ArcBest® Announces Third Quarter 2018 Results
- Third quarter 2018 revenue of $826.2 million, and net income of $40.8 million, or $1.52 per diluted share. On a non-GAAP1 basis, third quarter 2018 net income was $38.6 million, or $1.44 per diluted share, a 151 percent improvement over third quarter 2017.
- Third quarter Asset-Based revenue increase and operating income improvement associated with tonnage growth and greater pricing yields.
- Asset-Light net revenue increase resulting in improved profitability.
FORT SMITH, Arkansas, November 1, 2018 — ArcBest® (Nasdaq: ARCB), a leading logistics company with creative problem solvers who deliver integrated solutions, today reported third quarter 2018 revenue of $826.2 million compared to third quarter 2017 revenue of $744.3 million. This represented another record level of quarterly consolidated revenue for ArcBest. Third quarter 2018 operating income was $56.1 million compared to operating income of $26.7 million in the same quarter last year. Net income was $40.8 million, or $1.52 per diluted share compared to third quarter 2017 net income of $14.8 million, or $0.56 per diluted share.
Excluding certain items in both periods, as identified in the attached reconciliation tables, non-GAAP operating income was $54.2 million in third quarter 2018 compared to third quarter 2017 operating income of $27.3 million. On a non-GAAP basis, net income was $38.6 million, or $1.44 per diluted share, in third quarter 2018 compared to third quarter 2017 net income of $15.4 million, or $0.58 per diluted share.
“I am proud of our team for producing the third consecutive quarter of very positive results this year at ArcBest as we collaborate across the organization to provide customers the best solutions to their supply chain needs,” said Chairman, President and CEO Judy R. McReynolds. “Our sales, yield and operations teams – supported by significant technology investments we have made over the last several years – are doing an excellent job helping our customers navigate the industry capacity shortage while ensuring that ArcBest receives the appropriate value for our services. Significantly, our asset-based business reported its best third quarter operating ratio since 2006, and we experienced a strong net revenue improvement in our asset-light business.”
- U.S. Generally Accepted Accounting Principles
Asset-Based
Results of Operations
Third Quarter 2018 Versus Third Quarter 2017
- Revenue of $585.3 million compared to $517.4 million, a per-day increase of 12.2 percent.
- Tonnage per day increase of 1.6 percent.
- Shipments per day decrease of 1.0 percent.
- Total billed revenue per hundredweight increased 10.1 percent and was positively impacted by higher fuel surcharges. Excluding fuel surcharge, the percentage increase on ArcBest’s Asset-Based LTL freight was in the high-single digits.
- Operating income of $50.2 million and an operating ratio of 91.4 percent compared to third quarter 2017 operating income of $23.7 million and an operating ratio of 95.4 percent.
Third quarter results in ArcBest’s Asset-Based business reflect continued strength in account pricing and the benefits of careful cost management in the midst of a steady freight environment. The strong improvement in both revenue per hundredweight and revenue per shipment versus the same period last year was driven by the benefits of pricing initiatives implemented throughout the year and an increase in fuel surcharge. Increases in average shipment size and average length of haul were additional factors positively impacting revenue per shipment. The rise in freight tonnage handled throughout the ABF Freight network reversed a trend seen in the first half of the year and contributed to improvement in several key productivity metrics, thus resulting in cost efficiencies and improved operating income. Though the number of average daily Asset-Based shipments handled in the recent third quarter was slightly below the same period last year, the year-over-year change in this business metric has continually improved throughout each quarter of this year.
Asset-Light‡
Results of Operations
Third Quarter 2018 Versus Third Quarter 2017
- Revenue of $255.9 million compared to $235.3 million, a per-day increase of 7.9 percent.
- Operating income of $11.1 million compared to operating income of $8.8 million. On a non-GAAP basis, operating income of $9.1 million compared to $8.6 million.
- Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) of $14.9 million compared to Adjusted EBITDA of $12.0 million.
Compared to last year’s third quarter, total revenue growth in the Asset-Light ArcBest segment was the result of increased revenue per shipment associated with higher market rates, somewhat offset by a reduction in total shipments handled. Though net revenue margins continued to be under pressure related to limited availability of competitively priced equipment capacity, the rate of margin compression in the third quarter was less than in the first half of this year. The resulting increase in total net revenue and in average net revenue per shipment contributed to improved operating income. Versus the prior year period, the Asset-Light ArcBest segment also experienced significant growth in managed transportation services that positively impacted both revenue and net revenue, and was another factor contributing to higher operating income. At FleetNet, a strong increase in events contributed to growth in both total revenue and net revenue which, combined with efficient cost management, resulted in improved profitability.
Closing Comments
“Tight capacity and a favorable business environment this year have provided a strong foundation for ArcBest to execute on cross-selling and other growth initiatives,” said McReynolds. “As unemployment reaches historic lows and other indicators we study look favorable, our outlook remains positive and we will monitor the environment closely for any changes. As we close out the year and look forward to 2019, we will continue our focus on growth, profitable account management, cost control and providing a best-in-class customer experience.”
Conference Call
ArcBest will host a conference call with company executives to discuss the 2018 third quarter results. The call will be on Friday, November 2nd at 9:30 a.m. EDT (8:30 a.m. CDT). Interested parties are invited to listen by calling (800) 670-1536. Following the call, a recorded playback will be available through the end of the day on December 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 21897168. The conference call and playback can also be accessed, through December 15, 2018, on ArcBest’s website at arcb.com.
Call participants can submit questions this afternoon prior to the conference call by emailing them to ir@arcb.com. On the call, responses will be provided to as many questions as possible in the time available.
About ArcBest
ArcBest® (Nasdaq: ARCB) is a leading logistics company with creative problem solvers who deliver integrated solutions. We'll find a way to deliver knowledge, expertise and a can-do attitude with every shipment and supply chain solution, household move or vehicle repair. At ArcBest, we’re More Than LogisticsSM. For more information, visit arcb.com.
Forward-Looking Statements
Certain statements and information in this press release concerning results for the three months ended September 30, 2018 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; 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 loss or reduction of business from large customers; the cost, timing, and performance of growth initiatives; competitive initiatives and pricing pressures; 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; greater than expected funding requirements for our nonunion defined benefit pension plan; 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; governmental regulations; environmental laws and regulations, including emissions-control regulations; the cost, integration, and performance of any recent or future acquisitions; 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; union and nonunion 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; 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
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Three Months Ended
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Nine Months Ended
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September 30
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September 30
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2018
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2017
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2018
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2017
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(Unaudited)
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($ thousands, except share and per share data)
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REVENUES
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$
|
826,158
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$
|
744,280
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$
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2,319,509
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$
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2,115,736
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OPERATING EXPENSES (includes one-time charge)(1)(2)
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770,103
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717,538
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2,247,573
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2,073,127
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OPERATING INCOME
|
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56,055
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26,742
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71,936
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42,609
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OTHER INCOME (COSTS)
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Interest and dividend income
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1,120
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|
346
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|
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2,360
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|
905
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Interest and other related financing costs
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(2,470)
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(1,706)
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(6,542)
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(4,410)
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Other, net(2)
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(714)
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(1,314)
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(4,038)
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(3,548)
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|
|
|
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(2,064)
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(2,674)
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(8,220)
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(7,053)
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INCOME BEFORE INCOME TAXES
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53,991
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24,068
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63,716
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35,556
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INCOME TAX PROVISION
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13,215
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9,280
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11,753
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12,398
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NET INCOME
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$
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40,776
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$
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14,788
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$
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51,963
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$
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23,158
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EARNINGS PER COMMON SHARE(3)
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Basic
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$
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1.58
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$
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0.57
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$
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2.02
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$
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0.90
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Diluted
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$
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1.52
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$
|
0.56
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$
|
1.94
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$
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0.87
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AVERAGE COMMON SHARES OUTSTANDING
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Basic
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25,697,509
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25,671,535
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|
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25,670,435
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25,699,306
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Diluted
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26,795,659
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26,393,359
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26,708,259
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26,373,382
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CASH DIVIDENDS DECLARED PER COMMON SHARE
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$
|
0.08
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$
|
0.08
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$
|
0.24
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$
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0.24
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- Includes a $37.9 million multiemployer pension fund withdrawal liability charge for the nine months ended September 30, 2018.
- Effective January 1, 2018, the Company retrospectively adopted an amendment to ASC Topic 715, Compensation – Retirement Benefits, which requires changes to the financial statement presentation of certain components of net periodic benefit cost related to pension and other postretirement benefits accounted for under ASC Topic 715. As a result of adopting this amendment, the service cost component of net periodic benefit cost continues to be included in Operating Expenses, but the other components of net periodic benefit cost, including pension settlement expense, are presented in Other Income (Costs) for the three and nine months ended September 30, 2018 and 2017. The detail of the Company’s net periodic benefit costs will be presented in Note F to the consolidated financial statements included in Part I, Item I of the Company’s third quarter 2018 Quarterly Report on Form 10-Q.
- ArcBest uses the two-class method for calculating earnings per share. This method requires an allocation of dividends paid and a portion of undistributed net income (but not losses) to unvested restricted stock for calculating per share amounts.
ARCBEST CORPORATION
CONSOLIDATED BALANCE SHEETS
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September 30
|
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December 31
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2018
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2017
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(Unaudited)
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Note
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($ thousands, except share data)
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ASSETS
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CURRENT ASSETS
|
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Cash and cash equivalents
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$
|
177,436
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$
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120,772
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Short-term investments
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|
75,879
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56,401
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Accounts receivable, less allowances (2018 - $7,475; 2017 - $7,657)
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323,212
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|
279,074
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Other accounts receivable, less allowances (2018 - $975; 2017 - $921)
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17,992
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19,491
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Prepaid expenses
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21,291
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22,183
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Prepaid and refundable income taxes
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|
|
6,726
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|
12,296
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Other
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|
9,038
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12,132
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TOTAL CURRENT ASSETS
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|
631,574
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|
522,349
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PROPERTY, PLANT AND EQUIPMENT
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Land and structures
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338,046
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344,224
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Revenue equipment
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|
857,846
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793,523
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Service, office, and other equipment
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192,241
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179,950
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Software
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133,816
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129,589
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Leasehold improvements
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9,177
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|
8,888
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|
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1,531,126
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1,456,174
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Less allowances for depreciation and amortization
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|
904,180
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|
|
865,010
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|
|
|
|
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626,946
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|
|
591,164
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|
|
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|
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|
|
|
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|
GOODWILL
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|
|
108,320
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|
|
108,320
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|
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INTANGIBLE ASSETS, NET
|
|
|
70,075
|
|
|
73,469
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DEFERRED INCOME TAXES
|
|
|
5,967
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|
|
5,965
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OTHER LONG-TERM ASSETS
|
|
|
74,800
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|
|
64,374
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|
|
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$
|
1,517,682
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$
|
1,365,641
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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CURRENT LIABILITIES
|
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Accounts payable
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$
|
154,484
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|
$
|
129,099
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|
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Income taxes payable
|
|
|
138
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|
|
324
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|
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Accrued expenses
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|
233,076
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|
|
210,484
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|
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Current portion of long-term debt
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54,556
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|
|
61,930
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Current portion of pension and postretirement liabilities
|
|
|
12,640
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|
|
753
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|
|
TOTAL CURRENT LIABILITIES
|
|
|
454,894
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|
|
402,590
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|
|
|
|
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|
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LONG-TERM DEBT, less current portion
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|
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235,970
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|
|
206,989
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PENSION AND POSTRETIREMENT LIABILITIES, less current portion
|
|
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27,614
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|
|
39,827
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OTHER LONG-TERM LIABILITIES
|
|
|
40,372
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|
|
15,616
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DEFERRED INCOME TAXES
|
|
|
53,741
|
|
|
49,157
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STOCKHOLDERS’ EQUITY
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Common stock, $0.01 par value, authorized 70,000,000 shares;
issued 2018: 28,547,578 shares; 2017: 28,495,628 shares
|
|
|
285
|
|
|
285
|
|
|
Additional paid-in capital
|
|
|
325,533
|
|
|
319,436
|
|
|
Retained earnings
|
|
|
488,158
|
|
|
438,379
|
|
|
Treasury stock, at cost, 2018: 2,857,460 shares; 2017: 2,851,578 shares
|
|
|
(86,265)
|
|
|
(86,064)
|
|
|
Accumulated other comprehensive loss
|
|
|
(22,620)
|
|
|
(20,574)
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|
|
TOTAL STOCKHOLDERS’ EQUITY
|
|
|
705,091
|
|
|
651,462
|
|
|
|
|
$
|
1,517,682
|
|
$
|
1,365,641
|
|
Note: The balance sheet at December 31, 2017 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
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
September 30
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
Unaudited
|
|
|
|
|
($ thousands)
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
51,963
|
|
$
|
23,158
|
|
|
Adjustments to reconcile net income
|
|
|
|
|
|
|
|
|
to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
78,305
|
|
|
73,417
|
|
|
Amortization of intangibles
|
|
|
3,394
|
|
|
3,404
|
|
|
Pension settlement expense
|
|
|
1,603
|
|
|
3,644
|
|
|
Share-based compensation expense
|
|
|
6,185
|
|
|
5,070
|
|
|
Provision for losses on accounts receivable
|
|
|
1,937
|
|
|
705
|
|
|
Deferred income tax provision
|
|
|
3,697
|
|
|
5,846
|
|
|
Gain on sale of property and equipment
|
|
|
(188)
|
|
|
(257)
|
|
|
Gain on sale of subsidiaries
|
|
|
(1,945)
|
|
|
(152)
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(47,287)
|
|
|
(35,590)
|
|
|
Prepaid expenses
|
|
|
1,013
|
|
|
(37)
|
|
|
Other assets
|
|
|
(4,826)
|
|
|
(5,932)
|
|
|
Income taxes
|
|
|
5,675
|
|
|
5,180
|
|
|
Multiemployer pension fund withdrawal liability(1)
|
|
|
22,744
|
|
|
—
|
|
|
Accounts payable, accrued expenses, and other liabilities
|
|
|
51,309
|
|
|
17,915
|
|
|
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
|
|
173,579
|
|
|
96,371
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment, net of financings
|
|
|
(39,249)
|
|
|
(44,377)
|
|
|
Proceeds from sale of property and equipment
|
|
|
2,917
|
|
|
3,585
|
|
|
Proceeds from sale of subsidiaries
|
|
|
4,680
|
|
|
1,970
|
|
|
Purchases of short-term investments
|
|
|
(67,121)
|
|
|
(50,274)
|
|
|
Proceeds from sale of short-term investments
|
|
|
47,878
|
|
|
49,980
|
|
|
Capitalization of internally developed software
|
|
|
(7,411)
|
|
|
(7,225)
|
|
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(58,306)
|
|
|
(46,341)
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Borrowings under accounts receivable securitization program
|
|
|
—
|
|
|
10,000
|
|
|
Payments on long-term debt
|
|
|
(49,967)
|
|
|
(52,262)
|
|
|
Net change in book overdrafts
|
|
|
(1,975)
|
|
|
2,289
|
|
|
Deferred financing costs
|
|
|
(202)
|
|
|
(959)
|
|
|
Payment of common stock dividends
|
|
|
(6,176)
|
|
|
(6,207)
|
|
|
Purchases of treasury stock
|
|
|
(201)
|
|
|
(6,019)
|
|
|
Payments for tax withheld on share-based compensation
|
|
|
(88)
|
|
|
(3,080)
|
|
|
NET CASH USED IN FINANCING ACTIVITIES
|
|
|
(58,609)
|
|
|
(56,238)
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
|
|
|
56,664
|
|
|
(6,208)
|
|
|
Cash and cash equivalents and restricted cash at beginning of period
|
|
|
120,772
|
|
|
115,242
|
|
|
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD
|
|
$
|
177,436
|
|
$
|
109,034
|
|
|
|
|
|
|
|
|
|
|
|
NONCASH INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Equipment financed
|
|
$
|
71,575
|
|
$
|
61,607
|
|
|
Accruals for equipment received
|
|
$
|
438
|
|
$
|
851
|
|
- ABF Freight, Inc. recorded a one-time charge in second quarter 2018 for the multiemployer pension plan withdrawal liability resulting from the transition agreement it entered into with the New England Teamsters and Trucking Industry Pension Fund.