ArcBest Announces Fourth Quarter 2016 And Full Year 2016 Results

FORT SMITH, Ark., Feb. 8, 2017 /PRNewswire/ -- ArcBest^SM (Nasdaq: ARCB) today reported fourth quarter 2016 net income of $1.6 million, or $0.06 per diluted share, compared to fourth quarter 2015 net income of $5.0 million, or $0.19 per diluted share.  ArcBest's fourth quarter 2016 revenue was $688.2 million versus revenue of $648.1 million in the same period of 2015, an increase of 6.2 percent. 

Excluding certain items in both periods as identified in the attached reconciliation tables, ArcBest's non-GAAP net income was $7.6 million, or $0.29 per diluted share, in fourth quarter 2016 compared to fourth quarter 2015 non-GAAP net income of $5.5 million, or $0.21 per diluted share.  Adjustments in the fourth quarter 2016 period included $10.3 million, or $0.24 per diluted share after-tax, related to a reorganization charge for impairment of software, contract and lease terminations and severance associated with ArcBest's new corporate structure that was implemented beginning in 2017. 

"Throughout 2016, during an inconsistent operating environment in our industry, we saw a positive reception from customers about our commitment to provide full supply chain solutions they seek as we continued to grow our company," said ArcBest Chairman, President and CEO Judy R. McReynolds. "We accelerated that commitment when we announced a new, enhanced market approach in November that enables us to provide a better customer experience by simplifying our organization and offering logistics solutions primarily under the ArcBest brand. With this new structure operational as of January 1, our ArcBest team is fully engaged and delivering integrated logistics solutions through an exceptional customer experience."

Asset-Based^‡

Results of Operations

Fourth Quarter 2016 Versus Fourth Quarter 2015

• Revenue of $482.1 million compared to $461.0 million, a per-day increase of 5.4 percent.
• Tonnage per day increase of 0.9 percent.
• Shipments per day increase of 6.1 percent.
• Total billed revenue per hundredweight increased by 3.6 percent and was impacted by changes in shipment profile.  Excluding fuel surcharge, the percentage increase on ArcBest's asset-based traditional LTL freight was in the mid-single digits.
• Operating income of $7.1 million and an operating ratio of 98.5 percent compared to $7.7 million and an operating ratio of 98.3 percent.  On a non-GAAP basis, operating income of $8.9 million and an operating ratio of 98.2 percent compared to $8.3 million and an operating ratio of 98.2 percent.

ArcBest's asset-based services, offered through the ABF Freight brand, experienced higher average daily revenue resulting from increased revenue per hundredweight positively impacted by freight profile changes.  In the midst of a competitive but rational industry yield environment, ArcBest's asset-based pricing remained disciplined.  In fourth quarter 2016, freight shipments grew at a faster rate than freight tonnage.  Thus, the average weight, and resulting revenue, of each shipment was below that of fourth quarter 2015.  The shipment growth contributed to increased freight handling labor and purchased transportation costs.  Asset-based expenses as a percent of revenue improved in the areas of equipment repositioning, equipment maintenance and cargo care while a continuing trend of higher nonunion healthcare costs unfavorably impacted operating results.

Asset-Light^‡

Results of Operations

Fourth Quarter 2016 Versus Fourth Quarter 2015

• Revenue of $211.2 million compared to $191.5 million.
• Operating loss of $0.9 million compared to operating income of $3.4 million. On a non-GAAP basis, operating income of $7.5 million compared to $4.3 million.
• Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") of $11.2 million compared to Adjusted EBITDA of $7.0 million.

Asset-light revenue grew due to continued strength in the demand for expedited services and additional revenue from previous asset-light acquisitions within the truckload and dedicated truckload markets.  The non-GAAP operating margin improvement reflects cost management initiatives, including the expense reductions associated with the corporate restructuring.  Though less impactful than in the previous quarter, changes in the ocean shipping market contributed to lower revenues and margins in ArcBest's international business.  FleetNet's fourth quarter profit margin improvements were a result of strict cost management and the positive effects of changes in customer accounts throughout the year.

Full Year 2016 Results

ArcBest's revenue totaled $2.70 billion, a slight increase compared to $2.67 billion in 2015.  Net income was $18.7 million, or $0.71 per diluted share.  On a non-GAAP basis, ArcBest had 2016 net income of $24.4 million, or $0.93 per diluted share compared to net income of $47.9 million, or $1.78 per diluted share in 2015. 

During 2016, ArcBest increased shareholder returns through payment of an eight cent per share quarterly dividend and purchase of ArcBest shares valued at approximately $9.5 million.

Asset-Based^‡

Results of Operations

Full Year 2016 Versus Full Year 2015

• Revenue of $1.92 billion, equal to prior year. Asset-based revenue in 2016 was impacted by lower fuel surcharges.
• Tonnage per day decrease of 1.8 percent.
• Shipments per day increase of 2.3 percent. 
• Total billed revenue per hundredweight increased 1.3 percent and was impacted by lower fuel surcharges in 2016.  Excluding fuel surcharge, the percentage increase on ArcBest's asset-based traditional LTL freight was in the low-single digits.
• Operating income of $33.6 million and an operating ratio of 98.2 percent compared to $62.4 million and an operating ratio of 96.7 percent.  On a non-GAAP basis, an operating ratio of 98.0 percent compared to an operating ratio of 96.6 percent.

Asset-Light^‡

Results of Operations

Full Year 2016 Versus Full Year 2015

• Revenue of $803.4 million compared to $765.4 million, an increase of 5.0 percent.
• Operating income of $9.3 million compared to $23.7 million.  On a non-GAAP basis, operating income of $17.7 million compared to $24.8 million.
• Adjusted EBITDA of $32.9 million compared to $38.2 million.
• ArcBest acquired Logistics & Distribution Services in September 2016, enhancing its service offerings in dedicated truckload.

Capital Expenditures

In 2016, total net capital expenditures equaled $143 million, including approximately $91 million of revenue equipment for ArcBest's asset-based operation.  Depreciation and amortization costs on property, plant and equipment were $99 million.

For 2017, total net capital expenditures are estimated to range from $145 million to $170 million. This includes revenue equipment purchases of $94 million primarily for ArcBest's asset-based operation.  Expected real estate expenditures totaling approximately $32 million are for expansion opportunities and completion of previously disclosed call center facilities and office building, a portion of which replaces leased space.  The remainder of expected capital expenditures includes the costs of additional asset-based investments and technology enhancements across the enterprise.  ArcBest's depreciation and amortization costs on property, plant and equipment in 2017 are estimated to be in a range of $105 million to $115 million.

Closing Comments

"Although 2016 was a challenging freight environment, we were pleased with our positive momentum, particularly in our expedited service offerings, as we closed the year," said McReynolds. "That improvement, combined with expanded asset-light truckload service offerings, and the assets available through the broad ABF LTL network, means that we are positioned well with capacity sources when our customers ask for integrated logistics services to meet their needs.  ArcBest's enhanced market approach, combined with the cost savings resulting from our improved organizational structure, has resulted in a more efficient process for delivering an excellent experience for our customers.  It's an exciting time at ArcBest and our employees are energized around our new structure and the capabilities available to them."

Conference Call

ArcBest Corporation will host a conference call with company executives to discuss the 2016 fourth quarter results. The call will be today, Wednesday, February 8, at 9:30 a.m. ET (8:30 a.m. CT). Interested parties are invited to listen by calling (800) 682-8539. Following the call, a recorded playback will be available through the end of the day on March 15, 2017. To listen to the playback, dial (800) 633-8284 or (402) 977-9140 (for international callers). The conference call ID for the playback is 21842016. The conference call and playback can also be accessed, through March 15, 2017, on ArcBest's website at arcb.com.

About ArcBest

ArcBest^SM (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, 2016 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 forward-looking 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; union and nonunion employee wages and benefits, including changes in required contributions to multiemployer plans; competitive initiatives and pricing pressures; governmental regulations; environmental laws and regulations, including emissions-control regulations; the cost, integration, and performance of any future acquisitions; relationships with employees, including unions, and our ability to attract and retain employees and/or independent owner operators; 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; 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; potential impairment of goodwill and intangible assets; availability and cost of reliable third-party services; litigation or claims asserted against us; 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; the loss of key employees or the inability to execute succession planning strategies; the impact of our brands and corporate reputation; the cost, timing, and performance of growth initiatives; default on covenants of financing arrangements and the availability and terms of future financing arrangements; timing and amount of capital expenditures; seasonal fluctuations and adverse weather conditions; regulatory, economic, and other risks arising from our international business; and other financial, operational, and legal risks and uncertainties detailed from time to time in our Securities and Exchange Commission ("SEC") public filings.

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

‡ - Previously, ArcBest announced its plan to implement a new corporate structure, effective January 1, 2017, that better serves customers by unifying its sales, pricing, customer service, marketing, and capacity sourcing functions. Based on the financial information that management used during fourth quarter 2016 to make operating decisions and allocate resources, it is reporting its operating segment results as follows: Asset-Based, which represents ABF Freight; ArcBest, a single asset-light logistics operation combining the previously reported operating segments of ABF Logistics, Panther, and ABF Moving; FleetNet; and Other and eliminations.  The ArcBest and FleetNet reportable segments, combined, represent Asset-Light operations.  Certain restatements have been made to the prior year's operating segment data to conform to the current year presentation.  The 8-K filing associated with this earnings release includes an exhibit containing ArcBest's 2015 and 2016 quarterly operating segment data that conforms to the current year presentation.

Financial Data and Operating Statistics

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