Fort Smith-based ArcBest (formerly Arkansas Best Corp.) appears to be on its way to two consecutive years of positive financial results, with net income for the first six months of 2014 at $12.015 million, a big improvement over the $8.517 million loss during the same period in 2013.
The transportation holding company reported early Thursday (July 31) second quarter net income of $17.208 million on revenue of $658.646 million. Excluding a one-time pension charge, the net income was $17.764 million, or 65 cents per share. The per share earnings missed the consensus estimate of 72 cents, but revenue beat the estimate of $642.6 million.
Total revenue for the first half of 2014 totaled $1.236 billion, better than the $1.097 billion during the same period of 2013. Most of the company’s revenue and income is derived from ABF Freight, one of the nation’s largest less-than-truckload carriers. Net income during 2013 was $15.8 million, much better than the $7.7 million loss in 2012 and the most the company has earned in a year since 2008.
“Our second quarter results improved significantly from both the first quarter of 2014 and the year-ago quarter, which was welcome news as we emerged from the harsh winter weather earlier this year,” ArcBest President and CEO Judy McReynolds said in the earnings statement. “As the economy picked up in the second quarter, ABF Freight experienced better pricing conditions and also saw the positive impact from the new labor agreement, while Panther reported one of the strongest quarters in its history. We are also seeing more customers buying at the enterprise level, when they require two or more ArcBest services. We are focused on taking advantage of all opportunities to better serve customers with holistic solutions across the supply chain.”
Although ABF Freight still accounts for a bulk of the income and revenue at ArcBest, Panther Expedited operating income was $4.358 million in the second quarter, well ahead of the $1.506 million during the second quarter of 2013. More impressive is that the operating income for the logistics subsidiary during the first half of 2014 is $7.722 million, much higher than the $642,000 in the same period of 2013 and not much less than the $10.653 million for the much larger ABF Freight division.
Panther was acquired in June 2012 for $180 million.
“The hard work we have done over the last few years to better position ABF Freight and to grow and invest in our emerging businesses is reflected in today’s results,” McReynolds said. “It is particularly gratifying to see Panther achieving such strong results after two full years as an ArcBest company.”
In addition to returning to consistent profitability, an ArcBest goal has been to diversify the revenue stream. During the second quarter, non-ABF Freight (non-asset) revenue was 27% of the total, ahead of the 24 during the 2013 quarter. And that mix has more than doubled in less than three years. Revenue from the non-asset-based operations was 17.8% of the 2012 total revenue for 2012, and just 10.6% in 2011.
SEGMENT NUMBERS Q1-Q2 2014
ABFFreight
Operating income
2014 (January-June): $10.653 million
2013 (January-June): –$17.052 million
Premium Logistics (Panther)
Operating income
2014 (January-June): $7.722 million
2013 (January-June): $642,000
Domestic/Global transportation management (ABF Logistics)
Operating income
2014 (January-June): $1.389 million
2013 (January-June): $1.023 million
Emergency/preventative maintenance (FleetNet)
Operating income
2014 (January-June): $2,101 million
2013 (January-June): $1.522 million
Household goods moving (ABF Moving)
Operating income
2014 (January-June): –$218,000
2013 (January-June): $717,000
The company provided the following notes about key changes – many allowed by the new labor agreement with the International Brotherhood of Teamsters – and conditions within its ABF Freight division.
• An improving economic environment and business growth at ABF Freight contributed to an additional 6% of second quarter daily freight tonnage versus the same period last year.
• Tightening network capacity combined with improving pricing trends and a lower cost structure resulted in better operating margins.
• Total second quarter revenue per hundredweight increased by 4.2% over last year and increased 6.9% versus first quarter of this year.
• ABF Freight secured better freight rates and account pricing improvements amid broad LTL and truckload industry pricing strength.
• ABF Freight benefited from the previously announced network consolidation of 30 terminals that began in July 2013 and was completed in mid-March of this year.
• ABF Freight is now able to use purchased transportation – a flexibility component of the new ABF Freight labor contract – which has helped improve network operations.
• The level of savings from network changes as well as the expected incremental margins on revenue growth were not realized as ABF Freight brought on a significant number of new dock employees to handle the shipment growth. The company said the process will improve as the new employees complete training and gain experience.
Shares of ArcBest (NASDAQ: ARCB) closed Wednesday at $42.29. During the past 52 weeks the share price has ranged from a $45.68 high to a $19.40 low.