ArcBest : Announces Fourth Quarter 2019 And Full Year 2019 Results

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Investor Relations Contact: David Humphrey

Title: Vice President - Investor Relations

Phone: [phone]

Email: [e-mail]

ArcBest^®Announces Fourth Quarter 2019And Full Year 2019Results

• Fourth quarter 2019 revenue of $717.4 million, and a net loss of $5.5 million, or $0.22 per diluted share. On a non-GAAP¹ basis, fourth quarter 2019 net income was $14.8 million, or $0.56 per diluted share.
• Asset-Based profitability continues to benefit from yield initiatives and focused account management
• Profit-sharing bonus to union-represented ABF Freight employees of $5.1 million for 2019
• Asset-light results impacted by weaker demand

FORT SMITH, Arkansas, January 30, 2020- ArcBest^®(Nasdaq: ARCB), a leading logistics company with creative problem solvers who deliver innovative solutions, today reportedfourth quarter 2019revenueof $717.4 million compared to fourth quarter 2018 revenue of $774.3 million. ArcBest had a fourth quarter 2019 operating loss of $11.2 million compared to operating income of $37.2 million last year, and a netloss of $5.5 million, or $0.22 perdilutedsharecompared to fourth quarter2018netincome of $15.3 million, or $0.57 per diluted share.Fourth quarter 2019 results include a previously announced noncash impairment charge of $26.5 million (pre-tax), or $19.8 million (after-tax) and $0.75 per diluted share.

Excluding certain items in both periods as identified in the attached reconciliation tables, non-GAAPoperating income was $20.2 millionin fourth quarter 2019compared to fourth quarter 2018operating income of $39.9 million. On a non-GAAPbasis, net income was $14.8 million, or $0.56 per diluted share, in fourth quarter 2019compared to fourth quarter 2018 net income of $28.3 million, or $1.06 per diluted share.

'Overall, 2019 represented a solidly profitable year for ArcBest filled with ongoing innovation and customer-centric initiatives,' said Chairman, President and CEO Judy R. McReynolds. 'While conditions were not as favorable as those seen in 2018, our team succeeded in providing customers with valued expertise, a better experience and the full suite of logistics services they require. As a result of our expansion and investments in recent years, our cross-sold accounts have become larger in size and are growing faster than single-service accounts. Importantly, they also have higher rates of retention, which is a more stable foundation for future growth.'

ArcBest's full year 2019 revenue totaled $3.0 billioncompared to $3.1 billion in 2018.Net income was $40.0 million, or $1.51 per diluted share, compared to net income of $67.3 million, or $2.51 per diluted share in 2018.On a non-GAAP basis, ArcBest had 2019 net income of $76.3 million, or $2.88 per diluted share compared to net income of $107.4 million, or $4.02 per diluted share in 2018.

McReynolds noted that returning the asset-based business to historic margins has been a stated long-term goal. Payment of a profit-sharing bonus to union-represented employees as provided for in the 2018 collective bargaining agreement by achieving a 95.2 percent ABF Freight operating ratio in 2019 represented a significant milestone. 'We thank our ABF employees for their hard work and are proud to distribute this profit-sharing bonus to them,' McReynolds said.

1. U.S. Generally Accepted Accounting Principles

Fourth Quarter Results of Operations Comparisons

Asset-Based

FourthQuarter 2019VersusFourth Quarter 2018

• Revenue of $513.3 million compared to $548.9 million, a per-daydecreaseof 6.5 percent.
• Total tonnage per day decrease of 8.1 percent, with a double-digit percentage decrease in LTL-rated tonnage partially offset by a double-digit percentage increase in TL-rated spot shipment tonnage moving in the Asset-Based network.
• Total shipments per day decrease of 7.3 percent.Total weight per shipment decrease of 0.8 percent and a decrease of 6.3 percent in LTL-rated weight per shipment.
• Total billed revenue per hundredweight increased 2.1 percentand was negatively impacted by lower fuel surcharges versus prior year. Excluding fuel surcharge, the percentage increase onLTL-rated freight was in the high-single digits.
• Operating income of $20.5 million and an operating ratio of 96.0 percent compared to operating income of $36.9 million and an operating ratio of 93.3 percent. On a non-GAAP basis, operating income of$25.4 million and an operating ratio of 95.0 percent compared to operating income of $37.8 million and an operating ratio of 93.1 percent.

Fourth quarter tonnage and shipment totals in the Asset-Based business were below the same period last year due to weaker customer demand and smaller average sized LTL shipments associated with a tempered economic operating environment. These factors, along with reduced fuel surcharge revenue, and associatedreductions in fuel-related expenses, contributed to lower fourth quarter revenue. Reductions in total Asset-Based business levels resulting from fewer LTL-rated shipments were somewhatmitigated by an increase in TL‑rated, spot shipments moving through the ABF Freight network. Efforts to secure adequate Asset-Based yields during the quarter were successful, especially on LTL-rated shipments, amidst a positive pricingmarketplace. ABF Freight continues to have success in achieving pricing levels that match the superior customer service it offers.

Fourth quarter Asset-Based linehaul costs improved as a result of the combined impact of lower empty equipment costs and efficient management of outside capacity resources including rail, purchased transportation and cartage. Lower business levels contributed to reduced efficiency in providing dock, city pickup and delivery services, thus impacting operating costsper shipment. During this year's fourth quarter, Asset-Based results also benefitted from asset sales.

Asset-Light^‡

Fourth Quarter 2019 Versus Fourth Quarter 2018

• Revenue of $237.0 million compared to $243.8 million, a per-day decrease of 2.8 percent.
• An operating loss of $25.4 million due to a noncash impairment charge compared to operating income of $7.5 million. On a non-GAAP basis, operating income of $1.1 millioncompared to operating income of $7.8 million.
• Adjusted earnings before interest, taxes, depreciation and amortization ('Adjusted EBITDA') of $4.0 million compared to Adjusted EBITDA of $11.3 million.

Reduced fourth quarter revenue in the Asset-Light ArcBest segment versus the prior year reflectsa market-driven reduction in total average revenueper shipment, primarily in the expedite and truckload brokerage businesses. Though purchased transportation costs are below the prior year, the rate of decrease in these carrier capacity costs did not match that of the quarter's decline in revenue. This year's more available truckload capacity, compared to the tighter spot market last year, was a factor impacting demand for expedite services and operating margins. Strong demand for ArcBest's managed transportation solutions continues to be a positive contributor to Asset-Light financial results. At FleetNet, an increase in total events resulted in improved operating income over the prior year period.

Full Year Results of Operations Comparisons

Asset-Based

Full Year 2019 Versus Full Year 2018

• Revenue of $2.1 billion, compared to $2.2 billion in 2018, an average daily decrease of 1.2 percent.
• Tonnage per day decrease of 4.8 percent.
• Shipments per day decrease of 2.4 percent.
• Total billed revenue per hundredweight increased 3.7 percent. Excluding fuel surcharge, the percentage increase on LTL-rated freight was in the high-single digits.
• Operating income of $102.1 million compared to $103.9 million in 2018. On a non-GAAP basis, operating income of $118.8 million compared to $145.6 million in 2018.
• Profit-sharing bonus to union-represented ABF Freight employees of $5.1 millionfor 2019

Asset-Light^‡

Full Year 2019 Versus Full Year 2018

• Revenue of $950.1 million compared to $976.2 millionin 2018, anaverage daily decrease of 2.5 percent.
• An operating loss of $15.4 million compared to operating income of $28.0 million. On a non-GAAP basis, operatingincome of $11.2 millioncompared to operating income of $26.5 million.
• Adjusted EBITDA of $23.8 million compared to $43.4 millionin 2018.

Capital Expenditures

In 2019, total net capital expenditures, including equipment financed, equaled $147 million which was below previous expectations reflecting shifts in the timing of some expenditures into 2020 and higher sale proceeds. 2019 net capital expenditures included $86 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 $108 million.

For 2020, total net capital expenditures are estimated to range from $135million to $145million. This includes revenue equipment purchases of approximately $82million primarily for ArcBest's Asset-Based operation. ArcBest's depreciation and amortization costs on property, plant and equipment in 2020are estimated to range from $110million to $115million.

Quarterly Dividends and Share Repurchase Program

During 2019, ArcBest increased shareholder returns through payment of an eight cent per share quarterly dividend and purchase of ArcBest shares valued at approximately $9.1 million, and these are expected to continue at comparable levels in 2020.

Closing Comments

'For the last 10 years, our strategy has evolved purposefully by expanding our logistics offerings and opening up new avenues for growth to address our rapidly changing industry,' said McReynolds. 'Ease of doing business through multiple channels has become a customer requirement. We are confident that the solutions we have in place, and continue to develop and enhance, provide value in any environment, but especially this environment, as evidenced by the growth seen in our managed transportation and Retail+ solutions. As we look ahead, we are accelerating our efforts to deepen and broaden our customer relationships and to increase the effectiveness of our efforts to improve supply chain efficiencies.'

NOTE

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

Conference Call

ArcBest will host a conference call with company executives to discuss the 2019 fourth quarter and full year results. The call will be on Friday, January 31st at 9:30 a.m. EST (8:30 a.m. CST). Interested parties are invited to listen by calling (800) 756‑3565. Following the call, a recorded playback will be available through the end of the day on March 15, 2020. To listen to the playback, dial [phone] or [phone] (for international callers). The conference call ID for the playback is 21950554. The conference call and playback can also be accessed, through March 15, 2020, on ArcBest's website atarcb.com.

Call participants can submit questions this afternoon prior to the conference call by emailing them to [e-mail]. On the call, responses will be provided to as many questions as possible in the time available.

About ArcBest

ArcBest^®(Nasdaq: ARCB) is a leading logistics company with creative problem solvers who deliver innovative solutions. We'll find a way to deliver knowledge, expertise and a can-do attitude with every shipment and supply chain solution, household move or vehicle repair. At ArcBest, we're More Than Logistics^SM. For more information, visitarcb.com.

Forward-Looking Statements

Certain statements and information in this press release concerning results for the three months ended September 30, 2019 may constitute 'forward-looking statements' within the meaning of the Private Securities Litigation Reform Act of 1995. Terms such as 'anticipate,' 'believe,' 'could,' 'estimate,' 'expect,' 'forecast,' 'foresee,' 'intend,' 'may,' 'plan,' 'predict,' 'project,' 'scheduled,' 'should,' 'would,' and similar expressions and the negatives of such terms are intended to identify forward-looking statements. These statements are based on management's beliefs, assumptions, and expectations based on currently available information, are not guarantees of future performance, and involve certain risks and uncertainties (some of which are beyond our control). Although we believe that the expectations reflected in these forward-looking statements are reasonable as and when made, we cannot provide assurance that our expectations will prove to be correct. Actual outcomes and results could materially differ from what is expressed, implied, or forecasted in these statements due to a number of factors, including, but not limited to: a failure of our information systems, including disruptions or failures of services essential to our operations or upon which our information technology platforms rely, data breach, and/or cybersecurity incidents; untimely or ineffective development and implementation of new or enhanced technology or processes, including the pilot test program at ABF Freight; failure to realize potential benefits associated with new or enhanced technology or processes, including the pilot test program at ABF Freight, and any write-offs associated therewith; the loss or reduction of business from large customers; competitive initiatives and pricing pressures; relationships with employees, including unions, and our ability to attract and retain employees; unfavorable terms of, or the inability to reach agreement on, future collective bargaining agreements or a workforce stoppage by our employees covered under ABF Freight's collective bargaining agreement; the cost, timing, and performance of growth initiatives; general economic conditions and related shifts in market demand that impact the performance and needs of industries we serve and/or limit our customers' access to adequate financial resources; availability and cost of reliable third-party services; governmental regulations; environmental laws and regulations, including emissions-control regulations; union and nonunion employee wages and benefits, including changes in required contributions to multiemployer plans; our ability to secure independent owner operators and/or operational or regulatory issues related to our use of their services; litigation or claims asserted against us; maintaining our intellectual property rights, brand, and corporate reputation; the loss of key employees or the inability to execute succession planning strategies; default on covenants of financing arrangements and the availability and terms of future financing arrangements; timing and amount of capital expenditures; self-insurance claims and insurance premium costs; the cost, integration, and performance of any recent or future acquisitions; availability of fuel, the effect of volatility in fuel prices and the associated changes in fuel surcharges on securing increases in base freight rates, and the inability to collect fuel surcharges; increased prices for and decreased availability of new revenue equipment, decreases in value of used revenue equipment, and higher costs of equipment-related operating expenses such as maintenance and fuel and related taxes; potential impairment of goodwill and intangible assets; greater than anticipated funding requirements for our nonunion defined benefit pension plan; seasonal fluctuations and adverse weather conditions; regulatory, economic, and other risks arising from our international business; antiterrorism and safety measures; and other financial, operational, and legal risks and uncertainties detailed from time to time in ArcBest's public filings with the Securities and Exchange Commission ('SEC').

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

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

Financial Data and Operating Statistics

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

ARCBEST CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

		Three Months Ended						Year Ended
		December 31						December 31
		2019			2018			2019			2018
		(Unaudited)
		($ thousands, except share and per share data)
REVENUES		$	717,418		$	774,279		$	2,988,310		$	3,093,788
OPERATING EXPENSES(1)(2)			728,647			737,117			2,924,540			2,984,690
OPERATING INCOME (LOSS)			(11,229)			37,162			63,770			109,098
OTHER INCOME (COSTS)
Interest and dividend income			1,591			1,554			6,453			3,914
Interest and other related financing costs			(2,874)			(2,926)			(11,467)			(9,468)
Other, net			485			(15,120)			(7,285)			(19,158)
			(798)			(16,492)			(12,299)			(24,712)
INCOME (LOSS) BEFORE INCOME TAXES			(12,027)			20,670			51,471			84,386
INCOME TAX PROVISION (BENEFIT)			(6,478)			5,371			11,486			17,124
NET INCOME (LOSS)		$	(5,549)		$	15,299		$	39,985		$	67,262
EARNINGS PER COMMON SHARE(3)
Basic		$	(0.22)		$	0.59		$	1.56		$	2.61
Diluted		$	(0.22)		$	0.57		$	1.51		$	2.51
AVERAGE COMMON SHARES OUTSTANDING
Basic			25,490,393			25,707,335			25,535,529			25,679,736
Diluted			25,490,393			26,682,262			26,450,055			26,698,831
CASH DIVIDENDS DECLARED PER COMMON SHARE		$	0.08		$	0.08		$	0.32		$	0.32

1. Includes a one-time charge of $37.9 million for the year ended December 31, 2018 for the multiemployer pension fund withdrawal liability resulting from the transition agreement ABF Freight, Inc. entered into with the New England Teamsters and Trucking Industry Pension Fund.
2. For the three months and year ended December 31, 2019, includes a noncash impairment charge related to a portion of the goodwill, customer relationship intangible assets, and revenue equipment associated with the acquisition of truckload brokerage and truckload dedicated businesses within the ArcBest segment.
3. 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
		2019			2018
		(Unaudited)			Note
		($ thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	201,909		$	190,186
Short-term investments			116,579			106,806
Accounts receivable, less allowances (2019 - $5,448; 2018 - $7,380)			282,579			297,051
Other accounts receivable, less allowances (2019 - $476; 2018 - $806)			18,774			19,146
Prepaid expenses			30,377			25,304
Prepaid and refundable income taxes			9,439			1,726
Other			4,745			9,007
TOTAL CURRENT ASSETS			664,402			649,226
PROPERTY, PLANT AND EQUIPMENT
Land and structures			342,122			339,640
Revenue equipment			896,020			858,251
Service, office, and other equipment			233,354			199,230
Software			151,068			138,517
Leasehold improvements			10,383			9,365
			1,632,947			1,545,003
Less allowances for depreciation and amortization			949,355			913,815
			683,592			631,188
GOODWILL			88,320			108,320
INTANGIBLE ASSETS, NET			58,832			68,949
OPERATING RIGHT-OF-USE ASSETS			68,470			-
DEFERRED INCOME TAXES			7,725			7,468
OTHER LONG-TERM ASSETS			79,866			74,080
		$	1,651,207		$	1,539,231
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable		$	134,374		$	143,785
Income taxes payable			12			1,688
Accrued expenses			228,749			243,111
Current portion of long-term debt			57,305			54,075
Current portion of operating lease liabilities			20,265			-
Current portion of pension and postretirement liabilities			3,572			8,659
TOTAL CURRENT LIABILITIES			444,277			451,318
LONG-TERM DEBT, less current portion			266,214			237,600
OPERATING LEASE LIABILITIES, less current portion			52,277			-
PENSION AND POSTRETIREMENT LIABILITIES, less current portion			20,294			31,504
OTHER LONG-TERM LIABILITIES			38,892			44,686
DEFERRED INCOME TAXES			66,210			56,441
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value, authorized 70,000,000 shares; issued 2019: 28,810,902 shares; 2018: 28,684,779 shares			288			287
Additional paid-in capital			333,943			325,712
Retained earnings			533,187			501,389
Treasury stock, at cost, 2019: 3,404,639 shares; 2018: 3,097,634 shares			(104,578)			(95,468)
Accumulated other comprehensive income (loss)			203			(14,238)
TOTAL STOCKHOLDERS' EQUITY			763,043			717,682
		$	1,651,207		$	1,539,231

Note: The balance sheet at December 31, 2018 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

ARCBEST CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Year Ended
		December 31
		2019			2018
		Unaudited
		($ thousands)
OPERATING ACTIVITIES
Net income		$	39,985		$	67,262
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			108,099			104,114
Amortization of intangibles			4,367			4,521
Pension settlement expense, including termination expense			8,505			12,925
Share-based compensation expense			9,523			8,413
Provision for losses on accounts receivable			1,223			2,336
Change in deferred income taxes			5,411			1,872
Asset impairment(1)			26,514			-
Gain on sale of property and equipment			(5,247)			(59)
Gain on sale of subsidiaries			-			(1,945)
Changes in operating assets and liabilities:
Receivables			13,720			(23,554)
Prepaid expenses			(4,756)			(2,988)
Other assets			(1,365)			(4,341)
Income taxes			(8,720)			12,169
Operating right-of-use assets and lease liabilities, net			728			-
Multiemployer pension fund withdrawal liability(2)			(584)			22,602
Accounts payable, accrued expenses, and other liabilities			(27,039)			52,020
NET CASH PROVIDED BY OPERATING ACTIVITIES			170,364			255,347
INVESTING ACTIVITIES
Purchases of property, plant and equipment, net of financings			(90,955)			(43,992)
Proceeds from sale of property and equipment			13,490			4,256
Proceeds from sale of subsidiaries			-			4,680
Purchases of short-term investments			(129,709)			(108,495)
Proceeds from sale of short-term investments			120,409			58,698
Capitalization of internally developed software			(11,476)			(10,097)
NET CASH USED IN INVESTING ACTIVITIES			(98,241)			(94,950)
FINANCING ACTIVITIES
Payments on long-term debt			(58,938)			(71,260)
Proceeds from notes payable			20,410			-
Net change in book overdrafts			(2,722)			262
Deferred financing costs			(562)			(202)
Payment of common stock dividends			(8,187)			(8,244)
Purchases of treasury stock			(9,110)			(9,404)
Payments for tax withheld on share-based compensation			(1,291)			(2,135)
NET CASH USED IN FINANCING ACTIVITIES			(60,400)			(90,983)
NET INCREASE IN CASH AND CASH EQUIVALENTS			11,723			69,414
Cash and cash equivalents at beginning of period			190,186			120,772
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	201,909		$	190,186
NONCASH INVESTING ACTIVITIES
Equipment and other financings		$	70,372		$	94,016
Accruals for equipment received		$	234		$	2,807
Lease liabilities arising from obtaining right-of-use assets		$	32,761		$	-

1. Noncash impairment charge recognized in the year ended December 31, 2019relates to a portion of the goodwill, customer relationship intangible assets, and revenue equipment associated with the acquisition of truckload brokerage and truckload dedicated businesses within the ArcBest segment.
2. The year ended December 31, 2018 includes a one-time charge related to the multiemployer pension plan withdrawal liability.