10-Q 1 arcb-20220331x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2022

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                          to                         

Commission file number 000-19969

ARCBEST CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of
incorporation or organization)

71-0673405

(I.R.S. Employer Identification No.)

8401 McClure Drive

Fort Smith, Arkansas 72916

(479) 785-6000

(Address, including zip code, and telephone number, including

area code, of the registrant’s principal executive offices)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock $0.01 Par Value

ARCB

Nasdaq

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class

    

Outstanding at April 29, 2022

Common Stock, $0.01 par value

24,484,199 shares

ARCBEST CORPORATION

INDEX

    

    

Page

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

Consolidated Balance Sheets — March 31, 2022 and December 31, 2021

3

Consolidated Statements of Operations — For the Three Months ended March 31, 2022 and 2021

4

Consolidated Statements of Comprehensive Income — For the Three Months ended March 31, 2022 and 2021

5

Consolidated Statement of Stockholders’ Equity — For the Three Months ended March 31, 2022 and 2021

6

Consolidated Statement of Cash Flows — For the Three Months ended March 31, 2022 and 2021

7

Notes to Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

48

Item 4.

Controls and Procedures

48

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

49

Item 1A.

Risk Factors

49

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

49

Item 3.

Defaults Upon Senior Securities

50

Item 4.

Mine Safety Disclosures

50

Item 5.

Other Information

50

Item 6.

Exhibits

51

SIGNATURES

52

PART I.

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ARCBEST CORPORATION

CONSOLIDATED BALANCE SHEETS

March 31

December 31

    

2022

    

2021

 

(Unaudited)

(in thousands, except share data)

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

64,108

$

76,620

Short-term investments

 

37,024

 

48,339

Accounts receivable, less allowances (2022 – $15,737; 2021 – $13,226)

 

676,200

 

582,344

Other accounts receivable, less allowances (2022 – $697; 2021 – $690)

 

22,109

 

13,094

Prepaid expenses

 

42,688

 

40,104

Prepaid and refundable income taxes

 

9,010

 

9,654

Other

 

9,440

 

5,898

TOTAL CURRENT ASSETS

 

860,579

 

776,053

PROPERTY, PLANT AND EQUIPMENT

Land and structures

 

352,420

 

350,694

Revenue equipment

 

981,317

 

980,283

Service, office, and other equipment

 

259,201

 

251,085

Software

 

180,641

 

175,989

Leasehold improvements

 

17,226

 

16,931

 

1,790,805

 

1,774,982

Less allowances for depreciation and amortization

 

1,098,431

 

1,079,061

PROPERTY, PLANT AND EQUIPMENT, net

 

692,374

 

695,921

GOODWILL

 

299,008

 

300,337

INTANGIBLE ASSETS, net

 

123,363

 

126,580

OPERATING RIGHT-OF-USE ASSETS

125,988

106,686

DEFERRED INCOME TAXES

 

5,324

 

5,470

OTHER LONG-TERM ASSETS

 

103,063

 

101,629

TOTAL ASSETS

$

2,209,699

$

2,112,676

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Accounts payable

$

340,966

$

311,401

Income taxes payable

 

8,364

 

12,087

Accrued expenses

 

276,888

 

305,851

Current portion of long-term debt

 

89,766

 

50,615

Current portion of operating lease liabilities

24,127

22,740

TOTAL CURRENT LIABILITIES

 

740,111

 

702,694

LONG-TERM DEBT, less current portion

 

168,912

 

174,917

OPERATING LEASE LIABILITIES, less current portion

106,463

88,835

POSTRETIREMENT LIABILITIES, less current portion

 

16,710

 

16,733

OTHER LONG-TERM LIABILITIES

 

130,471

 

135,537

DEFERRED INCOME TAXES

 

63,860

 

64,893

STOCKHOLDERS’ EQUITY

Common stock, $0.01 par value, authorized 70,000,000 shares; issued 2022: 29,384,711 shares, 2021: 29,359,597 shares

 

294

 

294

Additional paid-in capital

 

344,429

 

318,033

Retained earnings

 

868,905

 

801,314

Treasury stock, at cost, 2022: 4,900,512 shares; 2021: 4,492,514 shares

 

(235,779)

 

(194,273)

Accumulated other comprehensive income

 

5,323

 

3,699

TOTAL STOCKHOLDERS’ EQUITY

 

983,172

 

929,067

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

2,209,699

$

2,112,676

See notes to consolidated financial statements.

3

ARCBEST CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended 

March 31

    

2022

    

2021

    

(Unaudited)

(in thousands, except share and per share data)

REVENUES

$

1,335,074

$

829,213

OPERATING EXPENSES

 

1,240,146

797,022

OPERATING INCOME

 

94,928

 

32,191

OTHER INCOME (COSTS)

Interest and dividend income

 

106

 

392

Interest and other related financing costs

 

(1,939)

 

(2,428)

Other, net

 

(826)

 

1,192

 

(2,659)

 

(844)

INCOME BEFORE INCOME TAXES

 

92,269

 

31,347

INCOME TAX PROVISION

 

22,700

 

7,986

NET INCOME

$

69,569

$

23,361

EARNINGS PER COMMON SHARE

Basic

$

2.82

$

0.92

Diluted

$

2.68

$

0.87

AVERAGE COMMON SHARES OUTSTANDING

Basic

 

24,710,685

 

25,454,921

Diluted

 

25,911,200

 

26,930,402

See notes to consolidated financial statements.

4

ARCBEST CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended 

March 31

    

2022

    

2021

    

(Unaudited)

(in thousands)

NET INCOME

$

69,569

$

23,361

OTHER COMPREHENSIVE INCOME, net of tax

Postretirement benefit plans:

Amortization of unrecognized net periodic benefit credit, net of tax of: (2022 – $48; 2021 – $35)

Net actuarial gain

 

(141)

 

(100)

Interest rate swap and foreign currency translation:

Change in unrealized income on interest rate swap, net of tax of: (2022 – $517; 2021 – $204)

1,458

575

Change in foreign currency translation, net of tax of: (2022 – $108; 2021 – $118)

 

307

 

329

OTHER COMPREHENSIVE INCOME, net of tax

 

1,624

 

804

TOTAL COMPREHENSIVE INCOME

$

71,193

$

24,165

See notes to consolidated financial statements.

5

ARCBEST CORPORATION

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

Three Months Ended March 31, 2022

Accumulated

Additional

Other

Common Stock

    

Paid-In

Retained

Treasury Stock

    

Comprehensive

Total

    

Shares

    

Amount

    

Capital

    

Earnings

    

Shares

    

Amount

    

Income

    

Equity

 

(Unaudited)

(in thousands)

Balance at December 31, 2021

29,360

$

294

$

318,033

$

801,314

 

4,493

$

(194,273)

$

3,699

$

929,067

Net income

 

69,569

 

69,569

Other comprehensive income, net of tax

 

1,624

 

1,624

Issuance of common stock under share-based compensation plans

 

25

 

 

 

Shares withheld for employee tax remittance on share-based compensation

 

(1,367)

 

(1,367)

Share-based compensation expense

 

2,763

 

2,763

Purchase of treasury stock

194

(16,506)

(16,506)

Forward contract for accelerated share repurchases

25,000

214

(25,000)

Dividends declared on common stock

 

(1,978)

 

(1,978)

Balance at March 31, 2022

 

29,385

$

294

$

344,429

$

868,905

 

4,901

$

(235,779)

$

5,323

$

983,172

Three Months Ended March 31, 2021

Accumulated

Additional

Other

Common Stock

    

Paid-In

Retained

Treasury Stock

    

Comprehensive

Total

    

Shares

    

Amount

    

Capital

    

Earnings

    

Shares

    

Amount

    

Income

    

Equity

 

(Unaudited)

(in thousands)

Balance at December 31, 2020

 

29,045

$

290

$

342,354

$

595,932

 

3,657

$

(111,173)

$

1,190

$

828,593

Net income

 

23,361

 

23,361

Other comprehensive income, net of tax

804

804

Issuance of common stock under share-based compensation plans

12

 

1

(1)

Shares withheld for employee tax remittance on share-based compensation

(165)

(165)

Share-based compensation expense

2,354

2,354

Purchase of treasury stock

15

(1,001)

(1,001)

Dividends declared on common stock

 

(2,037)

(2,037)

Balance at March 31, 2021

 

29,057

$

291

$

344,542

$

617,256

 

3,672

$

(112,174)

$

1,994

$

851,909

See notes to consolidated financial statements.

6

ARCBEST CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended 

March 31

    

2022

    

2021

 

(in thousands)

OPERATING ACTIVITIES

Net income

$

69,569

$

23,361

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization

 

31,591

 

29,387

Amortization of intangibles

 

3,232

 

967

Share-based compensation expense

 

2,763

 

2,354

Provision for losses on accounts receivable

 

1,628

 

(96)

Change in deferred income taxes

 

(1,417)

 

(4,998)

Gain on sale of property and equipment and lease termination

 

(3,002)

 

(8,635)

Changes in operating assets and liabilities:

Receivables

 

(103,677)

 

(22,568)

Prepaid expenses

 

(2,858)

 

(2,582)

Other assets

 

(2,781)

 

(164)

Income taxes

 

(3,017)

 

6,376

Operating right-of-use assets and lease liabilities, net

14

567

Accounts payable, accrued expenses, and other liabilities

 

(3,298)

 

(1,435)

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

 

(11,253)

 

22,534

INVESTING ACTIVITIES

Purchases of property, plant and equipment, net of financings

 

(19,471)

 

(9,588)

Proceeds from sale of property and equipment

 

5,334

 

10,079

Purchases of short-term investments

 

(12,339)

 

(18,130)

Proceeds from sale of short-term investments

 

23,590

 

24,418

Capitalization of internally developed software

(4,510)

 

(5,705)

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

 

(7,396)

 

1,074

FINANCING ACTIVITIES

Borrowings under credit facilities

 

58,000

 

Payments on long-term debt

 

(32,967)

 

(17,387)

Net change in book overdrafts

 

955

 

(5,434)

Payment of common stock dividends

 

(1,978)

 

(2,037)

Purchases of treasury stock

(16,506)

(1,001)

Payments for tax withheld on share-based compensation

 

(1,367)

 

(161)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

 

6,137

 

(26,020)

NET DECREASE IN CASH AND CASH EQUIVALENTS

 

(12,512)

 

(2,412)

Cash and cash equivalents at beginning of period

 

76,620

 

303,954

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

64,108

$

301,542

NONCASH INVESTING ACTIVITIES

Equipment and other financings

$

8,113

$

Accruals for equipment received

$

712

$

233

Lease liabilities arising from obtaining right-of-use assets

$

25,473

$

1,959

See notes to consolidated financial statements.

7

Table of Contents

ARCBEST CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE A – ORGANIZATION AND DESCRIPTION OF THE BUSINESS AND FINANCIAL STATEMENT PRESENTATION

ArcBest Corporation (the “Company”) is a multibillion-dollar integrated logistics company that helps keep the global supply chain moving. The Company’s operations are conducted through its three reportable operating segments: Asset-Based, which consists of ABF Freight System, Inc. and certain other subsidiaries (“ABF Freight”); ArcBest, the Company’s asset-light logistics operation; and FleetNet. References to the Company in this Quarterly Report on Form 10-Q are primarily to the Company and its subsidiaries on a consolidated basis.

The Asset-Based segment represented approximately 51% of the Company’s total revenues before other revenues and intercompany eliminations for the three months ended March 31, 2022. As of March 2022, approximately 82% of the Asset-Based segment’s employees were covered under a collective bargaining agreement, the ABF National Master Freight Agreement (the “2018 ABF NMFA”), with the International Brotherhood of Teamsters (the “IBT”), which will remain in effect through June 30, 2023.

On November 1, 2021, we acquired MoLo Solutions, LLC (“MoLo”). As a result of the acquisition, MoLo® became a wholly owned subsidiary of the Company. The acquired operations are reported within the ArcBest segment of our Asset-Light operations (see Note K). The fair value measurements related to MoLo reflected in the accompanying consolidated financial statements are preliminary, as fair values of acquired assets and liabilities assumed are subject to revision during the measurement period if information becomes available that warrants further adjustments. See Note C for further discussion of the MoLo acquisition.

Financial Statement Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) pertaining to interim financial information. Accordingly, these interim financial statements do not include all information or footnote disclosures required by accounting principles generally accepted in the United States for complete financial statements and, therefore, should be read in conjunction with the audited financial statements and accompanying notes included in the Company’s 2021 Annual Report on Form 10-K and other current filings with the SEC. In the opinion of management, all adjustments (which are of a normal and recurring nature) considered necessary for a fair presentation have been included.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual amounts may differ from those estimates.

Accounting Pronouncements Not Yet Adopted

Management believes there is no new accounting guidance issued but not yet effective that would have a material impact to the Company’s current financial statements.

8

NOTE B – FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Financial Instruments

The following table presents the components of cash and cash equivalents and short-term investments:

    

March 31

    

December 31

 

2022

2021

 

(in thousands)

Cash and cash equivalents

Cash deposits(1)

$

63,578

$

72,790

Variable rate demand notes(1)(2)

 

230

 

230

Money market funds(3)

 

300

 

3,600

Total cash and cash equivalents

$

64,108

$

76,620

Short-term investments

Certificates of deposit(1)

$

37,024

$

48,339

(1)Recorded at cost plus accrued interest, which approximates fair value.
(2)Amounts may be redeemed on a daily basis with the original issuer.
(3)Recorded at fair value as determined by quoted market prices (see amounts presented in the table of financial assets and liabilities measured at fair value within this Note).

The Company’s long-term financial instruments are presented in the table of financial assets and liabilities measured at fair value within this Note.

Concentrations of Credit Risk of Financial Instruments

The Company is potentially subject to concentrations of credit risk related to its cash, cash equivalents, and short-term investments. The Company reduces credit risk by maintaining its cash deposits primarily in FDIC-insured accounts and placing its short-term investments primarily in FDIC-insured certificates of deposit. However, certain cash deposits and certificates of deposit may exceed federally insured limits. At March 31, 2022 and December 31, 2021, cash, cash equivalents, and short-term investments totaling $32.3 million and $42.6 million, respectively, were neither FDIC insured nor direct obligations of the U.S. government.

Fair Value Disclosure of Financial Instruments

Fair value disclosures are made in accordance with the following hierarchy of valuation techniques based on whether the inputs of market data and market assumptions used to measure fair value are observable or unobservable:

Level 1 — Quoted prices for identical assets and liabilities in active markets.
Level 2 — Quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3 — Unobservable inputs (Company’s market assumptions) that are significant to the valuation model.

9

Fair value and carrying value disclosures of financial instruments are presented in the following table:

March 31

December 31

    

2022

    

2021

 

(in thousands)

Carrying

    

Fair

    

Carrying

    

Fair

Value

 

Value

 

Value

 

Value

Credit Facility(1)

$

88,000

$

88,000

$

50,000

$

50,000

Notes payable(2)

 

170,678

 

169,268

 

175,530

 

175,937

New England Pension Fund withdrawal liability(3)

20,604

22,022

20,769

23,521

$

279,282

$

279,290

$

246,299

$

249,458

(1)The revolving credit facility (the “Credit Facility”) carries a variable interest rate based on LIBOR, plus a margin, that is considered to be priced at market for debt instruments having similar terms and collateral requirements (Level 2 of the fair value hierarchy).
(2)Fair value of the notes payable was determined using a present value income approach based on quoted interest rates from lending institutions with which the Company would enter into similar transactions (Level 2 of the fair value hierarchy).
(3)ABF Freight’s multiemployer pension plan obligation with the New England Teamsters and Trucking Industry Pension Fund (the “New England Pension Fund”) was restructured under a transition agreement effective on August 1, 2018, which resulted in a related withdrawal liability. The fair value of the outstanding withdrawal liability is equal to the present value of the future withdrawal liability payments, discounted at an interest rate of 3.7% and 3.1% at March 31, 2022 and December 31, 2021, respectively, determined using the 20-year U.S. Treasury rate plus a spread (Level 2 of the fair value hierarchy). As of March 31, 2022, the outstanding withdrawal liability totaled $20.6 million, of which $0.7 million and $19.9 million was recorded in accrued expenses and the other long-term liabilities, respectively.

10

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the assets and liabilities that are measured at fair value on a recurring basis:

March 31, 2022

Fair Value Measurements Using

Quoted Prices

    

Significant

    

Significant

    

In Active

Observable

Unobservable

Markets

Inputs

Inputs

Total

    

(Level 1)

    

(Level 2)

    

(Level 3)

 

(in thousands)

Assets:

Money market funds(1)

$

300

$

300

$

$

Equity, bond, and money market mutual funds held in trust related to the Voluntary Savings Plan(2)

 

4,012

 

4,012

 

 

Interest rate swaps(3)

2,548

2,548

$

6,860

$

4,312

$

2,548

$

Liabilities:

 

Interest rate swaps(3)

$

154

$

$

154

$

Contingent consideration(4)

94,510

94,510

$

94,664

$

$

154

$

94,510

December 31, 2021

Fair Value Measurements Using

Quoted Prices

    

Significant

    

Significant

    

In Active

Observable

Unobservable

Markets

Inputs

Inputs

Total

    

(Level 1)

    

(Level 2)

    

(Level 3)

 

(in thousands)

Assets:

Money market funds(1)

$

3,600

$

3,600

$

$

Equity, bond, and money market mutual funds held in trust related to the Voluntary Savings Plan(2)

 

3,848

 

3,848

 

 

Interest rate swaps(3)

874

874

$

8,322

$

7,448

$

874

$

Liabilities:

 

Interest rate swaps(3)

$

455

$

$

455

$

Contingent consideration(4)

93,700

93,700

$

94,155

$

$

455

$

93,700

(1)Included in cash and cash equivalents.
(2)Nonqualified deferred compensation plan investments consist of U.S. and international equity mutual funds, government and corporate bond mutual funds, and money market funds which are held in a trust with a third-party brokerage firm. Included in other long-term assets, with a corresponding liability reported within other long-term liabilities.
(3)Included in other long-term assets or other long-term liabilities. The fair values of the interest rate swaps were determined by discounting future cash flows and receipts based on expected interest rates observed in market interest rate curves adjusted for estimated credit valuation considerations reflecting nonperformance risk of the Company and the counterparty, which are generally considered to be in Level 3 of the fair value hierarchy. However, the Company assessed Level 3 inputs as insignificant to the valuation at March 31, 2022 and December 31, 2021 and considers the interest rate swap valuations in Level 2 of the fair value hierarchy.
(4)Included in other long-term liabilities, based on when expected payouts become due. The estimated fair value of contingent consideration for the earn-out agreement related to the November 2021 acquisition of MoLo was determined by assessing Level 3 inputs. The Level 3 assessments utilize a Monte Carlo simulation with inputs including scenarios of estimated revenues and earnings before interest, taxes, depreciation and amortization to be achieved for the applicable performance periods, volatility factors applied to the simulations, and the discount rate applied, which was 10.2% and 9.0%