NOTE J – 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 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 impacted by seasonal fluctuations, as described below; therefore, 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 (ABF Freight), the Company’s principal operating segment, includes the results of operations of ABF Freight System, Inc. and certain other subsidiaries. The operations of ABF Freight include national, inter-regional, and regional transportation of general commodities through standard, expedited, and guaranteed LTL services. Revenue and expense for freight transportation related to consumer household goods self-move services provided to ABF Moving by ABF Freight are reported in the ABF Freight operating segment and certain support costs related to these services are allocated to ABF Freight from the ABF Moving operating segment.

ABF Freight is impacted by seasonal fluctuations which affect tonnage and shipment levels and, consequently, revenues and operating results. Earnings of the ABF Freight segment are adversely affected by the impact of inclement weather conditions on freight shipments and operating costs. 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 (Panther) provides expedited freight transportation services to commercial and government customers and offers premium logistics services that include 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 ABF Freight and ABF Logistics operating segments.

Panther’s operations 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 severe weather events can result in higher demand for expedited services.

Emergency & Preventative Maintenance (FleetNet) 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. FleetNet provides services to the ABF Freight and Panther segments.

Emergency roadside services events of the FleetNet segment are favorably impacted by adverse weather conditions that affect commercial vehicle operations and the segment’s results of operations will be influenced by seasonal variations in service event volume.

Transportation Management (ABF Logistics) includes the results of operations of the Company’s businesses which provide freight brokerage and intermodal transportation services, worldwide ocean shipping solutions, and transportation and warehouse management services.

The industries and markets served by ABF Logistics are impacted by seasonal fluctuations which affect tonnage and shipment levels and, consequently, revenues and operating results of the segment. 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 business levels. However, seasonal fluctuations are less apparent in the operating results of ABF Logistics than in the industry as a whole because of business growth in the segment.

Household Goods Moving Services (ABF Moving) includes the results of operations of the Company’s subsidiaries that provide transportation, warehousing, and delivery services to the consumer, corporate, and military household goods moving markets. ABF Freight provides transportation services to ABF Moving. Certain costs incurred by ABF Moving in support of consumer self-move services provided by ABF Freight are allocated to the ABF Freight operating segment.

Operating results for ABF Moving are impacted by the state of the national economy, including housing, unemployment, and U.S. mobility, as well as decisions made by the U.S. military which affect personnel moves. Operations of the segment are also impacted by seasonal fluctuations, resulting in higher business levels in the second and third quarters 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 ArcBest Corporation 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 tables reflect reportable operating segment information for the three and nine months ended September 30:


	Three Months Ended				Nine Months Ended
	September 30				September 30
	2015		2014		2015		2014
	(in thousands)
REVENUES
Freight Transportation (ABF Freight)	$	511,346	$	523,351	$	1,456,924	$	1,445,079
Premium Logistics (Panther)		73,583		82,784		229,146		236,435
Emergency & Preventative Maintenance (FleetNet)		45,181		40,117		129,685		120,123
Transportation Management (ABF Logistics)		49,270		40,672		147,061		105,882
Household Goods Moving Services (ABF Moving)		43,076		35,338		93,870		72,943
Other and eliminations		(13,076)		(10,967)		(37,915)		(32,617)
Total consolidated revenues	$	709,380	$	711,295	$	2,018,771	$	1,947,845

OPERATING EXPENSES
Freight Transportation (ABF Freight)
Salaries, wages, and benefits	$	304,865	$	294,826	$	884,875	$	835,354
Fuel, supplies, and expenses		77,708		91,406		236,381		275,473
Operating taxes and licenses		12,444		11,262		36,762		34,525
Insurance		8,288		6,498		20,340		17,859
Communications and utilities		3,808		3,768		11,559		11,741
Depreciation and amortization		18,841		17,746		54,528		50,925
Rents and purchased transportation		56,920		69,985		151,144		172,954
Gain on sale of property and equipment		(565)		(333)		(1,403)		(576)
Pension settlement expense(1)		572		627		1,860		4,224
Other		1,888		2,829		6,167		7,211
Total Freight Transportation (ABF Freight)		484,769		498,614		1,402,213		1,409,690

Premium Logistics (Panther)
Purchased transportation		54,015		61,298		168,569		176,057
Depreciation and amortization(2)		2,773		2,891		8,636		8,465
Salaries, benefits, insurance, and other		14,062		14,476		43,174		40,072
Total Premium Logistics (Panther)		70,850		78,665		220,379		224,594

Emergency & Preventative Maintenance (FleetNet)		44,225		39,378		126,542		117,283
Transportation Management (ABF Logistics)		47,478		39,612		142,686		103,433
Household Goods Moving Services (ABF Moving)		40,048		32,029		89,207		69,852
Other and eliminations(1)		(11,428)		(9,944)		(30,439)		(28,197)
Total consolidated operating expenses	$	675,942	$	678,354	$	1,950,588	$	1,896,655

⁽¹⁾

Pension settlement expense totaled $0.8 million (pre-tax) on a consolidated basis for the three months ended September 30, 2015 and 2014, of which $0.6 million was reported by ABF Freight, $0.2 million was reported in Other and eliminations, and less than $0.1 million was reported by the asset-light logistics operating segments. Pension settlement expense totaled $2.5 million (pre-tax) and $5.4 million (pre-tax) on a consolidated basis for the nine months ended September 30, 2015 and 2014, respectively, of which $1.9 million and $4.2 million was reported by ABF Freight, $0.5 million and $1.1 million was reported in Other and eliminations, and $0.1 million was reported by the asset-light logistics operating segments, for the respective periods.

⁽²⁾

Depreciation and amortization consists primarily of amortization of intangibles, including customer relationships and software associated with the June 15, 2012 acquisition of Panther.


	Three Months Ended				Nine Months Ended
	September 30				September 30
	2015		2014		2015		2014
	(in thousands)
OPERATING INCOME
Freight Transportation (ABF Freight)	$	26,577	$	24,737	$	54,711	$	35,389
Premium Logistics (Panther)		2,733		4,119		8,767		11,841
Emergency & Preventative Maintenance (FleetNet)		956		739		3,143		2,840
Transportation Management (ABF Logistics)		1,792		1,060		4,375		2,449
Household Goods Moving Services (ABF Moving)		3,028		3,309		4,663		3,091
Other and eliminations		(1,648)		(1,023)		(7,476)		(4,420)
Total consolidated operating income	$	33,438	$	32,941	$	68,183	$	51,190

OTHER INCOME (COSTS)
Interest and dividend income		378		215		882		600
Interest and other related financing costs		(1,157)		(834)		(3,183)		(2,367)
Other, net		(613)		234		(15)		1,549
Total other costs		(1,392)		(385)		(2,316)		(218)
INCOME BEFORE INCOME TAXES	$	32,046	$	32,556	$	65,867	$	50,972

The following table presents operating expenses by category on a consolidated basis for the three and nine months ended September 30:


	Three Months Ended				Nine Months Ended
	September 30				September 30
	2015		2014		2015		2014
	(in thousands)
OPERATING EXPENSES
Salaries, wages, and benefits	$	334,144	$	321,781	$	973,570	$	914,559
Rents, purchased transportation, and other costs of services		209,744		215,719		588,329		564,024
Fuel, supplies, and expenses		77,067		89,337		231,097		269,401
Depreciation and amortization		23,373		22,178		68,221		63,855
Other		31,614		29,339		89,371		84,816
Total consolidated operating expenses	$	675,942	$	678,354	$	1,950,588	$	1,896,655