ArcBest’s second-quarter report shows substantial revenue drop compared to 2019, but net cash up $44 million from first quarter of 2020

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ArcBest ABF Freight
Fort Smith, Arkansas-based ArcBest issued its second-quarter financial report in late July. While improved from the first quarter of 2020, the report still reflects the impact of COVID-19 on the company.

FORT SMITH, Ark. — The COVID-19 pandemic significantly impacted second-quarter business levels and financial results for ArcBest but asset-based and asset-light cost management partially offset the effects of the declines, according to a quarterly report released by the company July 29.

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The company reported second-quarter 2020 revenue of $627.4 million compared to second-quarter 2019 revenue of $771.5 million. Second-quarter 2020 operating income was $20.4 million compared to operating income of $35.2 million in the same period last year. Net income was $15.9 million, or 61 cents per diluted share, compared to second-quarter 2019 net income of $24.4 million, or 92 cents per diluted share.

ArcBest’s non-GAAP operating income was $25.1 million during this year’s second quarter compared to $38.8 million in the second quarter of 2019 non-GAAP. On a non-GAAP basis, net income was $17.6 million, or 67 cents per diluted share in this year’s second quarter compared to a net income of $27.4 million, or $1.04 per diluted share during the same time period last year.

On June 30, 2020, ArcBest’s consolidated cash and short-term investments, less debt, were $41 million net cash compared to the company’s $3 million net debt position on March 31, reflecting a $44 million improvement during the second quarter.

“The successes of the second quarter are rooted in the strength of our employees and the culture that we have cultivated here that unites all of us behind a set of shared values that drive excellence” said Judy R. McReynolds, chairman, president and CEO of ArcBest. “I am incredibly proud of our employees, especially our front-line teams, who continue to work hard and serve our customers in the face of a global pandemic that continues to affect so many aspects of the economy.”

Other highlights from the report include these asset-based comparisons of the second quarter of this year to the second quarter of 2019:

  • Revenue of $460.1 million compared to $559.6 million, a per-day decrease of 17.8%.
  • Total tonnage per day decrease of 13.8%, with a double-digit percentage decrease in both less-than-truckload-rated tonnage and truckload-rated spot shipment tonnage moving in the asset-based network.
  • Total shipments per day decrease of 13.3%; total weight per shipment decrease of 0.6% and an increase of 0.9% in less-than-truckload-rated weight per shipment impacted by transactional, less-than-truckload-rated shipments added during the second quarter.
  • Total billed revenue per hundredweight decreased 4.0% and was negatively impacted by lower fuel surcharges versus prior year. Excluding fuel surcharge, less-than-truckload-rated freight experienced a percentage increase in the low-single digits.
  • Operating income of $21 million and an operating ratio of 95.4% compared to the prior year quarter operating income of $36.2 million and an operating ratio of 93.5%. On a non-GAAP basis, operating income of $25.8 million and an operating ratio of 94.4% compared to the prior year quarter operating income of $38.9 million and an operating ratio of 93.0%.

In response to significantly lower shipment and tonnage levels related to the pandemic’s impact on customer shipping patterns, asset-based system labor and other resources were managed down to match business levels. Second-quarter business decreases were somewhat mitigated by the continued addition of spot, truckload-rated shipments and transactional LTL-rated shipments throughout the Asset-Based network. Combined with the cost reductions in place, the handling of these additional transactional shipments contributed to improved operational efficiencies, fewer empty miles and lower costs. Total second-quarter revenue per hundredweight decreased due to freight mix changes related to the addition of these transactional shipments. However, total yield on less-than-truckload-rated shipments, excluding changes in fuel surcharge, was positive versus the prior year. Pricing on ABF Freight’s traditional published and contractual business improved as the transportation marketplace’s rational pricing environment continued.

Asset-light figures for 2020’s second quarter compared to the second quarter of 2019 include:

  • Revenue of $197.9 million compared to $232.9 million, a per-day decrease of 15%.
  • Operating income of $2.1 million compared to operating income of $3.1 million.
  • Adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”) of $4.9 million compared to adjusted EBITDA of $6.5 million.

Second quarter revenue in the Asset-Light ArcBest segment decreased compared to the prior year period primarily due to lower demand in both the expedite and truckload brokerage businesses related to the pandemic. Reduced demand for expedited services was related to customer closures in the auto sector for the majority of the quarter and meaningful reductions in business levels for many manufacturing customers. Revenue reductions in truckload brokerage were the result of fewer total shipments combined with lower average revenue per shipment. The second quarter was highlighted by significant revenue growth in managed transportation services, consistent with the positive trend seen for the past several quarters in this portion of ArcBest’s Asset-Light business. Purchased transportation expense in the second quarter, as a percent of revenue, increased 120 basis points compared to the prior year period reflecting changes in business mix and the market effects of reductions in revenue per shipment that exceeded comparable decreases in purchased transportation expense. In the second quarter of 2020, operating results for the Asset-Light ArcBest segment benefitted from the corporate cost reduction initiatives previously announced in early April.

At FleetNet, a decrease in total events, primarily associated with fewer roadside repairs due to the pandemic, contributed to lower total revenue and reduced operating income compared to the prior year period.

In late March and early April, ArcBest took actions designed to mitigate the operating and financial impact of the COVID-19 pandemic: The company drew down $180 million of its senior secured revolving credit facility and borrowed $45 million under its account- receivable securitization program. Because of this, ArcBest’s net cash position improved $44 million since March 31, and customer account payment trends have stabilized. The company is now reviewing options for paying back the incremental borrowings during third quarter of this year.

In addition, ArcBest implemented cost reductions beginning in April that included a 15% decrease in the salaries of all nonunion employees; suspension of the employer match of ArcBest’s nonunion 401(k) Plan; a 15% decrease in the fees paid to ArcBest’s board members and the board committee chairpersons; along with other cost reductions. When compared to second quarter 2019, these compensation-related reductions resulted in savings of about $15 million during the second quarter. These cost reductions, along with using real-time, technology-enabling data to align operational costs with business levels, contributed to the positive second quarter financial results.

“As an essential business, our employees have worked on the front lines in sacrifice, both personally and financially, to serve our customers and our nation. We value our employees and appreciate their efforts and are pleased to now be able to restore full wage levels,” McReynolds said.

“I am pleased with what we have been able to accomplish over the last three months considering the dynamic nature of circumstances surrounding the COVID-19 pandemic,” she continued. “We are working to carry this momentum forward as the second half of the year unfolds and will, as always, monitor trends and make adjustments where necessary.”

To view the entire report, click here.

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