OPERATING SEGMENT DATA

12 Months Ended

Dec. 31, 2021

OPERATING SEGMENT DATA

OPERATING SEGMENT DATA

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 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:

● The Asset-Based segment includes the results of operations of ABF Freight System, Inc. and certain other subsidiaries. The segment operations include national, inter-regional, and regional transportation of general commodities through standard, expedited, and guaranteed LTL services. The Asset-Based segment also provides services to the ArcBest segment, including freight transportation related to certain consumer household goods self-move services.

● The ArcBest segment includes the results of operations of the Company’s service offerings in ground expedite, truckload, dedicated, intermodal, household goods moving, managed transportation, warehousing and distribution, and international freight transportation for air, ocean, and ground. The ArcBest segment also provides services to the Asset-Based segment.

● FleetNet includes the results of operations of FleetNet America, Inc. and certain other subsidiaries that provide roadside assistance and maintenance management services for commercial vehicles through a network of third-party service providers. FleetNet also provides services to the Asset-Based and ArcBest segments.

The Company’s other business activities and operating segments that are not reportable include ArcBest Corporation (the parent holding company) and certain subsidiaries. Certain costs incurred by the parent holding company and the Company’s shared services subsidiary 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.

Shared services represent costs incurred to support all segments, including sales, pricing, customer service, marketing, capacity sourcing functions, human resources, financial services, information technology, and other company-wide services. Certain overhead costs are not attributable to any segment and remain unallocated in “Other and eliminations.” Included in unallocated costs are expenses related to investor relations, legal, the Company’s Board of Directors, and certain technology investments. Shared services costs attributable to the operating segments are predominantly allocated based upon estimated and planned resource utilization-related metrics such as estimated shipment levels, number of pricing proposals, or number of personnel supported. The bases for such charges are modified and adjusted by management when necessary or appropriate to reflect fairly and equitably the actual incidence of cost incurred by the operating segments. Management believes the methods used to allocate expenses are reasonable.

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:

	2021		2020		2019
	(in thousands)
REVENUES
Asset-Based	$	2,573,773	$	2,092,031	$	2,144,679
ArcBest(1)		1,300,626		779,115		738,392
FleetNet		254,087		205,049		211,738
Other and eliminations		(148,419)		(136,032)		(106,499)
Total consolidated revenues	$	3,980,067	$	2,940,163	$	2,988,310
OPERATING EXPENSES
Asset-Based
Salaries, wages, and benefits	$	1,198,253	$	1,095,694	$	1,148,761
Fuel, supplies, and expenses		266,139		209,095		257,133
Operating taxes and licenses		49,461		49,300		50,209
Insurance		37,800		33,568		32,516
Communications and utilities		18,773		17,916		18,614
Depreciation and amortization		93,799		94,326		89,798
Rents and purchased transportation		364,345		250,159		221,479
Shared services		263,532		217,258		212,773
Gain on sale of property and equipment(2)		(8,676)		(3,309)		(5,892)
Innovative technology costs(3)		27,631		22,458		13,739
Other		2,009		6,701		3,488
Total Asset-Based		2,313,066		1,993,166		2,042,618
ArcBest(1)
Purchased transportation		1,097,332		649,933		606,113
Supplies and expenses		10,531		9,627		10,789
Depreciation and amortization		11,387		9,714		11,344
Shared services		132,137		90,983		93,961
Gain on sale of subsidiaries(4)		(6,923)		—		—
Other		9,765		9,203		9,860
Asset impairment(5)		—		—		26,514
Total ArcBest		1,254,229		769,460		758,581
FleetNet		249,543		201,682		206,932
Other and eliminations		(117,757)		(122,423)		(83,591)
Total consolidated operating expenses	$	3,699,081	$	2,841,885	$	2,924,540
OPERATING INCOME
Asset-Based	$	260,707	$	98,865	$	102,061
ArcBest(1)		46,397		9,655		(20,189)
FleetNet		4,544		3,367		4,806
Other and eliminations		(30,662)		(13,609)		(22,908)
Total consolidated operating income	$	280,986	$	98,278	$	63,770
OTHER INCOME (COSTS)
Interest and dividend income	$	1,275	$	3,616	$	6,453
Interest and other related financing costs		(8,904)		(11,697)		(11,467)
Other, net(6)		3,797		2,299		(7,285)
Total other costs		(3,832)		(5,782)		(12,299)
INCOME BEFORE INCOME TAXES	$	277,154	$	92,496	$	51,471

(1) For 2021, includes the operations of MoLo since the November 1, 2021 acquisition (see Note D).

(2) For 2021, includes an $8.6 million gain on the sale of unutilized service center property.

(3) Represents costs associated with the freight handling pilot test program at ABF Freight.

(4) Gain relates to the sale of the labor services portion of the ArcBest segment’s moving business in the second quarter 2021.

(5) The ArcBest segment recognized a noncash impairment charge in 2019 related to a portion of the goodwill, customer relationship intangible assets, and revenue equipment associated with the acquisition of truckload and dedicated businesses within the segment (see Note E).

(6) Includes the components of net periodic benefit cost other than service cost, including pension settlement and termination expense (see Note J), and proceeds and changes in cash surrender value of life insurance policies.

The following table reflects information about revenues from customers and intersegment revenues:

	2021		2020		2019
	(in thousands)
Revenues from customers
Asset-Based	$	2,470,529	$	1,998,549	$	2,077,287
ArcBest		1,291,679		770,560		731,366
FleetNet		213,882		166,654		175,055
Other		3,977		4,400		4,602
Total consolidated revenues	$	3,980,067	$	2,940,163	$	2,988,310
Intersegment revenues
Asset-Based	$	103,244	$	93,482	$	67,392
ArcBest		8,947		8,555		7,026
FleetNet		40,205		38,395		36,683
Other and eliminations		(152,396)		(140,432)		(111,101)
Total intersegment revenues	$	—	$	—	$	—
Total segment revenues
Asset-Based	$	2,573,773		2,092,031		2,144,679
ArcBest		1,300,626		779,115		738,392
FleetNet		254,087		205,049		211,738
Other and eliminations		(148,419)		(136,032)		(106,499)
Total consolidated revenues	$	3,980,067	$	2,940,163	$	2,988,310

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

	For the year ended December 31
	2021		2020		2019
	(in thousands)
CAPITAL EXPENDITURES, GROSS
Asset-Based(1)	$	96,180	$	85,135	$	122,437
ArcBest		9,565		1,258		3,909
FleetNet		1,174		675		590
Other and eliminations(2)(3)		11,193		17,983		33,748
	$	118,112	$	105,051	$	160,684

	For the year ended December 31
	2021		2020		2019
	(in thousands)
DEPRECIATION AND AMORTIZATION EXPENSE(2)
Asset-Based	$	93,799	$	94,326	$	89,798
ArcBest(4)		11,387		9,714		11,344
FleetNet(5)		1,661		1,622		1,341
Other and eliminations(2)		17,374		12,729		9,983
	$	124,221	$	118,391	$	112,466

(1) Includes assets acquired through notes payable of $59.7 million, $61.8 million, and $67.6 million in 2021, 2020, and 2019, respectively.

(2) Other and eliminations includes certain assets held for the benefit of multiple segments, including information systems equipment. Depreciation and amortization associated with these assets is allocated to the reporting segments. Depreciation and amortization expense includes amortization of internally developed capitalized software which has not been included in gross capital expenditures presented in the table.

(3) Includes assets acquired through notes payable of $23.2 million in 2019.

(4) Includes amortization of intangibles of $5.3 million, $3.7 million, and $4.2 million in 2021, 2020, and 2019, respectively.

(5) Includes amortization of intangibles which totaled less than $0.1 million in 2021 and $0.2 million in both 2020 and 2019.

A table of assets by reportable operating segment has not been presented as segment assets are not included in reports regularly provided to management nor does management consider segment assets for assessing segment operating performance or allocating resources.

The Company incurred research and development costs of $32.8 million and $25.6 million for the year ended December 31, 2021 and 2020, respectively, related to innovative technology initiatives.

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

	For the year ended December 31
	2021		2020		2019
	(in thousands)
OPERATING EXPENSES
Salaries, wages, and benefits	$	1,550,859	$	1,368,588	$	1,408,409
Rents, purchased transportation, and other costs of services		1,570,050		974,835		934,958
Fuel, supplies, and expenses		324,380		250,221		316,047
Depreciation and amortization(1)		124,221		118,391		112,466
Other(2)		129,571		129,850		126,146
Asset impairment(3)		—		—		26,514
	$	3,699,081	$	2,841,885	$	2,924,540

(1) Includes amortization of intangibles associated with acquired businesses.

(2) The year ended December 31, 2021 includes a $6.9 million gain related to the sale of a subsidiary within the ArcBest segment and an $8.6 million gain related to the sale of an unutilized service center property within the Asset-Based segment.

(3) The ArcBest segment recognized a noncash impairment charge in 2019 related to a portion of the goodwill, customer relationship intangible assets, and revenue equipment associated with the acquisition of truckload and dedicated businesses within the segment (see Note E).