NOTE N – OPERATING SEGMENT DATA

The Company uses the “management approach” to determine its reportable operating segments, as well as to determine the basis of reporting the operating segment information. The management approach focuses on financial information that the Company’s management uses to make operating decisions. Management uses operating revenues, operating expense categories, operating ratios, operating income, and key operating statistics to evaluate performance and allocate resources to the Company’s operations.

The Company’s reportable operating segments are as follows:

· Freight Transportation, the Company’s principal operating segment, includes the results of operations of ABF Freight System, Inc. and certain other subsidiaries of the Company (collectively “ABF”). ABF Freight System, Inc.’s self-move service operations provided by U-Pack Moving® are also reported in the Freight Transportation segment.

The operations of ABF include, in the aggregate, national, inter-regional and regional transportation of general commodities through standard, expedited, and guaranteed LTL services. ABF is headquartered in Fort Smith, Arkansas. The ABF transportation system operates throughout North America, providing direct service to over 98% of the cities in the United States having a population of 30,000 or more. ABF also offers global customizable supply chain solutions and provides motor carrier services in Canada, Puerto Rico, and, through arrangements with other trucking companies, in Mexico.

· Premium Logistics and Expedited Freight Services includes the results of operations of Panther, which the Company acquired on June 15, 2012 (see Note D). The segment provides expedited freight transportation services to commercial and government customers and offers premium logistics services that involve the rapid deployment of highly specialized equipment to meet extremely specific linehaul requirements, such as temperature control, hazardous materials, geofencing (routing a shipment across a mandatory, defined route with satellite monitoring and automated alerts concerning any deviation from the route), specialized government cargo, security services, and life sciences. Through its premium logistics and global freight forwarding businesses, Panther offers domestic and international freight transportation with air, ocean, and ground service offerings. The segment provides services to the Freight Transportation and Truck Brokerage and Management segments. Revenue and expense associated with these intersegment transactions are eliminated in consolidation.

· Truck Brokerage and Management includes the results of operations of the Company’s transportation brokerage services subsidiary, FreightValue, Inc.®

· Emergency and Preventative Maintenance includes the results of operations of FleetNet America, Inc., the subsidiary of the Company that provides roadside assistance and equipment services for commercial vehicles through a network of third-party service providers.

· Household Goods Moving Services, which was reported as the Special Services Logistics segment in the Company’s 2011 Annual Report on Form 10-K, includes the results of operations of Albert Companies, Inc. and Moving Solutions, Inc., the Company’s subsidiaries that provide transportation, warehousing, and delivery services to the consumer, corporate, and military household goods moving markets. Certain costs incurred by Household Goods Moving Services in support of ABF Freight System, Inc.’s self-move services are allocated to Freight Transportation at cost. Revenue and expense associated with these intersegment allocations are eliminated in consolidation.

The Company’s other business activities and operating segments that are not reportable include Arkansas Best Corporation, the parent holding company, and certain other subsidiaries. Certain costs incurred by the parent holding company are allocated to the reporting segments. The Company eliminates intercompany transactions in consolidation. However, the information used by the Company’s management with respect to its reportable segments is before intersegment eliminations of revenues and expenses.

Further classifications of operations or revenues by geographic location are impracticable and, therefore, are not provided. The Company’s foreign operations are not significant.

The following table reflects reportable operating segment information for the years ended December 31:

	2012(1)			2011			2010
				(in thousands)
OPERATING REVENUES
Freight Transportation	$	1,725,134		$	1,730,773		$	1,514,108
Premium Logistics and Expedited Freight Services(1)	132,326			–			–
Truck Brokerage and Management	42,710			25,429			19,241
Emergency and Preventative Maintenance	115,968			92,554			74,927
Household Goods Moving Services	77,619			85,611			63,733
Other and eliminations	(27,758		)	(26,758		)	(14,145		)
Total consolidated operating revenues	$	2,065,999		$	1,907,609		$	1,657,864
OPERATING EXPENSES AND COSTS
Freight Transportation
Salaries, wages, and benefits	$	1,073,205		$	1,061,213		$	1,004,267
Fuel, supplies, and expenses	330,063			333,779			262,420
Operating taxes and licenses	43,337			45,469			43,539
Insurance	20,751			24,490			18,745
Communications and utilities	14,733			15,118			14,655
Depreciation and amortization	78,748			70,810			68,695
Rents and purchased transportation	176,977			169,212			154,119
Gain on sale of property and equipment	(711		)	(2,370		)	(1,338		)
Pension settlement expense	–			1,125			178
Other	7,441			8,318			8,568
Total Freight Transportation	1,744,544			1,727,164			1,573,848
Premium Logistics and Expedited Freight Services(1)
Purchased transportation	101,559			–			–
Depreciation and amortization	5,438			–			–
Salaries, benefits, insurance, and other	22,927			–			–
Total Premium Logistics and Expedited Freight Services	129,924			–			–
Truck Brokerage and Management	40,087			23,539			17,868
Emergency and Preventative Maintenance	114,033			89,572			72,208
Household Goods Moving Services	76,927			82,893			62,014
Other and eliminations	(24,948		)	(25,318		)	(13,529		)
Total consolidated operating expenses and costs	$	2,080,567		$	1,897,850		$	1,712,409
OPERATING INCOME (LOSS)
Freight Transportation	$	(19,410	)	$	3,609		$	(59,740	)
Premium Logistics and Expedited Freight Services(1)	2,402			–			–
Truck Brokerage and Management	2,623			1,890			1,373
Emergency and Preventative Maintenance	1,935			2,982			2,719
Household Goods Moving Services	692			2,718			1,719
Other and eliminations	(2,810		)	(1,440		)	(616		)
Total consolidated operating income (loss)	$	(14,568	)	$	9,759		$	(54,545	)
OTHER INCOME (EXPENSE)
Interest and dividend income	$	808		$	1,069		$	1,194
Interest expense and other related financing costs	(5,273		)	(3,953		)	(2,852		)
Other, net(2)	2,041			2,618			2,406
	(2,424		)	(266		)	748
INCOME (LOSS) BEFORE INCOME TAXES	$	(16,992	)	$	9,493		$	(53,797	)

(1) Includes operations of the Premium Logistics and Expedited Freight Services segment since the June 15, 2012 acquisition of Panther.

(2) Other, net includes gains on cash surrender value and proceeds of life insurance policies.

The following table provides asset, capital expenditure, and depreciation and amortization information by reportable operating segment:

	December 31
	2012		2011		2010
			(in thousands)
ASSETS
Freight Transportation	$	556,195	$	600,239	$	565,461
Premium Logistics and Expedited Freight Services	222,280		–		–
Truck Brokerage and Management	9,656		6,225		5,250
Emergency and Preventative Maintenance	18,413		13,634		12,373
Household Goods Moving Services	21,754		20,687		18,016
Other and eliminations(1)	206,164		275,435		259,851
	$	1,034,462	$	916,220	$	860,951

	For the year ended December 31
	2012		2011		2010
			(in thousands)
CAPITAL EXPENDITURES, GROSS
Freight Transportation(2)	$	68,235	$	78,875	$	44,637
Premium Logistics and Expedited Freight Services(3)	1,579		–		–
Truck Brokerage and Management	45		163		12
Emergency and Preventative Maintenance	685		307		311
Household Goods Moving Services	416		480		209
Other and eliminations	4,291		3,812		2,596
	$	75,251	$	83,637	$	47,765

	For the year ended December 31
	2012		2011		2010
			(in thousands)
DEPRECIATION AND AMORTIZATION EXPENSE
Freight Transportation	$	78,748	$	70,810	$	68,695
Premium Logistics and Expedited Freight Services(3)(4)	3,179		–		–
Truck Brokerage and Management	288		154		153
Emergency and Preventative Maintenance	497		476		514
Household Goods Moving Services	413		332		323
Other and eliminations	2,368		1,970		1,880
	$	85,493	$	73,742	$	71,565

(1) Includes certain assets held by the parent holding company for strategic reasons, including unrestricted and restricted cash, cash equivalents, and short-term investments, as well as certain assets held for the benefit of multiple segments, including land and structures of the Company’s corporate headquarters and information systems equipment. Depreciation and amortization associated with these assets is allocated to the reporting segments.

(2) Includes assets acquired through notes payable and capital leases of $38.0 million, $30.4 million, and $36.3 million in 2012, 2011, and 2010, respectively.

(3) Includes operations of the Premium Logistics and Expedited Freight Services segment since the June 15, 2012 acquisition of Panther.

(4) Excludes amortization of intangibles which totaled $2.3 million in 2012 (see Note E).