ArcBest, one of the largest employers in the Fort Smith metro, is cutting pay, implementing a hiring freeze and taking other “cash preservation” measures as the COVID-19 pandemic has resulted in declining revenue.
Judy McReynolds, president and CEO of the Fort Smith-based transportation and logistics company, summarized the company’s struggles and outlined its actions in a letter sent to employees.
“Many businesses, including our customers, have reduced operations or shut their doors from either lack of business or orders to do so from federal, state or local governments. Stimulus aid hasn’t reached its intended recipients, and the length and depth of the coronavirus impact are unknown,” McReynolds noted in the undated letter obtained by Talk Business & Politics.
ArcBest employs around 1,630 in the Fort Smith area, with 880 of those hourly and 750 salaried, according to the company. The company has an estimated 13,000 employees, and the number of ABF employees who are union members is 8,320. ArcBest is the parent company of ABF Freight, one of the nation’s largest less-than-truckload carriers, and ArcBest Logistics and FleetNet.
“To ensure the health of ArcBest during this crisis, we are initiating multiple cost containment and cash preservation initiatives. The most difficult of these are ones that impact our employees. They are not made lightly, and the leadership team agonizes over any decision that impacts our employees. Unfortunately, due to falling business volumes, we can wait no longer to adjust our costs to reflect current business levels,” McReynolds noted in the letter.
Following are the cost-cutting actions listed in the letter.
• A 15% reduction in hours worked or “other equivalent adjustment” for hourly employees.
• A 15% salary reduction for salaried employees.
• A hiring freeze is in place for “noncritical roles.”
• A pay increase freeze.
• Suspension of the 401(k) match.
“They will remain in effect until further notice. We will re-evaluate all of our cost-savings actions over the next 90 to 120 days as the situation evolves, and we are committed to minimizing the impact to our employees. Our goal is to reverse these actions as soon as possible,” McReynolds said.
ArcBest has a broad customer base, with no customer generating more than 4% of total revenue, and the 10 largest customers accounting for 11% of total revenues, according to company data.
“Although we do not have a significant customer concentration, the growth of our business could be materially impacted and our results of operations and cash flows would be adversely affected if we were to lose all or a portion of the business of some of our large customers,” the company noted in its 2019 10K filing with the U.S. Securities and Exchange Commission.
McReynolds did not mention suspending the company’s quarterly dividend. The 8-cent dividend paid out more than $2 million to shareholders in the recent quarter. ArcBest ended 2019 with cash, cash equivalents and short-term holdings valued at $318.488 million.
ArcBest posted 2019 net income of $39.985 million, well below the $67.262 million in 2018, but the sixth consecutive year of positive income. The Fort Smith-based company posted full-year revenue of $2.988 billion, below the $3.093 billion in 2018.
Company shares (NASDAQ: ARCB) closed Monday at $18.49, up $1.81 as part of an overall market rally. During the past 52 weeks the share price has ranged between $34.45 and $13.54.