David Humphrey - Vice President of Investor Relations Judy McReynolds - Chairman, President and Chief Executive Officer David Cobb - Vice President, Chief Financial Officer.

Ladies and gentlemen, thank you for standing by. Welcome to the ArcBest Third Quarter 2017 Earnings Conference Call [Operator Instructions]. As a remainder, this conference is being recorded Friday, November 3, 2017. I will now turn the conference over to David Humphrey, Vice President of Investor Relations. Please go ahead, sir..

Welcome to ArcBest third quarter 2017 earnings conference call. Our presentation this morning will be done by Ms. Judy McReynolds, Chairman, President and Chief Executive Officer of ArcBest; Mr. David Cobb, Vice President, Chief Financial Officer of ArcBest.

As most of you know, we're approaching the end of ABF freight’s current labor contract with the Teamsters, which expires on March 31, 2018. The exchange of initial proposals on the next contract between the bargaining committees is anticipated to occur in the coming months.

Out of respect for this important process, we will give you an update on third quarter results during today's call but not take any questions following our prepared commentary. We hope you can understand our reasons for doing things a little differently, while this process takes places.

As always, following today's call, we will be available to speak with you to discuss the publically disclosed information about our third quarter results. 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 of our earnings press release. We will now begin with Ms. McReynolds..

Thank you, David. And good morning, everyone. We were pleased to report improved third quarter results. With the exception of weather related impacts from the various hurricanes in the quarter, a number of favorable tailwinds helped us achieve revenue and profitability growth.

An improving pricing environment and tighter capacity conditions more positive developments and the momentum we're seeing on those fronts is encouraging. In addition, our enhanced market approach implemented at the beginning of the year, also contributed to the success that we're seeing with customers.

For some time now, you've been hearing me describe our strategy to capture more of the total logistics market opportunity through the unique and reliable capacity options and a best-in-class customer experience.

Our continued emphasis on getting in front of customers with more options to help solve their complex logistics challenges is providing growth opportunities that were previously unavailable.

In meetings with customers seeking supply chain solutions, we are confidently able to discuss the full range of available services at our best, which helps us solidify and expand these relationships.

As someone who has participated in a number of these discussions, I'm confident in saying there is intangible change in how we approach the customer and excitement around the trusted advice we provide. Our sales organization is energized by the unified engagements and enhanced collaborations that have been established across our best.

We've also made good progress so far to achieve greater profitability on our asset base shipping accounts. And now I'll discuss more details about out service offerings.

Despite reduced shipment and tonnage totals, third quarter revenue for ArcBest asset based LTL service improved versus last year as our emphasis on yield management initiatives contributed to greater revenue per 100 weight and higher average revenue per shipment.

In addition, our pricing actions have positively impacted our asset based freight profile. Since May, our year-over-year LTL weight for shipment trends, have steadily improved. In August, they turn positive and they have continued to get even better in September and October.

The tonnage reductions we experienced were primarily driven by decline in asset based truckload rated shipments. We have succeeded in obtaining price increases in return for the value we offer in the marketplace.

As David will describe later, we achieved solid average renewable rates on the deferred and contract pricing agreements that were negotiated during the third quarter, and the retention of our May general rate increase has been good.

During the third quarter, we experienced the normal exchange of business related to additions and losses of some accounts and their associated freight levels. Our yield management efforts have contributed to this.

However, the profitability of new account business and additional business from existing accounts was better than that a business we no longer handle. For instance, the profitability of new business we have added into the asset based network has sequentially improved in each quarter of this year.

We believe this validates our work to improve asset base yields and that long-term profitability will benefit as a result. One example of our efforts to achieve better margins through LTL yield initiative is the space based pricing program that I mentioned earlier.

When we introduced this new program, we talked about the change in freight shipping trends, including overall growth and ongoing profile shift of lighter bulkier shipments across the entire supply chain. During the last three months, we've had success in implementing this new pricing program with the accounts we’ve worked with so far.

We view this as an opportunity to ensure that ArcBest is properly compensated for the value we provide on these kinds of shipments and commodities.

We continue to manage our cost in our asset based operation, and those efforts are benefiting us in the areas of line haul, including third quarter cost reductions we achieved in over the road purchase transportation. In the local street operations, lower cartage expenses resulted from focused cost management and improved utilization of owned assets.

We are carefully managing our work force in response to existing business levels. Continued growth in e-commerce and non-due pack residential delivery shipments impacted third quarter pick-up and delivery productivity.

Though the increases in these kinds of shipments were not as robust as we've seen in recent quarters, they continue to impact our cost and our local city operations.

We also experienced additional third quarter expenses associated with increases in equipment rental, as well as union health welfare and pension costs, which have risen throughout the year. During the third quarter, ArcBest was impacted by the effects of hurricanes.

These storms affected the operations and business levels of certain ABF freight service centers in the southern states, as well as our facility in Puerto Rico. We feel very fortunate that most of our employees remain safe and that the damage to our service centers was minimal.

Our employees, both in the impacted regions and those from other locations throughout our company, came together with additional equipment and resources to help and serve our customers. Several of these businesses were significantly impaired.

We were pleased to see that ArcBest corporate value collaboration revealed itself in a very positive way in our response to these challenging storms. Later, David will share the estimated financial impact of the storms on the results we reported this morning. Now, I know that you're interested in our upcoming contract negotiations with the Teamsters.

In keeping with federal labor law, we’re not able to discuss any proposals until those are actually exchanged between the bargaining committee. We will of course be working to ensure the competitiveness of our asset based business for many years to come, and will provide additional details to you at the appropriate time.

During the third quarter, ArcBest asset light business experienced revenue growth and improved operating income. Demand for ArcBest expedite services continued to be solid, reflecting like year-over-year revenue growth, and daily shipment counts were at record levels.

Strong growth in expedite revenue and net revenue was driven by significant increase in revenue per shipments that resulted from current market conditions. During the quarter, our expedite services experienced greatest demand from customers in manufacturing and life science market verticals.

And we are pleased with increased utilization of our expedite resources to support ArcBest truckload and dedicated businesses.

This illustrates our ability to consistently meet the needs of ArcBest customers across all of our logistics business lines by benefitting from solid owner operator relationship and committed contract carriers, or by using our owned assets.

ArcBest truckload services revenue growth was driven by significant improvements in revenue per shipment, resulting from early summer yield initiatives, combined with increases in revenue per mile and linked up haul. Shipment volumes were below the same-period of last year.

As we've experienced since the LDS purchase in early September of last year, incremental business in July and August associated with our dedicated truckload services contributed to asset light year-over-year revenue comparisons. As of September, we begin comparing back to a historical period when we owned its business.

Third quarter net revenue margins in our asset light logistics business were down 180 basis points year-over-year and up 40 basis points sequentially versus the second quarter. This was due to the rapid increase of purchase transportation cost, resulting from tightening supplier capacity and the market disruption from the hurricanes.

As we now celebrate the one year anniversary of our September 2016 purchase of logistics and distribution services, we are pleased to have dedicated truckload as a part of the ArcBest array of services.

The importance our Reno, Nevada personnel placed on strong customer service and collaboration with other elements of ArcBest confirm the opportunities for our company resulting from this acquisition.

Compared to declining year-over-year revenue trends in the first half of the year, that third quarter revenue increase was the result of higher revenue per event despite a reduction in total events. The significant increase in third quarter operating income was the result of improved net revenue and improvements in labor efficiencies.

As we saw last quarter, ArcBest third quarter non-union healthcare cost decreased by over 10% versus the same period last year. On a year-to-date basis, these costs were down 4%. Wellness is one of our sixth ArcBest corporate values.

Over the last several years, we have made numerous companywide changes and introduced several new programs that emphasize the importance of exercise, good eating habits and a healthy lifestyle. We have many examples of how these initiatives are helping our employees, and it is good to also see them benefit of our financial results.

And now, I'll turn it over to David Cobb for a discussion of the earnings results..

Thank you, Judy and good morning everyone. Let me begin with some consolidated information. Third quarter 2017 consolidated revenues were $744 million compared to $714 million in last year's third quarter, an increase of 4.2%.

On a GAAP basis, we had third quarter 2017 net income of $0.56 per diluted share compared to net income of $0.49 per diluted share last year. As detailed in the non-GAAP reconciliation table in this morning's earnings press release, adjusted third quarter 2017 net income was $0.59 per diluted share compared to $0.48 in the same period of 2016.

The adjustments taken in third quarter 2017 included $0.02 per share after tax related to our enhanced market approach that was implemented beginning in January. Through the remainder of the year, we currently expect to incur approximately $500,000 of additional restructuring cost related to our corporate reorganization.

Our non-union pension plan was closed to due participants in 2006 and in 2013 the accrual of future benefits was frozen.

The ArcBest Board of Directors recently approved an action to terminate the plan based on information provided by the claims actuary, we estimate cash funding of approximately $10 million and settlement charges of approximately $20 million during 2018. Although, there can be no assurances in this regard.

The actual charge and funding in now is dependent on a number of factors, including final benefit calculations, interest rates and the value of planned assets among the others.

Our non-GAAP net income in third quarter 2017 including an adjustment of $2 million pre-tax or $0.05 per share after-tax for our non union pension plan including settlement expanse. As we move to close out this frozen plan, pension costs have increased due to lower asset returns because of the more conservative investment strategy.

Pension expanse, including settlement charges for fourth quarter 2017, is currently estimated to be comparable with the third quarter of 2017. ArcBest third quarter effective tax rate was 38.6%.

This morning's earnings release shows a tax rate reconciliation that results in third quarter and year-to-date non-GAAP tax rates of approximately 40%, which is we what we expect for full year 2017 under the current tax law. Judy previously mentioned the reduction in asset based non-union healthcare cost.

On a corporate wide basis, third quarter healthcare costs were below the same period last year by approximately $1.5 million as claim frequency was lower and average cost per claim decreased. We have the recent quarter of non-union healthcare costs for covered employee decreased in successive month.

As part of our stock repurchase program, in the third quarter, we bought 92,000 shares for a total amount of $2.4 million. Under our existing repurchase program, we have approximately $32 million of purchase availability.

2017 net capital expenditures are expected to be in the range of $150 million to $165 million, and we are currently in process of developing our capital spending plans for next and we’ll provide an update on that at the appropriate time. In the third quarter, we completed delivery of all of the new asset based tractors we plan to purchase this year.

We will begin taking delivery of new tractors throughout the remainder of the year.

With the completion of our tractor deliveries and the transition of additional older city tractors out of our fleet, we further reduced the average age of both our road and city tractor fleets, and we're experiencing improved fuel economy and lower equipment maintenance cost.

We did the third quarter with unrestricted cash and short term investments of $166 million. Combined with the available resources in our recently admitted credit revolver, our admitted receivable securitization agreement and our associated accordion features, our total liquidity currently equals to $482 million.

Our total debt at the end of the third quarter of $263 million includes the $70 million balance in our credit revolver, the $45 million borrowed on our receivable securitization and $148 million of notes payable and capital leases, primarily on our equipment for asset based operation. The composite interest rates on all of our debt is 2.6%.

Full details of our GAAP cash flow were included in our earnings press release. You’ll recall that effective, at the beginning of this year, we implemented a new corporate structure that unified many companywide functions, including our sales, pricing, customer service marketing and capacity sourcing activities.

These unified functions represent ArcBest shared services. Beginning with the third quarter, we have modified the presentation of shared service costs within segment expenses. Previously, these expenses were allocated to segment expense line items by expense ties.

Now these costs are reported on a single shared services line in the financial tables within our operating segment disclosures. The prior period financial tables included in today's earnings press release reflect these changes for comparability. And there was no change to segment total expense.

ArcBest reported asset based third quarter revenue of $517 million, a per day increase of 4.1% compared to last year. We had 62.5 working days in third quarter of 2017 compared to 64 working days in last year's third quarter, and 63.5 in the second quarter.

The previous number of third quarter working days in over two years relative to those previous periods. This reduced both revenue and opportunities for additional incremental operating income. Asset based quarterly tonnage per day declined 3% versus last year's third quarter.

For third quarter 2017 by month, asset-based daily tonnage versus the same period last year decreased in July by 3%, decreased 4.2% in August and decreased 1.5% in September. The third quarter total tonnage reductions were primarily driven by decline in asset based truckload weighted shipments.

We had few early these shipments because of yields actions we took to improve their profitability along with purposeful management of equipment capacity to adequately serve our customers’ LTL requirements. And the need for fewer spot market shipments required to reposition line haul equipment.

Excluding these assets based truckload weighted shipments, our third quarter 2017 LTL tonnage declined approximately 1% versus last year. Third quarter total shipments per day decreased 1.4% compared to last year's third quarter.

Total asset based weight per shipment was 1,198 pounds, a 1.6% decrease from last year's third quarter and a decrease of 2.3% on a sequential basis compared to second quarter of 2017. For the first time in over a year, in August and September, LTL weight per shipment increased versus last year.

This is impacted by a reduced level of growth compared to recent quarters in our non-UPAC residential delivery shipments and some general increases in both shipments and tonnage, and with the LTL shipments side categories above 5,000 pounds. The average length of haul on asset based shipments was 1,027 miles.

This represents a 1% decrease from both third quarter last year when length of haul was 1,040 miles in second quarter this year when our length of haul was 1,038 miles. Third quarter total billed revenue per hundredweight on asset based shipments was $32.53, an increase of 6.6% compared to the third quarter of last year.

Year-over-year comparisons of this yield figure were positively impacted by higher fuel surcharge and changes in shipment profile and business mix. On a sequential basis, the shield metric increased 5.5%. Excluding fuel surcharge, the increase in third quarter billed revenue per hundredweight on asset based LTL freight was in the mid-single-digits.

We secured an average 6.8% increase on asset-based customer contract renewals and deferred pricing agreements negotiated during the quarter. This was the second highest third quarter average increase we have secured in the last 15 years, and was 330 basis points higher on a sequential basis.

As Judy mentioned earlier, the hurricanes in Texas and Southeastern U.S. and Puerto Rico that begin in late August adversely impacted asset based business levels in and out of those geographic regions. We estimate the effects of these storms should reach third quarter 2017 asset based operating income by approximately $1 million.

The third quarter hurricanes estimated to have had a minimal impact on ArcBest asset like business. In total, our asset light businesses have revenue of $235 million, a 12% increase over last year's third quarter. Third quarter operating income for these services totaled $8.5 million compared to $6.4 million in the prior year quarter.

On an adjusted basis, third quarter operating income totaled $8.7 million and adjusted EBITDA totaled $11.8 million compared to adjusted operating income of $6.4 million and adjusted EBITDA of $10.3 million in the prior year quarter.

During the third quarter, our asset light expedite business experienced a 16% increase in average revenue per shipment, only 1% increase in average daily shipments.

Preliminary asset based results for the month of October versus October 2016 were as follows; total daily billed revenues increased approximately 3%; total tonnage per day decreased approximately 3% with LTL coming down in the mid single digits related to our yield management initiatives and changes in account mix.

Daily shipment counts decreased approximately 7%. Total revenue per hundredweight increased approximately 7%. This asset based yield metric is being positively affected by higher fuel surcharges in our asset based yield initiatives. Total revenue per shipment increased approximately 11%.

On a sequential basis, total revenue per shipment increased approximately 1%. Total weight per shipment increased approximately 4%. On a sequential basis, total weight per shipment increased approximately 1%. For the third month in a row, average LTL weight per shipment increased on a year-over-year basis.

Since the implementation of the current labor contract, the historical average sequential change in ArcBest assets based operating ratio in the fourth quarter versus the third quarter has been an increase in an approximate range of 200 to 300 basis points.

We will have 61.5 working days in the fourth quarter, which is normal for fourth quarter, and half a day more than we had in fourth quarter last quarter and one day less than we had in this year’s third quarter. On a combined preliminary basis, our October 2017 revenue from our asset light businesses increased between 5% and 6% versus last year.

The increase in the logistics portion of the asset light business is related to growth in the expedite truck load and dedicated service lines. These October comparisons benefited from an additional business day this year compared to last year.

In October, fleet net experienced solid year-over-year revenue growth, driven by emergency growth side service activity. In this year’s third quarter, the loss reported in the other elimination plan was $5.9 million, including non-GAAP restructuring and pension cost of $700,000.

The increase from previous quarters reflects modifications to the allocation in shared services as previously discussed and an increase in incentives associated with an improved total share in return relative to comparable industry peer group. In the fourth quarter, we expect the loss to this line to be approximately $5.5 million.

As we've previously discussed, investments in ArcBest technology and innovations that are required to be expensed are included here as well. Interest expense, net of interest income, was $1.4 million in the third quarter. We expect the fourth quarter amount to be approximately $1.6 million.

This net interest expense estimate does not include changes in capturing the value, which reported in the other net line of our income statement of which we had income of nearly $1 million in the recent quarter. We consider changes in capturing the value to be non-operating items and therefore excluded from our non-GAAP presentation.

Now, I’ll turn it over to Judy for some closing comments..

As I said earlier, favorable tailwinds impacted the quarter positively. We are encouraged about the momentum we're seeing in terms of the economy overall, the general industry environment and our approach to the market.

The unique and reliable capacity options that we have readily available are very important to our customers as they look for logistics partner who can deliver an array of choices and solutions along with trusted expert advice and a great experience.

The enhanced market approach implemented in January and now fully operational helped us streamline costs and also provides that unified foundation I discussed earlier for our people to expand existing relationships, create new ones and win more business.

Finally, here are some additional highlights for the quarter, which I believe underscores the tremendous commitment of our employees to demonstrate the skill and the will.

In August, ArcBest received four 2017 Quest for Quality Awards from Logistics Management magazine, an honor that those in transportation and logistics industry regard as an important measure of customer satisfaction and performance excellence. ABF freight received two Quest for Quality Awards in the national LTL and expedited categories.

Panther was recognized in the expedited category and UPAC was honored in the household goods and high-value goods category. Also in August, 11 ABF drivers qualified for the national truck driving championship, and one Tony Spiro, play third in his class at the national competition.

We are very proud of Tony and his outstanding accomplishment, as well as all of our other qualifiers. In July, ArcBest was ranked as number 43 on the 2017 top 50 3PLS, a list generated by Armstrong and Associates. And also in July, ABF freight was included on supply chain grains and a lift of 100 great supply chain partners.

And now, I'll it back o David for final comments. Thank you..

We thank you for joining us this morning, and we appreciate your interest in ArcBest. That now concludes our call. Thank you..

Thank you. Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Have a great day..

End of Q&A:.