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ABF Freight lays off workers, cuts costs as LTL volumes drop
William B. Cassidy, Senior Editor | Feb 04, 2016 1:31PM EST
For some trucking companies, the current economic climate is beginning to feel more like a recession, even if the U.S. economy is still expanding. ArcBest, the parent of ABF Freight System, has laid off more than 200 dock and yard workers at the less-than-truckload carrier, and is preparing for more belt-tightening, CEO Judy R. McReynolds said yesterday.
“Given the current slow economic environment we have taken actions to further reduce our labor force and better align it with the number of shipments moving through our network,” Reynolds told Wall Street analysts in a conference call transcribed by Seeking Alpha. Further reductions are likely to come through attrition — by not replacing exiting employees.
“In January 2016, we've reduced our docks and city labor force by 4 percent compared to fourth quarter 2015, compared to January of last year that reduction is 3.3 percent,” McReynolds said. “Moving forward, we will continue to monitor our labor levels very closely.” ABF Freight has nearly 11,500 employees, 79 percent of them Teamsters union members.
“We have the flexibility to do what we need to do,” McReynolds said, but ABF walks a narrow line as it tries to match its labor force with shipment levels and maintain service levels. When freight volumes drop in January and February, “You don't just go back to a customer and say, ‘Well, we don't give good service in January and February,” McReynolds said.
ABF could quickly bring back employees and add new people if freight demand picks up in 2016, said McReynolds. LTL tonnage per day increased 0.5 percent in January from a year ago, a sign that the fourth-quarter decline may have bottomed out. “It's very doable to bring the people back that we have on layoff,” she said. “I would enjoy that problem.”
ABF Freight’s revenue dropped 5 percent year-over-year in the fourth quarter to $461.5 million, thanks in part to lower fuel surcharges but also a manufacturing decline that has siphoned freight from LTL trucks, reducing density in freight lanes. Manufacturing contracted for the fourth straight month in January, the Institute for Supply Management said.
Tonnage per day at ABF Freight dropped 4.9 percent year-over-year. Revenue per hundredweight, or LTL yield, dropped 1.1 percent, partly due to the reduction in fuel surcharge revenue. Surcharges across the trucking industry plummeted as the average retail diesel price per gallon dropped 32 percent year-over-year in the fourth quarter, to $2.43 per gallon.
LTL shipments per day dropped 1.5 percent, and revenue per shipment fell 4.5 percent from the 2014 fourth quarter, the company said. ABF Freight’s operating profit tumbled 47.5 percent year-over-year to $7.7 million. Many of the business trends that bedeviled ArcBest in the fourth quarter were evident in the third quarter, when ABF revenue dropped 2.3 percent to $511.3 million as tonnage declined 2.5 percent, but they became more pronounced as 2015 drew to a close.
For the full year, ABF Freight revenue dropped less than 1 percent to $1.92 billion. However, the seventh-largest U.S. LTL carrier increased operating profit 24.6 percent to $62.4 million. Despite a freight market that gradually weakened over the course of the year, ABF Freight handled 5.1 million shipments in 2015, a 2.4 percent increase from 2014.
Despite the drop in freight demand, ABF was able to get LTL rate increases from contract customers in a 3.5 to 4 percent range in the fourth quarter, “a good outcome in this kind of environment,” McReynolds said. Industry-wide, LTL pricing remains “disciplined,” she said. Too many LTL carriers remember the disastrous results of rate-cutting in 2009, and the economy, while weaker than in 2014, is not in a recession, though that's little comfort to laid off workers.
Stronger results at asset-light logistics businesses helped ArcBest. Overall, ArcBest’s consolidated revenue dropped 2.5 percent in the fourth quarter to $648.1 million, while net profit fell from $14.5 million in the 2014 fourth quarter to $5 million last quarter. For the full year, ArcBest consolidated revenue rose 2.1 percent to $2.67 billion, while net profit dropped 2.9 percent to $44.9 million. Adjusted net profit rose 1.2 percent to $44.4 million.
Total asset-light revenue, including Panther Premium Logistics, ABF Logistics, ABF Moving and Fleet Net increased 6 percent to $187.1 million, though Panther’s revenue dropped 11.2 percent year-over-year to $71.2 million due to lower demand for higher-priced expedited service in a market with ample truckload capacity. Panther’s shipment volume rose 11 percent, but loads shifted to smaller trucks, which contributed to the reduction in revenue.
ABF Logistics, the brokerage arm of ArcBest, increased revenue 17.2 percent year-over-year in the quarter to $56.5 million, though operating profit dropped slightly to $1.4 million. ArcBest has expanded ABF Logistics through acquisition, buying Bear Transportation and Smart Line Transportation Group in 2015. ABF Logistics increased annual revenue 33.3 percent in 2015 to $203.5 million, and operating profit at the brokerage rose 52.8 percent to $5.8 million.
'Despite continued weak demand in the truckload marketplace and reduced fuel-related revenue that contributed to lower revenue per load, ABF Logistics experience double-digit revenue and shipment growth in the fourth quarter,” McReynolds said. More ABF Freight customers are using ABF Logistics and Panther as well, thanks to efforts to cross-sell services.
The asset-light business is contributing more and more to ArcBest’s top line, as the company once called Arkansas Best works to transform itself from an LTL trucking operator to a full-fledged transportation and logistics company. The asset-light side now accounts for about 31 percent of total revenue — $198.3 million in 2015, a 6 percent increase from 2014.
ArcBest may be tightening its belt, but it’s not nailing down the hatches. Spending on real estate, equipment and technology will rise from $152 million in 2015 to between $170 million and $200 million in 2016, including $95 million on road tractors and road and city trailers at ABF Freight. The carrier will buy 600 tractors to replace aging equipment.
New technology will help ABF better manage its workforce and serve customers, McReynolds said.
“We’ve nearly completed the installation of electronic logging devices in all of our road and city tractors,” she said We choose to adopt this technology two years ahead of the industry mandate.” Real-time logbook data will improve labor and resource management, she said. “We're investing in many new initiatives to improve efficiencies and lower cost.”
Contact William B. Cassidy at [email protected] and follow him on Twitter: @wbcassidy_joc
http://www.joc.com/trucking-logisti...ers-cuts-costs-ltl-volumes-drop_20160204.html
William B. Cassidy, Senior Editor | Feb 04, 2016 1:31PM EST
For some trucking companies, the current economic climate is beginning to feel more like a recession, even if the U.S. economy is still expanding. ArcBest, the parent of ABF Freight System, has laid off more than 200 dock and yard workers at the less-than-truckload carrier, and is preparing for more belt-tightening, CEO Judy R. McReynolds said yesterday.
“Given the current slow economic environment we have taken actions to further reduce our labor force and better align it with the number of shipments moving through our network,” Reynolds told Wall Street analysts in a conference call transcribed by Seeking Alpha. Further reductions are likely to come through attrition — by not replacing exiting employees.
“In January 2016, we've reduced our docks and city labor force by 4 percent compared to fourth quarter 2015, compared to January of last year that reduction is 3.3 percent,” McReynolds said. “Moving forward, we will continue to monitor our labor levels very closely.” ABF Freight has nearly 11,500 employees, 79 percent of them Teamsters union members.
“We have the flexibility to do what we need to do,” McReynolds said, but ABF walks a narrow line as it tries to match its labor force with shipment levels and maintain service levels. When freight volumes drop in January and February, “You don't just go back to a customer and say, ‘Well, we don't give good service in January and February,” McReynolds said.
ABF could quickly bring back employees and add new people if freight demand picks up in 2016, said McReynolds. LTL tonnage per day increased 0.5 percent in January from a year ago, a sign that the fourth-quarter decline may have bottomed out. “It's very doable to bring the people back that we have on layoff,” she said. “I would enjoy that problem.”
ABF Freight’s revenue dropped 5 percent year-over-year in the fourth quarter to $461.5 million, thanks in part to lower fuel surcharges but also a manufacturing decline that has siphoned freight from LTL trucks, reducing density in freight lanes. Manufacturing contracted for the fourth straight month in January, the Institute for Supply Management said.
Tonnage per day at ABF Freight dropped 4.9 percent year-over-year. Revenue per hundredweight, or LTL yield, dropped 1.1 percent, partly due to the reduction in fuel surcharge revenue. Surcharges across the trucking industry plummeted as the average retail diesel price per gallon dropped 32 percent year-over-year in the fourth quarter, to $2.43 per gallon.
LTL shipments per day dropped 1.5 percent, and revenue per shipment fell 4.5 percent from the 2014 fourth quarter, the company said. ABF Freight’s operating profit tumbled 47.5 percent year-over-year to $7.7 million. Many of the business trends that bedeviled ArcBest in the fourth quarter were evident in the third quarter, when ABF revenue dropped 2.3 percent to $511.3 million as tonnage declined 2.5 percent, but they became more pronounced as 2015 drew to a close.
For the full year, ABF Freight revenue dropped less than 1 percent to $1.92 billion. However, the seventh-largest U.S. LTL carrier increased operating profit 24.6 percent to $62.4 million. Despite a freight market that gradually weakened over the course of the year, ABF Freight handled 5.1 million shipments in 2015, a 2.4 percent increase from 2014.
Despite the drop in freight demand, ABF was able to get LTL rate increases from contract customers in a 3.5 to 4 percent range in the fourth quarter, “a good outcome in this kind of environment,” McReynolds said. Industry-wide, LTL pricing remains “disciplined,” she said. Too many LTL carriers remember the disastrous results of rate-cutting in 2009, and the economy, while weaker than in 2014, is not in a recession, though that's little comfort to laid off workers.
Stronger results at asset-light logistics businesses helped ArcBest. Overall, ArcBest’s consolidated revenue dropped 2.5 percent in the fourth quarter to $648.1 million, while net profit fell from $14.5 million in the 2014 fourth quarter to $5 million last quarter. For the full year, ArcBest consolidated revenue rose 2.1 percent to $2.67 billion, while net profit dropped 2.9 percent to $44.9 million. Adjusted net profit rose 1.2 percent to $44.4 million.
Total asset-light revenue, including Panther Premium Logistics, ABF Logistics, ABF Moving and Fleet Net increased 6 percent to $187.1 million, though Panther’s revenue dropped 11.2 percent year-over-year to $71.2 million due to lower demand for higher-priced expedited service in a market with ample truckload capacity. Panther’s shipment volume rose 11 percent, but loads shifted to smaller trucks, which contributed to the reduction in revenue.
ABF Logistics, the brokerage arm of ArcBest, increased revenue 17.2 percent year-over-year in the quarter to $56.5 million, though operating profit dropped slightly to $1.4 million. ArcBest has expanded ABF Logistics through acquisition, buying Bear Transportation and Smart Line Transportation Group in 2015. ABF Logistics increased annual revenue 33.3 percent in 2015 to $203.5 million, and operating profit at the brokerage rose 52.8 percent to $5.8 million.
'Despite continued weak demand in the truckload marketplace and reduced fuel-related revenue that contributed to lower revenue per load, ABF Logistics experience double-digit revenue and shipment growth in the fourth quarter,” McReynolds said. More ABF Freight customers are using ABF Logistics and Panther as well, thanks to efforts to cross-sell services.
The asset-light business is contributing more and more to ArcBest’s top line, as the company once called Arkansas Best works to transform itself from an LTL trucking operator to a full-fledged transportation and logistics company. The asset-light side now accounts for about 31 percent of total revenue — $198.3 million in 2015, a 6 percent increase from 2014.
ArcBest may be tightening its belt, but it’s not nailing down the hatches. Spending on real estate, equipment and technology will rise from $152 million in 2015 to between $170 million and $200 million in 2016, including $95 million on road tractors and road and city trailers at ABF Freight. The carrier will buy 600 tractors to replace aging equipment.
New technology will help ABF better manage its workforce and serve customers, McReynolds said.
“We’ve nearly completed the installation of electronic logging devices in all of our road and city tractors,” she said We choose to adopt this technology two years ahead of the industry mandate.” Real-time logbook data will improve labor and resource management, she said. “We're investing in many new initiatives to improve efficiencies and lower cost.”
Contact William B. Cassidy at [email protected] and follow him on Twitter: @wbcassidy_joc
http://www.joc.com/trucking-logisti...ers-cuts-costs-ltl-volumes-drop_20160204.html
I'm sure Jimmy the Great and TJ are all over it. 
