ArcBest(US:ARCB)2020-11-06 21:58PART I. FINANCIAL INFORMATION Item 1. Financial Statements Presents the unaudited consolidated balance sheets, statements of operations, cash flows, and stockholders' equity Consolidated Balance Sheet Highlights (Unaudited) | Account | Sep 30, 2020 ($ thousands) | Dec 31, 2019 ($ thousands) | | :--- | :--- | :--- | | Total Current Assets | 730,240 | 664,402 | | Total Assets | 1,746,231 | 1,651,207 | | Total Current Liabilities | 497,516 | 444,277 | | Total Liabilities | 943,592 | 888,164 | | Total Stockholders' Equity | 802,639 | 763,043 | Consolidated Statement of Operations Highlights (Unaudited) | Metric | Three Months Ended Sep 30, 2020 ($ thousands) | Three Months Ended Sep 30, 2019 ($ thousands) | Nine Months Ended Sep 30, 2020 ($ thousands) | Nine Months Ended Sep 30, 2019 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | Revenues | 794,980 | 787,563 | 2,123,749 | 2,270,892 | | Operating Income | 39,782 | 31,208 | 68,026 | 74,999 | | Net Income | 29,404 | 16,270 | 47,186 | 45,534 | | Diluted EPS | $1.11 | $0.62 | $1.79 | $1.72 | Consolidated Statement of Cash Flows Highlights (Unaudited, Nine Months Ended) | Cash Flow Activity | Sep 30, 2020 ($ thousands) | Sep 30, 2019 ($ thousands) | | :--- | :--- | :--- | | Net Cash from Operating Activities | 151,266 | 138,013 | | Net Cash from Investing Activities | 12,539 | (90,542) | | Net Cash from Financing Activities | (98,069) | (53,819) | | Net Increase (Decrease) in Cash | 65,736 | (6,348) | Notes to Consolidated Financial Statements Provides details on business segments, accounting policies, debt, and the impact of the COVID-19 pandemic - The company operates through three reportable segments, with the Asset-Based segment accounting for approximately 69% of total revenues for the nine months ended September 30, 20201516 - Effective January 1, 2020, the company adopted ASC Topic 326, resulting in a $0.2 million decrease to retained earnings due to a change in credit loss methodology2023 Long-Term Debt Composition ($ thousands) | Debt Instrument | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Credit Facility | 70,000 | 70,000 | | Accounts receivable securitization | — | 40,000 | | Notes payable | 221,914 | 213,504 | | Total Long-Term Debt | 291,924 | 323,519 | Segment Revenues (Nine Months Ended Sep 30, $ thousands) | Segment | 2020 | 2019 | | :--- | :--- | :--- | | Asset-Based | 1,537,639 | 1,631,348 | | ArcBest | 533,536 | 554,135 | | FleetNet | 149,424 | 158,957 | | Total Consolidated Revenues | 2,123,749 | 2,270,892 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Discusses financial performance, the significant impact of the COVID-19 pandemic, and segment results COVID-19 Impact and Business Response Details the pandemic's negative Q2 2020 impact, a strong Q3 recovery, and the company's cost-saving responses - Consolidated revenues declined 6.5% for the nine months ended Sep 30, 2020, but increased 0.9% YoY in Q3 2020, indicating a significant business recovery107109 - To preserve financial flexibility, the company borrowed $180.0 million from its credit facility and $45.0 million from its securitization program, which were fully repaid in Q3 2020114 - Cost reduction actions in April 2020, including a 15% salary reduction and suspension of the 401(k) match, were reversed in Q3 2020 due to positive business trends117 Results of Operations Details segment and consolidated operating income, highlighting Q3 2020 improvements driven by cost management Segment Operating Income ($ thousands) | Segment | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Asset-Based | 36,646 | 31,722 | 70,922 | 81,515 | | Asset-Light (Total) | 5,818 | 3,623 | 7,534 | 9,989 | | Consolidated | 39,782 | 31,208 | 68,026 | 74,999 | - Asset-Based segment's Q3 2020 operating ratio improved to 93.5% from 94.4% in Q3 2019, reflecting better cost management148149156 - ArcBest (Asset-Light) segment revenue increased 8.8% in Q3 2020 YoY, driven by a 5.7% increase in revenue per shipment due to tighter truckload capacity178180 Liquidity and Capital Resources Outlines the company's strong liquidity position, robust operating cash flow, and reduced capital expenditure plan Cash and Short-Term Investments ($ thousands) | Date | Amount | | :--- | :--- | | Sep 30, 2020 | 351,056 | | Dec 31, 2019 | 318,488 | - Net cash provided by operating activities increased to $151.3 million for the nine months ended Sep 30, 2020, compared to $138.0 million for the same period in 2019201 - The 2020 capital expenditure plan was revised down by approximately 30% to an estimated range of $90 million to $95 million, net of asset sales210 - As of September 30, 2020, the company had available borrowing capacity of $180.0 million under its Credit Facility and $113.3 million under its accounts receivable securitization program212 Item 3. Quantitative and Qualitative Disclosures About Market Risk Addresses market risk from variable interest rates and mitigation efforts via an interest rate swap agreement - The company is exposed to interest rate risk from variable-rate borrowings under its Credit Facility and accounts receivable securitization program236 - On May 4, 2020, the company extended the term of its $50.0 million notional interest rate swap agreement to October 1, 2024, converting a portion of its variable-rate debt to a fixed rate236 Item 4. Controls and Procedures Confirms the effectiveness of disclosure controls and procedures with no material changes to internal controls - Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2020239 - No material changes were made to the company's internal controls over financial reporting during the third quarter of 2020240 PART II. OTHER INFORMATION Item 1. Legal Proceedings States that routine legal matters are not expected to have a material adverse effect on the company's financials - Information regarding legal proceedings indicates that routine matters are not expected to have a material adverse effect99241 Item 1A. Risk Factors Supplements existing risk factors with new risks related to the COVID-19 pandemic and other external events - A new risk factor was added concerning the adverse effects of pandemics or other public health crises, like COVID-19, on business operations, financial condition, and cash flows243244 - Another supplemental risk factor addresses the potential for external events to adversely affect the company or its third-party providers245246 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Reports the repurchase of 77,460 shares for $2.5 million in Q3 2020, with $7.5 million remaining in the program Issuer Purchases of Equity Securities (Q3 2020) | Period | Total Shares Purchased | Average Price Paid Per Share | Approx. Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | | Jul 2020 | — | $— | $10,034,000 | | Aug 2020 | 27,604 | $31.81 | $9,156,000 | | Sep 2020 | 49,856 | $32.62 | $7,530,000 | | Total Q3 | 77,460 | $32.33 | $7,530,000 | Item 5. Other Information Reports no other information for this item - The company reported no information for this item249 Item 6. Exhibits Lists filed exhibits, including Sarbanes-Oxley Act certifications and XBRL data files - Exhibits filed include CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act252