ArcBest® Announces Third Quarter 2019 Results

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.

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."

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 StatementsCertain 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 CORPORATIONRECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES

Non-GAAP Financial MeasuresWe 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.

Notes to Non-GAAP Financial Tables

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