ArcBest Corp (ARCB) Q4 2020 Earnings Call Transcript

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ArcBest Corp (ARCB -6.20%)
Q4 2020 Earnings Call
Feb 2, 2021, 9:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the ArcBest's Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to David Humphrey, Vice President of Investor Relations. Please go ahead.

David Humphrey -- Vice President of Investor Relations

Welcome to the ArcBest fourth quarter 2020 earnings conference call. Our presentation this morning will be done by Judy McReynolds, Chairman, President and Chief Executive Officer of ArcBest; David Cobb, Chief Financial Officer of ArcBest. 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 more complete discussion of factors that could affect the company's future results, please refer to the forward-looking statement section of the company's earnings press release and the company's most recent SEC public filings. In order to provide meaningful comparisons, certain information discussed in this conference call includes non-GAAP financial measures as outlined and described in the tables in our earnings press release.

We will now begin with Judy.

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

Thank you, David, and good morning everyone. 2020 was the year we won't forget. The pandemic caused uncertainty and disruption in our customers' businesses and in all of our lives. At ArcBest, we were challenged in new ways, but because of the character and heart shown by our employees, we turned many of those challenges into opportunities. Our people creatively and purposely served customers and executed well on initiatives to improve efficiencies in our business. I'm proud to say the hard work of the ArcBest team produced the second best non-GAAP operating income in the last 14 years. We positioned ArcBest to be more responsive to customers and to meet their changing needs. We look to customers to inform our strategy and the deep relationships we build allowed us to know their needs and pain points and to use that information to develop options and solutions. Our approach worked well in 2020, as we recognize the unique nature of the pandemic effects on our customers. As a logistics solutions provider, we worked alongside our customers and capacity providers to move essential goods to their destinations and to normalize disrupted supply chains.

The opportunities we have at ArcBest are tremendous and we are committed to growing the company in any economic environment. We have a multi-year strategy. And last year, despite the pandemic, we made progress in three important areas, expanding revenue opportunities, balancing our mix of revenue and profit, and optimizing our cost structure. 14% year-over-year total revenue growth for fourth quarter is representative of our progress. Our total revenue growth was made up of solid asset base growth of 8% and significant Asset-Light growth of 27%.

ArcBest's quarterly revenue growth resulted from expanding customer relationships and on boarding new ones. Our assured capacity options and the seamless integration we provide created value in the marketplace. As a result, we gained momentum on our goal toward 50% of our revenue coming from our Asset-Light segment with Asset-Light revenues representing 35% in the fourth quarter. Returning ABF Freight to historical operating margins has also been a long stated goal for us and I am excited to say, for the second consecutive year, we will pay a profit-sharing bonus to all eligible union-represented employees at ABF. This bonus reflects the 2020, 95.3 OR produced by ABF Freight. This is a significant accomplishment and I'm proud of our team.

And now, I'll discuss some additional detail on the fourth quarter performance of our service offerings. The fourth quarter results, in our Asset-Based segment reflect the positive impact of improving customer business levels, compared to the prior year. On a per day basis versus last year, tonnage and shipment growth in each month of the quarter combined with larger average shipments and the resulting increase in shipment revenue were factors in the fourth quarter revenue increase. In addition to the effects of an improved economic environment, the larger sized LTL shipments in our Asset-Based network were the results of continuing initiatives designed to improve capacity utilization on our equipment and in specific distribution lines throughout our system. Similar to the previous quarter, we didn't experience a meaningful impact from traditional truckload shipments, spilling over into our LTL network. The impact of the pandemic on consumer moving activities, caused the timing of the traditional busy period in our U-Pack Household Goods Moving business to shift from the second and third quarters into the fourth quarter. Combined with continued growth in residential delivery shipments associated with online consumer shopping activities, this represented a meaningful portion of the fourth quarter revenue increase we saw in the Asset-Based business.

Actions taken by our operations team to manage labor and properly match available personnel to existing freight levels continue to positively impact our financial results. These operational strategies included the use of more local and linehaul purchase transportation to supplement our own resources and as these costs increase as a percent of total revenue. However, key operating metrics that we watch closely relative to freight handling on our docks, local delivery and pickup of shipments to and from our customers' locations and efficiency measures in our over-the-road network improved during the quarter and contributed positively to greater profitability.

Cargo Care was another highlight in our Asset-Based business and this past year, we improved our cargo claim ratio for the 23rd time in the last 25 years. ABF was awarded the American Trucking Association's Excellence in Cargo Claims and Loss Prevention Award for an unprecedented 8th time. These important achievements are a testament to our customer obsession and our focus on improving customers' experience through safe and efficient handling of their shipments. In addition to serving our customers in a superior way, these actions reduce our costs and improve our profitability. Current market conditions and the high demand for available equipment capacity are positively contributing to the rational pricing environment. Our total asset-based revenue per hundredweight was slightly positive in the recent quarter related to changes in account mix and freight profile. The shipment size increase, I mentioned earlier, impacted comparisons of overall pricing metrics relative to the prior year period, as have lower fuel surcharges. However, increases on contract and deferred pricing agreement secured during the fourth quarter improved to levels last seen in late 2019 and early 2020, before the effects of the pandemic have begun. Improvement in pricing trends on these accounts, which generally are most price-sensitive are encouraging.

In our Asset-Light business during the fourth quarter, further improvement in customer demand, limited availability of marketplace equipment capacity and an improving rate environment resulted in better profitability versus last year's fourth quarter and the recent third quarter. Additional year-over-year shipments along with a market driven increase in average shipment revenue contributed to the significant top line growth that we experienced in this portion of our business. As a percent of revenue, cost for equipment capacity from our Asset-Light transportation partners were higher versus the previous year, consistent with the trends we experienced throughout 2020. Despite the resulting impact on margins, improved operating profit resulted from effective cost management and improved operational efficiencies, enhanced by beneficial technologies and increasing digital connectivity with our customers.

At FleetNet, a decrease in total events during the fourth quarter reflected fewer daily events in both roadside repair and preventative maintenance service. Despite having fewer events, solid improvement in average revenue per event contributed to fourth quarter revenue growth over the previous year. Operating income was lower due to a combination of two primary things, the payback of wage reductions from earlier in the year and efforts to maintain a consistent workforce despite lower events. Last year, FleetNet implemented various initiatives to digitally connect with its customers and service providers and that should contribute to operating efficiencies in the future. To illustrate the progress made in this area in November, FleetNet received their 500,000 electronic status update from a service provider partner.

During 2020, we continued to take actions to enhance shareholder value. Throughout the year, we paid our quarterly dividend and we bought back shares of our stock. Later, David will provide more specific details and he will also discuss the recent actions we took to improve shareholder returns by extending the amount of our share repurchase program. Our strong financial position, combined with capitalizing on opportunities available to us in the marketplace offers many options for profitably growing our company through investments in our existing businesses.

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

David R. Cobb -- Vice President, Chief Financial Officer

Thank you, Judy and good morning everyone. I'll begin with some consolidated information. Fourth quarter 2020 consolidated revenues were $816 million compared to $717 million in last year's fourth quarter, a per day increase of 14%. On a GAAP basis, we had fourth quarter 2020 net income of $0.89 per diluted share. This compared to a net loss of $0.22 per share last year that was impacted by a non-cash impairment charge related to Asset-Light business. As detailed in the GAAP to non-GAAP reconciliation table in this morning's earnings press release, adjusted fourth quarter 2020 net income was $0.97 per diluted share, compared to net income of $0.56 per share in the same period last year.

ArcBest fourth quarter 2020 effective GAAP tax rate was 20.8%, favorably impacted by a number of items identified as unusual to normal operations on our non-GAAP reconciliation table. So on a non-GAAP basis, the effective tax rate was 26.7%. Under the current tax laws, we expect our full-year 2021 non-GAAP tax rate to be in a range of 25% to 26%, while the effective rate in the quarter may be impacted by items discrete to that period. For the full year of 2020, consolidated revenues which were impacted by the pandemic, totaled $2.9 billion dollars compared to $3 billion in 2019, a per day decrease of 2.2%. Full year earnings per share were $2.69 per share compared to a $1.51 in 2020. On a non-GAAP adjusted basis, as outlined in our earnings press release, 2020 earnings were $3.23 per share, compared to $2.88 per share in 2019.

In 2020, total net capital expenditures, including equipment financed equalled $92 million, which is approximately 35% below what we've spent in recent years, due to reductions we announced in early second quarter 2020 associated with the effects of the global pandemic and shift in the timing of some expenditures into 2021. 2020 expenditures for revenue equipment totaled $63 million, the majority of which was for replacement of units in ArcBest Asset-Based operation. In 2020, because of the impact of the pandemic, we purchased fewer road tractors than we did in 2019 and fewer than we are planning on getting in 2021. However, the average age of our road tractor fleet at the end of 2020 compares favorably to our internal targets. Depreciation and amortization cost on property, plant and equipment were $114 million. In addition, amortization of intangible assets was $4 million in 2020.

For 2021, total net capital expenditures are estimated to range from $150 million to $160 million. This includes revenue equipment purchases of approximately $100 million, which are primarily replacements in our Asset-Based operation. The remaining amount includes items related to real estate, technology, dock equipment upgrades, and enhancements. ArcBest depreciation and amortization cost of property, plant and equipment in 2021 are estimated to range from $115 million to $120 million. This expense range does not include amortization of intangible assets, which is estimated to be approximately $4 million in 2021. We ended the year with unrestricted cash and short-term investments of $369 million. Combined with the available resources under our credit revolver and our receivable securitization agreement, our total liquidity currently equals $663 million.

Our total debt at the end of 2020 of $284 million includes the $70 million balance on credit revolver and $214 million of notes payable, primarily on our equipment for Asset-Based operation. Deposit interest rate on all of our debt was 2.9%. Through this very challenging year, I'm very pleased that compared to the previous year, we ended 2020 with an increase in net cash of $90 million and we lowered the composite interest rate on all of our debt by 24 basis points. The solid operating results during this challenging year further fortified our strong balance sheet and our solid financial position.

As Judy discussed earlier, during 2020, ArcBest increased shareholder returns through payment of an $0.08 per share quarterly dividend and purchase of $6.6 million of ArcBest shares. Also last week, we announced that the ArcBest board extended the share repurchase program, making a total of $50 million available for purchase of our stock. Our finance position allows us to continue investing in technologies and capabilities to efficiently and effectively serve our customers while also returning capital to shareholders through stock repurchases and dividend payments. Full details of our GAAP cash flow were included in our earnings press release.

The Asset-Based fourth quarter revenue was $554 million, an increase of 8% compared to last year. The Asset-Based quarterly total tonnage per day increased 7.8% versus last year's fourth quarter. The fourth quarter 2020 by month, Asset-Based daily total tonnage versus the same period last year increased by 10.5% in October, increased by 8% in November, and increased by 4.7% in December. Fourth quarter total shipments per day increased by 2.8% compared to last year's fourth quarter. Fourth quarter, total billed revenue per hundredweight on Asset-Based shipments increased 40 basis points and was negatively impacted by lower fuel surcharges and freight mix changes versus prior year. Revenue per hundredweight on traditional published LTL rated business excluding fuel surcharge in transactional LTL rated shipments improved by a percentage in the low single digits.

We secured an average 4% increase on Asset-Based customer contract renewals and deferred pricing agreements negotiated during the quarter. For the full year of 2020, ArcBest's Asset-Based total revenue was $2.1 billion, 3.5% below 2019's total revenue, due to the pandemic impact on business levels primarily during the second quarter. Asset-Based 2020 total tonnage per day decreased 40 basis points compared to the previous year, reflecting a 4.1% decrease in daily shipments partially offset by 3.9% increase in total pounds per shipment. On an adjusted basis, our Asset-Based full-year operating income was $121.3 million compared to $118.8 million in 2019.

In total, the revenue in ArcBest's Asset-Light businesses increased 27% versus last year's fourth quarter, reflecting strong demand in our ArcBest segment and improved revenue per event in the FleetNet segment. On an adjusted basis, fourth quarter of Asset-Light operating income was $5.5 million compared to $1.1 million last year. Adjusted fourth quarter 2020 Asset-Light EBITDA was $8.3 million compared to adjusted EBITDA of $4 million in the fourth quarter of 2019. Full year 2020 revenue for the Asset-Light businesses was $984 million, compared to $950 million in 2019, an increase of 4%. Full year 2020 adjusted operating income for these businesses of $13 million compared to $11.2 million in 2019. Adjusted full year 2020 Asset Light EBITDA was $24.4 million compared to adjusted EBITDA of $23.8 million in 2019.

Also, I want to mention that in January 2021, we sold a property that was not being used, resulting in a first quarter 2021 Asset-Based operating gain of approximately $8.5 million dollars versus a $2.2 million gain in first quarter of 2020. This morning we filed an 8-K that included our fourth quarter 2020 earnings release along with an exhibit that provided some additional information about our current quarterly financial results along with our recent business levels and our future expectations on certain financial metrics.

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

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

Thank you, David. I want to note an important announcement we made in January. Tim Thorn, President of ABF Freight has decided to retire at the end of June. Seth Runser became Chief Operating Officer for ABF on February 1st and he will become ABF President on July 1st. Tim has made significant contributions to our company over his 31-year career, and he has approached each role with integrity and excellence. I wished him and his family the very best, as he looks to retirement. Seth has a deep knowledge of our freight operations and is well versed in our strategy. He will work to facilitate growth and ensure that our ABF team continues its strong commitment to quality. Tim and Seth are working closely together to ensure a smooth transition this year.

Looking back on 2020, I also want to mention the importance of our whole industry. As the pandemic caused shutdowns and disruption, the public clearly saw how the logistics and trucking industry touches our everyday lives. Even at the height of the pandemic, freight kept moving and products were delivered, that wasn't easy, but the value at the supply chain and our role in the economy was very clear and the public response was heartwarming. It was a good reminder that our industry is fundamental all the time. The essential nature of our company was also on full display. I know that I speak for our whole team when I say we are proud to serve our customers and our country and to carry out our mission, which is to positively impact the world through solving logistics challenges.

For almost 100 years, our people and our culture have made the difference. We have always emerged stronger from periods of challenge and 2020 was no exception. I am very proud of the collaboration in the strength of character our employees have demonstrated throughout the pandemic. Moving forward into the new year, we are pleased with the early trends in our business that offer even more opportunities to serve our customers well, which leads to profitably growing our company.

And now, I'll turn it over to David Humphrey for our question-and-answer session.

David Humphrey -- Vice President of Investor Relations

Okay. Thank you, Judy. And Jennifer, I think we're ready for some questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Jason Seidl with Cowen. Please proceed with your question.

Jason Seidl -- Cowen -- Analyst

Thank you, operator and good morning everybody.

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

Good morning, Jason.

David R. Cobb -- Vice President, Chief Financial Officer

Hi, Jason.

Jason Seidl -- Cowen -- Analyst

Yeah. We're just trying to dig out here from the big blizzard. We got hit hard. Want to talk a little bit about your comps, as you move through 1Q, because overall 1Q 2020 was a pretty good one in terms of your tonnage growth and it seems like January started out pretty strong up 6%. Do the comps get harder, as we move through the first quarter here?

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

Well, if you look back at tonnage per day, Jason, in 2020 January, February and March compared to 2019, the tonnage increases were 5.7%, 7.5% and 1%. So the answer is yes, I think and you go into February, but there was I guess a lesser increase in '20 -- March 2020 versus March '19.

Jason Seidl -- Cowen -- Analyst

Right. That makes sense. And my last one is a follow-up, sale of UPS Freight obviously was a pretty big deal in the LTL industry, they were known for bundling thus being sort of a loss leader for UPS in some cases, how is this going to impact the pricing market for you guys going forward, as you said?

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

Well, when we -- we look at that transaction, you know, we don't have a lot of experience competing with TFI and we certainly appreciate the commentary that's out there, regarding their approach to some of this business and so, I think overall, we would say we're encouraged by that. We think that's probably going to be a favorable thing.

Jason Seidl -- Cowen -- Analyst

Okay. Fair enough. Those are my two. Thank you.

David Humphrey -- Vice President of Investor Relations

Okay. Thanks a lot Jason. Appreciate it.

Operator

My apologies Mr. Humphrey. Our next question comes from the line of Chris Wetherbee with Citi. Please proceed with your question.

Chris Wetherbee -- Citi -- Analyst

Hey, good morning everybody. I guess my question is about sort of the demand environment. So moving from December to January seems like tonnage has picked up here a little bit, I know we just talked about sort of the comps, as we move through the rest of the first quarter, but how do you think about sort of the mix of the business, whether it's some of that spot truckload business that's coming out of it, maybe you're beginning to lap that. Can you just talk about some of the demand dynamics, as we're transitioning from the end of 4Q into 1Q?

David R. Cobb -- Vice President, Chief Financial Officer

Yeah. I'll start with that, I guess we had a -- I think you see we had a solid fourth quarter. We continued to see segments of our business return really well in fact our sequential trends were some of the best, I think in our history, or at least in the last 10 years, now this is the top, when you think about sequential from third to fourth, in terms of revenue per day and weight per day, shipments per day, in total those were all top of that last 10 years and so, it was good to see -- the other aspect of this is and we quoted this out as just kind of the stronger demand for our Household Goods Moving business, our U-Pack offering and help now that the housing market has been solid strong and that's kind of continuing into January and it's unusual because typically that's seasonally stronger in the summer months of the year, but for the pandemic, there was very little of that in the second quarter of 2020. But anyway, we're seeing -- seeing some of that and that's influencing some of our business trends that we're seeing now, but as a mix, I think we started off saying is that we were seeing continued improvement from our -- just our core business customers and when you think about manufacturing and industrial and retailers, just kind of some of that returning and so that's encouraging. And I think that's influencing our LTL weight per shipment as well.

Chris Wetherbee -- Citi -- Analyst

Okay. That's helpful. And then maybe just a sort of a bigger picture question about 2021. So with the labor agreement on the Asset-Based side, you do have some visibility into the sort of inflationary aspects of your expense items for '21 and your tonnage is obviously positive, the comps actually get quite a bit easier, as you move into the second quarter and kind of beyond that, I guess, can you talk just conceptually about sort of the opportunity on the operating ratio for '21. We've seen that with pricing in tonnage moving in the same direction and cost under some control, but there is a bigger opportunity for margin expansion in '21 versus '20. But any help you can give us would be helpful in terms of how you guys are thinking about that opportunity?

David R. Cobb -- Vice President, Chief Financial Officer

Yeah. I agree. It's a challenging thing to look at, particularly as you compare back to 2020. But as you point out, we have some visibility into our inflation in our contract -- union contract and so that's helpful. I think the challenge -- our big challenge is getting the right resources in the right locations and so there are some, as you probably saw in our -- and Judy pointed out in her remarks earlier that our purchase transportation costs were higher -- that in the near-term may be a headwind for us, as we work through this resource challenge. We pointed out last quarter and we continue to have this imbalance, where over 50% of our locations had double digit changes in business levels, and so that obviously creates a lot of a lot of challenges in resource supporting the right resources in the right locations and so that piece of it is a potential headwind in the near-term, probably through the first half of the year, but as we sort through that, we could get that priced in a good place that could be a tailwind or perhaps later on, but I would say our team on that side of the cost have manage that really well. I think the -- in terms of mode selection and making good choices there and getting our cost per mile in a good place. So they've done a great job in managing that, it's just a challenge -- so that's one area. The other is around cost would be the substantial reduction of costs that we took in 2020, some of that returns when you think about the travel for instance and other marketing cost and the event cost for instance and even healthcare and we suspended our 401(k) for a period of time in 2020 and so we expect those costs to return to sort of pre-COVID levels. It's just the timing on that. Some of that is dependent upon when some of the just opportunities to travel return. So hopefully that helps.

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

I think -- I would say we're looking forward to a year, where we're not managing such steep changes in business levels. You have -- in 2021, it should be easier from that standpoint. And hopefully, it's just more of an improvement from our customers' businesses as well, so.

David Humphrey -- Vice President of Investor Relations

Hey, Chris. Thanks a lot, man.

Chris Wetherbee -- Citi -- Analyst

Appreciate you. Thank you.

David Humphrey -- Vice President of Investor Relations

All right.

Operator

Our next question comes from the line of David Ross with Stifel. Please proceed with your question.

David Ross -- Stifel -- Analyst

Yes. Good morning everyone.

David Humphrey -- Vice President of Investor Relations

Hi, Dave.

David Ross -- Stifel -- Analyst

I want to start off with the New Year, new administration and any preliminary talks you guys might have had on pension reform, what your thoughts are there, which you might be seeing in DC.

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

Well, you know, we always are involved with that. We always follow it. And it's a great question, especially with the change in administration, we participated in conversations with legislators and worked in Washington, as a part of numerous coalitions over a long period of years and I think on January 21st, the Emergency Pension Plan Relief Act was introduced to the House and it's an updated version of the 2019 Butch Lewis Act and we are hopeful that that will move through, if passed and enacted into law, it would address the funding issues space by Central States Pension Fund and the more than 120 other multi-employer funds projected to become insolvent in the coming year. So it's a hopeful sign of progress toward a solution in this area. So there is that, and again hope for that because it is a problem that we faced and is certainly needing to be addressed in the near term.

David Ross -- Stifel -- Analyst

And is there anything in there that would take the orphan liabilities, essentially off your books and lower your operating expenses as a result, if that --

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

But we don't have any orphan liabilities on our books. I want to make sure we say that clearly. And I do think that some of the discussion that's being had helps to address the insolvency issue, but there is nothing specific yet that we can really report on on that, but we're encouraged by the conversations and we know there is a better than average chance of getting that relief in the Biden administration with the Democrats in control of both houses of the Congress and -- but the other part of what you said was to lower our costs and that's a contractually agreed to hourly rate for pension and so although there is always an opportunity in future negotiations to try to address that, in the near term and our contract expires in June of 2023, I don't believe there would be any change in that. And so our best opportunity is to continue to create efficiencies in the business. And we've done that to some level and continue to have opportunities to do that. So I hope that helps.

David Ross -- Stifel -- Analyst

Yes. Thank you.

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

Thank you, Dave.

David Humphrey -- Vice President of Investor Relations

Thanks a lot, Dave.

Operator

Our next question comes from the line of Todd Fowler with KeyBanc Capital Markets. Please proceed with your question.

Todd Fowler -- KeyBanc Capital Markets -- Analyst

Hey, great, thanks and good morning.

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

Good morning, Todd.

Todd Fowler -- KeyBanc Capital Markets -- Analyst

Hey, good morning everybody. I wanted to ask about the mix in the network right now. It seems like the truckload spot shipments continue to come down. Does it feel like that the core customer is back to where you'd like it to be, is there still opportunity for that mix to improve and then, Judy, with the 9.5% increase in the LTL weighted shipments -- weight per shipment, excuse me, during the quarter. It's a pretty strong increase and you had some comments in your prepared remarks about doing some things to improve capacity around that. Is that a targeted effort there as well. So if you could maybe address those two pieces, that would be helpful.

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

Sure. Yeah. Thank you, Todd. Great questions. And yes, the answer is yes to that we still have more improvement we can do with our core customers. David mentioned that we're seeing that business come back and in the fourth quarter, there was a noticeable improvement in the retail part of our business returning and I think manufacturing that sector for us, it improved really in the third quarter compared to second, it kind of -- it was an improvement, but lesser of an improvement in fourth quarter and we're looking forward to even more robust activity there with the manufacturing PMI, yesterday coming in at the solid 58.7 I think and those are just really strong numbers, and I think you remember that our business typically correlates with that move -- a move in that metric with about a 4-month lag and we've seen that number be strong that manufacturing PMI index be strong for several months now in a row. So we're hopeful there and in the Asset-Light side of the business, we're seeing the same type thing, perhaps some strength in the retail side. So there -- there is improvement, but certainly opportunity for more improvement.

And your observation about truckload-rated shipments is right, we're not seeing the spillover and really want to focus on our LTL customers. We continue to use our LTL transactional shipments, but in a way that really helps us with some of this imbalance that David talked about. There is -- there has been opportunities because of this imbalance to really help fill empty capacity and that's certainly been an effective strategy and one that is contributed to the overall profitability improvement in our business and we also talked about the U-Pack business. That's been a relative strength in the fourth quarter and into January versus normal, because typically you know that's concentrated in the second and third quarters, but we're glad to see that it's a good part of our business, and it just gives us another transactional part of the business to really contribute to the overall utilization of the network effectively and to improve the overall results of the company.

Todd Fowler -- KeyBanc Capital Markets -- Analyst

Okay. That makes sense. And so, it sounds like a lot of mixed things in the fourth quarter, but some of the trends in the underlying business are positive and should help as we move into 2001.

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

Absolutely.

Todd Fowler -- KeyBanc Capital Markets -- Analyst

Okay. David, I'm going to turn it over. I'll jump back in the queue. Thanks.

David Humphrey -- Vice President of Investor Relations

Thanks, Todd.

Operator

Our next question comes from the line of Jack Atkins with Stephens. Please proceed with your question.

Jack Atkins -- Stephens -- Analyst

Good morning, everybody. Thank you for taking my question.

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

Good morning, Jack.

Jack Atkins -- Stephens -- Analyst

Well, so let me -- if I could go back to the OR discussion for 2021 for a moment and I don't know, Judy, if you want to take this or David, if you want to take it, but I guess when I look back to 2018, you guys did a 93.5 OR in the Asset-Based business. We're kind of at similar point of the freight cycle this time, but you guys have made a lot of structural improvements, I think to your profitability cycle to cycle. So is it right to really think about I understand there's a lot of puts and takes quarter-to-quarter, as you move through the year, but I guess help us think about the type of progress you really expect to be able to make this year from an operating ratio perspective in the Asset-Based business, if that's -- if that's possible.

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

Yeah. I mean, what I think of Jack and I'll comment first and then David has something to add, will allow him to do that. But you know your comment about longer-term improvements is really something that I think is worth commenting. If you look back the last few years, say you could compare 2020 for instance to a 2016 or something like that, which it obviously had some different challenges, but there is a comparison there. I think the improvement in the OR for the ABF business has been close to 400 basis points since that period, and so when you talk about the structural improvements that -- it just makes me think about the cubic minimum charge that we put in and was really effective for us late in 2017, all of 2018 and then it's just become a part of the way that we do business and we think it's just very effective in terms of making sure that some of the freight that we were handling was price right, but also just the overall approach that we have with customer accounts. We've had several different optimization projects that we have worked on and implemented in business, many of those in the linehaul either optimization or enable productivity improvements and raw load average. We also have some improvements in the visibility in our city operation to help us better manage route and labor and appointment setting, there are so many things that really help us to be more efficient there and there's more of those to come. And then the -- probably the last one we've talked about already, but they LTL transactional shipments and what that has helped us with in terms of making 2020 honestly a tolerable environment, I guess even with this imbalance, because we've been able to address that with these transactional shipments that you know they're lane based, day of the week decisions that individually we know they are incrementally profitable and help us with efficiencies. So all of that comes together. Well, I think I've never seen a time in our company history, where the data-driven approach and the insights based approach that we use in sales and customer management, along with our yield strategies is informed and working well with the needs of the operations to really produce a great result for our shareholders, but also for our customers and that's pretty exciting backdrop, when you think about not only 2021, but any future year for our company.

Jack Atkins -- Stephens -- Analyst

Okay. That makes sense. Maybe if I could squeeze one more in, Judy, when I think about capital allocation, you guys have a very strong balance sheet, cash flow is very healthy and you're trading had a such a significant discount to your nonunion peers and even with the hypothetical valuation of the UPS Freight business that TFI just bought, if you look at the stock reaction there, so why not get more aggressive on the buyback, I know you just put that new buyback authorization in place, but why not signal a pretty aggressive buyback given the value that you guys are really generating in this business year and it's just to your point, with the last comment around the improved operating performance of the business cycle-to-cycle.

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

Yeah. That is a great question and certainly we look for those opportunities and are very focused on improving shareholder value and to your point, we do feel like that there is a greater valuation out there that we can achieve. Our focus with the share buyback in the past has been to offset the dilutive effect of a restricted share unit program that we have on the compensation side and that's worked to effectively do that. And I'll tell you my preference for improving shareholder value over the long term is to continue to find those projects, those opportunities to really enhance the results of the company with above-average returns and we see a lot of those we refer to those as some of our Tier-1 technology projects and we've got a long list and we've got our team very focused on doing that. And so our resources that we're using that David highlighted in his opening comments about the capital are all evaluated through a return on capital employed lens as well.

So we know we have that authorization there and we can use it, but we weigh that or balance that against other opportunities that we have in the business and the other thing I'll say is that although there is not anything I want to point to that's on the near-term horizon, we stay very active and looking at opportunities, particularly on the Asset-Light side for acquisition, we're evaluating our options there. Some of the evaluations, I think are richer. We also are involved in different channels, where we can see start-ups and other opportunities I think to enhance our technology and our connections that we have with customers and capacity providers. So, there is a lot that goes into the mix on our shareholder value strategy, but we do see great opportunities.

Jack Atkins -- Stephens -- Analyst

Great. Thank you.

David Humphrey -- Vice President of Investor Relations

Thanks a lot, Jack. Appreciate it, man.

Operator

Our next question comes from the line of Scott Group with Wolfe Research. Please proceed with your question.

Scott Group -- Wolfe Research -- Analyst

Hey, thanks. Good morning, guys. So I want to ask about the margins in the first quarter. So you talk about typically they fall from fourth to first 350 to 400 basis points if tonnage is going to be a lot better than typical seasonality, should we apply the same logic to margins and I guess the crux of the question is if they fall in that range, right, they are down year-over-year, which I guess would just be surprising given the the revenue environment. So any thoughts there.

David R. Cobb -- Vice President, Chief Financial Officer

Yeah. I mean we're certainly going to strive to beat that historical sequential change. But I'll just point to that, what we did, I guess a base, if you will, for that sequential comparison the fourth quarter of 2020 was really -- was one of our strongest fourth quarters in our Company's history. So that gives you a good, but a tougher comparison than typical, I guess and so that's one aspect and the -- I think it's what we called out this $8.5 million property gain and I think it's fair to maybe set that aside when do you think about sort of the normal operating results, but last year had a $2.2 million gain as well. But you know I think you know there is some good momentum, I think that's helpful. I think there is a number of uncertainties to deal with, as we usually have. But that's about all the color I could probably provide at this time other than kind of the historical movement that we see there.

Scott Group -- Wolfe Research -- Analyst

Okay. And then just a few sort of specific things around fourth quarter, first quarter. Can you say with the profit sharing, were you accruing for this all last year or was there any sort of catch-up accrual in the fourth quarter and then what's it -- you've got one less operating day in the first quarter, is there a good rule of thumb what that typically cost you and then the last sort of thing, with the U-Pack strength, is that a better or lower margin business relative to Asset-Based? So a few little points there. Thank you.

David R. Cobb -- Vice President, Chief Financial Officer

Yeah. I would just say on the -- we had a number of questions there. One of those around -- around the daily revenue, I mean just think about our daily revenue, maybe apply some incremental profit on that and that would be the the potential miss of profit that -- versus last year that we would not have there I guess. The other around U-Pack profitability, I would just say that it's helpful, incremental to our system, it's a good business. We -- that's why we do it and so and lastly the...

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

Union profit sharing -- the timing.

David R. Cobb -- Vice President, Chief Financial Officer

Union profit sharing, so -- yeah that and just -- and think about our really the first quarter of last year, if you're thinking about that comparison to this year. In March, we were -- we had the effect of the pandemic, so by the time we were closing the books on the first quarter, it was -- it was a quite uncertain timing -- time to I think about the rest of the year and so, there were a number of incentive accruals and things like that that were at lower levels we'll just say given the perspective that we had at that time. And so, yeah, that would be an element of cost that in this year, we would hopefully wouldn't have or we would have better performance and have more of a normal accrual-type arrangement, I guess in the first quarter.

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

And -- Just to add to that, I mean, that cost would have fallen in the second half, because if you think about where we ended the first quarter and then the second quarter, the impact of the pandemic, we just -- we just would not have known or had the visibility on that, so it would have fallen in the second half.

David Humphrey -- Vice President of Investor Relations

Thanks a lot, Scott. Appreciate you, man.

Scott Group -- Wolfe Research -- Analyst

Okay. Thank you, guys.

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

Thanks.

Operator

Our next question comes from the line of Ken Hoexter with Bank of America. Please proceed with your question.

Ken Hoexter -- Bank of America -- Analyst

Hey, Judy, David, and Dave. Following up on Todd's question on mix a little earlier, your thoughts on the market obviously now more rational with TFI buying UPS Freight and YRC kind of moving a little more regionally announced yesterday, it's such a good market you've been at this for a while, is the addressable market shifting permanently kind of with e-commerce or Judy, you mentioned kind of IP coming back and your thoughts on that. Maybe just talk about that in light of the competitive environment that's changing with it.

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

Well, I do think that the market has grown. I don't know that I have at the -- at my hand what the market size is, but I do think that the addressable LTL market has grown and it is because of e-commerce, if that's the case. And we've been -- when I look back at 2020 and our -- the impact of e-commerce on our business and our ability to be nimble and handle it, I'm just glad for that. I'm glad for the business, but I'm also glad for how well that it fit in. We have many customers that we've always done those kinds of residential deliveries, not always but in modern times, you know we've done those residential deliveries. But we were really challenged with some higher percentage increases earlier in the year. I think at one point, we had a 48% increase in that business, and I'm talking about residential delivery and we were able to navigate through that period and handle that well, so I credit our operations team for being able to do that well and just shows the adaptability and flexibility of the network in different circumstances and so and that's business that we're -- we like, where we've had some efficiencies around that business that may not always be there, one of those that is created by the fact that people don't really want things delivered inside their homes and so there some efficiencies, we've been able to do threshold or curbside-type delivery of those items, so. But we enjoy that business, we're glad for it, it works well, also to be in the U-Pack Helpful Goods Moving business, all of that's residential and we've got an expertise in that area and I think it has grown the LTL opportunity.

Ken Hoexter -- Bank of America -- Analyst

So David, you mentioned capex, slowing capex a little earlier, but you mentioned also that the age of the fleet is still OK, despite pausing on the repurchasing. Can you maybe talk a little bit about that and need to catch up.

David R. Cobb -- Vice President, Chief Financial Officer

Yeah. We target our road tractors to be in kind of the 18-month to 24-month average age and I think that's kind of where we landed -- where we are right now, we're actually a little below, we're just -- in the last quarter, we were about about 18 months, yeah, so I guess that's about right. I'm sorry, what was -- what was rest of your question there.

Ken Hoexter -- Bank of America -- Analyst

No, so I was just -- I was going to say because you mentioned you slowed the capex, so I was going to -- I asked if there was a need to catch up if you had slowed.

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

Kenneth, it really wasn't a dramatic slowdown, it was very, very minor in the grand scheme. So, but we do have some dollars that have port over into 2021.

David R. Cobb -- Vice President, Chief Financial Officer

Ken, we slowed some elements of capex down and I think on the equipment, I think we bought like 5% less than what we were to plan on buying anyway in 2020.

David Humphrey -- Vice President of Investor Relations

Hey, thanks a lot man. I appreciate you being on the call.

Ken Hoexter -- Bank of America -- Analyst

Okay. All right. Thanks.

Operator

Our next question comes from the line of Stephanie Benjamin with Truist. Please proceed with your question.

Stephanie Benjamin -- Truist -- Analyst

Hi, good morning everybody.

David Humphrey -- Vice President of Investor Relations

Good morning, Steph.

Stephanie Benjamin -- Truist -- Analyst

I just wanted to talk a little bit on the Asset-Light business, maybe you could speak a little bit, I think it's pretty well reported just the strength we're seeing in that, the spot environment demand in the truckload side, but have you seen, either in the fourth quarter or January thus far, any benefit from any kind of vaccine rollout or any kind of business tied to the vaccine rollout on your Asset-Light side.

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

Well, we have experienced some increase that relates to -- let's just call it vaccine-related type shipments for loads, but we're not actually involved in the distribution of the vaccine itself in either fourth quarter or in the first quarter so far. And so it's not a major influence, I'd say in the expedite trends that we've experienced that's been more related to, I think just the coming back online, manufacturing, plants, and that would include auto and then just kind of the impact of overall tight capacity in the market, just really is helpful whenever you've got that sought after capacity through the owner-operators that the expedite network has, so.

Stephanie Benjamin -- Truist -- Analyst

Got it. Thank you. And continuing on the Asset-Light side, you've mentioned in the past your desire to really expand the segment of your business, and even cross-sell with some existing LTL customers. I can imagine 2020 being a pretty challenging year for your customers and yourself, so maybe if you look to this year in 2021, do you think that the opportunity to accelerate those cross-selling opportunities or really double down on that strategy might be even larger, any color there would be helpful. Thanks.

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

Yes. I really do see that and the fourth quarter, we had really good momentum. I highlighted that in my opening comments about the movement that we've had in terms of overall our Asset-Light business, as a percent of the total to 35 and the robust growth that we saw there in the fourth quarter and then also reported in our 8-K this morning for January. We have our customer management leadership team is very I think data driven insights gathering and using the information that we have about our existing customers and then also accessing new customers in different ways that allows us to really see the opportunity, think about how we can fit well into it and then get into the participation and we've got some better strategies there I think that are going to enable us and then also, Danny Loe's leadership that we have over our Asset-Light operations has really brought a focus of making sure that our carriers are treated or handled a lot like our customers and making sure that we're working with their preferences that we know what works well for them that can be matched up with other customer opportunities and I think that later in the year after some investments we'll make in the early part of the year -- we'll see some acceleration in our overall growth results as a result of that strategy as well. So we're encouraged by -- also by are managed just a number of customers and the overall growth that we've had there. I think the growth in that area is in the near 50% this last year and that's customers coming to us, saying can you manage this end-to-end or whether it's a special project or product launch or something like that, but we're managing beyond the asset base assets that we have and we're bringing together some integrated solutions that in particular in 2020 have really worked well. So thank you for that question.

David Humphrey -- Vice President of Investor Relations

Thanks, Stephanie. Appreciate that. I think we've got time for one more call or one more question.

Operator

Thank you. Our last question comes from the line of Jordan Alliger with Goldman Sachs. Please proceed with your question.

Jordan Alliger -- Goldman Sachs -- Analyst

Yeah. Hi, everyone.

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

Hi, Jordan.

Jordan Alliger -- Goldman Sachs -- Analyst

Hi. So just a question with price being what it is fairly -- pretty firm in the LTL space and I assume some of the headwinds around fuel dissipating, as we move forward is sort of the thought that that 4% or so total revenue per hundredweight that you're seeing in January, has that sort of a rough trend line we could think, as it flips from a headwind to a tailwind on that level. Thanks.

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

Well, Jordan, we really don't give guidance in that area, I mean I just feel like that you know us and you know us for a long time, we're going to do the best job to bring about all those elements of yield management and the deployment of yield strategies in order to advance our ability to grow with customers, but also at the same time to make sure we get paid for the value that we provide and what I'd say is the opportunity to do that particularly when business volumes are maybe strengthening or the economy is strengthening and we're seeing some of our core customers come back online, I mean the opportunity is going to be better for that in 2021 than it was trying to navigate through some of those yeah, I guess those deferred and contract price increase discussions in this last year. So we're encouraged by the backdrop that we have, but I'd rather not comment on what we think the exact percentages, because honestly we don't know, but I do know this, we're going to work to make sure that we have the best result there and also grow the company.

Jordan Alliger -- Goldman Sachs -- Analyst

Great. No, that makes sense. Thank you so much.

David Humphrey -- Vice President of Investor Relations

Okay. Well, listen, thanks a lot, Jordan. And Jennifer, I believe that concludes our call. We appreciate your interest in ArcBest and our call has ended. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 60 minutes

Call participants:

David Humphrey -- Vice President of Investor Relations

Judy R. McReynolds -- Chairman, President and Chief Executive Officer

David R. Cobb -- Vice President, Chief Financial Officer

Jason Seidl -- Cowen -- Analyst

Chris Wetherbee -- Citi -- Analyst

David Ross -- Stifel -- Analyst

Todd Fowler -- KeyBanc Capital Markets -- Analyst

Jack Atkins -- Stephens -- Analyst

Scott Group -- Wolfe Research -- Analyst

Ken Hoexter -- Bank of America -- Analyst

Stephanie Benjamin -- Truist -- Analyst

Jordan Alliger -- Goldman Sachs -- Analyst

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