Chronicle Journal: Finance

ArcBest® Announces Second Quarter 2020 Results

FORT SMITH, Ark., July 29, 2020 /PRNewswire/ -- ArcBest® (Nasdaq: ARCB), a leader in supply chain logistics, today reported second quarter 2020 revenue of $627.4 million compared to second quarter 2019 revenue of $771.5 million.  Second quarter 2020 operating income was $20.4 million compared to operating income of $35.2 million in the same period last year.  Net income was $15.9 million, or $0.61 per diluted share, compared to second quarter 2019 net income of $24.4 million, or $0.92 per diluted share.

ArcBest Logo (PRNewsFoto/ArcBest Corporation) (PRNewsfoto/ArcBest)

Excluding certain items in both periods as identified in the attached reconciliation tables, non-GAAP operating income was $25.1 million in second quarter 2020 compared to second quarter 2019 non-GAAP operating income of $38.8 million.  On a non-GAAP basis, net income was $17.6 million, or $0.67 per diluted share, in second quarter 2020 compared to second quarter 2019 net income of $27.4 million, or $1.04 per diluted share.

At June 30, 2020, ArcBest's consolidated cash and short-term investments, less debt, were $41 million net cash compared to the $3 million net debt position at March 31, 2020, reflecting a $44 million improvement during the second quarter.

"The successes of the second quarter are rooted in the strength of our employees and the culture that we have cultivated here that unites all of us behind a set of shared values that drive excellence," said Judy R. McReynolds, Chairman, President and CEO of ArcBest. "I am incredibly proud of our employees, especially our front-line teams, who continue to work hard and serve our customers in the face of a global pandemic that continues to affect so many aspects of the economy."

Second Quarter Results of Operations Comparisons

Asset-Based

Second Quarter 2020 Versus Second Quarter 2019

  • Revenue of $460.1 million compared to $559.6 million, a per-day decrease of 17.8 percent.
  • Total tonnage per day decrease of 13.8 percent, with a double-digit percentage decrease in both LTL-rated tonnage and TL-rated spot shipment tonnage moving in the Asset-Based network.
  • Total shipments per day decrease of 13.3 percent. Total weight per shipment decrease of 0.6 percent and an increase of 0.9 percent in LTL-rated weight per shipment impacted by transactional, LTL-rated shipments added during the second quarter.
  • Total billed revenue per hundredweight decreased 4.0 percent and was negatively impacted by lower fuel surcharges versus prior year. Excluding fuel surcharge, LTL-rated freight experienced a percentage increase in the low-single digits.
  • Operating income of $21.0 million and an operating ratio of 95.4 percent compared to the prior year quarter operating income of $36.2 million and an operating ratio of 93.5 percent. On a non-GAAP basis, operating income of $25.8 million and an operating ratio of 94.4 percent compared to the prior year quarter operating income of $38.9 million and an operating ratio of 93.0 percent.

In response to significantly lower shipment and tonnage levels related to the pandemic's impact on customer shipping patterns, Asset-Based system labor and other resources were managed down in order to match business levels. Second quarter business decreases were somewhat mitigated by the continued addition of spot, truckload-rated shipments and transactional LTL-rated shipments throughout the Asset-Based network. Combined with the cost reductions in place, the handling of these additional transactional shipments contributed to improved operational efficiencies, fewer empty miles and lower costs. Total second quarter revenue per hundredweight decreased due to freight mix changes related to the addition of these transactional shipments. However, total yield on LTL-rated shipments, excluding changes in fuel surcharge, was positive versus the prior year. Pricing on ABF Freight's traditional published and contractual business improved as the transportation marketplace's rational pricing environment continued.

Asset-Light3

Second Quarter 2020 Versus Second Quarter 2019

  • Revenue of $197.9 million compared to $232.9 million, a per-day decrease of 15.0 percent.
  • Operating income of $2.1 million compared to operating income of $3.1 million.
  • Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") of $4.9 million compared to Adjusted EBITDA of $6.5 million.

Second quarter revenue in the Asset-Light ArcBest segment decreased compared to the prior year period primarily due to lower demand in both the expedite and truckload brokerage businesses related to the pandemic.    Reduced demand for expedited services was related to customer closures in the auto sector for the majority of the quarter and meaningful reductions in business levels for many manufacturing customers.  Revenue reductions in truckload brokerage were the result of fewer total shipments combined with lower average revenue per shipment.  The second quarter was highlighted by significant revenue growth in managed transportation services, consistent with the positive trend seen for the past several quarters in this portion of ArcBest's Asset-Light business.  Purchased transportation expense in the second quarter, as a percent of revenue, increased 120 basis points compared to the prior year period reflecting changes in business mix and the market effects of reductions in revenue per shipment that exceeded comparable decreases in purchased transportation expense.  In the second quarter of 2020, operating results for the Asset-Light ArcBest segment benefitted from the corporate cost reduction initiatives previously announced in early April.

At FleetNet, a decrease in total events, primarily associated with fewer roadside repairs due to the pandemic, contributed to lower total revenue and reduced operating income compared to the prior year period.

July 2020 Update On Previously Announced Cost Actions

As previously announced, in anticipation of lower business levels and the potential for cash flow disruption, ArcBest implemented actions in late March and early April to mitigate the operating and financial impact of the COVID-19 pandemic.  ArcBest drew down $180 million of its Senior Secured Revolving Credit Facility and borrowed $45 million under its Accounts Receivable Securitization Program.  As described earlier, ArcBest's net cash position improved $44 million since March 31, 2020, and customer account payment trends have stabilized.  Because of these factors, we are currently reviewing options for paying back the incremental borrowings during third quarter 2020.

Due to the uncertainties at the time, ArcBest implemented cost reductions beginning in April 2020 that included a 15% decrease in the salaries of all nonunion employees; suspension of the employer match of ArcBest's nonunion 401(k) Plan; a 15% decrease in the fees paid to ArcBest's board members and the board committee chairpersons as well as other cost reductions.  When compared to second quarter 2019, these compensation-related reductions resulted in savings of approximately $15 million in second quarter 2020.  These cost reductions, along with utilizing real-time, technology-enabling data to align operational costs with business levels, contributed to the positive second quarter financial results.

Since the lowest monthly consolidated revenue levels of the year, which were reported in April, ArcBest has experienced improved financial trends that include sequential business improvement2, increased cash levels and improved EBITDA.   Year-over-year consolidated revenue has improved from a decline of 20% in April to a month-to-date July decline of 3%.  The sequential improvement in revenue for each month of the quarter resulted in a greater portion of the second quarter profitability being earned in June.  As a result of this positive momentum in our business, some cost reductions will be restored beginning in the third quarter of 2020.  These include the restoration of nonunion salaries; the 401(k) company match; and the board fees.  On a sequential basis, compared to second quarter 2020, ArcBest anticipates that the third quarter 2020 expense associated with these cost restorations will be in an approximate range of $10 million to $15 million.  Though some operational resources are being added back as business improves, they will continue to be carefully managed to available business.  "As an essential business, our employees have worked on the front lines in sacrifice, both personally and financially, to serve our customers and our nation," said McReynolds.  "We value our employees and appreciate their efforts, and are pleased to now be able to restore full wage levels."  

Closing Comments

"I am pleased with what we have been able to accomplish over the last three months considering the dynamic nature of circumstances surrounding the COVID-19 pandemic," said McReynolds. "Our entire team, from our best-in-class drivers and dock workers in the field to our office personnel working from home around the country, has executed very well in this environment and their fortitude, when mixed with prudent business decisions, has proven to be a winning combination for success during these times. We are working to carry this momentum forward as the second half of the year unfolds and will, as always, monitor trends and make adjustments where necessary. As a full-service logistics company, ArcBest is playing a vital role in getting our nation up and running again, and we plan to lead the way by continuing to deliver quality integrated solutions for all of our customers' supply chain needs."

NOTES



1.

U.S. Generally Accepted Accounting Principles

2.

Discussions of July 2020 business results and certain projections for 2020 are included in Exhibit 99.2 to ArcBest's second quarter 2020 earnings release filed with the SEC in our Current Report on Form 8–K.

3.

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 2020 second quarter results. The call will be today, Wednesday, July 29, at 9:00 a.m. ET (8:00 a.m. CT). Interested parties are invited to listen by calling (800) 681-2231. Following the call, a recorded playback will be available through the end of the day on September 15, 2020. To listen to the playback, dial (800) 633–8284 or (402) 977–9140 (for international callers). The conference call ID for the playback is 21965466. The conference call and playback can also be accessed, through September 15, 2020, on ArcBest's website at arcb.com.

About ArcBest

ArcBest® (Nasdaq: ARCB) is a leading logistics company with creative problem solvers who deliver innovative solutions for our customers' supply chain needs.  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 Logistics®. For more information, visit arcb.com.

The following is a "safe harbor" statement under the Private Securities Litigation Reform Act of 1995:  Certain statements and information in this press release concerning results for the three months ended June 30, 2020 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; the ability to maintain third-party information technology systems or licenses; widespread outbreak of an illness or any other communicable disease and the effects of pandemics, including the COVID-19 pandemic, or any other public health crisis; regulatory measures that may be implemented in response to widespread illness, including the COVID-19 pandemic; ineffectiveness of our business continuity plans to meet our operational needs in the event of adverse external events or conditions; untimely or ineffective development and implementation of, or 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; general economic conditions and related shifts in market demand, including the impact of and uncertainties related to the COVID-19 pandemic, that impact the performance and needs of industries we serve and/or limit our customers' access to adequate financial resources; the ability to manage our cost structure, and the timing and performance of growth initiatives; relationships with employees, including unions, and our ability to attract, retain, and develop 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; our ability to secure independent owner operators and/or operational or regulatory issues related to our use of their services; availability and cost of reliable third-party services; 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; governmental regulations; environmental laws and regulations, including emissions-control regulations; union 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; maintaining our intellectual property rights, brand, and corporate reputation; 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; 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, fuel, and related taxes; potential impairment of goodwill and intangible assets; the cost, integration, and performance of any recent or future acquisitions; seasonal fluctuations and adverse weather conditions; regulatory, economic, and other risks arising from our international business; acts of terrorism or war, or the impact of 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.

Investor Relations Contact: David Humphrey
Title: Vice President – Investor Relations
Phone: 479-785-6200
Email: dhumphrey@arcb.com

ARCBEST CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS




Three Months Ended 


Six Months Ended 




June 30


June 30




2020


2019


2020


2019




(Unaudited)




($ thousands, except share and per share data)


REVENUES


$

627,370


$

771,490


$

1,328,769


$

1,483,329
















OPERATING EXPENSES



606,945



736,290



1,300,525



1,439,538
















OPERATING INCOME



20,425



35,200



28,244



43,791
















OTHER INCOME (COSTS)














Interest and dividend income



991



1,616



2,366



3,094


Interest and other related financing costs



(3,378)



(2,811)



(6,325)



(5,693)


Other, net



2,696



(445)



(1,166)



(1,036)





309



(1,640)



(5,125)



(3,635)
















INCOME BEFORE INCOME TAXES



20,734



33,560



23,119



40,156
















INCOME TAX PROVISION



4,854



9,184



5,337



10,892
















NET INCOME


$

15,880


$

24,376


$

17,782


$

29,264
















EARNINGS PER COMMON SHARE(1)














Basic


$

0.62


$

0.95


$

0.70


$

1.14


Diluted


$

0.61


$

0.92


$

0.68


$

1.10
















AVERAGE COMMON SHARES OUTSTANDING














Basic



25,463,559



25,554,286



25,468,624



25,562,306


Diluted



26,217,957



26,431,592



26,252,486



26,483,011
















CASH DIVIDENDS DECLARED PER COMMON SHARE


$

0.08


$

0.08


$

0.16


$

0.16







1)

ArcBest uses the two-class method for calculating earnings per share. This method requires an allocation of dividends paid and a portion of undistributed net income (but not losses) to unvested restricted stock for calculating per share amounts.

 

ARCBEST CORPORATION

CONSOLIDATED BALANCE SHEETS




June 30


December 31



2020


2019



(Unaudited)


Note



($ thousands, except share data)

ASSETS







CURRENT ASSETS







Cash and cash equivalents


$

406,290


$

201,909

Short-term investments



167,719



116,579

Accounts receivable, less allowances (2020 - $7,130; 2019 - $5,448)



273,135



282,579

Other accounts receivable, less allowances (2020 - $661; 2019 - $476)



16,812



18,774

Prepaid expenses



28,928



30,377

Prepaid and refundable income taxes



4,236



9,439

Other



4,923



4,745

TOTAL CURRENT ASSETS



902,043



664,402








PROPERTY, PLANT AND EQUIPMENT







Land and structures



344,951



342,122

Revenue equipment



891,029



896,020

Service, office, and other equipment



232,058



233,354

Software



155,411



151,068

Leasehold improvements



11,821



10,383




1,635,270



1,632,947

Less allowances for depreciation and amortization



974,464



949,355




660,806



683,592








GOODWILL



88,320



88,320

INTANGIBLE ASSETS, NET



56,915



58,832

OPERATING RIGHT-OF-USE ASSETS



81,069



68,470

DEFERRED INCOME TAXES



7,507



7,725

OTHER LONG-TERM ASSETS



74,100



79,866



$

1,870,760


$

1,651,207








LIABILITIES AND STOCKHOLDERS' EQUITY














CURRENT LIABILITIES







Accounts payable


$

140,632


$

134,374

Income taxes payable



3,181



12

Accrued expenses



217,020



232,321

Current portion of long-term debt



59,050



57,305

Current portion of operating lease liabilities



19,769



20,265

TOTAL CURRENT LIABILITIES



439,652



444,277








LONG-TERM DEBT, less current portion



473,850



266,214

OPERATING LEASE LIABILITIES, less current portion



65,249



52,277

POSTRETIREMENT LIABILITIES, less current portion



20,448



20,294

OTHER LONG-TERM LIABILITIES



36,077



38,892

DEFERRED INCOME TAXES



60,393



66,210








STOCKHOLDERS' EQUITY







Common stock, $0.01 par value, authorized 70,000,000 shares;
      issued 2020: 28,958,258 shares; 2019: 28,810,902 shares



290



288

Additional paid-in capital



337,942



333,943

Retained earnings



546,689



533,187

   Treasury stock, at cost, 2020: 3,554,639 shares; 2019: 3,404,639 shares



(107,740)



(104,578)

Accumulated other comprehensive income (loss)



(2,090)



203

TOTAL STOCKHOLDERS' EQUITY



775,091



763,043



$

1,870,760


$

1,651,207






Note: 

The balance sheet at December 31, 2019 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

 

ARCBEST CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS




Six Months Ended 



June 30



2020


2019



Unaudited



($ thousands)

 OPERATING ACTIVITIES







Net income


$

17,782


$

29,264

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







Depreciation and amortization



56,140



51,722

Amortization of intangibles



1,959



2,249

Pension settlement expense



89



1,634

Share-based compensation expense



5,071



4,859

Provision for losses on accounts receivable



999



621

Change in deferred income taxes



(5,170)



5,124

Gain on sale of property and equipment and lease termination



(3,581)



(1,469)

Changes in operating assets and liabilities:







Receivables



9,626



1,781

Prepaid expenses



1,444



(3,323)

Other assets



4,358



(2,798)

Income taxes



8,413



(3,042)

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



(230)



159

Accounts payable, accrued expenses, and other liabilities



(14,833)



(6,310)

NET CASH PROVIDED BY OPERATING ACTIVITIES



82,067



80,471








 INVESTING ACTIVITIES







Purchases of property, plant and equipment, net of financings



(16,209)



(41,909)

Proceeds from sale of property and equipment



7,670



3,798

Purchases of short-term investments



(97,493)



(43,327)

Proceeds from sale of short-term investments



46,725



33,332

Capitalization of internally developed software



(6,495)



(5,535)

NET CASH USED IN INVESTING ACTIVITIES



(65,802)



(53,641)








 FINANCING ACTIVITIES







Borrowings under credit facilities



180,000



Borrowings under accounts receivable securitization program



45,000



Proceeds from notes payable





9,552

Payments on long-term debt



(29,185)



(29,984)

Net change in book overdrafts



615



(4,398)

Payment of common stock dividends



(4,082)



(4,102)

Purchases of treasury stock



(3,162)



(5,171)

Payments for tax withheld on share-based compensation



(1,070)



(1,182)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES



188,116



(35,285)








NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS



204,381



(8,455)

Cash and cash equivalents at beginning of period



201,909



190,186

CASH AND CASH EQUIVALENTS AT END OF PERIOD


$

406,290


$

181,731








 NONCASH INVESTING ACTIVITIES







Equipment financed


$

13,566


$

10,964

Accruals for equipment received


$

857


$

19,402

Lease liabilities arising from obtaining right-of-use assets


$

23,727


$

23,049

 

ARCBEST CORPORATION

FINANCIAL STATEMENT OPERATING SEGMENT DATA AND OPERATING RATIOS




Three Months Ended 



Six Months Ended 




June 30



June 30




2020



2019



2020



2019




Unaudited




($ thousands, except percentages)


REVENUES

























Asset-Based


$

460,070





$

559,648





$

975,783





$

1,065,727





























ArcBest



151,467






181,173






316,242






354,377




FleetNet



46,440






51,722






98,879






104,981




Total Asset-Light



197,907






232,895






415,121






459,358





























Other and eliminations



(30,607)






(21,053)






(62,135)






(41,756)




Total consolidated revenues


$

627,370





$

771,490





$

1,328,769





$

1,483,329





























OPERATING EXPENSES

























Asset-Based

























Salaries, wages, and benefits


$

248,995


54.1

%


$

297,016


53.1

%


$

532,833


54.6

%


$

577,292


54.2

%

Fuel, supplies, and expenses(1)



45,675


9.9




65,791


11.7




106,900


11.0




129,764


12.2


Operating taxes and licenses



11,629


2.5




12,214


2.2




24,423


2.5




24,612


2.3


Insurance



8,247


1.8




7,598


1.4




16,071


1.6




15,589


1.5


Communications and utilities(1)



4,342


1.0




4,500


0.8




9,053


0.9




9,117


0.8


Depreciation and amortization(1)



23,327


5.1




21,633


3.9




46,597


4.8




42,594


4.0


Rents and purchased transportation(1)



46,152


10.0




56,826


10.1




101,922


10.4




106,132


10.0


Shared services(1)



45,605


9.9




55,338


9.9




94,490


9.7




105,633


9.9


Gain on sale of property and equipment



(1,175)


(0.2)




(1,587)


(0.3)




(3,339)


(0.3)




(1,621)


(0.2)


Innovative technology costs(1)(2)



4,789


1.0




2,735


0.5




9,322


1.0




4,536


0.4


Other(1)



1,448


0.3




1,406


0.2




3,235


0.3




2,286


0.2


Total Asset-Based



439,034


95.4

%



523,470


93.5

%



941,507


96.5

%



1,015,934


95.3

%


























ArcBest

























Purchased transportation



125,090


82.6

%



147,552


81.4

%



262,272


82.9

%



287,657


81.2

%

Supplies and expenses



1,989


1.3




2,858


1.6




4,269


1.3




5,632


1.6


Depreciation and amortization(3)



2,449


1.6




3,055


1.7




4,919


1.6




6,206


1.7


Shared services



18,840


12.4




23,141


12.8




40,567


12.8




46,172


13.0


Other



1,796


1.2




2,445


1.3




4,321


1.4




4,858


1.4





150,164


99.1

%



179,051


98.8

%



316,348


100.0

%



350,525


98.9

%

FleetNet



45,658


98.3

%



50,696


98.0

%



97,057


98.2

%



102,467


97.6

%

Total Asset-Light



195,822






229,747






413,405






452,992





























Other and eliminations



(27,911)






(16,927)






(54,387)






(29,388)




Total consolidated operating expenses


$

606,945


96.7

%


$

736,290


95.4

%


$

1,300,525


97.9

%


$

1,439,538


97.0

%


























OPERATING INCOME (LOSS)

























Asset-Based


$

21,036





$

36,178





$

34,276





$

49,793





























ArcBest



1,303






2,122






(106)






3,852




FleetNet



782






1,026






1,822






2,514




Total Asset-Light



2,085






3,148






1,716






6,366





























Other and eliminations(4)



(2,696)






(4,126)






(7,748)






(12,368)




Total consolidated operating income


$

20,425





$

35,200





$

28,244





$

43,791









1)

Beginning 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) 

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

3) 

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

4) 

"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 


Six Months Ended 



June 30



June 30



2020


2019



2020



2019

ArcBest Corporation - Consolidated


(Unaudited)



($ thousands, except per share data)

Operating Income













Amounts on GAAP basis


$

20,425


$

35,200


$

28,244


$

43,791

Innovative technology costs, pre-tax(1)



4,699



3,619



9,299



6,377

Non-GAAP amounts


$

25,124


$

38,819


$

37,543


$

50,168














Net Income













Amounts on GAAP basis


$

15,880


$

24,376


$

17,782


$

29,264

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



3,637



2,753



7,207



4,848

Nonunion pension expense, including settlement, after-tax(2)





377



66



1,664

Life insurance proceeds and changes in cash surrender value



(2,560)



(542)



1,245



(2,156)

Tax expense from vested RSUs(3)



659



410



679



408

Non-GAAP amounts


$

17,616


$

27,374


$

26,979


$

34,028














Diluted Earnings Per Share













Amounts on GAAP basis


$

0.61


$

0.92


$

0.68


$

1.10

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



0.14



0.10



0.27



0.18

Nonunion pension expense, including settlement, after-tax(2)





0.01





0.06

Life insurance proceeds and changes in cash surrender value



(0.10)



(0.02)



0.05



(0.08)

Tax expense from vested RSUs(3)



0.03



0.02



0.03



0.02

Non-GAAP amounts(4)


$

0.67


$

1.04


$

1.03


$

1.28






1)

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

2) 

For the six months ended June 30, 2020, represents pension settlement expense related to the Company's supplemental benefit plan. For the three and six months ended June 30, 2019, nonunion defined benefit pension expense is presented as a non-GAAP adjustment with pension settlement expense, because expenses related to the plan were excluded from the financial information management used 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.

3) 

The Company recognized the tax impact for the vesting of share-based compensation resulting in excess tax expense during the three and six months ended June 30, 2020 and 2019.

4) 

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


 




Three Months Ended 


Six Months Ended 



June 30


June 30



2020


2019


2020


2019

Segment Operating Income Reconciliations


(Unaudited)



($ thousands, except percentages)

Asset-Based Segment





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















Amounts on GAAP basis


$

21,036


95.4

%


$

36,178


93.5

%


$

34,276


96.5

%


$

49,793


95.3

%

Innovative technology costs, pre-tax(1)



4,789


(1.0)




2,735


(0.5)




9,322


(1.0)




4,536


(0.4)


Non-GAAP amounts


$

25,825


94.4

%


$

38,913


93.0

%


$

43,598


95.5

%


$

54,329


94.9

%






Other and Eliminations





Operating Loss ($)















Amounts on GAAP basis


$

(2,696)





$

(4,126)





$

(7,748)





$

(12,368)




Innovative technology costs, pre-tax(1)



(90)






884






(23)






1,841




Non-GAAP amounts


$

(2,786)





$

(3,242)





$

(7,771)





$

(10,527)









1) 

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

 

Effective Tax Rate Reconciliation










ArcBest Corporation - Consolidated





























(Unaudited)



















($ thousands, except percentages)


Three Months Ended June 30, 2020






Other


Income


Income









Operating


Income


Before Income


Tax


Net





Income


(Costs)


Taxes


Provision


Income


Tax Rate(4)

Amounts on GAAP basis


$

20,425


$

309


$

20,734


$

4,854


$

15,880


23.4

%

Innovative technology costs(1)



4,699



199



4,898



1,261



3,637


25.7


Life insurance proceeds and changes in cash surrender value





(2,560)



(2,560)





(2,560)



Tax expense from vested RSUs(3)









(659)



659



Non-GAAP amounts


$

25,124


$

(2,052)


$

23,072


$

5,456


$

17,616


23.6

%






















Six Months Ended June 30, 2020





Other


Income Before


Income









Operating


Income


Income


Tax


Net





Income


(Costs)


Taxes


Provision


Income


Tax Rate(4)

Amounts on GAAP basis


$

28,244


$

(5,125)


$

23,119


$

5,337


$

17,782


23.1

%

Innovative technology costs(1)



9,299



406



9,705



2,498



7,207


25.7


Nonunion pension expense, including settlement(2)





89



89



23



66


25.8


Life insurance proceeds and changes in cash surrender value





1,245



1,245





1,245



Tax expense from vested RSUs(3)









(679)



679



Non-GAAP amounts


$

37,543


$

(3,385)


$

34,158


$

7,179


$

26,979


21.0

%






















Three Months Ended June 30, 2019





Other


Income


Income









Operating


Income


Before Income


Tax


Net





Income


(Costs)


Taxes


Provision


Income


Tax Rate(4)

Amounts on GAAP basis


$

35,200


$

(1,640)


$

33,560


$

9,184


$

24,376


27.4

%

Innovative technology costs(1)



3,619





3,619



866



2,753


23.9


Nonunion pension expense, including settlement(2)





507



507



130



377


25.6


Life insurance proceeds and changes in cash surrender value





(542)



(542)





(542)



Tax expense from vested RSUs(3)









(410)



410



Non-GAAP amounts


$

38,819


$

(1,675)


$

37,144


$

9,770


$

27,374


26.3

%






















Six Months Ended June 30, 2019




















Other


Income Before


Income









Operating


Income


Income


Tax


Net





Income


(Costs)


Taxes


Provision


Income


Tax Rate(4)

Amounts on GAAP basis


$

43,791


$

(3,635)


$

40,156


$

10,892


$

29,264


27.1

%

Innovative technology costs(2)



6,377





6,377



1,529



4,848


24.0


Nonunion pension expense, including settlement(2)





2,241



2,241



577



1,664


25.7


Life insurance proceeds and changes in cash surrender value





(2,156)



(2,156)





(2,156)



Tax expense from vested RSUs(3)









(408)



408



Non-GAAP amounts


$

50,168


$

(3,550)


$

46,618


$

12,590


$

34,028


27.0

%






1) 

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

2) 

For the six months ended June 30, 2020, represents pension settlement expense related to the Company's supplemental benefit plan. For the three and six months ended June 30, 2019, nonunion defined benefit pension expense is presented as a non-GAAP adjustment with pension settlement expense, because expenses related to the plan were excluded from the financial information management used 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.

3) 

The Company recognized the tax impact for the vesting of share-based compensation resulting in excess tax expense during the three and six months ended June 30, 2020 and 2019.

4) 

Tax rate for total "Amounts on GAAP basis" represents the effective tax rate. The tax effects of non-GAAP adjustments are calculated based on the statutory rate applicable to each item based on tax jurisdiction, unless the nature of the item requires the tax effect to be estimated by applying a specific tax treatment.

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 


Six Months Ended 



June 30



June 30



2020


2019


2020


2019



(Unaudited)

ArcBest Corporation - Consolidated Adjusted EBITDA


($ thousands)




Net Income


$

15,880


$

24,376


$

17,782


$

29,264

Interest and other related financing costs



3,378



2,811



6,325



5,693

Income tax provision



4,854



9,184



5,337



10,892

Depreciation and amortization



29,086



27,434



58,099



53,971

Amortization of share-based compensation



2,890



2,801



5,071



4,859

Amortization of net actuarial (gains) losses of benefit plans and pension settlement expense(1)



(148)



586



(204)



2,340

Consolidated Adjusted EBITDA


$

55,940


$

67,192


$

92,410


$

107,019






1) 

The six months ended June 30, 2020 includes pre-tax pension settlement expense of $0.1 million related to the Company's supplemental benefit plan. The three and six months ended June 30, 2019 includes pre-tax pension settlement expense of $0.3 million and $1.6 million, respectively, related to the Company's nonunion defined benefit pension plan for which plan termination was completed as of December 31, 2019.

 



Three Months Ended 


Six Months Ended 



June 30


June 30



2020


2019


2020


2019

Asset-Light Adjusted EBITDA


(Unaudited)



($ thousands)





ArcBest













Operating Income (Loss)


$

1,303


$

2,122


$

(106)


$

3,852

Depreciation and amortization(2)



2,449



3,055



4,919



6,206

Adjusted EBITDA


$

3,752


$

5,177


$

4,813


$

10,058





FleetNet




Operating Income


$

782


$

1,026


$

1,822


$

2,514

Depreciation and amortization



402



333



793



650

Adjusted EBITDA


$

1,184


$

1,359


$

2,615


$

3,164





Total Asset-Light













Operating Income


$

2,085


$

3,148


$

1,716


$

6,366

Depreciation and amortization(2)



2,851



3,388



5,712



6,856

Adjusted EBITDA


$

4,936


$

6,536


$

7,428


$

13,222






2) 

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


 

ARCBEST CORPORATION

OPERATING STATISTICS




Three Months Ended 


Six Months Ended 



June 30


June 30



2020


2019


% Change


2020


2019


% Change



(Unaudited)

Asset-Based


































Workdays



63.5



63.5





127.5



126.5




















Billed Revenue(1) / CWT


$

33.69


$

35.11


(4.0%)


$

33.41


$

34.90


(4.3%)


















Billed Revenue(1) / Shipment


$

423.39


$

443.94


(4.6%)


$

425.73


$

431.40


(1.3%)


















Shipments



1,103,106



1,272,317


(13.3%)



2,306,522



2,483,104


(7.1%)


















Shipments / Day



17,372



20,036


(13.3%)



18,090



19,629


(7.8%)


















Tonnage (Tons)



693,192



804,487


(13.8%)



1,469,660



1,534,897


(4.3%)


















Tons / Day



10,916



12,669


(13.8%)



11,527



12,134


(5.0%)


















Pounds / Shipment



1,257



1,265


(0.6%)



1,274



1,236


3.1%


















Average Length of Haul (Miles)



1,084



1,040


4.2%



1,062



1,032


2.9%























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 


Six Months Ended 



June 30, 2020


June 30, 2020



(Unaudited)

ArcBest(2)













Revenue / Shipment


(2.1%)


(2.6%)








Shipments / Day


(23.4%)


(16.8%)






2) 

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

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/arcbest-announces-second-quarter-2020-results-301101724.html

SOURCE ArcBest

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