ArcBest Corp. purchased Smart Lines Transportation Group in early January with plans of merging the Oklahoma City-based company into its ABF Logistics operation.
Four months later, Chief Executive Officer Judy McReynolds labeled the acquisition a "success."
"We are pleased to now have a new ABF Logistics location outside the Fort Smith area that is immediately making a positive contribution to revenue and margin increases," McReynolds said during the company's first-quarter earnings call last week. "Our plans for this location include significant growth in employees and business as it will be a key contributor to ABF Logistics' future success."
ArcBest purchased Smart Lines for $5.2 million in early January. It wasn't a seismic transaction for a company that reported $2.6 billion in revenue in 2014 and is aiming for $3 billion this year, but it provided ABF Logistics with its first branch outside of Fort Smith and further opportunity for growth.
Smart Lines, a logistics firm founded in 2003, had 24 employees and about $18 million in annual revenue when ArcBest announced the acquisition. At the time, ABF Logistics President Jim Ingram described it as an "important step" in the company's plan to strengthen its emerging businesses, which accounted for 29 percent of ArcBest's revenue in the first quarter of 2015.
Ingram said Thursday that ABF Logistics has four main service lines, supporting the company's brokerage and intermodal, international, warehousing and moving businesses. The Oklahoma City operation serves as a sales branch supporting the company's truckload brokerage and intermodal divisions, becoming fully integrated into ABF Logistics' systems in three months.
Ingram believes ArcBest's previous history of acquisitions, which included the $180 million addition of Ohio-based Panther Premium Logistics in June 2012, paved the way for a smooth transition.
"We've kind of learned a little bit about what not to do and what to do," Ingram said. "We had a good game plan and the team in Oklahoma City was on board with moving quickly. So we were able to do it in less than three months."
Detailed financial information regarding sales generated by the Oklahoma City branch was not available. But ArcBest did report revenue growth of 59 percent at ABF Logistics during the first quarter of 2015, crediting the rise to the number of brokerage accounts and shipments received.
"In the logistics business, good sales talent is by far the hardest type of talent to find," Ingram said. "So to the extent you can diversify where you're recruiting for good sales talent, we believe that's a better strategy for growth. ... We can find a lot of good people in Fort Smith and we're going to continue to grow [in Fort Smith], but we we've got a good pipeline of very talented, high potential sales people."
ABF Freight remains ArcBest's largest subsidiary, but growing the nonasset businesses has been the driving emphasis in reaching the $3 billion revenue mark. ArcBest plans for its four nonasset businesses -- Panther Premium Logistics, ABF Logistics, FleetNet and U-Pack -- to produce $1 billion in revenue in 2015. The businesses accounted for $722.5 million in revenue in 2014.
Bob Williams, senior vice president and managing director of Simmons First Investment Group Inc. in Little Rock, said acquisitions such as Panther and Smart Lines have been key to ArcBest's success. The emerging businesses accounted for 9 percent of the company's revenue in 2009 and 27 percent in 2014.
"It's a huge help any time you can expand your customer base," Williams said. "On top of that, there has just been a trend to go to the just-in-time scheduling materials for businesses and the realization that if you want to do that correctly, it probably is important to outsource to a professional logistics firm. So they're poised to benefit in not only industry trends, but manufacturing trends.. ... Once you're in and you cover those fixed costs, there's the potential, if it's run correctly, to make a lot of money."
ABF Logistics is planning for expansion at its Oklahoma City branch. Ingram said there are currently 28 employees in a facility that has space for 30. So the company has leased a new office that could house up to 100 employees and plans to be moved in by the end of June.
"We're not going to hire another 70 people this year," Ingram said. "But if we execute our plans over the next few years we can hopefully get close to filling that up."
ArcBest's expansion may not be over, either. McReynolds said during a conference in March the company would continue to pursue acquisitions that made sense.
She added during last week's earnings call the company is "most interested" in expanding its ABF Logistics business because it's an area where ArcBest could gain scale quickly.
"They're still making a lot of investments for growth," said Brad Delco, an analyst for Stephens Inc. in Little Rock. "So you're not necessarily seeing the leverage yet in the model play out. It sounds like they're going to keep investing for growth. So that's a trend we'll have to keep following."
SundayMonday Business on 05/11/2015