500)


Total consolidated operating income

$

31,208



$

56,055



$

74,999



$

71,936


______________________

1) 

In third quarter 2019, the presentation of Asset-Based segment expenses was modified to present innovative technology costs as a separate operating expense line item. Previously, innovative technology costs incurred directly by the segment or allocated through shared services were categorized in individual segment expense line items. Certain reclassifications have been made to the prior period operating segment expenses to conform to the current year presentation. There was no impact on the segment's total expenses as a result of the reclassifications.

2) 

The nine months ended September 30, 2018 includes a one-time charge for the multiemployer pension plan withdrawal liability.

3) 

Represents costs associated with the previously announced freight handling pilot test program at ABF Freight.

4) 

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

5) 

Gain recognized in the 2018 periods relates to the sale of the ArcBest segment's military moving businesses in December 2017.

6) 

"Other and eliminations" includes corporate costs for certain unallocated shared service costs which are not attributable to any segment, additional investments to offer comprehensive transportation and logistics services across multiple operating segments, and other investments in ArcBest technology and innovations, including innovative technology costs.

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


2019

2018

2019

2018


(Unaudited)


($ thousands, except per share data)

ArcBest Corporation - Consolidated


























Operating Income












Amounts on GAAP basis

$

31,208

$

56,055

$

74,999

$

71,936

Innovative technology costs, pre-tax(1)

4,727

1,753

11,104

4,060

ELD conversion costs, pre-tax(2)

1,796

—

2,358

—

Nonunion pension termination costs, pre-tax(3)

350

—

350

—

Multiemployer pension fund withdrawal liability charge, pre-tax(4)

—

—

—

37,922

Restructuring charges, pre-tax(5)

—

50

—

766

Gain on sale of subsidiaries, pre-tax(6)

—

(1,945)

—

(1,945)

Non-GAAP amounts

$

38,081

$

55,913

$

88,811

$

112,739














Net Income












Amounts on GAAP basis

$

16,270

$

40,776

$

45,534

$

51,963

Innovative technology costs, after-tax (includes related financing costs)(1)

3,614

1,304

8,462

3,017

ELD conversion costs, after-tax(2)

1,333

—

1,751

—

Nonunion pension termination costs, after-tax(3)

260

—

260

—

Multiemployer pension fund withdrawal liability charge, after-tax(4)

—

—

—

28,161

Restructuring charges, after-tax(5)

—

37

—

566

Gain on sale of subsidiaries, after-tax(6)

—

(1,437)

—

(1,437)

Nonunion pension expense, including settlement and termination expense, after-tax(7)

6,011

1,325

7,675

4,146

Life insurance proceeds and changes in cash surrender value

(557)

(1,296)

(2,713)

(2,230)

Tax expense (benefit) from vested RSUs(8)

56

(24)

464

(325)

Deferred tax adjustment for 2017 Tax Reform Act(9)

—

(825)

—

(3,466)

Impact of 2017 Tax Reform Act on current tax expense(9)

—

22

—

(47)

Alternative fuel tax credit(10)

—

—

—

(1,203)

Non-GAAP amounts

$

26,987

$

39,882

$

61,433

$

79,145














Diluted Earnings Per Share












Amounts on GAAP basis

$

0.62

$

1.52

$

1.72

$

1.94

Innovative technology costs, after-tax (includes related financing costs)(1)

0.14

0.05

0.32

0.11

ELD conversion costs, after-tax(2)

0.05

—

0.07

—

Nonunion pension termination costs, after-tax(3)

0.01

—

0.01

—

Multiemployer pension fund withdrawal liability charge, after-tax(4)

—

—

—

1.05

Restructuring charges, after-tax(5)

—

—

—

0.02

Gain on sale of subsidiaries, after-tax(6)

—

(0.05)

—

(0.05)

Nonunion pension expense, including settlement and termination expense, after-tax(7)

0.23

0.05

0.29

0.16

Life insurance proceeds and changes in cash surrender value

(0.02)

(0.05)

(0.10)

(0.08)

Tax expense (benefit) from vested RSUs(8)

—

—

0.02

(0.01)

Deferred tax adjustment for 2017 Tax Reform Act(9)

—

(0.03)

—

(0.13)

Impact of 2017 Tax Reform Act on current tax expense(9)

—

—

—

—

Alternative fuel tax credit(10)

—

—

—

(0.05)

Non-GAAP amounts(11)

$

1.02

$

1.49

$

2.32

$

2.96

Note: See Notes to Non-GAAP Financial Tables of this press release for the footnotes to this ArcBest Corporation – Consolidated non-GAAP table. 

Notes to Non-GAAP Financial Tables

The following footnotes apply to the non-GAAP financial tables presented in this press release.

1) 

Represents costs associated with the previously announced freight handling pilot test program at ABF Freight.

2) 

The three and nine months ended September 30, 2019 include impairment charges related to equipment replacement and other one-time costs incurred to comply with the electronic logging device ("ELD") mandate which will be effective in December 2019.

3) 

The three and nine months ended September 30, 2019 include a one-time consulting fee associated with the termination of the nonunion defined benefit pension plan.

4) 

The nine months ended September 30, 2018 includes a one-time charge for the multiemployer pension plan withdrawal liability.

5) 

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

6) 

Gain recognized in the 2018 periods relates to the sale of the ArcBest segment's military moving businesses in December 2017.

7) 

Nonunion pension expense is presented as a non-GAAP adjustment with pension settlement expense, because expenses related to the plan have been excluded from the financial information management uses to make operating decisions, as the nonunion defined benefit pension plan was amended to terminate the plan with a termination date of December 31, 2017. Pension settlements related to benefit distributions for the plan termination began in fourth quarter 2018 and were completed in third quarter 2019. The three and nine months ended September 30, 2019 include a noncash pension termination expense related to an amount which was stranded in accumulated other comprehensive income until the pension benefit obligation was settled upon plan termination.

8) 

The Company recognized the tax impact for the vesting of share-based compensation resulting in excess tax expense (benefit) during the three and nine months ended September 30, 2019 and 2018.

9) 

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

10) 

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.

11) 

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



















Effective Tax Rate Reconciliation













ArcBest Corporation - Consolidated




































(Unaudited)

















($ thousands, except percentages)

Three Months Ended September 30, 2019





Other

Income Before

Income







Operating

Income

Income

Tax

Net

Effective


Income

(Costs)

Taxes

Provision

Income

Tax Rate

Amounts on GAAP basis

$

31,208

$

(7,866)

$

23,342

$

7,072

$

16,270

30.3

%

Innovative technology costs(1)

4,727

139

4,866

1,252

3,614

25.7

ELD conversion costs(2)

1,796

—

1,796

463

1,333

25.8

Nonunion pension termination costs(3)

350

—

350

90

260

25.7

Nonunion pension expense, including settlement and termination expense(7)

—

6,718

6,718

707

6,011

10.5

Life insurance proceeds and changes in cash surrender value

—

(557)

(557)

—

(557)

—

Tax expense from vested RSUs(8)

—

—

—

(56)

56

—

Non-GAAP amounts

$

38,081

$

(1,566)

$

36,515

$

9,528

$

26,987

26.1

%





















Nine Months Ended September 30, 2019




















Other

Income Before

Income







Operating

Income

Income

Tax

Net

Effective


Income

(Costs)

Taxes

Provision

Income

Tax Rate

Amounts on GAAP basis

$

74,999

$

(11,501)

$

63,498

$

17,964

$

45,534

28.3

%

Innovative technology costs(1)

11,104

291

11,395

2,933

8,462

25.7

ELD conversion costs(2)

2,358

—

2,358

607

1,751

25.7

Nonunion pension termination costs(3)

350

—

350

90

260

25.7

Nonunion pension expense, including settlement and termination expense(7)

—

8,959

8,959

1,284

7,675

14.3

Life insurance proceeds and changes in cash surrender value

—

(2,713)

(2,713)

—

(2,713)

—

Tax expense from vested RSUs(8)

—

—

—

(464)

464

—

Non-GAAP amounts

$

88,811

$

(4,964)

$

83,847

$

22,414

$

61,433

26.7

%





















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

%

Innovative technology costs(1)

1,753

2

1,755

451

1,304

25.7

Restructuring charges(5)

50

—

50

13

37

26.0

Gain on sale of subsidiaries(6)

(1,945)

—

(1,945)

(508)

(1,437)

(26.1)

Nonunion pension expense, including settlement(7)

—

1,785

1,785

460

1,325

25.8

Life insurance proceeds and changes in cash surrender value

—

(1,296)

(1,296)

—

(1,296)

—

Tax benefit from vested RSUs(8)

—

—

—

24

(24)

—

Deferred tax adjustment for 2017 Tax Reform Act(9)

—

—

—

825

(825)

—

Impact of 2017 Tax Reform Act on current tax expense(9)

—

—

—

(22)

22

—

Non-GAAP amounts

$

55,913

$

(1,573)

$

54,340

$

14,458

$

39,882

26.6

%





















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

%

Innovative technology costs(1)

4,060

2

4,062

1,045

3,017

25.7

Multiemployer pension fund withdrawal liability charge(4)

37,922

—

37,922

9,761

28,161

25.7

Restructuring charges(5)

766

—

766

200

566

26.1

Gain on sale of subsidiaries(6)

(1,945)

—

(1,945)

(508)

(1,437)

(26.1)

Nonunion pension expense, including settlement(7)

—

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)

—

Tax benefit from vested RSUs(8)

—

—

—

325

(325)

—

Deferred tax adjustment for 2017 Tax Reform Act(9)

—

—

—

3,466

(3,466)

—

Impact of 2017 Tax Reform Act on current tax expense(9)

—

—

—

47

(47)

—

Alternative fuel tax credit(10)

—

—

—

1,203

(1,203)

—

Non-GAAP amounts

$

112,739

$

(4,864)

$

107,875

$

28,730

$

79,145

26.6

%

________________________

Note: See Notes to Non-GAAP Financial Tables of this press release for the footnotes to this ArcBest Corporation – Consolidated Effective Tax Rate Reconciliation table.




























Three Months Ended 

Nine Months Ended 


September 30

September 30


2019

2018

2019

2018

Segment Operating Income Reconciliations

(Unaudited)


($ thousands, except percentages)

Asset-Based Segment




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














Amounts on GAAP basis

$

31,722

94.4

%

$

50,150

91.4

%

$

81,515

95.0

%

$

66,933

95.9

%

Innovative technology costs, pre-tax(1)

4,664

(0.8)


1,080

(0.2)


9,200

(0.6)


2,947

(0.2)

ELD conversion costs, pre-tax(2)

1,796

(0.3)


—

—


2,358

(0.1)


—

—

Nonunion pension termination costs, pre-tax(3)

295

(0.1)


—

—


295

—


—

—

Multiemployer pension fund withdrawal liability charge, pre-tax(4)

—

—


—

—


—

—


37,922

(2.3)

Non-GAAP amounts

$

38,477

93.2

%

$

51,230

91.2

%

$

93,368

94.3

%

$

107,802

93.4

%






Asset-Light




ArcBest Segment




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














Amounts on GAAP basis

$

2,452

98.8

%

$

9,993

95.1

%

$

6,304

98.9

%

$

16,865

97.1

%

Nonunion pension termination costs, pre-tax(3)

23

—


—

—


23

—


—

—

Restructuring charges, pre-tax(5)

—

—


—

—


—

—


152

—

Gain on sale of subsidiaries, pre-tax(6)

—

—


(1,945)

0.9


—

—


(1,945)

0.3

Non-GAAP amounts

$

2,475

98.8

%

$

8,048

96.0

%

$

6,327

98.9

%

$

15,072

97.4

%






FleetNet Segment




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














Amounts on GAAP basis

$

1,171

97.8

%

$

1,088

97.8

%

$

3,685

97.7

%

$

3,638

97.5

%

Nonunion pension termination costs, pre-tax(3)

12

—


—

—


12

—


—

—

Non-GAAP amounts

$

1,183

97.8

%

$

1,088

97.8

%

$

3,697

97.7

%

$

3,638

97.5

%






Total Asset-Light




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














Amounts on GAAP basis

$

3,623

98.6

%

$

11,081

95.7

%

$

9,989

98.6

%

$

20,503

97.2

%

Nonunion pension termination costs, pre-tax(3)

35

—


—

—


35

—


—

—

Restructuring charges, pre-tax(5)

—

—


—

—


—

—


152

—

Gain on sale of subsidiaries, pre-tax(6)

—

—


(1,945)

0.8


—

—


(1,945)

0.3

Non-GAAP amounts

$

3,658

98.6

%

$

9,136

96.5

%

$

10,024

98.6

%

$

18,710

97.5

%






Other and Eliminations




Operating Loss ($)














Amounts on GAAP basis

$

(4,137)



$

(5,176)



$

(16,505)



$

(15,500)



Innovative technology costs, pre-tax(1)

63




673




1,904




1,113



Nonunion pension termination costs, pre-tax(3)

20




—




20




—



Restructuring charges, pre-tax(5)

—




50




—




614



Non-GAAP amounts

$

(4,054)



$

(4,453)



$

(14,581)



$

(13,773)



_______________________

Note: See Notes to Non-GAAP Financial Tables of this press release for the footnotes to this ArcBest Corporation – Segment Operating Income Reconciliations non-GAAP table.

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


2019

2018

2019

2018


(Unaudited)

ArcBest Corporation - Consolidated Adjusted EBITDA

($ thousands)



Net Income

$

16,270

$

40,776

$

45,534

$

51,963

Interest and other related financing costs

2,900

2,470

8,593

6,542

Income tax provision

7,072

13,215

17,964

11,753

Depreciation and amortization

29,361

28,026

83,332

81,699

Amortization of share-based compensation

2,409

2,641

7,268

6,185

Amortization of net actuarial losses of benefit plans and pension
settlement expense, including termination expense(1)

6,800

1,108

9,140

3,755

Multiemployer pension fund withdrawal liability charge(2)

—

—

—

37,922

Restructuring charges(3)

—

50

—

766

Consolidated Adjusted EBITDA

$

64,812

$

88,286

$

171,831

$

200,585

______________________

1) 

The three and nine months ended September 30, 2019 include a noncash pension termination expense related to an amount which was stranded in accumulated other comprehensive income until the pension benefit obligation was settled upon plan termination.

2) 

The three and nine months ended September 30, 2018 include a one-time charge for the multiemployer pension plan withdrawal liability.

3) 

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


2019

2018

2019

2018

Asset-Light Adjusted EBITDA

(Unaudited)


($ thousands, except percentages)





ArcBest












Operating Income

$

2,452

$

9,993

$

6,304

$

16,865

Depreciation and amortization(4)

2,607

3,558

8,813

10,563

Restructuring charges(5)

—

—

—

152

Adjusted EBITDA

$

5,059

$

13,551

$

15,117

$

27,580





FleetNet



Operating Income

$

1,171

$

1,088

$

3,685

$

3,638

Depreciation and amortization

332

291

982

834

Adjusted EBITDA

$

1,503

$

1,379

$

4,667

$

4,472





Total Asset-Light












Operating Income

$

3,623

$

11,081

$

9,989

$

20,503

Depreciation and amortization(4)

2,939

3,849

9,795

11,397

Restructuring charges(5)

—

—

—

152

Adjusted EBITDA

$

6,562

$

14,930

$

19,784

$

32,052

______________________

4) 

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

5) 

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

ARCBEST CORPORATION

OPERATING STATISTICS




















Three Months Ended 

Nine Months Ended 


September 30

September 30


2019

2018

% Change

2019

2018

% Change


(Unaudited)

Asset-Based


































Workdays

63.5

63.0



190.0

190.5




















Billed Revenue(1) / CWT

$

36.35

$

35.83

1.5%

$

35.38

$

33.92

4.3%


















Billed Revenue(1) / Shipment

$

443.82

$

440.65

0.7%

$

435.61

$

430.34

1.2%


















Shipments

1,271,697

1,312,621

(3.1%)

3,754,801

3,793,276

(1.0%)


















Shipments / Day

20,027

20,835

(3.9%)

19,762

19,912

(0.8%)


















Tonnage (Tons)

776,370

807,110

(3.8%)

2,311,266

2,406,250

(3.9%)


















Tons / Day

12,226

12,811

(4.6%)

12,165

12,631

(3.7%)


















Pounds / Shipment

1,221

1,230

(0.7%)

1,231

1,269

(3.0%)


















Average Length of Haul (Miles)

1,040

1,043

(0.3%)

1,035

1,042

(0.7%)


















______________________

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, 2019

September 30, 2019


(Unaudited)

ArcBest(2)












Revenue / Shipment

(7.9%)

(8.1%)







Shipments / Day

(1.9%)

(1.5%)

______________________

2) 

Statistical data related to managed transportation services transactions are not included in the presentation of operating statistics for the ArcBest 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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