ARCBEST CORP /DE/ [ARCB] Filings

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

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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

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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.

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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.

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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.

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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

Other comprehensive income, net of tax

804

Issuance of common stock under share-based compensation plans

(1)

—

Shares withheld for employee tax remittance on share-based compensation

(165)

Share-based compensation expense

2,354

Purchase of treasury stock

(1,001)

Dividends declared on common stock

(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.

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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.

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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.

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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.

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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.

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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

In Active

Observable

Unobservable

Markets

Inputs

Total

(Level 1)

(Level 2)

(Level 3)

(in thousands)

Assets:

Money market funds⁽¹⁾

300

—

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

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%