FORT SMITH, Ark., Jan. 31, 2018 /PRNewswire/ — ArcBest® (Nasdaq: ARCB) today reported fourth quarter 2017 revenue of $710.7 million compared to fourth quarter 2016 revenue of $688.2 million.  Fourth quarter 2017 operating income was $16.7 million compared to operating income of $1.2 million last year.  Net income of $36.6 million, or $1.37 per diluted share compared to fourth quarter 2016 net income of $1.6 million, or $0.06 per diluted share.  Due to the lower corporate tax rate under the Tax Reform Act, fourth quarter 2017 net income reflects the impact of a $24.5 million reduction of income tax liabilities related to deferred income taxes established under GAAP. While GAAP requires the recognition of the Tax Reform Act impact on deferred taxes in 2017, the realization of those benefits are spread over many future years.

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

Excluding certain items in both periods as identified in the attached reconciliation tables, non-GAAP net income was $11.2 million, or $0.42 per diluted share, in fourth quarter 2017 compared to the fourth quarter 2016 amount of $7.3 million, or $0.28 per diluted share. On a non-GAAP basis, operating income was $18.5 million in fourth quarter 2017 compared to fourth quarter 2016 operating income of $12.1 million.  Cost controls resulting from the enhanced market approach implemented at the beginning of the year continue to be in-line with expectations.

“We began 2017 with an aggressive plan to implement our enhanced market approach,” said Chairman, President & CEO Judy McReynolds.  “Our customers have been asking for full logistics solutions from us and more manageable points of contact. By responding with a unified sales force, customer service and capacity sourcing, we more expertly answer their total supply chain needs and position the company for growth.”

“In addition,” said McReynolds, “we undertook a number of significant actions to improve our pricing and ensure that we are adequately compensated for the value we provide customers, particularly in our Asset-Based business.  We are pleased with the results of these actions to date, which are in line with our expectations, and are confident we have the right pricing strategy going forward.”

1.

Tax Cuts and Jobs Act of 2017

2.

U.S. Generally Accepted Accounting Principles

Asset-Based

Results of Operations

Fourth Quarter 2017 Versus Fourth Quarter 2016

  • Revenue of $497.0 million compared to $482.1 million, a per-day increase of 2.3 percent.
  • Tonnage per day decrease of 4.7 percent.
  • Shipments per day decrease 8.1 percent.
  • Total billed revenue per hundredweight increased 7.6 percent and was positively impacted by Asset-Based pricing initiatives and higher fuel surcharges. Excluding fuel surcharge, the percentage increase on ArcBest’s Asset-Based LTL freight was in the mid-single digits.
  • Operating income of $18.0 million and an operating ratio of 96.4 percent compared to operating income of $7.1 million and an operating ratio of 98.5 percent. On a non-GAAP basis, operating income of $19.4 million and an operating ratio of 96.1 percent compared to operating income of $8.7 million and an operating ratio of 98.2 percent.

Continued focus on yield management initiatives was reflected in solid increases in revenue per hundredweight and revenue per shipment.  This was the most significant factor contributing to the improvement in fourth quarter Asset-Based profitability versus the same period last year.  The fourth quarter emphasis on securing compensatory pricing contributed to reductions in shipment and tonnage levels despite a healthy economic environment and tightened industry capacity.  Impacted positively by account pricing activities, the recent trend of increasing weight and revenue per shipment continued throughout the fourth quarter.  Cost controls and focused workforce management contributed to overall operational labor savings that were somewhat offset by higher union health, welfare and pension expense.  Reduced costs for outside resources including city cartage and local rental equipment also contributed positively to fourth quarter results.

Asset-Light

Results of Operations

Fourth Quarter 2017 Versus Fourth Quarter 2016

  • Revenue of $222.2 million compared to $211.2 million.
  • Operating income of $5.2 million compared to an operating loss of $0.9 million. On a non-GAAP basis, operating income of $5.4 million compared to $7.4 million.
  • Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) of $9.1 million compared to Adjusted EBITDA of $10.8 million.

ArcBest’s Asset-Light revenue increased primarily as a result of strong revenue per shipment growth in expedite and truckload related to higher customer demand and tightened capacity in the marketplace.  The revenue growth in these portions of the Asset-Light business occurred despite shipment count reductions.  The fourth quarter operating income decline was related to several factors that included: lower net revenue margins related to rising purchased transportation costs and the difficulty of obtaining commensurate rate increases from Asset-Light shippers; reductions in the military moving business and the handling of fewer consumer moving loads requiring out-of-network resources; and the costs, and related business loss, associated with customer bankruptcies.  At FleetNet, a slight increase in total events and improved pricing contributed to revenue growth.

Full Year 2017 Results

ArcBest’s revenue totaled $2.8 billion, compared to $2.7 billion in 2016.  Net income was $59.7 million, or $2.25 per diluted share, compared to net income of $18.7 million, or $0.71 per diluted share in 2016.  Net income in 2017 was impacted by the Tax Reform Act, as previously described.  On a non-GAAP basis, ArcBest had 2017 net income of $35.6 million, or $1.33 per diluted share compared to net income of $24.3 million, or $0.92 per diluted share in 2016. 

During 2017, ArcBest increased shareholder returns through payment of an eight cent per share quarterly dividend and purchase of ArcBest shares valued at approximately $6.0 million.

Asset-Based

Results of Operations

Full Year 2017 Versus Full Year 2016

  • Revenue of $2.0 billion, compared to $1.9 billion in 2016.
  • Tonnage per day decrease of 2.1 percent.
  • Shipments per day were flat.
  • Total billed revenue per hundredweight increased 6.5 percent and was impacted by Asset-Based pricing initiatives and higher fuel surcharges in 2017. Excluding fuel surcharge, the percentage increase on ArcBest’s Asset-Based traditional LTL freight was in the mid-single digits.
  • Operating income of $51.9 million and an operating ratio of 97.4 percent compared to $33.6 million and an operating ratio of 98.2 percent. On a non-GAAP basis, an operating ratio of 97.2 percent compared to an operating ratio of 98.0 percent.

Asset-Light

Results of Operations

Full Year 2017 Versus Full Year 2016

  • Revenue of $863.0 million compared to $803.4 million, an increase of 7.4 percent.
  • Operating income of $22.1 million compared to $9.3 million. On a non-GAAP basis, operating income of $23.6 million compared to $17.7 million.
  • Adjusted EBITDA of $37.2 million compared to $32.4 million.

Capital Expenditures

In 2017, total net capital expenditures equaled $146 million which was somewhat below previous expectations.  This included $95 million of revenue equipment, the majority of which was for ArcBest’s Asset-Based operation.  Depreciation and amortization costs on property, plant and equipment were $99 million.

For 2018, total net capital expenditures are estimated to range from $155 million to $165 million. This includes revenue equipment purchases of approximately $100 million primarily for ArcBest’s Asset-Based operation.  Because ABF Freight’s union labor negotiations are in progress, the timing and actual amount of these capital investments are highly dependent on the outcome of the union labor contract.  ArcBest’s depreciation and amortization costs on property, plant and equipment in 2018 are estimated to be in a range of $100 million to $105 million.

Closing Comments

McReynolds said 2017 presented challenging conditions with tighter capacity resulting from an improving economy, and impacts from the damaging hurricanes in August and September. “We expect tighter capacity will continue in 2018 as the Electronic Logging Device mandate took effect last December,” McReynolds said. “I am confident that our assets, owner operators and relationships with contract carriers will continue to provide comprehensive and valued options for our customers.”

“As we go forward, the operating results of our Asset-Based and Asset-Light segments should reflect the investments we are making today,” McReynolds said. “We continue to have a great opportunity to grow our company, while also keeping our costs under control. In order to profitably grow our Asset-Based business, we must have the appropriate cost structure and work rules to do so, and we will continue to work on these areas in 2018. We also have a large opportunity to grow Asset-Light revenues thanks to our expanded range of logistics solutions and great relationships with our providers. The future for ArcBest is promising.”

Conference Call

ArcBest will host a conference call with company executives to discuss the 2017 fourth quarter results. The call will be today, Wednesday, January 31, at 9:30 a.m. ET (8:30 a.m. CT). Interested parties are invited to listen by calling (888) 223-4953. Following the call, a recorded playback will be available through the end of the day on March 15, 2018. To listen to the playback, dial (800) 633-8284 or (402) 977-9140 (for international callers). The conference call ID for the playback is 21877801. The conference call and playback can also be accessed, through March 15, 2018, on ArcBest’s website at arcb.com.

About ArcBest

ArcBest® (Nasdaq: ARCB) is a logistics company with creative problem solvers who have The Skill and the Will® to deliver integrated logistics solutions.  At ArcBest, 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.  For more information, visit arcb.com.

Forward-Looking Statements

Certain statements and information in this press release concerning results for the three and twelve months ended December 31, 2017 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; not achieving some or all of the expected financial and operating benefits of our corporate restructuring or incurring additional costs or operational inefficiencies as a result of the restructuring; 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; competitive initiatives and pricing pressures; union and nonunion employee wages and benefits, including changes in required contributions to multiemployer plans; the cost, integration, and performance of any recent or future acquisitions; 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; governmental regulations; environmental laws and regulations, including emissions-control regulations; the loss or reduction of business from large customers; litigation or claims asserted against us; the cost, timing, and performance of growth initiatives; the loss of key employees or the inability to execute succession planning strategies; availability and cost of reliable third-party services; our ability to secure independent owner operators and/or operational or regulatory issues related to our use of their services; default on covenants of financing arrangements and the availability and terms of future financing arrangements; timing and amount of capital expenditures; self-insurance claims and insurance premium costs; availability of fuel, the effect of volatility in fuel prices and the associated changes in fuel surcharges on securing increases in base freight rates, and the inability to collect fuel surcharges; increased prices for and decreased availability of new revenue equipment, decreases in value of used revenue equipment, and higher costs of equipment-related operating expenses such as maintenance and fuel and related taxes; potential impairment of goodwill and intangible assets; maintaining our intellectual property rights, brand, and corporate reputation; seasonal fluctuations and adverse weather conditions; regulatory, economic, and other risks arising from our international business;  antiterrorism and safety measures; and other financial, operational, and legal risks and uncertainties detailed from time to time in ArcBest’s public filings with the Securities and Exchange Commission (“SEC”).

For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see our filings with SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events, or otherwise.

NOTE

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

Financial Data and Operating Statistics

The following tables show financial data and operating statistics on ArcBest® and its reportable segments.

ARCBEST CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended 

Year Ended 

December 31

December 31

2017

2016

2017

2016

(Unaudited)

($ thousands, except share and per share data)

REVENUES

$

710,721

$

688,214

$

2,826,457

$

2,700,219

OPERATING EXPENSES

694,041

687,003

2,772,947

2,671,249

OPERATING INCOME

16,680

1,211

53,510

28,970

OTHER INCOME (COSTS)

Interest and dividend income

388

345

1,293

1,523

Interest and other related financing costs

(1,932)

(1,376)

(6,342)

(5,150)

Other, net

884

916

3,115

2,944

(660)

(115)

(1,934)

(683)

INCOME BEFORE INCOME TAXES

16,020

1,096

51,576

28,287

INCOME TAX PROVISION (BENEFIT)

(20,548)

(488)

(8,150)

9,635

NET INCOME

$

36,568

$

1,584

$

59,726

$

18,652

EARNINGS PER COMMON SHARE(1)

Basic

$

1.42

$

0.06

$

2.32

$

0.72

Diluted

$

1.37

$

0.06

$

2.25

$

0.71

AVERAGE COMMON SHARES OUTSTANDING

Basic

25,637,568

25,669,280

25,683,745

25,751,544

Diluted

26,540,716

26,272,487

26,424,389

26,256,570

CASH DIVIDENDS DECLARED PER COMMON SHARE

$

0.08

$

0.08

$

0.32

$

0.32

_____________________

(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

December 31

December 31

2017

2016

(Unaudited)

Note

($ thousands, except share data)

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

120,772

$

114,280

Short-term investments

56,401

56,838

Restricted cash

962

   Accounts receivable, less allowances (2017 – $7,657; 2016 – $5,437)

279,074

260,643

   Other accounts receivable, less allowances (2017 – $921; 2016 – $849)             

19,491

22,041

Prepaid expenses

22,183

22,124

Prepaid and refundable income taxes

12,296

9,909

Other

12,132

4,300

  TOTAL CURRENT ASSETS

522,349

491,097

PROPERTY, PLANT AND EQUIPMENT

Land and structures

344,224

324,086

Revenue equipment

793,523

743,860

Service, office, and other equipment

179,950

154,119

Software

129,589

120,877

Leasehold improvements

8,888

8,758

1,456,174

1,351,700

Less allowances for depreciation and amortization

865,010

819,174

591,164

532,526

GOODWILL

108,320

108,875

INTANGIBLE ASSETS, NET

73,469

80,507

DEFERRED INCOME TAXES

5,965

2,978

OTHER LONG-TERM ASSETS

64,374

66,095

$

1,365,641

$

1,282,078

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Accounts payable

$

129,099

$

133,301

Income taxes payable

324

Accrued expenses

211,237

198,731

Current portion of long-term debt

61,930

64,143

  TOTAL CURRENT LIABILITIES

402,590

396,175

LONG-TERM DEBT, less current portion

206,989

179,530

PENSION AND POSTRETIREMENT LIABILITIES

39,827

35,848

OTHER LONG-TERM LIABILITIES

15,616

16,790

DEFERRED INCOME TAXES

49,157

54,680

STOCKHOLDERS’ EQUITY

Common stock, $0.01 par value, authorized 70,000,000 shares;
issued 2017: 28,495,628 shares; 2016: 28,174,424 shares

285

282

Additional paid-in capital

319,436

315,318

Retained earnings

438,379

386,917

   Treasury stock, at cost, 2017: 2,851,578 shares; 2016: 2,565,399 shares

(86,064)

(80,045)

Accumulated other comprehensive loss

(20,574)

(23,417)

  TOTAL STOCKHOLDERS’ EQUITY

651,462

599,055

$

1,365,641

$

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

Year Ended 

December 31

2017

2016

Unaudited

($ thousands)

 OPERATING ACTIVITIES

Net income

$

59,726

$

18,652

Adjustments to reconcile net income

to net cash provided by operating activities:

Depreciation and amortization

98,530

98,814

Amortization of intangibles

4,538

4,239

Impairment of long-lived assets

6,244

Pension settlement expense

4,156

3,229

Share-based compensation expense

6,958

7,588

Provision for losses on accounts receivable

4,081

1,643

Deferred income tax provision

(10,213)

9,522

Gain on sale of property and equipment

(227)

(3,335)

Changes in operating assets and liabilities:

Receivables

(19,588)

(23,809)

Prepaid expenses

(64)

(1,393)

Other assets

(4,231)

(4,355)

Income taxes

(2,144)

6,236

Accounts payable, accrued expenses, and other liabilities

10,393

(11,335)

 NET CASH PROVIDED BY OPERATING ACTIVITIES

151,915

111,940

 INVESTING ACTIVITIES

Purchases of property, plant and equipment, net of financings

(65,781)

(68,271)

Proceeds from sale of property and equipment

4,279

8,804

Purchases of short-term investments

(73,459)

(69,400)

Proceeds from sale of short-term investments

73,842

74,167

Business acquisitions, net of cash acquired

(24,780)

Proceeds from sale of subsidiaries

2,490

2,780

Capitalization of internally developed software

(9,840)

(10,472)

 NET CASH USED IN INVESTING ACTIVITIES

(68,469)

(87,172)

 FINANCING ACTIVITIES

Borrowings under accounts receivable securitization program

10,000

Payments on long-term debt

(68,924)

(52,202)

Net change in book overdrafts

(502)

(4,171)

Deferred financing costs

(937)

Payment of common stock dividends

(8,264)

(8,318)

Purchases of treasury stock

(6,019)

(9,510)

Payments for tax withheld on share-based compensation

(3,270)

(1,682)

 NET CASH USED IN FINANCING ACTIVITIES

(77,916)

(75,883)

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

5,530

(51,115)

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

$

120,772

$

115,242

 NONCASH INVESTING ACTIVITIES

Equipment financed

$

84,170

$

83,366

Accruals for equipment received

$

1,734

$

397

 

ARCBEST CORPORATION

FINANCIAL STATEMENT OPERATING SEGMENT DATA AND OPERATING RATIOS

Three Months Ended 

Year Ended 

December 31

December 31

2017

2016

2017

2016

Unaudited

($ thousands, except percentages)

REVENUES

Asset-Based

$

497,004

$

482,079

$

1,993,314

$

1,916,394

ArcBest(1)

182,144

172,999

706,698

640,734

FleetNet

40,034

38,212

156,341

162,629

  Total Asset-Light

222,178

211,211

863,039

803,363

Other and eliminations

(8,461)

(5,076)

(29,896)

(19,538)

  Total consolidated revenues

$

710,721

$

688,214

$

2,826,457

$

2,700,219

OPERATING EXPENSES

Asset-Based

Salaries, wages, and benefits

$

271,712

54.7

%

$

274,571

56.9

%

$

1,125,186

56.5

%

$

1,103,883

57.6

%

Fuel, supplies, and expenses

59,680

12.0

55,731

11.6

234,006

11.7

216,263

11.3

Operating taxes and licenses

12,041

2.4

11,941

2.5

47,767

2.4

48,180

2.5

Insurance

7,693

1.5

6,686

1.4

30,761

1.5

29,178

1.5

Communications and utilities

4,113

0.8

4,334

0.9

17,373

0.9

16,181

0.8

Depreciation and amortization

20,730

4.2

20,717

4.3

82,507

4.1

80,331

4.2

Rents and purchased transportation

51,462

10.4

53,155

11.0

206,457

10.4

198,594

10.4

Shared services(2)

47,706

9.6

45,368

9.4

186,406

9.4

184,817

9.6

Gain on sale of property and equipment

(96)

(529)

(0.1)

(695)

(2,979)

(0.2)

Nonunion pension expense, including settlement(3)

1,325

0.3

384

0.1

4,799

0.2

2,313

0.1

Other

2,589

0.5

1,400

0.3

6,525

0.3

4,889

0.3

Restructuring costs(4)

76

1,173

0.2

344

1,173

0.1

Total Asset-Based

479,031

96.4

%

474,931

98.5

%

1,941,436

97.4

%

1,882,823

98.2

%

ArcBest(1)

Purchased transportation

146,184

80.2

%

135,813

78.5

%

563,497

79.7

%

502,159

78.4

%

Supplies and expenses

3,822

2.1

3,863

2.2

15,087

2.1

13,145

2.1

Depreciation and amortization(5)

3,579

2.0

3,115

1.8

13,090

1.9

13,612

2.1

Shared services(2)(3)

21,044

11.5

20,310

11.8

84,159

11.9

85,238

13.3

Other

3,034

1.7

3,446

2.0

11,189

1.6

11,678

1.8

Restructuring costs(4)

8,038

4.6

875

0.1

8,038

1.2

177,663

97.5

%

174,585

100.9

%

687,897

97.3

%

633,870

98.9

%

FleetNet(3)

39,287

98.1

%

37,488

98.1

%

153,017

97.9

%

160,204

98.5

%

  Total Asset-Light

216,950

212,073

840,914

794,074

Other and eliminations(3)

(1,940)

(1)

(9,403)

(5,648)

  Total consolidated operating expenses

$

694,041

97.7

%

$

687,003

99.8

%

$

2,772,947

98.1

%

$

2,671,249

98.9

%

OPERATING INCOME

Asset-Based

$

17,973

$

7,148

51,878

33,571

ArcBest(1)

4,481

(1,586)

18,801

6,864

FleetNet

747

724

3,324

2,425

  Total Asset-Light

5,228

(862)

22,125

9,289

Other and eliminations(6)

(6,521)

(5,075)

(20,493)

(13,890)

  Total consolidated operating income

$

16,680

$

1,211

$

53,510

$

28,970

__________________________

1)

Includes the operations of Logistics & Distribution Services, LLC (“LDS”) since the September 2016 acquisition date.

2)

The presentation of segment expenses allocated from shared services was modified during third quarter 2017 and reclassifications have been made to the prior period operating segment expenses to conform to the current year presentation. Previously, expenses allocated from company-wide functions were categorized in individual segment expense line items by type of expense. Allocated expense is now presented on a single “Shared services” line within the Company’s operating segment disclosures. There was no impact on each segment’s total expenses as a result of the reclassifications.

3)

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

4)

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

5)

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

6)

“Other” corporate costs include $0.2 million and $1.8 million of restructuring charges for the three months and year ended December 31, 2017, respectively, and $0.9 million for the three months and year ended December 31, 2016. (See Segment Operating Income Reconciliations of GAAP to Non-GAAP Financial Measures table.) 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
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 Second 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.

Three Months Ended 

Year Ended 

December 31

December 31

2017

2016

2017

2016

(Unaudited)

($ thousands, except per share data)

ArcBest Corporation – Consolidated

Operating Income

Amounts on GAAP basis

$

16,680

$

1,211

$

53,510

$

28,970

Restructuring charges, pre-tax(1)

232

10,313

2,963

10,313

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

1,622

511

6,090

3,075

Transaction costs, pre-tax(3)

39

601

Non-GAAP amounts

$

18,534

$

12,074

$

62,563

$

42,959

Net Income

Amounts on GAAP basis

$

36,568

$

1,584

$

59,726

$

18,652

Deferred tax adjustment for 2017 Tax Reform Act(4)

(24,542)

(24,542)

Impact of 2017 Tax Reform Act on current tax expense(4)

(1,288)

(1,288)

Restructuring charges, after-tax(1)

142

6,273

1,810

6,273

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

991

312

3,721

1,878

Life insurance proceeds and changes in cash surrender value

(699)

(884)

(2,642)

(2,864)

Tax expense (benefit) from vested RSUs(5)

14

(1,215)

Transaction costs, after-tax(3)

24

365

Non-GAAP amounts

$

11,186

$

7,309

$

35,570

$

24,304

Diluted Earnings Per Share

Amounts on GAAP basis

$

1.37

$

0.06

$

2.25

$

0.71

Deferred tax adjustment for 2017 Tax Reform Act(4)

(0.92)

(0.93)

Impact of 2017 Tax Reform Act on current tax expense(4)

(0.05)

(0.05)

Restructuring charges, after-tax(1)

0.01

0.24

0.07

0.24

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

0.04

0.01

0.14

0.07

Life insurance proceeds and changes in cash surrender value

(0.03)

(0.03)

(0.10)

(0.11)

Tax expense (benefit) from vested RSUs(5)

(0.05)

Transaction costs, after-tax(3)

0.01

Non-GAAP amounts

$

0.42

$

0.28

$

1.33

$

0.92

_________________________

1)

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

2)

Nonunion pension expense is presented as a non-GAAP adjustment with pension settlement expense, for all periods presented, because expenses related to the plan have been excluded from the financial information management uses to make operating decisions, as an amendment to terminate the nonunion defined benefit pension plan with a termination date of December 31, 2017 was executed in November 2017. Plan participants will have an election window in which they can choose any form of payment allowed by the plan for immediate commencement of payment or defer payment until a later date with pension settlements related to the plan termination likely to occur in the second half of 2018.

3)

Transaction costs for the year ended December  31, 2016 are associated with the September 2, 2016 acquisition of Logistics & Distribution Services, LLC.

4)

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

5)

The Company recognized the tax impact for the vesting of share-based compensation resulting in excess tax expense during the three months ended December 31, 2017 and excess tax benefit during the year ended December 31, 2017.

 

ARCBEST CORPORATION

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES – Continued

Effective Tax Rate Reconciliation

ArcBest Corporation – Consolidated

(Unaudited)

($ thousands, except percentages)

Three Months Ended December 31, 2017

Income

Before

Income

Operating

Other

Income

Tax

Net

Effective

Income

Income

Taxes

Provision

Income

Tax Rate

Amounts on GAAP basis

$

16,680

$

(660)

$

16,020

$

(20,548)

$

36,568

(128.3)

%

Deferred tax adjustment for 2017 Tax Reform Act(1)

24,542

(24,542)

Impact of 2017 Tax Reform Act on current tax expense(1)

1,288

(1,288)

Restructuring charges(2)

232

232

90

142

38.8

Nonunion pension expense, including settlement(3)

1,622

1,622

631

991

38.9

Life insurance proceeds and changes in cash surrender value

(699)

(699)

(699)

Tax expense from vested RSUs(4)

(14)

14

Non-GAAP amounts

$

18,534

$

(1,359)

$

17,175

$

5,989

$

11,186

34.9

%

Three Months Ended December 31, 2016

Income

Before

Income

Operating

Other

Income

Tax

Net

Effective

Income

Income

Taxes

Provision

Income

Tax Rate

Amounts on GAAP basis

$

1,211

$

(115)

$

1,096

$

(488)

$

1,584

(44.5)

%

Restructuring charges(2)

10,313

10,313

4,040

6,273

39.2

Nonunion pension expense, including settlement(3)

511

511

199

312

38.9

Life insurance proceeds and changes in cash surrender value

(884)

(884)

(884)

Transactions costs(5)

39

39

15

24

38.5

Non-GAAP amounts

$

12,074

$

(999)

$

11,075

$

3,766

$

7,309

34.0

%

Year Ended December 31, 2017

Income

Before

Income

Operating

Other

Income

Tax

Net

Effective

Income

Income

Taxes

Provision

Income

Tax Rate

Amounts on GAAP basis

$

53,510

$

(1,934)

$

51,576

$

(8,150)

$

59,726

(15.8)

%

Deferred tax adjustment for 2017 Tax Reform Act(1)

24,542

(24,542)

Impact of 2017 Tax Reform Act on current tax expense(1)

1,288

(1,288)

Restructuring charges(2)

2,963

2,963

1,153

1,810

38.9

Nonunion pension expense, including settlement(3)

6,090

6,090

2,369

3,721

38.9

Life insurance proceeds and changes in cash surrender value

(2,642)

(2,642)

(2,642)

Tax benefit from vested RSUs(4)

1,215

(1,215)

Non-GAAP amounts

$

62,563

$

(4,576)

$

57,987

$

22,417

$

35,570

38.7

%

Year Ended December 31, 2016

Income

Before

Income

Operating

Other

Income

Tax

Net

Effective

Income

Income

Taxes

Provision

Income

Tax Rate

Amounts on GAAP basis

$

28,970

$

(683)

$

28,287

$

9,635

$

18,652

34.1

%

Restructuring charges(2)

10,313

10,313

4,040

6,273

39.2

Nonunion pension expense, including settlement(3)

3,075

3,075

1,197

1,878

38.9

Life insurance proceeds and changes in cash surrender value

(2,864)

(2,864)

(2,864)

Transactions costs(5)

601

601

236

365

39.3

Non-GAAP amounts

$

42,959

$

(3,547)

$

39,412

$

15,108

$

24,304

38.3

%

_________________________

1)

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

2)

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

3)

Nonunion pension expense is presented as a non-GAAP adjustment with pension settlement expense, for all periods presented, because expenses related to the plan have been excluded from the financial information management uses to make operating decisions, as an amendment to terminate the nonunion defined benefit pension plan with a termination date of December 31, 2017 was executed in November 2017.

4)

The Company recognized the tax impact for the vesting of share-based compensation resulting in excess tax expense during the three months ended December 31, 2017 and excess tax benefit during the year ended December 31, 2017.

5)

Transaction costs for the year ended December 31, 2016 are associated with the September 2, 2016 acquisition of Logistics & Distribution Services, LLC.

 

ARCBEST CORPORATION

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES – Continued

Three Months Ended 

Year Ended 

December 31

December 31

2017

2016

2017

2016

Segment Operating Income Reconciliations

(Unaudited)

($ thousands, except percentages)

Asset-Based

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

Amounts on GAAP basis

$

17,973

96.4

%

$

7,148

98.5

%

$

51,878

97.4

%

$

33,571

98.2

%

Restructuring charges(1)

76

1,173

(0.2)

344

1,173

(0.1)

Nonunion pension expense, including settlement(2)

1,325

(0.3)

384

(0.1)

4,799

(0.2)

2,313

(0.1)

Non-GAAP amounts

$

19,374

96.1

%

$

8,705

98.2

%

$

57,021

97.2

%

$

37,057

98.0

%

Asset-Light

ArcBest

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

Amounts on GAAP basis

$

4,481

97.5

%

$

(1,586)

100.9

%

$

18,801

97.3

%

$

6,864

98.9

%

Restructuring charges(1)

8,038

(4.6)

875

(0.1)

8,038

(1.2)

Nonunion pension expense, including settlement(2)

109

(0.1)

11

413

(0.1)

63

Non-GAAP amounts

$

4,590

97.4

%

$

6,463

96.3

%

$

20,089

97.1

%

$

14,965

97.7

%

FleetNet

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

Amounts on GAAP basis

$

747

98.1

%

$

724

98.1

%

$

3,324

97.9

%

$

2,425

98.5

%

Restructuring charges(1)

245

(0.7)

245

(0.2)

Nonunion pension expense, including settlement(2)

39

(0.1)

10

147

(0.1)

61

Non-GAAP amounts

$

786

98.0

%

$

979

97.4

%

$

3,471

97.8

%

$

2,731

98.3

%

Total Asset-Light

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

Amounts on GAAP basis

$

5,228

97.6

%

$

(862)

100.4

%

$

22,125

97.4

%

$

9,289

98.8

%

Restructuring charges(1)

8,283

(3.9)

875

(0.1)

8,283

(1.0)

Nonunion pension expense, including settlement(2)

148

(0.1)

21

560

(0.1)

124

Non-GAAP amounts

$

5,376

97.5

%

$

7,442

96.5

%

$

23,560

97.2

%

$

17,696

97.8

%

Other and Eliminations

Operating Loss ($)

Amounts on GAAP basis

$

(6,521)

$

(5,075)

$

(20,493)

$

(13,890)

Restructuring charges(1)

156

857

1,744

857

Nonunion pension expense, including settlement(2)

149

106

731

638

Transaction costs(3)

39

601

Non-GAAP amounts

$

(6,216)

$

(4,073)

$

(18,018)

$

(11,794)

_________________________

1)

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

2)

Nonunion pension expense is presented as a non-GAAP adjustment with pension settlement expense, for all periods presented, because expenses related to the plan have been excluded from the financial information management uses to make operating decisions, as an amendment to terminate the nonunion defined benefit pension plan with a termination date of December 31, 2017 was executed in November 2017.

3)

Transaction costs for the year ended December 31, 2016 are associated with the September 2, 2016 acquisition of Logistics & Distribution Services, LLC.

 

ARCBEST CORPORATION

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES – Continued

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

Three Months Ended 

Year Ended

December 31

December 31

2017

2016

2017

2016

(Unaudited)

($ thousands)

ArcBest Corporation – Consolidated

Net income

$

36,568

$

1,584

$

59,726

$

18,652

Interest and other related financing costs

1,932

1,376

6,342

5,150

Income tax provision (benefit)

(20,548)

(488)

(8,150)

9,635

Depreciation and amortization

26,247

26,361

103,068

103,053

Amortization of share-based compensation

1,888

1,437

6,958

7,588

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

1,493

2,140

8,064

8,173

Restructuring charges(1)

232

10,313

2,963

10,313

Transaction costs(2)

39

601

  Consolidated Adjusted EBITDA

$

47,812

$

42,762

$

178,971

$

163,165

______________________

1)

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

2)

Transaction costs for the year ended December 31, 2016 are associated with the September 2, 2016 acquisition of Logistics & Distribution Services, LLC.

 

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

Three Months Ended December 31

2017

2016

Depreciation

Depreciation

Operating

and

Restructuring

Adjusted

Operating

and

Restructuring

Adjusted

Income

Amortization

Charges(3)

EBITDA

Income

Amortization

Charges(3)

EBITDA

(Unaudited)

($ thousands)

Asset-Light

ArcBest(4)

$

4,481

$

3,579

$

$

8,060

$

(1,586)

$

3,115

$

8,038

$

9,567

FleetNet

747

266

1,013

724

310

245

1,279

  Total Asset-Light

$

5,228

$

3,845

$

$

9,073

$

(862)

$

3,425

$

8,283

$

10,846

Year Ended December 31

2017

2016

Depreciation

Depreciation

Operating

and

Restructuring

Adjusted

Operating

and

Restructuring

Adjusted

Income

Amortization

Charges(3)

EBITDA

Income

Amortization

Charges(3)

EBITDA

(Unaudited)

($ thousands)

Asset-Light

ArcBest(4)

$

18,801

$

13,090

$

875

$

32,766

$

6,864

$

13,612

$

8,038

$

28,514

FleetNet

3,324

1,089

4,413

2,425

1,210

245

3,880

  Total Asset-Light

$

22,125

$

14,179

$

875

$

37,179

$

9,289

$

14,822

$

8,283

$

32,394

______________________

3)

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

4)

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

 

ARCBEST CORPORATION

OPERATING STATISTICS

Three Months Ended 

Year Ended 

December 31

December 31

2017

2016

% Change

2017

2016

% Change

(Unaudited)

Asset-Based

Workdays

61.5

61.0

251.5

252.5

Billed Revenue(1) CWT

$

32.34

$

30.06

7.6%

$

31.27

$

29.35

6.5%

Billed Revenue(1) / Shipment

$

404.25

$

362.31

11.6%

$

381.55

$

365.68

4.3%

Shipments

1,215,433

1,311,846

(7.3%)

5,218,346

5,237,827

(0.4%)

Shipments / Day

19,763

21,506

(8.1%)

20,749

20,744

Tonnage (Tons)

759,549

790,535

(3.9%)

3,183,228

3,263,025

(2.4%)

Tons / Day

12,350

12,960

(4.7%)

12,657

12,923

(2.1%)

_____________________

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 

Year Ended 

December 31, 2017

December 31, 2017

(Unaudited)

ArcBest

Expedite(2)

Revenue / Shipment

15.1%

13.9%

Shipments / Day

(4.9%)

(0.4%)

Truckload and Truckload – Dedicated(3)

Revenue / Shipment

22.5%

10.3%

Shipments / Day

(12.0%)

7.4%

_____________________

2)

Expedite primarily represents the expedited operations which were previously reported in the Premium Logistics (Panther) segment.

3)

Truckload represents the brokerage operations and the Truckload – Dedicated represents the dedicated operations of LDS. Comparisons are impacted by the operations of LDS, which was acquired in September 2016.

 

Investor Relations Contact: David Humphrey

Media Contact: Kathy Fieweger

Title: Vice President – Investor Relations

Phone: 479-719-4358

Phone: 479-785-6200 

Email: kfieweger@arcb.com

Email: dhumphrey@arcb.com

 

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/arcbest-announces-fourth-quarter-2017-and-full-year-2017-results-300590432.html

SOURCE ArcBest