ArcBest Corporation — FY 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. The filing also reports fourth-quarter results. ArcBest provides less-than-truckload (LTL) freight, asset-light logistics, and fleet maintenance services.
Financial performance and liquidity
| Metric | 2019 | 2018 |
|---|---|---|
| Revenue | $2,988.3 million | $3,093.8 million |
| Operating income | $63.8 million | $109.1 million |
| Operating margin | 2.1% | 3.5% |
| Net income | $40.0 million | $67.3 million |
| Diluted EPS | $1.51 | $2.51 |
| Operating cash flow | $170.4 million | $255.3 million |
| Adjusted EBITDA | $221.2 million | $266.4 million |
- Revenue fell 3.4%; operating income declined 41.5% and net income 40.6%. Net margin was approximately 1.3%, versus 2.2% in 2018.
- Cash, cash equivalents, and short-term investments totaled $318.5 million at year-end. Current assets of $664.4 million exceeded current liabilities of $444.3 million.
- Debt, including notes payable and finance leases but excluding operating leases, was $323.5 million: $70.0 million under the revolving credit facility, $40.0 million under receivables securitization, and $213.5 million in notes payable and finance leases. Operating lease liabilities added $72.5 million.
- Available borrowing capacity was $180.0 million under the credit facility and $72.8 million under the receivables program. The company reported compliance with financing covenants.
- Gross capital expenditures were $160.7 million; cash provided by operations was lower than the prior year, primarily reflecting working-capital changes and income-tax timing.
Material changes and unusual items
- Asset-Based revenue declined 1.4%. Daily tonnage fell 4.8%, partly offset by a 3.7% increase in billed revenue per hundredweight. The segment reported $102.1 million operating income and a 95.2% operating ratio in both 2019 and 2018; 2018 included a $37.9 million pension withdrawal-liability charge.
- ArcBest segment revenue declined 5.5% to $738.4 million, and it recorded a $20.2 million operating loss versus $23.6 million operating income. Results included a $26.5 million noncash impairment charge related to acquired truckload and truckload-dedicated operations.
- FleetNet revenue increased 8.5% to $211.7 million; operating income rose to $4.8 million from $4.4 million.
- Fourth-quarter revenue was $717.4 million; operating loss was $11.2 million and net loss was $5.5 million. The quarter included the impairment charge.
- 2019 operating results also included $15.7 million of pre-tax costs for the ABF Freight freight-handling technology pilot, $2.7 million of ELD-related conversion costs, and pension termination and settlement expenses. The nonunion defined benefit pension plan was liquidated by year-end.
Outlook, management commentary, and risks
- Management cited softer economic conditions, weakness in industrial and manufacturing activity, lower freight volumes, and excess truckload capacity as pressures on volume, pricing, and margins. Managed transportation demand and FleetNet service events partly offset declines elsewhere.
- For 2020, management estimated net capital expenditures of $135–$145 million and depreciation and amortization of fixed assets, excluding intangible amortization, of $110–$115 million; intangible amortization was estimated at approximately $4 million. No specific full-year revenue or earnings guidance is provided.
- Early-2020 trends through late February included higher Asset-Based tonnage but lower yield, and continued ArcBest asset-light pricing and margin pressure. The company said coronavirus effects had not been significant through February, but future impact was uncertain.
- Key risks include underfunded multiemployer pension plans (approximately 57% of 2019 pension contributions went to plans in critical and declining status; Central States was projected to become insolvent within six years without legislative action), labor costs and collective bargaining, competition and pricing, third-party carrier availability and cost, fuel surcharge recovery, cybersecurity, and potential further impairment.
- The freight-handling pilot remained limited and early-stage; management cautioned that its success and broader deployment were not assured. Routine legal matters were not expected to materially affect results; environmental cleanup reserves were $0.4 million.
Investor verification priorities
- Assess whether Asset-Based tonnage and ArcBest segment pricing and margins improved after the 2019 declines.
- Review the assumptions supporting the $26.5 million impairment and whether further impairment indicators emerged.
- Track operating cash flow, working-capital movements, capital spending, and total debt and lease obligations.
- Evaluate multiemployer pension exposure, future contribution requirements, and the Central States plan’s funding outlook.
- Monitor 2020 operating trends, the technology pilot’s costs and results, and the evolving economic and coronavirus impacts.
The independent auditor issued an unqualified opinion on the financial statements and internal control over financial reporting as of December 31, 2019.