ArcBest Corp (ARCB) 2015 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the ArcBest Corporation first quarter earnings conference call.

(Operator Instructions)

As a reminder, this conference is being recorded Monday, May 4, 2015. I'd now 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 then we'll open up for a question-and-answer period.

Our presentation this morning will be done by Ms. Judy R. McReynolds, President and Chief Executive Officer of ArcBest Corporation; Mr. David R. Cobb, Vice President, 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 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 in 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 revenue growth in the quarter despite the impact of significantly lower fuel surcharges associated with the decline in diesel fuel prices.

We earned $0.03 per share in the quarter compared to a net loss of $0.20 per share last year. Excluding adjustments for pension settlement charges of $0.03 per share related to our non-Union defined benefit pension plan, we reported first quarter net income of $1.4 million or $0.06 per share compared to a 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 throughout all ArcBest companies of approximately $2.9 million, which is twice the expected level.

As we mentioned in an early March business update, Panther, in addition to the unusual healthcare cost, had unfavorable experience in casualty claims that were primarily weather related. The associated first quarter casualty claims charge was $700,000. The higher than expected consolidated healthcare cost and the Panther casualty claims, impacted operating results by a combined $0.05 per share.

Our low effective tax rate in the first quarter was primarily related to reductions in deferred tax liabilities, associated with lower tax rates enacted by a few states. We continue to expect our full-year 2015 tax rate to be in the range of 37% to 40%, as the adjustments that occurred in the first quarter are only expected to have a small impact on our annual tax rate.

In February, under a previously authorized stock repurchase program, we bought 64,200 shares of our stock for a total amount of $2.5 million. The 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 $337 million.

The accordion features of those two agreements allow for an additional total amount of $100 million. These capital resources allow us to continue our share buyback program and fund our $0.06 per 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 of the fleet over longer periods of time, and to organically grow our companies, as well as to seek appropriate acquisition opportunities in the brokerage and transportation management spaces that broaden the logistic services we offer our customers.

Our total debt of $156 million includes the $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 were 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 that reduced ABF Freight's first quarter operating results in both 2014 and 2015. Though 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 affects.

ABF Freight's total weight per shipment was 1,328 pounds, a 5.9% decrease from last year's first quarter, but a sequential increase of 1.2% compared to fourth quarter of 2014.

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 billed revenue per 100 weight 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 a 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 percent of revenues, which are presented in the ABF Freight segment detail of the release, were significantly impacted by the affect 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 year quarter on a percent of revenue basis excluding the fuel surcharge revenue. Adjusted for the settlement charges ABF Freight's 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 100 weight increased approximately 0.7%, which is better than we would expect based on recent history. Year-over-year comparisons of revenue per 100 weight 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's base LTL business increased in the low to mid-single digits versus the prior year, and low single digits on a sequential basis. The preliminary increase on contract and deferred pricing agreements renewed in April is 4.8%. Handled bills per dock hour continue to reflect steady improvement at ABF Freight.

All of our emerging businesses increased their first quarter revenue versus last year, with a 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 costs, associated with higher health care and casualty claims, equal $2.1 million, primarily Panther, which has impacted $1.5 million and FleetNet by $400,000.

Now, I'll turn the call over to Judy.

Hi, everyone and thanks for joining us. It's very exciting for us to report a first quarter profit for the first time in seven years, as it gives us confidence we're moving in the right direction, and that our employees are really working hard on behalf of customers. While there's 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 the efficiencies of its freight network. Though tonnage handled was slightly below that of last year's first quarter, system resources were directed towards 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 for management's 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, on to 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 the auto and life sciences segment.

Lower fuel surcharges had a dampening effect on revenue comparisons for the quarter. Versus last year, truckload capacity was more readily available within the markets, thus impacting business opportunities for Panther and reducing the demand for the expedited services that it offers. These market conditions contributed to reduced average shipment revenue and lower profit margins.

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 health care 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 and business, we expect them to be consistently contributing higher revenue 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 instruction that includes supervisor coaching sessions, mini modules and contact with experienced 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 for 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 a 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.

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 eleventh 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 has recognized ABF Freight as the top LTL carrier. This award is based on input 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, who owned asset resources at ABF Freight, Panthers 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're ready to take some questions.

Okay Nikki, I think we're ready for some questions.

Thank you.

(Operator Instructions)

And our first question comes from the line of Bill Greene with Morgan Stanley. Please go ahead.

Hi there, good morning.

Hey, Bill.

Hey, Judy, in your comments you mentioned the GRI. I have 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 you won't have that GRI. So, is that a major headwind versus seasonality that we need to keep in mind when we think about the OR changes this quarter? Thank you.

Bill, I think from the standpoint of will the industry be able to support another GRI this year? I would certainly assume so. I mean it, I can't really speak to the timing of that. But I certainly believe that there will 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 a 5 or 6 point OR improvement in our results when you move into the second quarter compared back to the first quarter.

And so, that's something to, I'm sure that you probably already 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. We believe that our indications from the deferred 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're 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 the outlook for tonnage for the year, curious to get your take. The comps seem like they're relatively static in terms of year-over-year growth from last year as we go through at least Q2 and then probably progressing on through the rest of the year. How should we think about that? You say you 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're seeing an increase in April. 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 macro trends, just kind of curious if you have commentary around that?

We recently spoke with our sales leads in a recent monthly staff meting and what I recall their commentary being is that customers seem pretty positive. We're not hearing anything that's of concern 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 could squeeze one more in before David cuts me off here, wanted to just see if I can ask a question about employee productivity going forward? You've had a couple of quarters where there's been a ramp up here of productivity as you get some more seasoning for this work force. How should we think about that? Obviously, tonnage growth you probably need to hire a few more people. Or do you feel comfortable with the group you have and just going to get better productivity as the year goes on? Thanks for the time. Appreciate it.

The hiring of people will be dependent on business levels and so, that's always going to be the case. I think ABF Freight, in particular, does a good job in 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 this same time and 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 just a question on purchased transportation. I know that we see some impact from the fuel surcharge and the change in the quarter, but it looks like there potentially was some other things going on in terms of the costs coming down. I was just curious to hear if there were any changes in the quarter that impacted that particular expense line? And then maybe how we should think about purchased 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 costs from cartage agents, we saw lower costs in the rented equipment area and we reduced our use of purchased transportation both with truckload carriers as well as in rail. 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 end cost for us was in a better place as a result of those decisions.

Okay. Good to hear and then just a second question. Curious to hear if the West Coast ports had an impact either on your LTL business or if there was potentially also an impact in terms of what you're doing at Panther? Thanks.

The West Coast port strike really didn't have a major impact on any of our businesses for the quarter and we're 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 be rail or some other approach that would have resulted in a slower transit time.

So we had, again, a limited amount of business that we did that with. Panther saw some air opportunities as a result as customers wanting to skip that whole experience altogether. We feel good about what we offered to customers, but I have to say that we didn't see a great volume of business attached to that. It still could come. It may come at a busier time of the year. We're still hearing that but we'll believe it whenever we see it.

Appreciate the color.

Yep. Thanks.

Thanks a lot, Matt.

Our next question comes from the line of Brad Delco with Stephens Inc.

Good morning, Judy. Good morning, David. How's it going?

Good. How are you?

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 were hiring and you also had rail service issues. Is there any way to quantify what cost impact that had on your business? It seems like productivity is getting better but I would imagine rail service as well is allowing to see that purchased trans line going down as well. Can you quantify that for us?

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've seen their productivity improve even from where they were in December to March levels. And so, again, on our overall productivity, you're seeing maybe that offset a little bit 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 purchased transportation. If you look at our line item that's called rents and purchased transportation, you can see those costs managed down when really you were in kind of a flat tonnage situation. So that's something that I think would be helpful to you. 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 gives us the best all-in cost.

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

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.

Hi. 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 national customers versus field accounts that are using those non-asset based services and whether there's 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 of 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 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.

We really like 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 traditional third-party relationships, you might not have as much certainty in that. It's kind of an interesting thing as the Company evolves but we're really finding that customers see a lot of value in the combinations that we present to them. We would need another hour on this call to talk about all the ways that we've utilized that.

Great. 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.

Circling back to the productivity, you had indicated that the dock productivity was up 3.5%. Was that for the entire of Q1 or is that what you're looking at in the month of April? I think you had indicated in the prepared remarks that it was actually improving subsequent in the month of April. 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 mid-quarter. But we don't have that today.

That's helpful, Judy.

I mean, it's better. Yes, 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 are some headwinds that you're experiencing at least with regard to the pickup and delivery side.

Yes.

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, they -- 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.

That's helpful. I guess the final, which is I'd just like a little more color is, Judy, you mentioned on the purchased transportation that you're using more internal line. Was this driven by network optimization or the tonnage being down a little bit allowed that opportunity? Obviously we've got lower weight per shipment with shipments up and tonnage down.

I think last year, we were in a situation where rail service was an issue. We were actually new to the game of using more purchased 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. 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 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 based segment, can you talk about what you're seeing on the competition side? Is that remaining stable, remaining competitive or are you seeing increasing competition or even possibly decreasing 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're best coordinating those for our customers. And so, we don't see that as much from others and we really feel like that's a differentiator for us. Plus, the combination of options that we have, as I mentioned earlier, with our asset based 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're doing is better penetrating those customer relationships with better answers for the customers. When we think about competition, perhaps we don't see it as much because we're, again, working with customers that we know and really having a good discussion with them about utilizing us for more services. 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're 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.

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

Yes, Willard. This is David. We had given a guidance range of around $95 million to $100 million for the full-year on depreciation and amortization. We're probably going to be on the lower end of that as you've noticed from our CapEx being a little lower than it's been perhaps on a run-rate basis what we had originally projected.

Okay. Great. And in the past calls, you've given me percent miles on truck. I was wondering if you all could give that again given the, I think you were up to 6% and I think you did about 1.9% in the March quarter last year and just wanted to see how that compared?

Yes, we did -- I'm sorry. Let me find it here. It was 0.6% for the quarter.

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

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.

Hey, Matt.

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

What we'd like to have is the best balanced answer that we could have. That's what we're always trying to achieve. I mean we like those shipments when they help us balance the network and that's what we're always trying to achieve. What's difficult, and that's what we've experienced, is 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 that. It's a little softer. And so, you're 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 and they help us balance the network. We had seen in the latter part of the first quarter an uptick in our empties 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 they're priced right.

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 comparison since last year's first quarter was exceptionally tight. More than a material loosening in truckload capacity. I'm assuming it's more of a comp issue.

Yes, yes. I think you're reading that right. I think that's exactly right.

Okay. Thanks.

Thank you.

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

Yes, thanks for taking the follow-up.

Hi, Brad.

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

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 heard David probably in his prepared comments give you the interest rate, the overall interest rate, we have on that debt so we're comfortable there.

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 have as a part of our overall program again.

Got you. But there's no way to - you're comfortable with two times leverage on and EBITDA basis. There's no way to look at it from that perspective?

We really -- the 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 comes, that we're most prepared for that. And so, in some of the other areas, share repurchase and dividends, we're a little bit more modest in what we're doing there than 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?

I think that's the focus and the reason that's the focus is because we need scale in our logistics businesses and that's where we could gain that scale quickly. 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.

Yep. 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 and we appreciate your interest in ArcBest Corporation. Thanks a lot. We'll see you next quarter.

Ladies and gentlemen, that does conclude the conference call for today. We thank you once again for your participation and ask that you please disconnect your line.