Economic disruption from the COVID-19 pandemic “did not have a significant impact” on ArcBest in the first quarter, but revenue for the shipping and logistics company fell 20% in April, the company announced Tuesday (May 5) in its first quarter earnings report.
First quarter net income was $1.902 million, down 61% from the $4.888 million in the same quarter of 2019. The per share net income of 7 cents was better than the consensus estimate of an 11 cent loss.
Revenue in the first quarter was $701.399 million, down 1.46% from the $711.839 million, and below the consensus estimate of $706.02 million.
“The effects of the coronavirus pandemic began impacting our customers’ businesses in late March,” Judy McReynolds, chairman, president and CEO of ArcBest, noted in the earnings report. “In some cases, we began handling new shipments related to the pandemic while we also started to experience impacts of reduced demand and facility closures from other customers. Though this contributed to reductions in shipments, and revenue that was somewhat below previous expectations, operational resources and the associated costs were effectively managed to available business levels. As a result, the COVID-19 pandemic did not have a significant impact on our financial results in first quarter 2020. In fact, it was one of the best first quarters in our company’s history. However, in April we experienced significant business declines in all operating segments.”
ArcBest is the parent company of ABF Freight, one of the nation’s largest less-than-truckload carriers, and ArcBest Logistics and FleetNet.
Revenue with ABF was $515.713 million in the quarter, better than the $506.079 million in the same quarter of 2019. Operating income in the segment was $13.24 million, below the $13.615 million in the 2019 quarter. Revenue per hundredweight – a key metric in the industry – was $33.16, down 4.3% from the 2019 quarter. Much of the decline was related to lower fuel surcharges, the company said in the report.
ArcBest Logistics revenue was $164.775 million, down from $173.204 million in the same quarter of 2019. The segment posted an operating income loss of $1.409 million, compared with a $1.73 million gain in the 2019 quarter. Revenue at FleetNet was $52.439 million, down from the $53.259 million in the 2019 quarter. Operating income in the segment was $1.04 million, down from $1.488 million in the same quarter of 2019.
The company noted in the earnings report that a “significant April 2020 business decline” resulting from COVID-19 reduced revenue by 20% during the month, with most of that in the ABF segment. Following are some of the measures the company made in response to the revenue loss.
• The company pulled the $180 million remaining available borrowing capacity from a credit line and borrowed $45 million under its Accounts Receivable Securitization Program.
• Capital expenditures are estimated to range from $95 million to $105 million, down 30% from the previous estimate. This includes a reduction in revenue equipment purchases of $18 million from the previously disclosed amount of $82 million.
• The company implemented cost reductions that include a 15% decrease in the salaries or work hours of all nonunion employees and suspension of the employer match of ArcBest’s nonunion 401(k) Plan. Also, fees paid to ArcBest’s board members and to the board committee chairpersons are reduced by 15%. Savings from these cuts are estimated in the $15 million to $20 million range.
The company ended the quarter with $352.165 million in cash and cash equivalents, a healthy increase over the $201.909 million at the end of December. Long-term debt at the end of the quarter was $476.945 million, up 79% from the $266.214 million at the end of December.
“These are truly extraordinary times and the duration and magnitude of COVID-19’s total impact are not fully understood,” McReynolds noted. “In times of crisis, our industry is vital in playing a key role to ensure essential goods such as medical supplies and food are available when and where they are needed. The work we do here at ArcBest is important to our nation’s recovery, and we will continue serving our customers to meet their logistical needs as we all do our part to get our country back to work again. I want to thank our 13,000 valued employees who work around the clock to ensure the safe delivery of our services.”
Company shares (NASDAQ: ARCB) closed Tuesday at $21.93, up $2.69. During the past 52 weeks the share price has ranged between $32.46 and $13.54.