ArcBest Corporation (ARCB) Q1 2015 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. And welcome to the ArcBest Corporation First Quarter Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded Monday, May 04, 2015. I’d like to turn the conference over to David Humphrey, Vice President of Investor Relations. Please go ahead, sir.

Welcome to the ArcBest Corporation first quarter 2015 earnings conference call. We’ll have a short discussion of the first quarter results, and we’ll open up for question-and-answer period. Our presentation this morning will be done by Ms. Judy R. McReynolds, President and Chief Executive Officer of ArcBest Corporation; and Mr. David R. Cobb, Vice President and Chief Financial Officer of ArcBest Corporation. We thank you for joining us today. In order to help you better understand ArcBest Corporation and its results, some forward-looking statements could be made during this call. As you all know, forward-looking statements by their very nature are subject to uncertainties and risks. 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 in the tables in our earnings press release. We will now begin with Mr. Cobb.

Good morning. Thank you for joining us this morning. ArcBest first quarter 2015 revenues increased 6% to $613 million. All of our operating companies experienced positive growth in the quarter, despite the impact of significantly lower fuel surcharges associated with a decline in diesel fuel prices. We earned $0.03 per share in the quarter compared to net loss of $0.20 per share last year. Excluding adjustments for pension settlement charges of $0.03 per share related to our nonunion defined benefit pension plan, we reported first quarter net income of $1.4 million or $0.06 per share, which is similarly adjusted $0.11 loss in the prior year quarter. First quarter 2015 was negatively impacted by severe winter weather. Although, less severe than the prior year. We experienced increases in healthcare claims costs with all our best companies, approximately $2.9 million, which is twice the expected level. As we mentioned in early March Business Update, Panther in addition to the unusual healthcare costs had terrible experience in casualty claims that were primarily weather related. The associated first quarter casualty claims charge was [$700,000] [ph]. The higher than expected consolidated healthcare costs in the financial casualty claims impacted operating results by combined $0.05 per share. Our low effective tax rate in the first quarter was primarily related to the reductions in deferred tax liabilities associated with lower tax rates enacted by few states.. We continue to expect our full year 2015 tax rate to be in the range of 37% to 40% as the adjustment that occurred in the first quarter are only expected to have a small impact on our annual tax rate. In February, we generated previously authorized stock repurchase program evolves 64,200 shares of our stock for total amount of $2.5 million. Remaining amount authorized to repurchase under this program is $15.7 million. We ended the first quarter with unrestricted cash and short-term investments of $212 million. Combined with the available resources under our credit revolver and our AR securitization agreement, our total liquidity equals to $337 million. The accordion features of those two agreements allow for an additional total amount of $100. These capital resources allow us to continue our share buyback program and fund our $0.06 share quarterly dividend that was doubled back in last October. Also invest in our companies by executing on this year’s $200 million net CapEx plan, which includes investment in ABF Freight revenue equipment to optimize the total cost of ownership with the fleet over longer periods of time. We organically grow our companies, as well as to seek appropriate acquisition opportunities in the brokerage and transportation management spaces that broaden the Logistics services we offer our customers. Our total debt of $156 million includes $70 million balance on our credit revolver, the $35 million borrowed on our AR securitization and $51 million of notes payable in capital leases, primarily on ABF Freight equipment. The composite interest rate on all of our debt is 2.1%. Full details of our GAAP cash flow are included in our earnings press release. ABF Freight reported first quarter revenue of $441 million, a 3% increase compared to last year that was affected by lower fuel surcharges. ABF Freight's quarterly tonnage per day decreased 0.5%, compared to last year's first quarter, with monthly year-over-year tonnage changes that included a 4% increase in January, a decrease of 4.4% in February, and a decrease of 1.6% in March. Severe winter weather was a significant factor the reduced ABF Freight's first quarter operating results in both 2014 and 2015. The lower than a year ago first quarter 2015 weather effects were above what we would normally expect during this time of year. We estimate that business trends would have resulted in an increase in tonnage for the first quarter absent the severe weather effects. ABF Freight's total weight per shipment was 1,328 pounds, a 5.9% decrease in last year's first quarter, but a sequential increase of 1.2% compared to fourth quarter of ’14. Year-over-year comparisons of shipment size were impacted by reductions in the number of full truckload shipments ABF Freight handled during the quarter. The average shipment size in the core LTL business increased slightly over last year. ABF Freight's average length of haul was 1,024 miles, compared to 1,018 miles in last year's first quarter, an increase of 0.6%. ABF Freight's first quarter total build revenue per hundredweight was $28.6, an increase of 3.7% versus the first quarter of last year. This measure was negatively impacted by lower fuel surcharge revenue associated with reduction in diesel fuel prices compared to last year's first quarter. It is important to note that the year-over-year comparison of operating expenses as a percentage of revenues, which are presented in the ABF Freight segment detail of the release were significantly impacted by the effect of fuel and the reduction in fuel surcharge revenue from the prior year quarter. In particular, salaries, wages and benefit costs were lower than the prior quarter, only percent of revenue base excluding the fuel surcharge revenue. Adjusted for the settlement charges, ABF Freight first quarter operating ratio was 99.8%, compared to 102.1% in the prior year. ABF Freight preliminary daily revenues for the month of April 2015 versus April 2014 increased by 3% to 4%, driven by higher tonnage on a sequential basis versus March, total revenue per hundredweight increased approximately 0.7%, which is better than we would expect based on recent history. Year-over-year comparisons of revenue per hundredweight will continue to be affected by decreases in fuel surcharges related to lower diesel fuel costs versus last year and changes in profile and business mix. Adjusted for fuel surcharge and profile changes, April yield on ABF Freight base LTL business increased in the low to mid-single digits versus the prior year and low-single digits on sequential basis. The preliminary increase on contract and deferred pricing agreements renewed in April is 4.8%. Annual bills per dock hour continued to reflect steady improvement of ABF Freight. All of our emerging businesses increased their first quarter revenue versus last year with combined total revenue for these companies growing 16% to $184 million. First quarter EBITDA for these businesses totaled $6.6 million, compared to $7.9 million in the prior year quarter. These companies portion of the additional first quarter cost associated with higher healthcare and casualty claims equaled to $2.1 million, primarily Panther, which is impacted by $1.5 million and FleetNet by $400,000. Now I will turn the call over to Judy.

Hi, everyone, and thanks for joining us. It's very exciting for us to report our first quarter profit for the first time in seven years, as it gives us confidence we are moving in the right direction and our employees are really working hard on behalf of customers. While there is always more work to do, there were certainly some bright spots in the quarter. First, I'll talk about ABF Freight. During the first quarter ABF Freight continued to emphasize meeting the specific needs of customers, while working to improve efficiency of its freight network. So tonnage handled was slightly below that of last year's first quarter, system resources were directed toward handling tonnage received from traditional LTL shippers. As a result, this portion of our business experienced year-over-year growth during the quarter. Efficiencies and improved dock handling resulted from experience gained by dock employees hired throughout last year and from management emphasis on improving ABF Freight’s performance as measured against key operational goals. Improvements in the dock handling metrics were reflected in year-over-year and sequential comparisons of the first quarter. As David mentioned earlier, those improvements have continued in April. David also described how the level of ABF Freight's total first quarter price increase versus last year was meaningfully impacted by lower fuel prices and the resulting decline in fuel surcharge. Increases on true freight rates excluding fuel surcharge were better than the reported total increase. Throughout the first quarter, retention of ABF Freight’s November 2014 general rate increase was good. You'll recall it was the second GRI of 2014 and it impacted about one-third of our total business. In the first quarter, we also successfully concluded negotiations on contract and deferred pricing accounts with increases of 5.1%, which is the best first quarter level in 15 years. During the first quarter, ABF Freight continued to develop long-term customer relationships that offer value at a fair price. And now onto our emerging businesses, Panther increased its revenue by 4% versus a strong prior-year first quarter when revenue increased over 35%. Revenue during the quarter was positively impacted by increases in business from customers in Auto and Life Sciences segments. Lower fuel surcharges had a dampening effect on revenue comparisons for the quarter. Versus last year, truckload capacity was more readily available within the market thus impacting business opportunities for Panther and reducing the demand for their expedited services that it offers. These market conditions contributed to reduced average shipment revenue and lower profit margin. While Panther’s revenue increased 4%, loads handled during the quarter increased by 16%. Compared to 2014, Panther's first quarter costs were impacted by the previously mentioned increases in healthcare and casualty expenses. Since this time last year, Panther has added needed sales and support personnel, including those associated with two new stations opened in the second half of last year that are located in important customer markets. As these new locations mature and begin to add more customers in business, we expect them to be consistently contributing higher revenue and higher and improved profit margins. ABF Logistics experienced a strong first quarter revenue increase of 59%. This was primarily the result of continued growth in the number of active brokerage accounts and in the number of shipments received from those accounts. Operating margins were impacted by reduced rates associated with an increase in available industry capacity and changes in their brokerage customer mix. The inexperience and lower production of new employees added in the last few quarters slowed the growth of first quarter profit margin. ABF Logistics has an active training program for new employees consisting of several weeks of initial training and ongoing instructions that includes a supervisor coaching sessions, mini modules and contact with experience employees.’ ABF Logistics’ integration of its early January acquisition of the Smart Lines Transportation Group in Oklahoma City was a success. We are pleased to now have a new ABF Logistics location outside the Fort Smith area that is immediately making a positive contribution to revenue and margin increases. Our plans for this location include significant growth in employees and business as it will be a key contributor to ABF Logistics’ future success. FleetNet America’s moderate first quarter revenue growth versus last year was related to significant increase in events in its fleet maintenance business, offset by fewer than expected events with roadside repair customers. The increased activity in fleet maintenance was associated with business from both new and existing customers that made up for the loss of a large customer from the prior year. Labor costs were below last year due to improved productivity in the roadside repair and fleet maintenance. But as David mentioned, increased medical expenses were significant factor in FleetNet’s reported results. For the second consecutive quarter, ABF Moving experienced strong revenue growth versus the same period last year, primarily related to increases in both its government and consumer moving businesses. The reduced first quarter operating loss versus last year was related to improved operating cost management associated with handling more business. I continue to be pleased with the steady progress that we're making in growing our emerging businesses and developing them into an important element of our comprehensive logistics solutions we offer. During the quarter, these businesses represented 29% of ArcBest total revenue and we continue to have success in offering these services to traditional ABF Freight customers. For instance, during the last 12 months over 19% of ABF Freight customers also did business with either Panther or ABF Logistics. That compares to 9% of ABF Freight customers in 2012. And now for some first quarter highlights. For the sixth year in a row, ABF Freight’s training department was included as one of the training top 125 for excellence in employer-sponsored training and development programs as recognized by training magazine. This year, ABF Freight is listed as the sixth best training program, an increase from 11th place last year. Training has been an important element of the ABF Freight employee experience for many years. And we believe that consistent training of our personnel helps us safely and efficiently provide our customers with an exceptional experience. Last month, we announced ABF Freight earned the 2015 National LTL Carrier of the Year Award from The National Shippers Strategic Transportation Council. This is the third year in a row and the fifth time in the last six years that NASSTRAC as recognized ABF Freight as the top LTL carrier. This award is based on inputs from shippers around the country and validates our efforts to listen to the specific needs of customers and offer customized solutions to meet those needs. So to conclude as ABF Freight maintains its focus on better serving customers and our emerging businesses grow to represent nearly a third of our total company revenues, we know that our efforts to solve complex problems across the supply chain are resonating well. As we move into the busier period of the year, our array of companies are in a position to offer the needed capacity solutions to meet our customers’ needs through owned asset resources at ABF Freight, Panther’s owner-operator fleet or through solid third-party relationships at ABF Logistics and our other companies. While we work on improving our operating margins, we believe that the improved pricing environment and our customers’ increasing use of a variety of ArcBest services are encouraging signs. And David now, I think we are ready to take some questions.

Okay, Nicky. I think we are ready for some questions.

Thank you. [Operator Instructions] And our first question comes from line of Bill Greene with Morgan Stanley. Please go ahead.

Yeah. Hi, there. Good morning.

Good morning, Bill.

Hi, Bill.

Hey. Judy, in you comments you mentioned the GRI. I have sort of two questions on that. First, can you talk about what you think the ability of the industry to get us another GRI this year is? And secondly, as we look at the second quarter, when we think sequentially we will have that GRI. So is that sort of a major kind of headwind versus seasonality that we need to keep in mind when we think about the OR changes this quarter? Thank you.

Well, Bill. I think from the standpoint of will the industry be able to support another GRI this year, I would certainly assume so. I can't really speak to the timing of that, but I certainly believe that there'll be one. And then with respect to our situation, of course, we don't give guidance specific to the second quarter but our history shows about 5 or 6 point OR improvement in our results when you moved into the second quarter, compare back to the first quarter. And so that’s something I'm sure that you probably had in your modeling but to use in your modeling. And it is -- when you look at the revenue per hundredweight year-over-year change, not having that second GRI is going to have an impact or it is having an impact, as we move into the second quarter. But we believe that our indications from the deferred and contract price increases that we have gained both in the first quarter, I think it was over 5% and here in April it's about 4.8%. Those are good indications of what we are experiencing in the decisions that are being made this year as far as pricing goes. So that’s just some additional information for you.

That's great. Thank you.

Thank you, Bill.

Our next question comes from the line of Chris Wetherbee with Citi. Please go ahead.

Thanks. Good morning, guys.

Hi, Chris.

Just thinking about sort of the outlook for tonnage for the year, kind of curios to get your take. The comps seems like they are relatively sort of static in terms of year-over-year growth from last year as we go through at least 2Q and then probably progressing onto the rest of the year. So should we think about that? You say you kind of lost some tonnage maybe to weather in the first quarter. Should we expect positive numbers going forward?

The April indication that we -- I think David mentioned in his comments is that we are seeing an increase in April and so that's the indication that we have so far this quarter.

Okay. In terms of the feedback you're getting from customers in terms of just comfort with the economy, the overall sort of macro trends, just kind of curios to have some commentary around that?

We recently spoke to our sales leads and in recent monthly staff meeting. And when I recall their commentary being is that the customers seem pretty positive. We are not hearing anything that’s of concerns out of that group and felt like they were pretty bullish on the prospects for revenue growth for our company this year.

Okay. That’s helpful. If I can squeeze more before David cuts me off here. I want to just see if I could ask a question about employee productivity going forward. You’ve had a couple of quarters where there has been a ramp up here in productivity as you get some more seasoning for this workforce. How should we think about that obviously tonnage growth? You probably need to hire a few people or do you feel comfortable with the kind of group that you have and just going to get better productivity as year goes on? Thanks for the time. Appreciate it.

Well, the hiring of people will be dependent on business levels, and so that’s always going to be the case. And our I think ABF Freight in particular does a good job of matching those people with the level of business that we have and we have the flexibility to do that. From a dock productivity standpoint, we’ve seen about a 3.5% increase there and that’s a good sign. We’re still struggling a little bit with street productivity. So we’ve got some opportunities there to improve that. But it’s certainly an opportunity from a cost standpoint for us to increase the productivity of the people that we’ve hired. And we have -- and again, this is based on business volumes, but we have reduced the number of people that we’re hiring. It’s significantly less than it was last year at the same time. So that gives you the opportunity to really work with those people and get them on an improved productivity path which we’re seeing.

That’s great. Thank you very much.

Thank you.

Thanks, Chris.

And our next question comes from the line of Matt Brooklier with Longbow Research. Please go ahead.

Yes. Thanks. Good morning.

Hi, Matt.

Hello. So I -- just a question on purchase transportation, I know that we see some impact from the fuel surcharge and the change in the quarter, but it looks like there potentially were some other things going on in terms of the cost coming down. I was just curious to hear there are any changes in the quarter that impacted that particular expense line and then maybe how we should think about purchase transportation as the year progresses.

Well, we certainly focused on that area for cost management in the quarter. I think we had mentioned in previous conference calls our intention to do that and we certainly did that. So we saw lower cost from cartage agents. So we saw lower cost in the rented equipment area and we’ve reduced our use of purchase transportation both with truckload carriers as well as inrail. And so we utilized more heavily our personnel in the first quarter and we were pleased with the result of that. We felt like the all-in cost for us was better placed as a result of those decisions.

Okay. Good to hear. And then just second question, curious to hear if the West Coast ports had an impact either on your LTL business or if there is potentially also an impact in terms of works you’re doing at Panther’s? Thanks.

The West Coast ports really didn’t have a major impact on any of our businesses for the quarter and we are really not seeing much change in that as we move into April. We had some opportunities ready and prepared and utilized to some extent for customers helping them in situations where they had a need for expediting some shipments out of there or having just alternatives to their typical approach that they might use, whether it would be rail or some other approach that would have resulted in the slower trends at time. And so we had again a limited amount of business that we did that with. Panther saw some area of opportunities, as a result customers wanting to skip that hole, experience all together, and so we feel good about what we offer to customers that I have to say that we didn’t see a great volume of business attach to that. It still could come, it may come at a busier time of the year and we are still hearing that, but we will believe it whenever we see it.

Appreciate the color.

Yes. Thanks.

Thanks a lot, Matt.

Hi. Next question comes from the line of Brad Delco with Stephens Inc. Please go ahead.

Good morning, Judy. Good morning, David. How is it going?

Good.

Judy, I wanted to just focus a little bit on the year-over-year trends. When I go back to last year, I know you had some productivity issues with the ramp of dock workers that you are hiring and you also had rail services issues. Is there any way to sort of quantify kind of what cost impact that had on your business? And it seems like productivity is getting better, but I would imagine rail service as well is allowing to see that purchase trends line go down as well. Can you just kind of quantify that for us?

Well, I think what I gave earlier is probably the best information that we have. We’ve seen dock productivity improve about 3.5%. If you look back at the employees that we hired from March to July of last year, we have seen their productivity improve even from where they were in December to March level. And so again on our overall productivity you are seeing maybe that offset a little by our street productivity, which is an area that we still need to improve in. Rail service did affect us as you mentioned. One of the things that we did last year to try to combat that was use more purchase transportation. If you look at our line item, that’s called rents and purchase transportation, you can see those costs manage down when really you’re in kind of a flat tonnage situation. So that’s something that I think would be helpful to you. But I think what you see this year that you didn’t see last year is just more options and opportunities to address your freight movements. And our choice has been to better utilize our people. We feel like that that gives us the best selling cost.

Yes. Brad, just to add to that, our rail utilization declined about 7% year-over-year. And the other thing in the purchase transportation that you see is fuel surcharge associated with those services. So that's also obviously declining.

Hey, great. Thanks for the time, guys.

Thank you.

Thanks, Brad.

Thank you. And our next question comes from the line of David Ross with Stifel Nicolaus. Please go ahead.

Yes. Good morning, Judy, David, and David. It’s actually Bruce Chan on for Dave.

Hi, Bruce.

Hey, Bruce.

Hi. So quick question here. Obviously, the goal is to onboard as many of your traditional freight customers on to the non-asset-based services as possible. I'm wondering if you have a breakdown of the percentage of international customers versus field accounts that are using those non-asset-based services and whether there is a higher uptake with one versus the other.

Yes. That’s actually a really good question. We do see a greater utilization of multiple services with our larger accounts, but we've seen our smaller accounts really increase in terms of growth over the last couple years. So that's been an interesting thing to evaluate. I’ve actually been looking at that myself more carefully recently to try to better understand where our best opportunities are. But when you think about it, the larger shipper that needs to utilize more options is probably where you're going to have your best conversation, although one of the things that we find with smaller shippers is they’re more interested in us managing the entire process for them. In many cases, they find value in utilizing the services that ABF Logistics has combined with the ABF Freight services because it gives them kind of the best total answer for them. At times they’ll need guaranteed service and we’ll be able to utilize combinations that include the facilities for ABF Freight. And other companies that they might be able to gain services from don't necessarily have all those options. So we’ve really liked the fact that we have the control if you will over the network. And in some cases, the Panther owner operators help us with that as well because we can get more of an answer that gives the customer certainty where whenever you're using kind of traditional third-party relationships, you might not have as much certainty in that. So it's kind of an interesting thing as the company evolves, but we’re really finding that customer see a lot of value in the combinations that we present to them. And we would need another hour on this call to talk about all the ways that we’ve utilized that.

Great. Well, that’s very helpful. Thank you.

Thanks.

[Operator Instructions] Our next question is coming from Rob Salmon with Deutsche Bank. Please go ahead.

Hey, good morning.

Good morning, Rob.

Hey, Rob.

I guess circling back to the productivity. You had indicated that kind of the dock productivity I think was up 3.5%. Was that for the entire of Q1? Or is that kind of what you're looking at in the month of April, because I think you had indicated in the prepared remarks that it was actually improving subsequent in the month of April? So if that was a Q1 number. Could you give us an update how much of an improvement you guys have seen month to date in April?

Well, this is a Q1 number and it’s a sequential, it’s up 3.5%, up sequentially 3.8% so that gives you some sense of how it compared back to the fourth quarter. And Rob, we don't have the full number for April as yet. We could give that at a later point when perhaps, we’re doing an update midquarter but we don't have that today.

That’s helpful, Judy.

Yeah, it’s better but it's just -- we don’t have that number finalized.

And I guess, you had been calling out as well that there is some headwinds that you're experiencing at least with regard to the pickup and delivery side? I'm curious what you think is driving that because shipments per day are up nicely, which I would think would add some operating leverage to the P&D operations?

Well, again if you look at where we need to be from a service standpoint, that’s largely the issue. What we’re doing is looking at, making sure that we give good service to customers so that creates a need to have a certain amount of activity. And what I'm suggesting to you is that we're not as efficient with that activity and those decisions as we could be. And so there's an opportunity there to improve that.

Okay. That’s helpful. I guess the final which I’d just like a little bit more color is Judy, you’d mentioned on the purchase transportation that you're using kind of more internal linehauls, is this driven just by kind of network optimization or the tonnage been down a little bit allow that opportunity because obviously we got lower rate per shipment with shipments up and tonnage down.

I think last year we were in situation where rail service was an issue. We were -- we were actually new to the game of using more purchase transportation in terms of truckload carriers because we had just gotten the contract finalized in the previous November. And so I think this year we just have better visibility and better options. And so I think it's really just a function of that.

Perfect. Thank you.

Thanks Rob.

Our next question comes from the line of Shawn Collins with the Bank of America Merrill Lynch. Please go ahead.

Great. Thank you. Good morning Judy and David and David.

Good morning.

Hey Shawn.

Thanks. So as you continue to build out your emerging non-asset base segment, can you talk about what you're seeing on the competition side. Is that remaining stable, remaining competitive or are you seeing increase in competition or even possibly decrease in competition there if you could provide any context around that?

Well, I think what we see is that we have a fairly unique set of offerings and what’s even added to that is our interest in making sure that we are best coordinating those for our customers. And so we don't see that as much from others and we really feel like that that's a differentiator for us plus the combination of options that we have as I mentioned earlier with our asset base network as well as our third-party relationships and then the Panther owner-operators really gives us something that -- in terms of combinations that you can provide to customers something that's fairly unique in the marketplace. Also it’s interesting because our greatest opportunity is within customers that we already know. So really what we are doing is better penetrating those customer relationships with better answers for the customers. And so when we think about competition, perhaps we don't see it as much because we are again working with customers that we know and really having a good discussion with them about utilizing us for more services. And so although we see out there plenty of good competitors and all these different service offerings, we feel good about the combination of things that we are providing to the marketplace and where that places us.

Okay. Great. That's helpful. Thank you for your time and the information.

Thank you, Shawn.

And our next question comes from the line of Willard Milby with BB&T. Please go ahead.

Hey. Good morning everyone. Just wanted to ask on D&A, do you kind of expect that to ramp-up in the remaining quarters of the year in freight and the rest of businesses? Didn’t know if you had a target that you all are willing to disclose for 2015.

Yeah. Willard, this is David. We had given a guidance range of around $95 million to a $100 million for the full year on depreciation and amortization. We are probably going to be on the lower end of that, as you’ve noticed from our CapEx being a little lower than perhaps on a run rate basis what we had originally projected so.

Okay. Great. And in past calls you’ve given the percent miles on truck. I was wondering if you all can give that again, given the -- I think you can wrap to 6% and I think you did about 1.9% in the March quarter of last year, just want to see how that compared?

Yes. We did -- sorry, let me find it here. It was 0.6% for the quarter.

All right. Great. That's all for me. Thanks.

Thanks Will.

Thanks Will.

And our next question comes from the line of Matt Young with Morningstar. Please go ahead.

Good morning, guys. Thanks for taking my question.

Good morning, Matt.

Hey Matt.

Hey. Could you give us some additional color on the truckload shipment trends you are talking about that we are in the network last year? With truckload capacity likely to be tightening ahead, would you allow that to come back into the network if the demand was there or is it something that you'd rather kind of keep off the system?

Well, I’ll tell you what we’d like to have is the best balanced answer that we could have. That’s what we are always trying to achieve. I mean, we like those shipments when they help us balance the network and that's what we are always trying to achieve. And so what’s difficult and that's what we've experienced this, when you have changing dynamics in the marketplace which last year, the marketplace was excessively tight in terms of capacity. This year, it’s less but it’s a little softer. And so you are always trying to make sure that you have the shipments that are appropriate and dealing with the changes in the marketplaces is always the challenge. But we like those shipments, when they help us balance the network. We had seen in the latter part of the first quarter an uptick in our MTs. And so we encouraged a little bit more of that business to come back. But what we do going forward will depend on, again the business that's out there. We want to be sure and serve our LTL customers and we will adjust that accordingly based on our needs in the LTL network.

And Matt, those shipments can be profitable as long as the price is right.

Well, that makes sense. But I’m guessing some of the less of the demand for the truckload side of it is more related to the comparisons since last year first quarter was exceptionally tight more than a material loosening in truckload capacity? I’m assuming it’s more of a comp this year.

Yes. I think you are reading that right.

Okay. Thanks.

I think that’s right. Thank you.

Our next question is a follow-up from the line of Brad Delco with Stephens Inc. Please go ahead.

Yeah. Thanks for taking the follow-up.

Hi Brad.

Judy, just want to ask you guys bought back some stock in February and was curious what your comfort level was with leverage in the balance sheet and maybe with the little reduced CapEx plan. What you expect the debt levels to look like throughout the year?

Well, we wouldn’t expect our -- for instance, our debt to equity ratio to materially change. As we go throughout the year, we’re going to be doing some financing on our CapEx with equipment financing. And we feel good about that. You’ve heard David probably in his prepared comments give you the interest rate, the overall interest rate we have on that debt. So we are comfortable there. But our share repurchases, we continue to expect to do some of those. We would particularly like to offset any dilution that we have from our restricted share unit program and so we’re interested in that. And what you saw in the first quarter as we go through the year is something that I would expect to -- that have as a part of our overall program again.

Got you. But there is no way that you comfortable with two times leverage on the EBITDA basis, there is no way to look at it from that perspective?

Yeah. We really -- difference there, Brad is what we do on the acquisition side. So it's hard for me to give you some kind of rule of thumb that’s on that basis. Because we really want to be sure that if the right acquisition opportunity come, that we’re most prepared for that. And so -- and in some of the other areas share repurchases and dividends, we’re a little bit more modest in what we're doing there, then maybe in some past years. But it's really to make sure that we have the resources that we need for the right acquisition opportunity.

Okay. Great. Do you care to provide any update in terms of what may be attractive to you in terms of -- I imagine it’s something to expand the emerging non-asset-based business but anything in particular you can share there?

Well. I think, that’s the focus and the reason that that's the focus is because we need scale in our logistics businesses. And that’s where we could gain that scale quickly. But we’re most interested in expanding our ABF Logistics business. But if we found something that was interesting that would facilitate scale in the Panther business, that made sense, we would be interested there as well.

Okay. Great. Thanks for the follow-up.

Yeah. Thanks Brad.

Okay. Thanks a lot Brad.

And Mr. Humphrey, I’ll turn the call back to you.

Okay. Well, this now concludes our call. We thank you for joining us this morning. We appreciate your interest in ArcBest Corporation. Thanks a lot. We’ll see you next quarter.