ArcBest Reports Lower Q2, Midyear Earnings Because of COVID-19

John Sommers II for Transport Topics

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ArcBest turned a second-quarter profit, albeit considerably lower than the year-ago level because of the COVID-19 pandemic, the Fort Smith, Ark., carrier announced July 29.

The company’s net income was down 36.1% to $15.9 million, or 62 cents per share, compared with $24.4 million, or 92 cents, in the same period a year ago.

For the first two quarters of 2020, the company posted income of $17.8 million, or 70 cents per share, compared with $1.14 in 2019.

Second-quarter revenue was $627.4 million compared with $711.5 million in 2019, down 11.8% year-over-year.

In the first six months of the year, the company generated $1.33 billion in revenue compared with $1.48 billion in 2019.

ArcBest’s leadership said the quarter was particularly challenging because of the coronavirus, and it instituted significant cost-cutting measures to stay profitable.

Upward of 1,000 Teamsters union members were furloughed during the quarter, and the carrier instituted a 15% cut in the salaries of all nonunion employees. Other cost reductions included suspending the employer match of ArcBest’s nonunion 401(k) plan and cutting by 15% fees paid to board members and the board committee chairpersons. Compared with the second quarter of 2019, these compensation-related reductions resulted in savings of about $15 million. A company official told Transport Topics that the 1,000 union members are being brought back as business improves.

“As an essential business, our employees have worked on the front lines in sacrifice, both personally and financially, to serve our customers and our nation,” CEO Judy McReynolds said. “We value our employees and appreciate their efforts, and are pleased to now be able to restore full wage levels.”

The company’s operating ratio slightly worsened to 96.0 in the second quarter from 95.0 in the same period a year ago.

The operating ratio is operating expenses as a percentage of revenue, and it is used to determine efficiency. The lower the ratio, the greater the company’s ability to generate a profit.

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The company said revenue from asset-based operations declined 17.8% to $460 million compared with $559.6 million in the same period in 2019.

Tonnage per day decreased by 13.8% to 10,916 compared with 12,669 in the year-ago period. For the first two quarters of the year, tonnage per day was down 5% to 11,527 compared with 12,134 in 2019.

The company said there was a decrease in less-than-truckload tonnage and truckload spot shipment tonnage.

“The second quarter of the year started under the full weight of the coronavirus pandemic,” McReynolds said in a conference call with reporters and analysts. “I am incredibly proud of how our employees have operated in the face of adversity, especially our frontline teams, to come in day-in and day-out. We have made a lot of progress over the last quarter in fighting one of the sharpest declines in the economy since the Great Depression.”

The company said one bright spot in the second-quarter and year-to-date numbers was the rapid growth of e-commerce business, in which residential deliveries were up 12% in the first quarter and 35% in the second quarter.

McReynolds said she believes ArcBest has a competitive advantage because it has been doing home delivery service since 1997 when e-commerce emerged as a profitable business line.

“I think this whole stay-at-home change that has occurred with people has really contributed to a greater comfort with having those kinds of transactions,” McReynolds said. “Whether it’s exercise equipment, or storage sheds or outdoor furniture or bigger items like televisions, inside-the-house items.

“We’ve been in this business for a long, long time. We have had to get comfortable with going into neighborhoods and the requirements to delivering to a home and what that meant to our city routes and the requirements for our city drivers. That helped with the customer service side.”

ArcBest ranks No. 14 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.

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