OPERATING SEGMENT DATA

3 Months Ended

Mar. 31, 2013

OPERATING SEGMENT DATA

OPERATING SEGMENT DATA

NOTE K — 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.

Certain reclassifications have been made to the prior year’s operating segment data to conform to the current year presentation. Financial information of Global Supply Chain Services and Supply Chain Services, businesses which provide ocean container transport and warehousing services, respectively, have been reclassified from the Freight Transportation segment to “Other and eliminations.” There was no impact on consolidated amounts as a result of these reclassifications.

The Company’s reportable operating segments are impacted by seasonal fluctuations, as described below, and as a result, operating results for the interim periods presented may not necessarily be indicative of the results for the fiscal year.

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.

ABF is impacted by seasonal fluctuations which affect tonnage and shipment levels and, consequently, revenues and operating results. The second and third calendar quarters of each year usually have the highest tonnage levels while the first quarter generally has the lowest, although other factors, including the state of the U.S. and global economies, may influence quarterly tonnage levels.

· Premium Logistics and Expedited Freight Services includes the results of operations of Panther, which the Company acquired on June 15, 2012 (see Note C). 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.

Operations of the Premium Logistics and Expedited Freight Services segment are influenced by seasonal fluctuations that impact customers’ supply chains and the resulting demand for expedited services. Expedited shipments may decline during winter months because of post-holiday slowdowns but can be subject to short-term increases depending on the impact of weather disruptions to customers’ supply chains. Plant shutdowns during summer months may affect shipments for automotive and manufacturing customers, but hurricanes and other weather events can result in higher demand for expedited services.

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

The truck brokerage industry is impacted by seasonal fluctuations which affect tonnage and shipment levels and, consequently, revenues and operating results. The second and third calendar quarters of each year usually have the highest tonnage levels while the first quarter generally has the lowest, although other factors, including the state of the U.S. and global economies, may influence quarterly tonnage levels. However, seasonal fluctuations are less apparent in the operating results of Truck Brokerage and Management than in the industry as a whole because of business growth in the segment.

· 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.

Emergency roadside services are impacted by weather conditions that affect commercial vehicle operations, and the segment’s results of operations will be influenced by seasonal variations in business levels.

· Household Goods Moving Services 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.

Operations of the Household Goods Moving Services segments are impacted by seasonal fluctuations, resulting in higher business levels in the second and third calendar quarters of the year as the demand for moving services is typically higher in the summer months.

The Company’s other business activities and operating segments that are not reportable include Arkansas Best Corporation, the parent holding company, and 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 three months ended March 31:

	Three Months Ended
	March 31
	2013			2012
	(in thousands)
OPERATING REVENUES
Freight Transportation	$	407,281		$	396,513
Premium Logistics and Expedited Freight Services	53,252			—
Truck Brokerage and Management	14,604			8,039
Emergency and Preventative Maintenance	32,522			22,378
Household Goods Moving Services	13,576			15,052
Other and eliminations	(548		)	(1,115		)
Total consolidated operating revenues	$	520,687		$	440,867
OPERATING EXPENSES AND COSTS
Freight Transportation
Salaries, wages, and benefits	$	267,178		$	265,061
Fuel, supplies, and expenses	83,332			80,640
Operating taxes and licenses	10,990			10,801
Insurance	4,484			4,881
Communications and utilities	3,933			3,799
Depreciation and amortization	19,574			18,573
Rents and purchased transportation	38,469			33,216
Gain on sale of property and equipment	(212		)	(282		)
Other	2,082			1,682
Total Freight Transportation	429,830			418,371
Premium Logistics and Expedited Freight Services
Purchased transportation	41,036			—
Depreciation and amortization	2,550			—
Salaries, benefits, insurance, and other	10,530			—
Total Premium Logistics and Expedited Freight Services	54,116			—
Truck Brokerage and Management	13,837			7,645
Emergency and Preventative Maintenance	31,811			22,515
Household Goods Moving Services	13,807			15,844
Other and eliminations	636			(521		)
Total consolidated operating expenses and costs	$	544,037		$	463,854
OPERATING INCOME (LOSS)
Freight Transportation	$	(22,549	)	$	(21,858	)
Premium Logistics and Expedited Freight Services	(864		)	—
Truck Brokerage and Management	767			394
Emergency and Preventative Maintenance	711			(137		)
Household Goods Moving Services	(231		)	(792		)
Other and eliminations	(1,184		)	(594		)
Total consolidated operating loss	$	(23,350	)	$	(22,987	)
OTHER INCOME (EXPENSE)
Interest and dividend income	$	171		$	253
Interest expense and other related financing costs	(1,207		)	(1,142		)
Other, net(1)	1,083			1,340
	$	47		$	451
LOSS BEFORE INCOME TAXES	$	(23,303	)	$	(22,536	)

(1) Other, net includes changes in cash surrender value and proceeds of life insurance policies.