ArcBest Corporation

Ladies and gentlemen, thank you for standing by and welcome to the fourth quarter 2018 earning call brought to you by ArcBest. During the presentation, our participants will be in the listen-only mode. If at any time during the conference you need to reach an operator, please press star zero. As a reminder, this conference is being recorded Thursday, January 31st, 2019. I would now like to turn the conference over to David Humphrey, Vice President of Investor Relations. Please go ahead, sir.

Welcome to the ArcBest fourth quarter 2018 earnings conference call. Our presentation this morning will be done by Judy McReynolds, Chairman, President, and Chief Executive Officer of ArcBest, and David Cobb, Chief Financial Officer of ArcBest. Today, following Judy and David's opening remarks about the fourth quarter results, I will conduct a question and answer period with them by reading submitted questions that we received last night following our earnings release. We appreciate the questions that we received, and we will try to answer as many as we can during the remaining time of the call. We thank you for joining us today. In order to help you understand ARCBest and its results, some forward-looking statements could be made during this call. As we all know, forward-looking statements, by their very nature, are subject to uncertainties and risk. For a more complete discussion of factors that could affect the company's future results, Please refer to the forward-looking statements section of the company's earnings press release and the company's most recent SEC public filings. In order to provide meaningful comparisons, certain information discussed in this conference call includes non-GAAP financial measures as outlined and described in the tables in our earnings press release. We will now begin with Judy.

Thank you, David, and good morning, everyone. 2018 was a year of considerable achievement at ArcBest. We accomplished many milestones throughout the year and each quarter saw strong year-over-year results, including the fourth quarter earnings that we reported yesterday afternoon. I am very proud of our team for producing this consistently strong performance and I look forward to discussing the highlights of the quarter and the year with you today. The economic environment was favorable and our customers certainly recognize the value we offer through our asset-based and asset-light logistics solutions. Our team's solid execution on behalf of customers led ArcBest to surpass $3 billion in total revenue last year and to report record non-GAAP earnings per share. We are also pleased that our stock hit an all-time high in September. ABF celebrated 95 years in business A remarkable story of longevity, prosperity, and innovation in an industry where many competitors have disappeared over the years. As you know, ABF's Teamster employees ratified a five-year labor contract in July, allowing us to maintain low-cost inflation in a tight labor market while providing some of the best wages and benefits in the industry. Returning ABF to historical margins has been a long-stated goal, and we are pleased with our progress. Even while this process was underway, we continued to work on many different customer-facing initiatives across the organization. Another one of the great stories of the year was the improved profitability we achieved as a result of our space-based pricing initiative in which minimum charges were established to ensure we are compensated for the value we provide. This effort propelled our asset-based business to surpass $2 billion in revenue for the first time ever and record an operating ratio in the low 90s as we close out the year. On the asset light side, we saw solid improvement in operating income as we continued to deepen customer and carrier relationships. In particular, managed transportation solutions continued to gain traction and acceptance. And now I'll discuss some detail on the fourth quarter performance of our service offerings. In our asset-based business, we took advantage of a positive freight environment by growing our freight levels and improving profitability compared to the same period last year. For the first time this year, we experienced growth in both average daily shipments and tonnage. The increase in business levels positively impacted productivity and helped us in cost management. Combined with the continuing benefits of our yield management initiatives, we were able to generate asset-based revenue growth and a 280 basis point improvement in ABF Freight's fourth quarter operating ratio compared to the same period last year. The improved asset-based financial results we experienced in the quarter versus last year illustrate the continuing benefits of our efforts to improve pricing on many accounts. We are well past the August 2017 implementation of our space-based pricing program But the foundation that came from that initiative is driving the success we are seeing today. In addition to the positives associated with the effects of this initiative, we obtained good renewal rates on the deferred and contract pricing agreements negotiated during the fourth quarter. The pricing environment continues to be good, and as a result, we will implement a 5.9% general rate increase beginning next Monday that should impact approximately a third of our business. David Cobb will provide specific details on our yield management metrics later in the call. We were pleased with the year-over-year increase in both average daily shipments and tonnage that we experienced in the fourth quarter. Our tonnage increases steadily improved in each month of the fourth quarter due to strength in our LTL business. David will also provide the monthly tonnage stats and some additional color on the mix of our business in a few minutes. As more freight moved through the asset-based network, cost management and improved operational efficiency contributed positively to fourth quarter profitability. Many of the operational metrics used to manage the business showed improvement. Our financial results certainly benefited from efficiencies gained from handling more shipments and freight through the ABF network. However, the cost efficiencies we are experiencing also reflect the benefits of new systems, and planning tools implemented throughout the year. Growth in revenue per shipment contributed to an increase in ARCBest asset-light revenue despite our handling fewer shipments during the quarter. The reduction in shipment count was associated with changes in the mix of customers and business opportunities with them. However, we are pleased with the relationships we're building as we continue to pursue a large opportunity for growth. On a per-shipment basis, direct costs were below last year and total operating expenses were flat with last year's fourth quarter. The combination of higher total net revenue and flat operating expenses resulted in a year-over-year increase of ArcVest AssetLite fourth quarter operating income. Within our customer base, we are encountering more and more opportunities to combine various transportation elements into a complete logistics solution that we are managing on behalf of our customers. During the recent quarter, our success in winning a significant number of these opportunities positively contributed to profitable growth and improved asset light margins. We are currently bidding on additional opportunities in this area that, if we're successful in winning those new accounts, should support continued managed transportation growth in 2019. Strong event growth versus the same period last year and an increase in average repair costs per event contributed to FleetNet's fourth quarter revenue improvement. The growth in events was the main driver of higher total net revenue despite a reduction in average net revenue per event. This was the primary factor contributing to fourth quarter operating income that was comparable to last year. In 2018, we continued to have great results with our non-union healthcare expense as these costs decreased over $5 million compared to 2017, a reduction of approximately 12%. Combined with the $5 million decrease in these costs in 2017 compared to 2016, the annual cost of non-union healthcare for ArcBest is $10 million below what it was two years ago. We are pleased with this remarkable cost savings when most companies are experiencing significant annual health care cost increases. During 2018, we continued to take actions to enhance shareholder value. Throughout the year, we paid our $0.08 per share quarterly cash dividend and we bought back over 246,000 shares of our stock for a total price of $9.4 million. Under our existing repurchase program, we have approximately $22 million of purchase availability. And now, I'll turn it over to David Cobb for a discussion of the earnings results and operating statistics.