NOTE A – ORGANIZATION AND DESCRIPTION OF THE BUSINESS AND FINANCIAL STATEMENT PRESENTATION

Organization and Description of Business

ArcBest Corporation® (the “Company”) is the parent holding company of businesses providing integrated logistics solutions. On November 3, 2016, the Company announced its plan to implement a new corporate structure to unify its sales, pricing, customer service, marketing, and capacity sourcing functions, and to allow the Company to operate as one logistics provider under the ArcBestSM brand. Under the new structure, the Company’s operations are conducted through its three reportable operating segments:

Asset-Based (formerly the Freight Transportation segment), which consists of ABF Freight System, Inc. and certain other subsidiaries;

ArcBest, which represents the consolidation of the operations of the former Premium Logistics (Panther), Transportation Management (ABF Logistics), and Household Goods Moving Services (ABF Moving) segments; and

FleetNet (formerly the Emergency & Preventative Maintenance segment).

References to the Company in this Annual Report on Form 10-K are primarily to the Company and its subsidiaries on a consolidated basis.

The Asset-Based segment represented approximately 70% of the Company’s 2016 revenues before other revenues and intercompany eliminations. As of December 2016, approximately 77% of the Asset-Based segment’s employees were covered under a collective bargaining agreement, the ABF National Master Freight Agreement (the “ABF NMFA”), with the International Brotherhood of Teamsters (the “IBT”) which extends through March 31, 2018. The ABF NMFA included a 7% wage rate reduction upon the November 3, 2013 implementation date, followed by wage rate increases of 2% on July 1 in each of the next three years, which began in 2014, and a 2.5% increase on July 1, 2017; a one‑week reduction in annual compensated vacation effective for employee anniversary dates on or after April 1, 2013; the option to expand the use of purchased transportation; and increased flexibility in labor work rules. The ABF NMFA and the related supplemental agreements provide for continued contributions to various multiemployer health, welfare, and pension plans maintained for the benefit of the Asset-Based segment employees who are members of the IBT. The estimated net effect of the November 3, 2013 wage rate reduction and the benefit rate increase which was applied retroactively to August 1, 2013 was an initial reduction of approximately 4% to the combined total contractual wage and benefit rate under the ABF NMFA. Following the initial reduction, the combined contractual wage and benefit contribution rate under the ABF NMFA is estimated to increase approximately 2.5% on a compounded annual basis throughout the contract period which extends through March 31, 2018.

On September 2, 2016, the ArcBest segment acquired Logistics & Distribution Services, LLC (“LDS”), a private logistics and distribution company, in a transaction valued at $25.0 million (subject to post-closing adjustments), reflecting net cash consideration of $17.0 million paid at closing and an additional $8.0 million of contingent consideration to be paid over the next two years based upon the achievement of certain financial targets. On December 1, 2015, the ArcBest segment acquired Bear Transportation Services, L.P. (“Bear”), a privately-owned truckload brokerage firm, for net cash consideration of $24.4 million (subject to post-closing adjustments). On January 2, 2015, the ArcBest segment acquired Smart Lines Transportation Group, LLC (“Smart Lines”), a privately‑owned truckload brokerage firm, for net cash consideration of $5.2 million. On April 30, 2014, the Company acquired a privately-owned business which is reported within the FleetNet reporting segment for net cash consideration of $2.6 million. As these acquired businesses are not significant to the Company’s consolidated operating results and financial condition, pro forma financial information and the purchase price allocations of acquired assets and liabilities have not been presented. The results of the acquired operations subsequent to the respective acquisition dates have been included in the accompanying consolidated financial statements. The Company is in the process of making a final determination of acquired assets and liabilities for the LDS transaction and the provisional measurements are subject to change during the measurement period.

On December 30, 2016, the Company divested certain subsidiaries associated with its ArcBest segment in a transaction valued at $4.8 million, reflecting $2.8 million in net cash consideration and $2.0 million in contingent consideration. The subsidiaries are not significant to the Company’s consolidated operating results and financial condition.

Financial Statement Presentation

Consolidation: The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation.

Segment Information: The Company uses the “management approach” for determining its reportable segment information. The management approach is based on the way management organizes the reportable segments within the Company for making operating decisions and assessing performance. See Note M for further discussion of segment reporting.

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual amounts may differ from those estimates.

Restatements: Certain restatements have been made to the prior year’s operating segment data to conform to the current year presentation, which reflects our new corporate structure. Segment revenues and expenses were adjusted to eliminate certain intercompany charges consistent with the manner in which they are reported under the new corporate structure. There was no impact on the Company’s consolidated revenues, operating expenses, operating income, or earnings per share as a result of the restatements. See Note O for further discussion of restructuring activities.