ArcBest Announces First Quarter 2017 Results

ARCBEST CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended 

March 31

2017

2016

(Unaudited)

($ thousands, except share and per share data)

REVENUES

$

651,088

$

621,455

OPERATING EXPENSES

663,341

630,720

OPERATING LOSS

(12,253)

(9,265)

OTHER INCOME (COSTS)

Interest and dividend income

274

401

Interest and other related financing costs

(1,315)

(1,247)

Other, net

647

366

(394)

(480)

LOSS BEFORE INCOME TAXES

(12,647)

(9,745)

INCOME TAX BENEFIT

(5,240)

(3,642)

NET LOSS

$

(7,407)

$

(6,103)

LOSS PER COMMON SHARE⁽¹⁾

Basic

$

(0.29)

$

(0.24)

Diluted

$

(0.29)

$

(0.24)

AVERAGE COMMON SHARES OUTSTANDING

Basic

25,684,475

25,822,522

Diluted

25,684,475

25,822,522

CASH DIVIDENDS DECLARED PER COMMON SHARE

$

0.08

$

0.08

⁽¹⁾ ArcBest uses the two-class method for calculating earnings per share. This method, as calculated below for diluted earnings per
    share, 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.

NET LOSS

$

(7,407)

$

(6,103)

EFFECT OF UNVESTED RESTRICTED STOCK AWARDS

(17)

(18)

ADJUSTED NET LOSS FOR CALCULATING LOSS PER COMMON SHARE 

$

(7,424)

$

(6,121)

ARCBEST CORPORATION

CONSOLIDATED BALANCE SHEETS

March 31

December 31

2017

2016

(Unaudited)

Note

($ thousands, except share data)

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

82,253

$

114,280

Short-term investments

56,984

56,838

Restricted cash

962

962

   Accounts receivable, less allowances (2017 - $5,283; 2016 - $5,437)

258,931

260,643

   Other accounts receivable, less allowances (2017 - $875; 2016 - $849)             

18,687

22,041

Prepaid expenses

27,012

22,124

Prepaid and refundable income taxes

11,008

9,909

Other

8,226

4,300

 TOTAL CURRENT ASSETS

464,063

491,097

PROPERTY, PLANT AND EQUIPMENT

Land and structures

330,909

324,086

Revenue equipment

742,394

743,860

Service, office, and other equipment

155,618

154,119

Software

123,857

120,877

Leasehold improvements

8,993

8,758

1,361,771

1,351,700

Less allowances for depreciation and amortization

838,147

819,174

523,624

532,526

GOODWILL

108,981

108,875

INTANGIBLE ASSETS, NET

79,371

80,507

DEFERRED INCOME TAXES

3,064

2,978

OTHER LONG-TERM ASSETS

65,380

66,095

$

1,244,483

$

1,282,078

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable

$

130,750

$

133,301

Accrued expenses

190,829

198,731

Current portion of long-term debt

59,995

64,143

 TOTAL CURRENT LIABILITIES

381,574

396,175

LONG-TERM DEBT, less current portion

167,075

179,530

PENSION AND POSTRETIREMENT LIABILITIES

37,541

35,848

OTHER LONG-TERM LIABILITIES

15,844

16,790

DEFERRED INCOME TAXES

50,773

54,680

STOCKHOLDERS' EQUITY

Common stock, $0.01 par value, authorized 70,000,000 shares;
issued 2017: 28,193,117 shares; 2016: 28,174,424 shares

282

282

Additional paid-in capital

316,802

315,318

Retained earnings

377,444

386,917

   Treasury stock, at cost, 2,565,399 shares

(80,045)

(80,045)

Accumulated other comprehensive loss

(22,807)

(23,417)

 TOTAL STOCKHOLDERS' EQUITY

591,676

599,055

$

1,244,483

$

1,282,078

Note:  The balance sheet at December 31, 2016 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

Three Months Ended 

March 31

2017

2016

Unaudited

($ thousands)

 OPERATING ACTIVITIES

Net loss

$

(7,407)

$

(6,103)

Adjustments to reconcile net loss

to net cash provided by operating activities:

 Depreciation and amortization

24,258

24,164

 Amortization of intangibles

1,136

987

 Pension settlement expense

1,957

900

 Share-based compensation expense

1,731

1,709

 Provision for losses on accounts receivable

442

82

 Deferred income tax provision (benefit)

(4,197)

5,212

 Gain on sale of property and equipment

(613)

(311)

 Changes in operating assets and liabilities:

Receivables

3,345

9,569

Prepaid expenses

(5,174)

(3,998)

Other assets

(3,357)

(2,954)

Income taxes

(1,205)

(10,211)

Accounts payable, accrued expenses, and other liabilities

(9,155)

(6,706)

 NET CASH PROVIDED BY OPERATING ACTIVITIES

1,761

12,340

 INVESTING ACTIVITIES

Purchases of property, plant and equipment, net of financings

(12,273)

(13,357)

Proceeds from sale of property and equipment

1,692

2,435

Purchases of short-term investments

(6,223)

(15,745)

Proceeds from sale of short-term investments

6,125

7,840

Capitalization of internally developed software

(2,440)

(2,668)

 NET CASH USED IN INVESTING ACTIVITIES

(13,119)

(21,495)

 FINANCING ACTIVITIES

Payments on long-term debt

(17,297)

(11,066)

Net change in book overdrafts

(981)

(5,095)

Payment of common stock dividends

(2,066)

(2,088)

Purchases of treasury stock

—

(2,602)

Payments for tax withheld on share-based compensation

(325)

(178)

 NET CASH USED IN FINANCING ACTIVITIES

(20,669)

(21,029)

 NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

(32,027)

(30,184)

Cash and cash equivalents and restricted cash at beginning of period

115,242

166,357

 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

$

83,215

$

136,173

 NONCASH INVESTING ACTIVITIES

Equipment financed

$

694

$

1,947

Accruals for equipment received

$

440

$

8,486

ARCBEST CORPORATION

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES

Non-GAAP Financial Measures. We report our financial results in accordance with generally accepted accounting principles ("GAAP"). However, management believes that certain non-GAAP performance measures and ratios, such as Adjusted EBITDA, utilized for internal analysis provide analysts, investors, and others the same information that we use internally for purposes of assessing our core operating performance and provides meaningful comparisons between current and prior period results, as well as important information regarding performance trends. Accordingly, using these measures improves comparability in analyzing our performance because it removes the impact of items from operating results that, in management's opinion, do not reflect our core operating performance. Management uses Adjusted EBITDA as a key measure of performance and for business planning. The measure is particularly meaningful for analysis of the Asset-Light businesses, because they exclude amortization of acquired intangibles and software, which are significant expenses resulting from strategic decisions rather than core daily operations. Additionally, Adjusted EBITDA is a primary component of the financial covenants contained in our Amended and Restated Credit Agreement. Other companies may calculate EBITDA differently; therefore, our calculation of Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Certain information discussed in the scheduled conference call could be considered non-GAAP measures. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results. These financial measures should not be construed as better measurements than operating income, operating cash flow, net income or earnings per share, as determined under GAAP.

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

Three Months Ended 

March 31

2017

2016

(Unaudited)

($ thousands, except per share data)

ArcBest Corporation - Consolidated

Operating Loss

Amounts on GAAP basis

$

(12,253)

$

(9,265)

Restructuring charges, pre-tax⁽¹⁾

1,631

—

Pension settlement expense, pre-tax

1,957

900

Non-GAAP amounts

$

(8,665)

$

(8,365)

Net Loss

Amounts on GAAP basis

$

(7,407)

$

(6,103)

Restructuring charges, after-tax⁽¹⁾

991

—

Pension settlement expense, after-tax

1,196

550

Life insurance proceeds and changes in cash surrender value

(580)

(355)

Non-GAAP amounts

$

(5,800)

$

(5,908)

Diluted Loss Per Share

Amounts on GAAP basis

$

(0.29)

$

(0.24)

Restructuring charges, after-tax⁽¹⁾

0.04

—

Pension settlement expense, after-tax

0.05

0.02

Life insurance proceeds and changes in cash surrender value

(0.02)

(0.01)

Non-GAAP amounts

$

(0.22)

$

(0.23)

_________________________

¹⁾ 

Restructuring charges relate to the realignment of the Company's organizational structure.

ARCBEST CORPORATION

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES – Continued

Three Months Ended 

March 31

2017

2016

Segment Operating Income Reconciliations

(Unaudited)

($ thousands, except percentages)

Asset-Based

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

Amounts on GAAP basis

$

(10,025)

102.2

%

$

(8,999)

102.0

%

Restructuring charges⁽¹⁾

140

—

—

—

Pension settlement expense

1,401

(0.3)

677

(0.2)

Non-GAAP amounts

$

(8,484)

101.9

%

$

(8,322)

101.8

%

Asset-Light

ArcBest

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

Amounts on GAAP basis

$

901

99.4

%

$

8

100.0

%

Restructuring charges⁽¹⁾

810

(0.5)

—

—

Pension settlement expense

115

(0.1)

18

—

Non-GAAP amounts

$

1,826

98.8

%

$

26

100.0

%

FleetNet

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

Amounts on GAAP basis

$

974

97.6

%

$

984

97.7

%

Pension settlement expense

46

(0.1)

18

—

Non-GAAP amounts

$

1,020

97.5

%

$

1,002

97.7

%

Total Asset-Light

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

Amounts on GAAP basis

$

1,875

99.0

%

$

992

99.5

%

Restructuring charges⁽¹⁾

810

(0.4)

—

—

Pension settlement expense

161

(0.1)

36

—

Non-GAAP amounts

$

2,846

98.5

%

$

1,028

99.5

%

Other and Eliminations

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

Amounts on GAAP basis

$

(4,103)

135.7

%

$

(1,258)

164.8

%

Restructuring charges⁽¹⁾

681

(10.7)

—

—

Pension settlement expense

395

(6.2)

187

(5.2)

Non-GAAP amounts

$

(3,027)

118.8

%

$

(1,071)

159.6

%

_________________________

¹⁾

Restructuring charges relate to the realignment of the Company's organizational structure.

ARCBEST CORPORATION

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES – Continued

Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (Adjusted EBITDA)

Three Months Ended 

March 31

2017

2016

(Unaudited)

($ thousands)

ArcBest Corporation - Consolidated

Net loss

$

(7,407)

$

(6,103)

Interest and other related financing costs

1,315

1,247

Income tax benefit

(5,240)

(3,642)

Depreciation and amortization

25,394

25,151

Amortization of share-based compensation

1,731

1,709

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

3,037

2,069

Restructuring charges⁽¹⁾

1,631

—

Consolidated Adjusted EBITDA

$

20,461

$

20,431

______________________

¹⁾

Restructuring charges relate to the realignment of the Company's organizational structure.

Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (Adjusted EBITDA)

Three Months Ended March 31

2017

2016

Depreciation

Depreciation

Operating

and

Restructuring

Adjusted

Operating

and

Adjusted

Income

Amortization

Charges⁽²⁾

EBITDA

Income

Amortization

EBITDA

(Unaudited)

($ thousands)

Asset-Light

ArcBest⁽³⁾

$

901

$

3,366

$

810

$

5,077

$

8

$

3,465

$

3,473

FleetNet

974

280

—

1,254

984

287

1,271

Total Asset-Light

$

1,875

$

3,646

$

810

$

6,331

$

992

$

3,752

$

4,744

_________________________

²⁾

Restructuring charges relate to the realignment of the Company's organizational structure.

³⁾

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

ARCBEST CORPORATION

FINANCIAL STATEMENT OPERATING SEGMENT DATA AND OPERATING RATIOS

Three Months Ended 

March 31

2017

2016

Unaudited

($ thousands, except percentages)

REVENUES

Asset-Based

$

464,356

$

439,063

ArcBest⁽¹⁾

152,876

142,397

FleetNet

40,238

43,564

  Total Asset-Light

193,114

185,961

Other and eliminations

(6,382)

(3,569)

  Total consolidated revenues

$

651,088

$

621,455

OPERATING EXPENSES

Asset-Based

Salaries, wages, and benefits

$

304,843

65.7%

$

296,162

67.4%

Fuel, supplies, and expenses

75,432

16.3%

66,689

15.2%

Operating taxes and licenses

11,869

2.6%

11,980

2.7%

Insurance

7,109

1.5%

6,466

1.5%

Communications and utilities

4,822

1.0%

4,372

1.0%

Depreciation and amortization

20,983

4.5%

20,392

4.6%

Rents and purchased transportation

46,608

10.0%

39,696

9.0%

Gain on sale of property and equipment

(617)

(172)

—

Pension settlement expense⁽²⁾

1,401

0.3%

677

0.2%

Other

1,791

0.4%

1,800

0.4%

Restructuring costs⁽³⁾

140

—

—

—

Total Asset-Based

474,381

102.2%

448,062

102.0%

ArcBest⁽¹⁾

Purchased transportation

121,919

79.8%

111,831

78.5%

Salaries, wages, and benefits

16,536

10.8%

18,581

13.1%

Supplies and expenses

5,286

3.5%

4,418

3.1%

Depreciation and amortization⁽⁴⁾

3,366

2.2%

3,465

2.4%

Other⁽²⁾

4,058

2.6%

4,094

2.9%

Restructuring costs⁽³⁾

810

0.5%

—

—

151,975

99.4%

142,389

100.0%

FleetNet

39,264

42,580

  Total Asset-Light

191,239

184,969

Other and eliminations⁽⁵⁾

(2,279)

(2,311)

  Total consolidated operating expenses

$

663,341

$

630,720

OPERATING INCOME (LOSS)⁽²⁾

Asset-Based

$

(10,025)

$

(8,999)

ArcBest⁽¹⁾

901

8

FleetNet

974

984

  Total Asset-Light

1,875

992

Other and eliminations⁽⁵⁾

(4,103)

(1,258)

  Total consolidated operating income (loss)

$

(12,253)

$

(9,265)

______________________________

¹⁾

The 2017 period includes the operations of Logistics & Distribution Services, LLC ("LDS"), which was acquired in September 2016.

²⁾

Consolidated and segment operating results for all periods presented were impacted by pension settlement expense. (See ArcBest Corporation - Consolidated and Segment Operating Income Reconciliations of GAAP to Non-GAAP Financial Measures tables previously presented.)

³⁾

Restructuring charges relate to the realignment of the Company's organizational structure.

⁴⁾

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

⁵⁾

"Other" corporate costs include $0.7 million of restructuring charges for the three months ended March 31, 2017. (See Segment Operating Income Reconciliations of GAAP to Non-GAAP Financial Measures table previously presented.) Other corporate costs also include additional investments to provide an improved platform for revenue growth and for offering ArcBest services across multiple operating segments.

ARCBEST CORPORATION

OPERATING STATISTICS

Three Months Ended 

March 31

2017

2016

% Change

(Unaudited)

Asset-Based

Workdays

64.0

63.5

Billed Revenue⁽¹⁾ CWT

$

29.47

$

27.72

6.3%

Billed Revenue⁽¹⁾ / Shipment

$

355.86

$

356.25

(0.1%)

Shipments

1,316,918

1,236,323

6.5%

Shipments / Day

20,577

19,470

5.7%

Tonnage (Tons)

795,175

794,472

0.1%

Tons / Day

12,425

12,511

(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 

March 31, 2017

(Unaudited)

ArcBest

Expedite⁽²⁾

Revenue / Shipment

9.9%

Shipments / Day

(1.8%)

Truckload and Truckload - Dedicated⁽³⁾

Revenue / Shipment

2.7%

Shipments / Day

16.5%