ArcBest(US:ARCB)2023-05-04 16:00PART I. FINANCIAL INFORMATION This section presents the company's consolidated financial statements, management's discussion, market risk disclosures, and internal controls Item 1. Financial Statements The consolidated financial statements for Q1 2023 show decreased revenues and operating income, offset by a significant gain from discontinued operations Consolidated Balance Sheets Total assets slightly decreased to $2.43 billion, while stockholders' equity increased to $1.21 billion as of March 31, 2023 Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $917,030 | $989,783 | | Total Assets | $2,431,593 | $2,494,286 | | Total Current Liabilities | $688,043 | $768,470 | | Total Liabilities | $1,225,734 | $1,342,885 | | Total Stockholders' Equity | $1,205,859 | $1,151,401 | Consolidated Statements of Operations Q1 2023 revenues from continuing operations declined, but total net income increased due to a substantial gain from discontinued operations Q1 2023 vs Q1 2022 Statement of Operations (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Revenues | $1,106,094 | $1,268,091 | | Operating Income | $21,159 | $92,943 | | Net Income from Continuing Operations | $18,847 | $68,008 | | Income from Discontinued Operations, Net of Tax | $52,436 | $1,561 | | Net Income | $71,283 | $69,569 | | Diluted EPS from Continuing Operations | $0.75 | $2.62 | | Total Diluted EPS | $2.84 | $2.68 | Consolidated Statements of Cash Flows Q1 2023 operating cash flow improved significantly, with investing activities boosted by proceeds from the FleetNet sale Q1 2023 vs Q1 2022 Cash Flow Summary (in thousands) | Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Cash Provided By (Used In) Operating Activities | $20,663 | $(11,253) | | Net Cash Provided By (Used In) Investing Activities | $70,960 | $(7,396) | | Net Cash Provided By (Used In) Financing Activities | $(46,676) | $6,137 | | Net Increase (Decrease) in Cash | $44,947 | $(12,512) | Notes to Consolidated Financial Statements Key notes detail the FleetNet sale, contingent consideration for MoLo, segment reporting, and new legal proceedings - On February 28, 2023, the Company sold its FleetNet subsidiary for $101.1 million in cash, recording a pre-tax gain of $69.1 million2239 - The fair value of the contingent consideration liability for the MoLo acquisition increased by $15.04 million during Q1 2023, to a total of $127.04 million3836 - The company's reportable segments are Asset-Based (61% of revenue) and Asset-Light2021 - In January 2023, the Company and MoLo were named as defendants in lawsuits related to a pre-acquisition auto accident involving a MoLo contract carrier, with a loss believed to be reasonably possible101 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Consolidated revenue declined due to market rates, with operating income impacted by contingent consideration and technology costs, while liquidity remains strong Results of Operations Q1 2023 consolidated revenue and operating income decreased, with Asset-Light experiencing an operating loss due to market softness and a contingent consideration charge Segment Performance Summary (in thousands) | Segment | Q1 2023 Revenue | Q1 2022 Revenue | Q1 2023 Operating Income (Loss) | Q1 2022 Operating Income | | :--- | :--- | :--- | :--- | :--- | | Asset-Based | $697,817 | $705,311 | $47,471 | $80,034 | | Asset-Light | $438,092 | $595,284 | $(14,091) | $21,116 | - The Asset-Based segment's billed revenue per hundredweight decreased 3.9% YoY, while shipments per day increased 7.9%, reflecting a strategic shift to optimize network capacity115140 - The Asset-Light segment's revenue per shipment fell 30.5% YoY due to a softer economic environment and increased truckload capacity171 - Consolidated results were negatively impacted by a $15.0 million pre-tax charge for the remeasurement of the MoLo contingent earnout liability and $12.5 million in costs for innovative technology initiatives119120 Liquidity and Capital Resources The company's liquidity improved with the FleetNet sale proceeds, supporting planned capital expenditures and share repurchases - Total capital expenditures for 2023 are estimated to be $300.0 million to $325.0 million, net of asset sales, including approximately $175.0 million for revenue equipment222 - During Q1 2023, the company repurchased 154,089 shares for $14.1 million, with the Board increasing the share repurchase authorization to $125.0 million in February 2023214226 - As of March 31, 2023, the company had available borrowing capacity of $200.0 million under its revolving credit facility and $40.0 million under its accounts receivable securitization program223 - The fair value of the MoLo contingent earnout consideration is estimated at $127.0 million, with $43.4 million classified as a current liability expected to be paid in 2024224 Balance Sheet Changes and Income Taxes Significant balance sheet changes include decreases in accounts receivable and accrued expenses, alongside a lower effective tax rate - Accrued expenses decreased by $59.8 million, primarily due to Q1 payments for performance-based incentive plans accrued at year-end 2022233 - The effective tax rate for continuing operations was 20.0% for Q1 2023, compared to the 21.0% federal statutory rate, driven by state taxes, tax benefits from vested RSUs, and the federal alternative fuel credit236239 Item 3. Quantitative and Qualitative Disclosures About Market Risk The primary market risk is interest rate fluctuations on variable-rate debt, partially mitigated by an interest rate swap agreement - The primary market risk is from interest rate fluctuations on variable-rate debt under the revolving credit facility and accounts receivable securitization program246 - The company uses an interest rate swap agreement to mitigate a portion of its interest rate risk246 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal controls - Management concluded that the Company's disclosure controls and procedures were effective as of March 31, 2023248 - No changes in internal controls over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls249 PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, and a list of exhibits filed with the report Item 1. Legal Proceedings Information on legal proceedings, including a MoLo-related lawsuit and an environmental consent decree, is referenced in Note K of the financial statements - For information on legal proceedings, the report refers to Note K of the financial statements251 Item 1A. Risk Factors There have been no material changes to the company's risk factors since the filing of its 2022 Annual Report on Form 10-K - No material changes to the Company's risk factors have occurred since the Company filed its 2022 Annual Report on Form 10-K252 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not have unregistered equity sales but repurchased 154,089 shares for $14.1 million, with $110.9 million remaining in the authorization Issuer Purchases of Equity Securities (Q1 2023) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | | Jan 2023 | — | $— | $26,504,000 | | Feb 2023 | — | $— | $125,000,000 | | Mar 2023 | 154,089 | $91.45 | $110,908,000 | | Total | 154,089 | $91.45 | $110,908,000 | Item 6. Exhibits This section lists various agreements, compensation plans, and required officer certifications filed as exhibits to the report - The exhibits filed with the report include various agreements, compensation plans, and required certifications such as the CEO and CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906261262