ArcBest Corporation

Welcome to the ARCBEST first quarter 2019 earnings conference call. During today's presentation, all participant lines will remain in a listen-only mode. If at any time during today's presentation you need to reach an operator, please press star zero on your telephone. Please note as well that today's conference is being recorded Friday, May 3, 2019. It is now with pleasure that I turn today's conference over to Mr. David Humphrey, Vice President, Investor Relations. Please go ahead, sir.

Welcome to the ARCBEST first quarter 2019 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 first quarter results, I will conduct the 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 better 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. We were pleased to report positive results in the first quarter, a period that historically often generated losses for the company. The economy remained strong, although not quite at the levels we saw last year, and pricing levels held firm. In general, We are seeing higher customer retention rates because of the decisions we've made to solve complex supply chain challenges for our customers. Challenges that require a broad array of solutions in order to help them navigate their own businesses in a more purposeful and successful way. Our asset-based business continued to benefit from the space-based pricing and yield management initiatives. And the asset-like capacity investments we've made enable us to respond positively and quickly to customers' needs for a variety of solutions. By deepening our customer relationships, serving not only as a source of guaranteed capacity but also as trusted advisors, we are seeing wins in our cross-selling efforts. Some of the moderating forces at play during the first quarter included a truckload market that was more balanced and some changes in key statistics we watch like rising inventories. Also, the U.S. manufacturing PMI which leads our business four to six months continued to show overall strength but in the first quarter came in well below the level seen last summer. April's number also dipped for March. The expedited market had some challenges in the first quarter due to more balanced truckload capacity and we expect that will take several months to resolve. And now I'll discuss some additional detail on the first quarter performance of our service offerings. Our asset-based business performed well during the first quarter as we achieved solid price increases across our account base and overcame challenges with weather events and the associated impact on productivity and other costs to generate slightly higher operating income compared to last year. On a combined basis, total daily shipment counts increased versus last year's first quarter. This was the result of an increase in LTL rated shipments whose growth during the first quarter offset a significant decrease in truckload rated shipments related to greater availability of truckload capacity in the marketplace. Lower tonnage levels versus last year reflect changes in customer mix, more challenging prior year monthly tonnage comparisons as we move through the quarter, and some effects of reduced demand in the marketplace. Decreased tonnage combined with the increase in shipments resulted in a lower average weight per shipment versus the same period last year. During the first quarter, a rational pricing environment and our continued emphasis on yield improvement initiatives, including the early February general rate increase, contributed to a solid increase in average first quarter asset-based price per hundredweight versus the same period last year. The solutions we develop to respond to unique supply chain needs create value for our customers and we are being rewarded for that value creation. Our disciplined approach to yield management and account pricing provides the basis for our success. We obtained reasonable renewal rates on the deferred and contract pricing agreements negotiated during the first quarter. Our space-based pricing initiative, which began in August 2017, was a good long-term decision for our company that addressed specific shipments for which we offer superior cargo handling. Its lasting effects positively contribute to our asset-based financial results. Asset-based costs were somewhat elevated during the first quarter as the weather challenges we encountered slowed our ability to effectively handle shipments through the network, thus requiring additional labor resources to do so. Also, In preparation for the traditional seasonal increase in freight levels typically seen as we move into second quarter, we chose to maintain some freight handling and delivery employees during the slower first quarter period. These commitments to uphold our service levels and to better prepare for serving customers in the coming months impacted our first quarter costs. As we gain more visibility into second quarter freight trends and as opportunities present themselves, We are taking appropriate actions to achieve a better balance between network costs and sustaining good service for our customers. ArcBest asset light revenue declined in the first quarter on a year-over-year basis due to the combined impact of fewer total daily shipments and a reduction in total revenue per shipment. A more balanced truckload market with more plentiful availability of equipment capacity reduced our customers' need for the asset light services we offer. The decline in total revenue reflected weaker demand for expedite and truckload brokerage services, offset by continued strength we've been experiencing in our managed transportation solutions. The resulting decline in first quarter net revenue reflected the weakness in expedite load count and net revenue per shipment, somewhat offset by the net revenue and net revenue margin improvement in both truckload brokerage and managed solutions. During the first quarter, steps were taken to strengthen the owner-operator and contract carrier partnerships that are a vital part of ArcBest's long-term strategy to offer dependable, assured capacity solutions to our customers. The cost investments we made unfavorably impacted the AssetLite first quarter operating income by approximately $1 million compared to last year, but contributed to an 8% increase in the average overall AssetLite fleet size. As a result, we were able to increase the equipment counts of tractor trailers, straight trucks, and cargo vans. Though recent business levels did not track with this improvement in our asset-light equipment resources, we believe the commitment we are making with these actions will benefit our customers while positioning us for future growth and enhanced service offerings. At FleetNet, the recent trend of solid event growth compared to the same period last year contributed to an increase in revenue. The first quarter net revenue increased over the prior period due to an increase in events. Changes in event mix within the fleet net customer base contributed to a reduction in average net revenue per event. First quarter operating income was even with last year. And now I'll turn it over to David Cobb for a discussion of the earnings results and operating statistics.