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 by ABF Freight are reported in the ABF Freight segment and certain support costs related to these services are allocated to ABF Freight from the ABF Moving segment.

ABF Freight is impacted by seasonal fluctuations which affect tonnage, shipment levels, and demand for its services, and, consequently, revenues and operating results of the segment. Freight shipments and operating costs of ABF Freight are adversely affected by inclement weather conditions. 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 freight tonnage levels.

Premium Logistics (Panther) 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, 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 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 Panther’s automotive and manufacturing customers, but severe weather events can result in higher demand for expedited services.

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 shipment levels and, consequently, revenues and operating results of the segment. The second and third calendar quarters of each year usually have the highest shipment levels while the first quarter generally has the lowest, although other factors, including the state of the U.S. and global economies, may impact 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, including acquisitions.

Emergency & Preventative Maintenance (FleetNet) includes the results of operations of FleetNet America, Inc., the subsidiary of the Company that provides roadside assistance and maintenance-related services for commercial vehicles through a network of third-party service providers. FleetNet provides services to the ABF Freight and Panther segments.

Emergency roadside service 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.

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 segment.

Operating results for ABF Moving are impacted by the state of the national economy, including housing, unemployment, and mobility of U.S. residents, as well as decisions made by the U.S. military which affect personnel moves. Operations of the segment are also impacted by seasonal fluctuations, generally resulting in higher business levels in the second and third quarters as the demand for moving services is typically stronger 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:


	Three Months Ended				Nine Months Ended
	September 30				September 30
	2016		2015		2016		2015
	(in thousands)
REVENUES
Freight Transportation (ABF Freight)	$	509,452	$	511,346	$	1,435,691	$	1,456,924
Premium Logistics (Panther)		75,365		73,583		211,148		229,146
Transportation Management (ABF Logistics)(1)		72,442		49,270		207,344		147,061
Emergency & Preventative Maintenance (FleetNet)		39,073		45,181		124,417		129,685
Household Goods Moving Services (ABF Moving)		31,040		43,076		74,926		93,870
Other and eliminations		(13,449)		(13,076)		(41,521)		(37,915)
Total consolidated revenues	$	713,923	$	709,380	$	2,012,005	$	2,018,771

OPERATING EXPENSES
Freight Transportation (ABF Freight)
Salaries, wages, and benefits	$	312,458	$	304,865	$	912,758	$	884,875
Fuel, supplies, and expenses		71,774		77,708		210,742		236,381
Operating taxes and licenses		12,312		12,444		36,446		36,762
Insurance		8,487		8,288		22,613		20,340
Communications and utilities		4,608		3,808		13,259		11,559
Depreciation and amortization		20,753		18,841		62,056		54,528
Rents and purchased transportation		58,350		56,920		145,846		151,144
Gain on sale of property and equipment		(81)		(565)		(2,450)		(1,403)
Pension settlement expense(1)		604		572		1,705		1,860
Other		2,137		1,888		6,293		6,167
Total Freight Transportation (ABF Freight)		491,402		484,769		1,409,268		1,402,213

Premium Logistics (Panther)
Purchased transportation		54,586		54,015		155,444		168,569
Depreciation and amortization		2,860		2,773		8,565		8,636
Salaries, benefits, insurance, and other		13,946		14,062		41,808		43,174
Total Premium Logistics (Panther)		71,392		70,850		205,817		220,379

Transportation Management (ABF Logistics)(1)		72,032		47,478		205,772		142,686
Emergency & Preventative Maintenance (FleetNet)		38,952		44,225		122,716		126,542
Household Goods Moving Services (ABF Moving)		29,054		40,048		72,819		89,207
Other and eliminations(2)		(9,279)		(11,428)		(32,146)		(30,439)
Total consolidated operating expenses(2)	$	693,553	$	675,942	$	1,984,246	$	1,950,588

⁽¹⁾

The 2016 periods include the operations of LDS since the September 2, 2016 acquisition date and the operations of Bear, which was acquired in December 2015.

⁽²⁾

Pre-tax pension settlement expense totaled $0.8 million on a consolidated basis for the three months ended September 30, 2016 and 2015, 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. For the nine months ended September 30, 2016 and 2015, pre-tax pension settlement expense totaled $2.3 million and $2.5 million, respectively, of which $1.7 million and $1.9 million, respectively, was reported by ABF Freight, $0.5 million was reported in Other and eliminations, and $0.1 million was reported by the asset-light logistics operating segments.


	Three Months Ended				Nine Months Ended
	September 30				September 30
	2016		2015		2016		2015
	(in thousands)
OPERATING INCOME
Freight Transportation (ABF Freight)	$	18,050	$	26,577	$	26,423	$	54,711
Premium Logistics (Panther)		3,973		2,733		5,331		8,767
Transportation Management (ABF Logistics)(1)		410		1,792		1,572		4,375
Emergency & Preventative Maintenance (FleetNet)		121		956		1,701		3,143
Household Goods Moving Services (ABF Moving)		1,986		3,028		2,107		4,663
Other and eliminations		(4,170)		(1,648)		(9,375)		(7,476)
Total consolidated operating income	$	20,370	$	33,438	$	27,759	$	68,183

OTHER INCOME (COSTS)
Interest and dividend income	$	390	$	378	$	1,178	$	882
Interest and other related financing costs		(1,296)		(1,157)		(3,774)		(3,183)
Other, net(2)		1,091		(613)		2,028		(15)
Total other costs		185		(1,392)		(568)		(2,316)
INCOME BEFORE INCOME TAXES	$	20,555	$	32,046	$	27,191	$	65,867

⁽¹⁾

The 2016 periods include the operations of LDS since the September 2, 2016 acquisition date and the operations of Bear, which was acquired in December 2015.

⁽²⁾

Includes changes in cash surrender value of life insurance policies.

The following table presents operating expenses by category on a consolidated basis:


	Three Months Ended				Nine Months Ended
	September 30				September 30
	2016		2015		2016		2015
	(in thousands)
OPERATING EXPENSES
Salaries, wages, and benefits	$	345,091	$	334,144	$	1,009,654	$	973,570
Rents, purchased transportation, and other costs of services		218,906		209,744		601,345		588,329
Fuel, supplies, and expenses		69,508		77,067		204,134		231,097
Depreciation and amortization(1)		25,793		23,373		76,692		68,221
Other		34,255		31,614		92,421		89,371
	$	693,553	$	675,942	$	1,984,246	$	1,950,588

⁽¹⁾

Includes amortization of intangible assets.

The following table provides asset information by reportable segment:


	September 30		December 31
	2016		2015
	(in thousands)
ASSETS
Freight Transportation (ABF Freight)	$	763,385	$	694,059
Premium Logistics (Panther)		215,659		216,075
Transportation Management (ABF Logistics)		113,079		75,023
Emergency & Preventative Maintenance (FleetNet)		23,563		21,958
Household Goods Moving Services (ABF Moving)		26,988		28,547
Other and eliminations(1)		178,194		227,247
	$	1,320,868	$	1,262,909

⁽¹⁾

Other and eliminations 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.