ArcBest quarterly income falls 48.7%, income down 80% for first half of 2016

ArcBest Corp. posted second quarter income of $10.231 million, 48.7% below the same quarter in 2015 and four cents per share below the consensus estimate. Officials with the Fort Smith-based transportation and logistics company said the industry has a mix of too many trucking companies and not enough demand.

The net income of 39 cents per share for the second quarter missed the 43 cents pwer share consensus estimate of the 13 analysts who follow the company. Second quarter revenue was $676.627 million, below the $696.115 million in the same quarter of 2015 and below the consensus estimate of $683.9 million.

While the quarter was tough for the company, it did put the company in the black following a $6.103 million loss in the first quarter.

For the first half of 2016, the company posted net income of $4.128 million, below the $20.712 million in the same period of 2016. Revenue in the first six months totaled $1.298 billion, down from $1.309 billion in the same period of 2016.

“The inconsistent economic operating environment combined with a surplus of transportation capacity continues to impact available business levels and operating margins at ABF Freight and at each of ArcBest’s asset-light logistics companies,” the company noted in the earnings report released early Friday (July 29). “In the midst of this challenging period, ArcBest continues to successfully build on the strategic opportunities it has to gain new business, strengthen shipper relationships and offer additional services to existing customers.”

ABF FREIGHT
The company’s largest subsidiary, ABF Freight, one of the nation’s largest less-than-truckload carriers, had operating income of $17.372 million, below the $28.092 million in the same quarter of 2015. Operating income for the first half of the year is $8.373 million, 70.2% below the $28.135 million in the same period of 2015.

Revenue from the division in the second quarter was $486.731 million, down from $504.371 million in the 2015 quarter. Revenue in the first half of the year totaled $926.239 million, down from $945.578 million in the same period of 2015. Company officials said reductions in fuel surcharges – driven down by lower diesel fuel prices – was the primary reason for lower revenue.

The company said tonnage fell 3.2% in the quarter and shipments per day fell 0.4%. In the first half of 2016, tonnage hauled (1.64 million tons) is 1.4% for ABF Freight and the number shipments (20,078) are up 0.9%. Evidence of the downward pressure on prices in the industry is seen in revenue per shipment. Billed revenue per shipment was down 3.5% in the quarter and is down 4% in the first half of 2016.

“ABF Freight’s decreasing average weight per shipment has been driven by market factors that include abundant customer inventory levels combined with excess industry capacity available to move customers’ larger-sized shipments. Along with the effects of lower fuel surcharges, these factors have contributed to reduced second quarter revenue compared to last year,” the company noted in the statement.

‘ASSET-LIGHT’ FINANCIALS
ArcBest continues to see revenue growth in its asset-light – non-trucking – businesses. Revenue in the four businesses – Panther Logistics, ABF Logistics, FleetNet, and ABF Moving – totaled $205.182 million in the quarter, ahead of the $204.93 million in the same quarter of 2015. Revenue for the businesses in the first half of 2016 reached $399.915 million, up from $388.651 million in the same period of 2015.

Revenue from the asset-light businesses captured 30% of ArcBest total revenue in the quarter, just above the 29% in the second quarter of 2015. However, operating income in the businesses fell compared to the second quarter of 2015 and the first half of 2016.

Panther Logistics (operating income)
Jan.-June 2016: $1.358 million
Jan.-June 2015: $6.033 million

ABF Logistics (operating income)
Jan.-June 2016: $1.162 million
Jan.-June 2015: $2.583 million

FleetNet (operating income)
Jan.-June 2016: $1.58 million
Jan.-June 2015: $2.187 million

ABF Moving (operating income)
Jan.-June 2016: $121,000
Jan.-June 2015: $1.634 million

Factors curtailing income in the quarter included lower market rates, smaller shipments hauled shorter distances, decline in number of government shipments, and integration of Bear Transportation Services into the company. ArcBest in December announced the $26 million acquisition of Plano-Texas based Bear. The company, which had 140 employees and generated about $120 million a year in revenue, was placed under the ABF Logistics division.

CASH POSITION, DIVIDEND
The company continues to maintain a healthy cash position, although it did decline in the first half of 2016. Cash and cash equivalents as of June 30 totaled $152.236 million, down from $192.016 million in the same period of 2015. In addition to the Bear acquisition, the company is in the midst of an estimated $30 million expansion primarily involving construction of a 205,000-square-foot corporate complex in east Fort Smith (Chaffee Crossing) that will house 800-1,000 employees.

The company will retain its 191,000-square-feet corporate headquarter building on Old Greenwood Road in Fort Smith. That facility, which opened in early 1995, is expected to provide space for ABF Freight and ArcBest Technologies employees. Moving corporate and logistics jobs out of the existing corporate headquarters will allow room for expansion at ABF Freight and ArcBest Technologies (formerly Data-Tronics).

The company on Thursday announced a quarterly dividend of 8 cents per share payable Aug. 26 to shareholders of record on Aug. 11.

Company shares (NASDAQ: ARCB) closed Thursday trading at $17.78. During the past 52 weeks the share price has ranged from a $34.97 high to a $14.85 low.