ArcBest boosts logistics business with $26 million acquisition of Bear Transportation

Fort Smith-based ArcBest Corp. is spending about 10% of its more than $260 million in cash to beef up its logistics business by acquiring Bear Transportation Services, a Plano, Texas-based regional truckload brokerage company.

The deal, valued at $26 million, will pull the more than 140 Bear employees and annual revenue of about $120 million under the ABF Logistics wing of ArcBest. ArcBest is a transportation holding company, with ABF Freight System its largest subsidiary.

“This company is an excellent fit for ABF Logistics, as we believe the purchase will drive growth and profitability by combining our vision, brand and customer relationships with Bear’s deep pool of experienced sales and operations team members,” ABF Logistics President Jim Ingram said in the statement issued Tuesday (Dec. 1) afternoon. “We have admired the Bear organization for years and have been impressed with the skillsets and innovative IT concepts we have seen in action.”

Bear Transportation was founded in 1982 and most of its employees are based in Plano and Fayetteville, Ark.

“We are pleased to find a strategic buyer with a strong culture and a clear growth plan,” said Mike Loehr, a principal owner of Bear Transportation. “Our employees and our customers will benefit from the resources and solutions ABF Logistics and the broader ArcBest organization will provide.”

PUSH TO DIVERSIFY REVENUE
ArcBest Corp. CEO Judy McReynolds and the company’s Board of Directors have been clear in their goal to boost revenue beyond $3 billion a year by growing the non-asset side of the house. Non-asset subsidiaries are Panther Premium Logistics, ABF Logistics, FleetNet, ABF Moving and ArcBest Technologies (formerly known as Data-Tronic.).

The company does continue to benefit from the non-asset operations created or acquired in recent years to help diversify its business model and revenue stream. Panther (logistics), ABF Logistics, Fleetnet and ABF Moving generated 29% of total revenue during the third quarter, up compared to 28% during the same period of 2014.

ABF Logistics, which provides broad third-party logistics support through services like truckload brokerage, posted operating income of $4.375 million for the first nine months of the year, almost double the $2.449 million in the same period of 2014.

Panther (Premium Logistics), which primarily provides dedicated one-truck service typically through an owner-operator network, posted operating income of $8.767 million during the first nine months, below the $11.841 million during the same period of 2014. Company officials said specific economic factors in 2014 – tighter truckload capacity and higher fuel surcharges – were not present in 2015, thereby reducing revenue and squeezing margins.

For the first nine months of the year, total revenue for ArcBest reached $2.018 billion, ahead of the $1.947 billion during the same period of 2014. Net income for the first nine months of 2015 totaled $39.866 million, up 26% over the $31.633 million during the same period in 2014.

CORPORATE EXPANSION
Organic and acquisition growth pushed the company to expand its corporate footprint in Fort Smith. ArcBest officials first announced in May 2014 the plan to invest $30 million in a new 40-acre corporate campus. The news was part of a larger announcement in which the company plans to add 975 corporate jobs in the area by 2021. As of May, there were about 1,400 ArcBest employees in the Fort Smith area. The company employed more than 11,480 at the end of 2014.

When first announced, the new corporate office was estimated to be up to 150,000 square foot. The building is now projected to be 200,000 square foot and four stories, with completion expected by late 2016. ArcBest corporate offices and its technology subsidiary will move into the new building. The company will retain its high-profile, 195,000-square-feet corporate headquarter building on Old Greenwood Road in Fort Smith. That facility opened in early 1995.

Officials with the transportation and logistics company said earlier this year that they will spend $200 million during 2015 to modernize and add trucking equipment, build new facilities – about $55 million planned for buildings and real estate – and invest in technology.

At the end of the quarter, cash and short-term investments at ArcBest totaled $261.213 million, up almost 29% compared to $202.951 million at the end of the 2014 third quarter.

ArcBest has posted two consecutive years in the black. Full year net income in 2014 was $46.177 million, up 192% compared to the $15.811 million in 2013, and a wide swing from the $7.7 million loss in 2012. Total revenue during 2014 for the publicly held company was $2.612 billion, up 13.6% compared to 2013.

The investor class has been cautious with ArcBest, with the share price well below the 52-week high. Company shares (NASDAQ: ARCB) closed Tuesday (Dec. 1) at $24.33, up 25 cents. During the past 52 weeks the share price has ranged from a $47.52 high to a $23.60 low.

The consensus estimate of analysts covering ArcBest is that the company will post full year earnings per share of $1.99, better than the $1.69 in 2014. The consensus revenue estimate is $2.67 billion, just ahead of the $2.612 billion in 2014.