David Humphrey - VP, IR Judy McReynolds - Chairman, President & CEO David Cobb - VP & CFO

Amit Mehrotra - Deutsche Bank AG Christian Wetherbee - Citigroup Albert Delco - Stephens Inc. Todd Fowler - KeyBanc Capital Markets David Ross - Stifel, Nicolaus & Company Jason Seidl - Cowen and Company Ariel Rosa - Bank of America Merrill Lynch

Welcome to ArcBest Second Quarter 2017 Earnings Conference Call. We will have a short discussion of the second quarter results and then we'll open it up for a question-and-answer period.

Our presentation this morning will be done by Ms. Judy McReynolds, Chairman, President and Chief Executive Officer of ArcBest; and Mr.

David Cobb, Vice President, Chief Financial Officer of ArcBest. 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 we all know, forward-looking statements, by their very nature, are subject to uncertainties and risk.

For a more complete discussion of factors that could affect the company's future results, please refer to Forward-Looking Statements section of the company's earnings press release and the company's most recent SEC public filings. In order to provide meaningful comparisons, certain information discussed in this conference call includes non-GAAP financial measures as outlined and described in the tables in our earnings press release.

we'll now begin with Ms. McReynolds.

Thank you, David and good morning, everyone. We were pleased to report improved second quarter results.

Economic strength, shipment growth and improved pricing for truck load services underpin the quarter, leading to both revenue and profitability growth. Demand for expedited services was also notably strong.

As a logistics company, our strategy to capture more of the total transportation and logistics market twofold supply-chain solutions and a more simplified customer experience is indeed bearing fruit. By offering both Asset-Based and Asset-Light solutions, we either have or can secure the right kind of capacity depending on what our customers require at a given time.

This matter through our customers and puts us in a position to an business that we previously could not access and to do so profitably. While this strategy has been in place for some time, I feel confident to the investments we've made in technology and people and in solidifying strong relationships with our customers and providers are paying off.

At the same time, we continue to monitor costs across the organization and reduce those whenever appropriate. As far as the overall economy, we expected to see some improvement in the operating environment in the spring and summer and that certainly has occurred.

Activity in the manufacturing sector improved and in our industry, from our perspective, the truckload market tighten as the quarter progressed. After analysis of our changing for a profile, on June 30, we announced that we will apply pricing for less than truckload shipments with minimum charges.

This would designed to ensure that we're appropriately compensated for it to be dominant shipments that have deliberated our network. Many of you have asked us if this is directly related to a going e-commerce phenomenon, as we noted, that we've seen a large increase in residential deliveries this year, that is one factor that we consider but another significant trend is the overall growth and ongoing profile shift of bulk shipments across the entire supply chain.

In addition, many shipping and logistics solution now include unique requirement. So the need for the logical, complement repricing to the standard rate base classification system is in fact quite broad.

As we noted in our press release, we currently captured data on more than 90% of the freight shift in our Asset-Based network. By August 1, the effective date for this pricing initiative static to matures will be installed in the majority for Asset-Based distribution centers in order to obtain dimensions on the remaining shipments and to validate the dimensional data we currently have.

We believe this dimensional pricing initiative will more adequately compensate our best for the value we offer our customers with handling these types of shipments. The effects of our January 1, the organization also gained momentum.

The cost that are associated with our enhanced market approach are in line with our original expectations. Our financial flexibility, one of the pillars we outlined to you in our Investor Day that makes us well-positioned for growth, also remains solid.

Earlier this month, be completed the amendment and extension of our credit agreement for another 5 years with our current lender group. The new agreement increases the amount of revolving credit facility to $200 million from $150 million and raises the revolver to $100 million from $75 million.

This is in addition to this year's amendment and extension of our receivable securitization through April 2020. We value the solid relationships we have with our lender group and appreciate their confidence in the ArcBest management team and it in our ability to execute on behalf of shareholders.

And now, I'll discuss more details about our service offerings. Second quarter revenue for ArcBest Asset-Based LTL services improved versus last year related to increases in shipment counts, better years and higher average revenue per shipment.

The increase in revenue per hundredweight resulted from an emphasis on pricing initiatives during the quarter designed to improve account profitability across our Asset-Based network. This pricing metric benefited from a year-over-year increase in fuel surcharge and shipment profile changes, including reductions in average weight per shipment.

The recent pricing environment improves from previous quarters. We have experienced good retention of our May 22 LTL generating increase and we continue to have success in securing cycle price increases on accounts not meeting our profitability threshold.

We're having success in adding new business at pricing levels that are satisfactory to us and we have set higher margins thresholds for operationally inefficient segments. During the second quarter, we continued to experience Asset-Based shipment growth that exceeded the rate of the increase in freight tonnage.

The significant growth in e-commerce and on U-Pack residential delivery shipments that begin late last year continued in the most recent quarter. This contributor to the year-over-year reduction in total weight per shipment that we experienced.

And handling of these smaller shipments continued to impact doc entry delivery expense and additional cartage costs were incurred in order to meet our service commitments. As we work to improve shipment handling productivity in our Asset-Based network, we're also making progress on IT investments that will improve network efficiencies and reduce handling costs.

These include, replacement of handheld and tablet technology utilized by our touch labor employees as well as upgrades to our dock, Street and line-haul optimization systems. During the quarter, expenses related to our Asset-Based linehaul operation continued to trend lower as this area benefited from reductions in total line miles and the empty miles and improvements in trailer load factor.

Reversing a trend, we've seen in recent quarters, nonunion Asset-Based healthcare cost decreased during the second quarter versus the same period last year by over 10%. As I discussed in the past, we have a strong corporate commitment to help programs, emphasizing education, healthy lifestyles, provision, periodic streaming and regular physician visits.

It is good to see the benefits of those initiatives began to reveal themselves. During the second quarter, ArcBest Asset-Light business experienced revenue growth and significant improvement in operating income.

This was primarily related to strong demand for expedited services, an incremental business associated with our dedicated truckload services that ArcBest acquired last September. Net revenue margins in this business were down slightly compared to last year's second quarter, lower by only 40 basis points.

We were pleased with the minimal decline in this profitability measure relative to what many of our peer companies have reported. On a sequential basis, compared to first quarter, Asset-Light net revenue margins improved 50 basis points.

The growth in our expedite business was a result of an increase in shipments combined with greater average shipment revenue. Customer demand for expedited service was particularly high in the automotive and manufacturing market verticals.

Our dedicated business benefited from an improved operating environment and positive customer outlook. Our dedicated truckload offering is an important element of the Asset-Light services we offer our customers.

Slightly lower revenue for ArcBest truckload services was driven by reduced shipment counts, offset by a double-digit increase in truckload revenue per shipment, related to increases in revenue from link to vault. Improve truckload market conditions are positively contributing to increases in shipment revenue and we continue to capitalize on opportunities for offering more of the services to our account base.

That is not at a level of last year second quarter when we experience positive market conditions, the net revenue margin percent on ArcBest international business increased sequentially for the third quarter in a row on flat revenue. Versus last year, FleetNet's reduced second quarter revenue was driven by fewer total events associated with less road side activity and changes in customer mix.

Despite the decline in revenue, second quarter operating income improved as a result of higher net revenue per event and improved labor efficiencies. And now, turn it over to David Cobb for a discussion of the earnings results.

Thank you, Judy and good morning, everyone. That may begin with some consolidated statistics on ArcBest.

Second quarter 2017 consolidated revenues were $720 million compared to $676 million and last year's second quarter, an increase of 6.5%. On a GAAP basis, we had second quarter 2017 net income of $0.60 per diluted share compared to net income of $0.39 per diluted share last year.

As detailed in the non-GAAP rents reconciliation table in this morning's earnings release, the adjusted second quarter 2017 net income was $0.57 per share compared to $0.38 in the same period of 2016. The adjustments taken in second quarter 2017 included $300,000 pretax or $0.01 per share after-tax enhanced market approach as in January.

During the second half of 2017, we currently expect to incur $1 million of additional restructuring cost related to our corporate reorganization. Our non-GAAP net income also included an adjustment of $1.2 million or $0.04 per share related to a tax benefit we received for the best of share-based compensation.

We're now required to recognize the tax changes in restricted stock when they are settled. For us it typically occurs in the second quarter.

ArcBest second quarter effective tax rate is 34.6% which included the tax benefit associated with the share-based compensation. This morning's earnings release shows that tax rates reconciliation that results in second quarter and year-to-date non-GAAP tax rate of 40% to 41% which is in the full range we expected and 2017 and at the current tax laws.

Due to previously mentioned the reduction in asset-based nonunion healthcare costs, on a corporate-wide basis, second quarter health care cost was below the same period last year by approximately $1.4 million. As claim was your slight increase in average cost per claim.

As a part of our stock repurchase program in the second quarter, we bought 195,000 shares for a total amount of $3.6 million. Under our existing repurchase program we have approximately $34 million of purchase availability.

Earlier this year, we provided an estimated range of our 2017 net capital expenditures of $145 million to $107 million, based on what we stand to the first half of the year and our expectations for the remainder of the year, we're nearing that range to $150 mil to $165 million. So far this year, net capital expenditures totaled $63 million which includes $24 million of net cash expenditures and $39 million of finance equipment.

We have been on accelerating schedule of taking delivery of the new Asset-Based tractor's we're purchasing this year. We expect to complete the delivery of those and look forward to the positive contribution they will make in reducing average fleet age including fuel economy and lower the equipment maintenance costs.

We had in the second quarter with unrestricted cash and short term investments of $157 million. The balance of our available resources under our recently credit revolver receivable securitization agreement according features, our total liquidity currently equals for $473 million.

Our total debt at the end of the second quarter was $257 million including the $70 million from the credit revolver, the $45 million borrowed in our receivable securitization and $142 million of notes payable and capital leases, primarily in equipment for Asset-Based operation. Positive interest rate on all of our debt is 2.5% and full details of our GAAP cash flow are included in our earnings press release.

ArcBest reported asset-based second quarter revenue of $515 million, a per day increase of 6.7% compared to last year. We had 63.5 working days in second quarter of 2017 compared to 64 working days in last year's second quarter.

Asset-Based quarterly tonnage per day was flat compared to last year's second quarter. In second quarter 2017 by month asset-based daily tonnage versus the same period last year increase in April by 0.7% increased to 5% in May and decreased by 1% in June.

June LTL tonnage was positive and the decline in total tonnage was associated with deliberate reductions we made to the asset-based truckload related spot shipments that we. Second quarter total shipments per day increase at a slower pace than in recent quarters.

They were up by 4.4% compared to second quarter 2016. Total Asset-Based weight per shipment was 1,226 pounds a 4.1% decrease from last year's second quarter and 1.5% sequentially compared to first quarter of 2017.

Average length of haul on Asset-Based shipments increased 2% to 2,038 miles compared to 1,018 miles in the second quarter of last year. On a sequential basis versus first quarter length of haul was up a little less than 1%.

Second quarter total billed revenue per hundredweight on Asset-Based shipments was $30.94, an increase of 6.1% compared to the second quarter of last year. Year-over-year comparison to this yield figure were positively impacted by higher fuel surcharge and changes in shipment profile and business mix.

Excluding fuel surcharge second quarter billed revenue per hundredweight and Asset-Based LTL Freight at a percentage increase in the mid-single-digits. We secured an average 3.5% increase on asset-based customer contract renewals during the quarter.

That average increase was 60 basis points higher than last year's second quarter and lower on a sequential basis. In total, our Asset-Light businesses had revenue of $212 million, an 8.3% increase over last year second quarter.

On an adjusted basis, second quarter operating income from the services totaled $6.7 million and adjusted EBITDA totaled $10.2 million compared to a adjusted operating income of $2.8 million and adjusted EBITDA of $6.5 million in the prior year quarter. As we normally do, we're reporting to last statistics for a total of Asset-Based business.

Those metrics are and somewhat by intentional reductions we have made it our Asset-Based truckload-related business. During the summer, our Asset-Based moving business seasonally increases.

We purposely manage these truckload consumer moving shipments maintaining their corporate level with ABF Freight equipment capacity required to adequately serve our traditional LTL customers. Also, the recent success we've had an improving the line-haul efficiency and lowering our line-haul ET cost as we reduced our need for Asset-Based truckload spot business, our strategic reduction of both of these kinds of truckload-rated shipments this is impacted July statistics on our total business trends.

Just want to clarify that the trends in our July LTL business are positive and reflects stronger growth and indicated by the following statistics for our total Asset-Based business. Based on month-to-date results, versus last year we currently expect full month July business levels to be as follows, total daily billed revenues to increase approximately 3%, a percentage increase in LTL daily billed revenue is expected to be in the high-single digits, while Asset-Based truckload-graded revenue is expected to be down significantly by double digits.

Total tonnage per day to decrease approximately 3% for the percentage of LTL increasing in the low-single digits. On a sequential basis versus June, July LTL tonnage trends are above the historical average.

Shipment counts to increase approximately 4%, the recent trend we've seen for several quarters of our average weight per shipment declining on a year-over-year basis continues, but at a more moderate level on the LTL basis. July LTL weight per shipment is expected to be down in the low-single digits.

July's average weight per shipment on all Asset-Based business decline further because of the impact of the changes in asb [ph] truckload rated changed. Total revenue per hundredweight to increase approximately 6%, this Asset-Based yield metric is being positively impacted by a slightly higher fuel surcharges and changes in freight profile and account mix.

Since the implementation of the current labor contract which provides from the union employees wage rate to increase on July 1 and held pension in the August 1, our sequential change in ABF Freight's operating ratio on the third quarter versus the second quarter has been roughly flat, ranging from a 10 basis point decrease in 2014 to an increase of 40 basis points in 2015. Based on yesterday's result we can't expect July 2017 revenue for our Asset-Light businesses to increase by approximately 13% versus last year.

Growth in the logistics portion of the Asset-Light business is being driven by increasingly for expedited services and dedicated truckload revenue in this year due to the acquisition in September 2016. In July, fleet is experiencing slight year-over-year revenue declines as the comparison against the impact of changes in customer mix during last year's second quarter.

Consistent with the first 3 quarters of this year, the quarterly loss reported in other limitations line for the remainder of 2017 is expected to approximately $4 million. This includes the technology in innovations and investments we have previously discussed.

As we mentioned last quarter, our 2017 interest expense net of interest income is expected total of approximately $4.5 million for the year. This net interest expense estimate does not include changes in cash value which are reported in the other net line of our income statement which we had income of $400,000 in the recent quarter.

We consider changes in cash is are undervalued to be non-operating items and therefore, excluded from our non-GAAP presentation. Now I'll turn it over to Judy for some closing comments.

Thank you, David. As we look to the second half of the year, we're encouraged that the operating environment should remain favorable, based on various indicators we track.

We continue to have a number of initiatives that we're working on to ensure an excellent customer experience, cost control and adaptability to the involved the market. Our sales team has been unified under the ArcBest organization and after 6 months of this optimized structure, we're receiving positive feedback from customers about the trusted adviser relationships we provide to help solve their conflict supply-chain issues.

By unifying all of our Asset-Light solutions under 1 umbrella, we've also made it easier for customers and our people to understand a full scope of logistics solutions available at ArcBest. There're also a number of highlights from the quarter worth mentioning.

In April, we announced that we moved up to three spots to number 18 on transport topics top brokerage firms of 2017. Also in April, 4 of our ABS service centers earn the presidents quality award for their achievements in 2016, Grand Island Nebraska, Long Beach California, Texas and lower rock Arkansas, we congratulate the people at each of these local oceans for their hard work and dedication to excellent customer service, embodying the skill and the will every day.

And in June we announced that we've moved up 26 parts on the Fortune 1000 the annual ranking by the Fortune magazine of the 1000 largest U.S. companies.

And David, I think we're ready to take some questions now.

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

I want to ask about pricing, but I'd like to start with tonnage and shipment trends if that's okay. The shipment growth was great.

I just would've thought maybe with the acceleration we saw in industrial production we would've seen some follow through on tonnage, if you could just talk about that maybe the mix between e-commerce and the traditional industrial freight? And maybe what we could expect -- and then in terms of the relationship between the 2, if you can just also help us on how that shifting mix of lower weight per shipment can impact the company's durability sort of observe the fixed cost in the business?

Thanks. Well, if you look at our business on a shipment growth basis, we've seen some I think some pretty good trends, as you mentioned, contributing to that is the growth in some e-commerce shipments also this residential delivery issue that we identified in the first quarter actually started maybe last November, December, is continuing to impact our results.

We had over 40% increase in residential deliveries, not related to our moving business in the second quarter as well. And so with our mix of customers right now, we're continuing to see our growth is smaller shipments and again, we don't necessarily think that, that is bad, we just need to be sure that we're working through that with our customers and identifying situations where we need to improve the value that for receiving.

And so we have been taking some actions, including our action that for going to be putting in place that we're referring to as cubic minimum charges, the CMC on August 1study to address that. We will observe that the tonnage trends that we've seen from some of the competitors, certainly ours is less of an increase of that, but we really feel good about the pipeline our business activity is good.

The conversations that we're having with customers as good. I think it just speaks to the different mix of business that we have right now and that is certainly being addressed from of value and pricing standpoint to the extent that it needs to be.

Okay, that's really helpful. And just one follow-up on the pricing front, a couple of things, one is that of just try to understand, the yield obviously is very strong.

And you talked about the pricing impact on that, but my understanding is when the weight per shipment comes down, the yield can kind of optically look higher, so I'm just trying to decide for in the quarter that kind of the same-store pricing if you will? And what that mix impact was?

And as you guys -- as you do this new pricing strategy which sounds really good and then makes a lot of sense, can you just talk to us about how much of that new strategy will be applied across the entire freight that you guys handle? And just get a sense of the what the effected impact of that would be based on customers different pricing options that the customers have?

Yes. We feel good about the -- what I characterize as a pure pricing increase that we received on the LTL shipments.

I think David it's mid-single digits, it's what we would characterize that. And so you can also look to our deferred pricing increases which I think about 3.5% which is year-over-year comparison.

And that's an indication on our most price-sensitive accounts. So just outside some of the actions that we've taken, we feel good about where we're landing there.

When you look towards August 1 in the space-based pricing that we're putting into place, we're in the process of having conversations with the customers that are affected by that, our sales teams are very well-educated on the topic and having good conversations, some customers have a greater portion of their shipments and are affected by this change, others have lesser than effect. And so it's something that we're going to be monitoring and we're going to be watching it unfold, but is to say, that we're taking this initiative because that we do believe that it will improve our revenue and profitability.

We're going to see how this unfolds in August and as we go to the rest of the year and we're very encouraged by the conversations that we're having with customers so far.

This is Ian on for Ravi Shanker. So it looks like your revenue growth has accelerated from your day-to-day updates.

And it sounds like that's mostly results your choice to reduce the LTL business, so it was wondering, when did you make this decision whether at sometime in June?

Well, it did -- it was I think during the month of June that we accelerated our efforts to reduce both shipments. And so you do see some affect of that in June, particularly towards the end of June.

Okay. Got it.

So this will continue to impact your Asset-Based results for the rest of the year?

Well, no, not necessarily. What we're reporting on at this point is just with what we're seeing in July and again, one element of this relates to our U-Pack moving shipments.

And that's a seasonal business that really is concentrated in the summer months. And so and it's also the case that based on how we approach that, we can encourage additional shipments or we can purposely manage those down.

And so it's definitely not a permanent decision, definitely not.

Okay. Okay.

And then my second question is, what is the reason our customer feedbacked on your pricing initiative?

It's actually gone well. We've had our sales team out having conversations with customers.

They are working through these items with them -- directly with them. And some of the customers had actually expressed appreciation of the simplicity of the CMC wavetable and the fact that it will help ensure accurate quotes in our to avoid kind of RVing and research folks coming in after the fact and adjusting the pricing based on what actually that shipment -- the profile was.

So anyway, we're working through this. Another area that is coming up as customers that use TMS systems, wanting to make sure that these changes are adequately reflected in those systems.

And to the extent that there's difficulty there, we're able to work through what you call an API interface and application programming interfaces what API stands for. And that really can be utilized in helping with this transition while they're getting their TMS system updated.

So that's something that's come up and some of the articles that I've seen written. And we just have more than one way to address that in the meantime.

I wanted to ask a little bit more about the pricing initiatives, I guess it starts on August 1 and maybe if you could put some numbers around what you think the impact might be to the overall Asset-Based business? And then also thinking about in the context of the sequential ORM improvement I think you mentioned typically about flattish from Q2 to 3Q, you're going to have maybe couple of months this dynamic change in the third quarter I'm curious how that might have an impact on historical standards?

Well, as we said a couple different times, when we announced in and then I think I mentioned it already, we're -- we would be taking this action if he didn't think it was going to positively effect our revenue and our profitability. What we're actually not taking that step further and giving any kind of guidance surrounding that, because it's a situation where you're going to, individual conversations with customers about how this impacts them and although, we feel very strongly about this initiative and that it should be deployed within these accounts, we want to allow the implementation of it and we'd like to see the results coming and then I think it will be more obvious how that actually affects our numbers.

The OR that you mentioned between second and third quarter, as David mentioned, is typically flattish or in the last two years anyway and those 2 years are really the best comparison because we had a union contract change to apply our wage increase on July 1 rather than April. So that's just historical information that we provided to you.

But David, I don't know if you want to mention a few of the other items that perhaps people should be keeping in mind relative to that.

Right, this is a good opportunity to kind of highlight some of those things. One of those is the fewer working days that we will have in the third quarter.

We will have 62.5 working days in the third quarter this year versus the 63.5 that we had in this year's second quarter. So that's an impact there as you have less revenue for the quarter as a whole to cover normal cost.

Also, Judy mentioned the region increased, that's effective July 1 this year. This is the last year of our 5-year contract in the rate increase this year on wages is 2.5% versus in previous years, that was 2%.

There's other things that could impact, I think Chris you mentioned, the CMC and we we're expecting that to be positive impact to our business overall, other yield initiatives that we're doing that are reflective in our second quarter results for instance could be a positive impact as well. So I think there's several gives and takes to that sequential comparison to weigh in all this.

The timing of the GRIs is I think the last one that I would offer, just in this year we had a GRI along with the other yield initiatives that we did, we had a GRI in May between second effective date and so the timing can somewhat impact that as well.

Okay. That’s helpful to way out on those dynamics, thank you.

The other sort of follow-up I have which is you are going back to some of the restructuring efforts you took again in the last year taking implementation beginning of this year. If you can give me a sense may be its sort of the progress on the second quarter, how much of that sort of benefit -- you realize -- I think you mentioned $15 million previously just want to get it for the full year, trying to get a sense of maybe how that kind of played out in the second quarter?

And how to think about that in the back half.

Well, there was about $10 million or so of that really related to I think kind of the wage and benefit side of things and perhaps the other 5 related to write offs of different systems and that sort of thing. And so when I stepped back and think about that and look at the second quarter, I think the second quarter contained its representative parts of that annual savings is what I'd say and we're actually pleased with how that's gone and it certainly contributed to the results that you see for both the Asset-Light business and the Asset-Based business.

Okay, so proportional is the way to think about it for the rest of the year.

Yes.

Yes, I think the other thing to keep in mind is that we put some of those cost savings in place at the beginning of November and so those were, in other words, it's not -- you have to consider that when you get back to the fourth quarter in terms of your modeling.

For David, you talked about the July tonnage and I know there was for the total Asset-Based and then for LPL specifically and you made a comment about seeing sequential trends from June to July, can you just talk about that in more detail, I think there's a little concerned in the market that things have slowed down in July despite some decent economic data point. I just want to make sure that it's clear what we're really you are seeing in the business today.

Yes, no, I think that's right. I understand what you're referring to and for us, I mean July on our LTL rated business, sequentially from June, was actually on the better end of the historical averages.

And so that's moderate, so you know...

But you give a number and put into context, sequentially, it's usually up or down 1% and it was actually X or Y?

Brad, it's David. I'll tell you what we do is the guy that looks at it for us he looks backs in history several years and just looking it kind of where it ranks in that area, it's above average.

So we've had more historical months that had less of an increase to what we're seeing. So that's was what the basis of that comment.

Okay. And then maybe, Judy.

Good improvement on the Asset-Light side here. Just curious, what you think is this sort of momentum that's building and we should expect and I know you guys don't provide guidance, but sequential improvement in I guess FleetNet, it sounds like things are getting better, but also on our ArcBest side as well.

In the back half of the year, is it mostly related to tightening truckload capacity? Or what other factors should we attribute to things picking up or maybe slowing down?

Well, one thing and this is just specific to the second quarter that I'll mention is, our visibility on what's happening in the market is pretty good, because we have the Asset-Based. What's going on there?

We have kind of the volume truckload business that we see on the market trends and then have the X business that we can see what the activity is there. And then just the truckload brokerage business as well.

And then now, we're adequately adding the dedicated markets to that. And so what that does for us from a let's just call it a yield-management basis, is it really is informative and enables us to consider how best to approach the market.

And we had conversations about the tightening of the capacity towards the end of June and we reacted to that earlier in the month of June. And I think that allowed us to have less of a margin compression than some of the Asset-Light competitors that we have out there.

And again, I think it stems from the different services that we offer and our insight into what's happening with those markets and availability of capacity. And so -- and that's something I think that perhaps is unique to our company.

And so we're going to be keeping that in mind the only other thing I'd say, we need to make more progress on our truckload growth because within our customer base, there is a vast opportunity there and we need to take advantage of that. So what I'm hopeful of is that as we go through the rest of the year, the markets really tightened at the end of June, maybe it's a little less pride in the month of July, but if it continues down that path and we start to see the constructional business that is reviewing at a higher price level, that's going to help that's going to continue to help these services that are offering the appropriate value let's just say for the services that are offering.

The only other thing that Seiko is that as we went through the kind of second half of last year, we did have some healthy expedite business trend and we're going to be comparing that against those now I hope that we're going to continue to do well against that and certainly her team is engaged and ready to make that happen. But I just point that out as a comparison.

Back over the decision around the had a less truckload rated spot business it sounds like -- I think I understand the impact on the tonnage trends late in the quarter and then into July. But just strategically, I mean seasonally you have the moving business pickup what are the other impacts in the model?

And how does that help may be the margin profile, what is that for the business if you can just walk through that, that would be helpful.

Sure. We have the ability to encourage spot truckload business and we talked about that on a number of these calls with you and other investors in the past.

What is part of that is how U-Pack moving business and I think David applied that, that is a seasonal business and the opportunity is great during the summer months. And so for the 20 years that we've had that business, that less-than-truckload business we had, we've always thought through particularly in the summer months because we have to make sure that we you have capacity for your regular good LTL customers.

And you want to be sure that it doesn't disrupt the service that you providing them. And so as we're seeing some of the LTL trends improve and we've seen that improvement as we kind of march through this year, we want to be sure that we have the capacity to serve those customers.

So we're making decisions to reduce the spot volume business that we have and again, we commented that includes our moving business, but as we start to see available capacity and a can't service those shipments, we can go right back to encourage those actually very quickly. And we're just balancing what works best from a service and revenue growth and profitability, perhaps more profitability than revenue growth in that case.

That make sense?

High-level basically you are saying that the LTL market is firming up and you just want to make sure that you have got line-haul capacity in your network to handle the additional LTL business that you're seeing?

Well, it's an addition to line-haul capacity is also the city pickup and delivery capacity because as we mentioned, we've had an increase in non-u-Pack residential shipments. We also to consider that as well.

As we want to be sure that your able to deliver on the promises that are making to customers and it's just as a factor in addition to the ones that you mentioned.

But I wanted to add to that is that we had some great success in our line-haul team reducing schedules and when you do that, that takes some of that need for backhaul where you have Dubai that in the spot market and as employees logistics asset like the tightening margin compression that we talked about over there on that side, that's where you would buy this and that would be more expensive and so we were pleased to see the reduction there.

Yes I think we had about 7% or 8% reduction in empty miles. And so again, that's a good thing.

Okay. This all helps.

That kind of ties all of it together, David if you let me ask one more quickly, Judy when you think about the sales realignment and kind of where you're at in the process, what are some of the main metrics that we can see externally from the initiatives that you've done and maybe to kind of benchmark the progress that you're having from the realigned sales force and kind of the opportunities from line across the businesses?

Well, we tried David and I have tried to work through this in a way that we were developing information that's helpful to you for you to see it. First of all, some commentary around that change.

We really feel good about the change. Its unified our sales force.

It's coordinated them much better. We have a customer experience management system that everyone is working with.

It's allowing us to see opportunities to manage those opportunities and we're continuing to have great stories about business that is entered the company historically in 1 place, the LTL or expedite is able to be expanded through discussions with customers about the solutions that it need that having all of the people aligned and coordinated has been a positive thing. But when you look at the percentage of accounts that are cross sold, we've seen a continual March and that percentage say, go back to 2012, it was about a 30% figure from a percentage of accounts that are cross sold and is because of the second quarter, it's 37% of our accounts.

And so what that says to me is that we're making progress, but we still have a lot of upside to go. And then the percentage of revenue from that secondary Crossville group is also elevated.

So back in 2012, that was less than 10% and now it's almost 30%. And again, are just getting started on many of our efforts to really bring about that big customer opportunity that we've outlined for you in the past.

Hey I want to manage the rest at this time because we got a calls from a competitor rest to us. So just please keep that in mind as we come down to the end of the half hour.

And David, I will keep it to one question.

Good deal.

With the administration in Washington a lot of moving parts would be coming out of there, what are you seeing or are you hearing, Judy, in terms of pension reforms? And anything that's being considered right now that could be helpful for ABF?

Well, there are some discussion about that and it's more, at this point, discussion. There's a UPS proposal that really is attempting that is again it's not a deal, but it's a proposal but it's attempting to address the simple stage problem specifically.

It includes proposals like a low-interest long term federal government will loan to trouble to cover their cash flow shortages. The federal state is probably what they're targeting when they're trying to do that, but the thing that we're doing is, we're involved in the discussions.

the following what's happening here, but it's in a extremely complex problems with the potential to really harm thousands of retirees and what are issue has been is that we've paid every dollar that we were contractually obligated to pay and we're concerned about the retirees that work for our company actually seeing those benefits because of the situation that central state has been. But the one I think paid to keep in mind about all of that is, there's a lot of ice on it, there's a lot of discussions about it.

There was a recent insolvent fund, I think it's 207, local 707 fund and the 707 fund reality is the benefit of those workers or actually cut back in an extreme level. And so the outcome there is I think a telegraphs what could happen with these funds if they are allowed to go insolvent.

And so it's best interest that we have in making sure that our people are considered in that. And that we know what the effects are back on the company.

But I can't say that I know how those are going to do, because they haven't been introduced as bills and we haven't been able to see anything really kind of making its way through the process. What I can tell you that we're in a position where we're involved in were paying what we should pay according to the contract.

And again, we're going to support proposals that we think help the situation.

Optimistically a year ago about this?

Well, I don't know how really to answer that. Sometimes when there's a need, a great need to get things done, that's when it gets done.

As we know, we've seen some really important thing not make their way through. And so I think having pressure on the situation, they help us.

But I would say really of about the same as I was a year ago, but that's more about just the difficulty in getting these things through. Progress in some other process in Washington.

It's Rob Samon on for Scott. With the new cubic minimum charges that you guys recently announced, can you give us a sense as what to what percentage of business this is going to impact across ABS rates network?

And how should we think about kind of the overall arching impact of the increased price?

Well, as I mentioned a couple of times on this call and I think when we announced it, we're entering into this approach because we feel like it helps us to recover the value for the services that were providing because it does that, we think it's going to positively affect our revenue in our profitability what we're really not going to step further what the impact will be. And that's because we've got conversations that were working through with our customers and it's a process.

And so Rob, that's what we're going to leave the discussion on that so...

Initially will this impact all contractual prices like an uncontractual arrangement initially headed? Or do we have to wait until the contract cycles through?

Well, can, there's a variety of answers to that question, but it is approach that were going to use and so we're very intentional about that. And so but there is a time period that it takes to work through these things.

Okay. As a follow-up with regards to purchase transportation, we didn't see much inflation in the purchase transportation and rental expenses.

And I think it may related to some of the initiatives that you guys haven't been upon, but could you give us a sense of what if any cost inflation you experience on the truckload side as a result of that market being a little bit tighter? And what are you doing differently to mitigate that potential cost inflation looking forward if the market is really tightening here?

Well, the purchase transportation on the asset-based side is that what you're referring to are you referring to the general in Asset-Light side as well?

Asset-Based, but...

Okay. Okay.

Let me answer that and then we'll talk more. On the asset-based that, this is about 3% that we have that relates to purchased transportation outside of real.

And so it's actually pretty small. So I wouldn't correct resident think that we saw there as in usual and in fact, been using that directionally help us with overall management of our line haul which again, reduce empty miles by 7%.

And so, we're using and effectively and I think when I step back and I look at what's happening there, I'm are encouraged by whole were using it then concerned about any issue related to the rates there. And again, because it so small, I don't think that that's an issue that's really going to be material for you or for us.

And then I think on the Asset-Light side, we talked about the margin impact that we had we had about a 40 basis point impact whenever you look year-over-year and then we had a sequential improvement in our net revenue margins. And so again, because of the amount of spot business versus contractual business that we have there, I think we have the flexibility to address those increases through pricing to some extent in the marketplace with the shippers.

But I think as things get even tighter, we have perhaps more flexibility to address that because of our mix of spot and constructional business and even some of our construction business on the Asset-Light side, we have the ability to spot quote some of those shipments. So hope that helps.

Hey Rob, we've got to couple of more over here...

I'll try to be quick.

Thanks.

Two quick ones. Number one, Judy, you were talking about sort of that home-delivery product and how you think that the margins can get better as you guys just increase some productivity around it.

Can you talk a little bit about pricing that product and do you think there's some sort of a learning curve of ABF, that's number 1. Number 2, can you talk about your line-haul service?

And are you seeing rates go up for substitute truckload? And also could you speak to, if you are seeing any service disruptions in the real site?

Okay. On the home delivery, we had a lot of experience going in the neighborhood because of our 20 years of experience of our U-Pack business.

So we're always learning. But I think were up on that learning curve, perhaps more than others because of the work that we've always done in these residential deliveries.

On the line-haul question, the cost versus transportation cost, that's a good question. Rob, just asked that question and what I said was, to relatively small part of our Asset-Based spend, it's like 3% or less and that actually helps us with the efficiencies of that business.

So I'm not very concerned there about inflation, like really affecting overall our numbers and on the real destruction side. I was reading about that last night we haven't really seen anything that's been a material impact on us from that standpoint.

So what I did see some commentary about what you're referring to and I'm me ask about more questions about that today.

So Caroline I think we got time for one more question.

So I'm thinking about this dim weight initiative, so could you talk about what the cost associated with implementing dimensions? And then also address what challenges may be or any pushback customers might experience, particularly smaller customers our understanding is sometimes dimensional pricing can be a challenge for them, so just kind of wanted to hear how you guys are addressing that?

And what are the cost for ArcBest associated to that?

Quick questions. We're not going to provide, we don't feel like we should provide the specific cause of our dimension ours, but just understand I think it and the relatives it some modest costs are especially for the benefit that you gain for it.

And I'll just address specifically the small customer. Our drivers have been dimensioning freight for many years.

So if a customer doesn't have dimensions on the airfreight, our driver is going to be dimensioning that freight for them. And in addition to that we can verify that with the static dimensioners that will have at our distribution centers.

So that all works. And the other thing Ailsa mentioned, that if there on a TMS system, we have another strategy that allows us to work with them to do API calls, to get that information for them.

So and so there's a number of different ways to work through this. We really feel like it's appropriate, simpler and the customers that have really gotten their sleeves rolled up with a sonnet have appreciated the simplicity of it.

So yes.

Okay, Judy, that's great, I don’t know if I can squeeze one more in, but let me try. Just so it seems like you guys are having a little bit of a shift in terms of your thinking on pricing and obviously, the pricing initiatives seem to be paying off pretty nicely here.

Are you targeting anything in terms of incremental margins on the LTL side? And how should we think about may be modeling that going forward?

Well, although we did have good incremental margins as you moved into second quarter versus first, we don't target incremental margins on a company or a service line basis like that. What we do is we manage, account profitability and we're working through accounts that we're not getting the value you that we're offering in terms of the handling of those shipments and we're working through those.

We've several different initiatives this year and the largest is this cubic minimum charge initiative to really, again, recover more fully the value that we're providing the customer and again, we think is more appropriate for those customers. And many of the conversations that we've had with them have recognized that.

All right. Carolina, I think we're done.

And I want to thank everybody for joining us this morning. We appreciate your interest in ArcBest.

That concludes our call.