ArcBest Corporation

Greetings and welcome to the ArcBest second quarter 2020 earnings conference call. During the presentation, all participants will be in the listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, this conference is being recorded on Wednesday, July 29, 2020. I would now like to turn the conference over to David Humphrey, Vice President of Investor Relations. Please go ahead, sir.

Welcome to the Art Best second quarter 2020 earnings conference call. A presentation this morning will be done by Judy McReynolds, Chairman, President, and Chief Executive Officer of Art Best, and David Cobb, Chief Financial Officer of Art Best. 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. And before I turn it over to Judy, I want to take a moment to congratulate her on being named one of the top 10 women in logistics by Global Trade Magazine. This is a tremendous honor, and I want to let her know how proud we are of her on this well-deserved recognition. With that, I'll turn it over to Judy.

Good morning, everyone. I appreciate all of you joining us this morning. As you are aware, the second quarter of this year started under the full weight of the coronavirus pandemic. Its impact was felt by everyone in almost every aspect of the economy. While the effects were still playing out during the first quarter call in May, you heard me mention that during times like these, I feel ArcBest shines the brightest. This sentiment has not changed. In addition to having a strong balance sheet and the long-term relationships we have established with our customers, I credit much of the success we have had over the last three months to the hard work of our employees and to the culture we've created here. that cultivates creative problem solving for the challenges of the times. I am incredibly proud of how our employees have operated in the face of adversity, especially our frontline teams who come in day in and day out focused on keeping product moving and providing the type of world-class customer service that is expected when one does business with ArcBest. 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. And David and I are looking forward to going through the results with you today. In the asset-based business, we saw the shipping patterns of many of our customers highly affected by the pandemic outbreak. The impact on individual customers varied, with some, like those shipping essential products, seeing increased activity. while many others had business levels below the previous year. We experienced significant increases in residential delivery shipments related to growth in e-commerce. Customers with an online order presence saw additional shipment volumes, especially those with products that are used in the home, such as exercise equipment and outdoor storage sheds. Despite the growth in e-commerce with significant reductions in total shipment and tonnage levels in our asset-based network, It was imperative that we match our labor and other network resources with the business levels of the period. At the height of the pandemic, we had to temporarily lay off approximately 1,000 employees and reduce many equipment and supplemental resources that are normally utilized in our network. Our operations team responded well to this heightened challenge, and as a result, most all of our operational metrics we used in managing our business improved over last year's second quarter, many by at least 5%. Also, despite the weak market, our yield management strategy caused us to be successful in achieving needed account pricing levels. Reductions in the core account LTL-rated shipments handled in our ABF rate network were the biggest contributor to the total shipment and tonnage decline. As we experienced earlier in the year during the second quarter, We benefited from our strategy of utilizing lane-specific data to identify capacity opportunities and fill them with truckload-rated spot loads as well as heavier, transactional LTL-rated shipments. During a period when shipment levels from regular customers were lacking, handling these spot shipments in lanes that had available capacity helped mitigate the total business declines we were experiencing. while allowing us to more efficiently utilize available network resources. I am incredibly proud of how our operations, sales and yield teams responded during this unexpected period in our business. They have executed at exceptionally high levels and illustrated our abilities to remotely maintain trusted customer relationships while proactively flexing our asset-based cost structure and our account pricing in response to an ever-changing environment. Great mix changes related to the lower business levels combined with the supplemental spot and transactional shipments that we opportunistically added in the network contributed to a decrease in total second quarter revenue per hundred weight. Also, as we've seen for some time, fuel surcharge revenue reductions compared to last year's second quarter contributed to lower revenue per hundred weight comparisons. However, despite the sharp Business reductions are industry experienced. We are pleased that pricing rationality continues. Later in the call, David Cobble offered more specific details on our contract renewals, but they were good and comparable with last year. Excluding the impact of transactional shipments and changes in fuel surcharge, we experienced high single-digit percent price increases on our core account LTL business. Moving on to the asset light segment, Significantly fewer total shipments due to business closures and reduced customer shipping levels related to the pandemic combined with slightly lower total revenue for shipment were the primary causes of the year-over-year second quarter revenue decrease in ARC Best Asset Light segment. Automotive plant closures throughout April and May combined with continued weakness in industrial manufacturing reduced the demand for expedite services and thus impacted daily shipment counts in that portion of the business. The availability of lower cost capacity resources in the marketplace was another factor that contributed to the reduction in expedite business levels. Similarly, the asset-light revenue contribution from truckload brokerage was below the previous year as shipment counts and average shipment revenue declined. The effects of the pandemic combined with declines in the petroleum industry impacted shipments from our traditional asset-light truckload customer mix. The largest second quarter year-over-year revenue declines in that segment of our business were from customers in oil and gas, wholesale durable goods, and in the manufacturing sectors of metal products and industrial machinery. Asset-light margin compression resulting from these market dynamics decreased second quarter operating income relative to the previous year. As also seen in the asset-based business, reduced consumer household goods moving activity during the uncertain pandemic period unfavorably impacted asset-light financial results. In these challenging times, we are finding that supply chain optimization and the need for unique logistics solutions is more important than ever for our customers. As a result, our managed transportation services continued to flourish, and they were a positive contributor to the asset-light results. Managed daily revenue grew 82% versus last year's second quarter, and through the first half of the year, managed revenue has increased 69%. Crafting managed solutions allows us to combine our experience, knowledge, and the full impact of our assets and capacity resources in a way that helps our customers navigate the uncertainty they are facing in the current environment. At FleetNet, both roadside repair and preventative maintenance events declined, reflecting the impact of the pandemic on the business activity of FleetNet's customers. As a result, second quarter revenue was below last year. The reduction in this quarter's operating income was primarily related to the lower event count. And next, I would like to ask David Cobb to go over the earnings results and operating statistics.