OPERATING SEGMENT DATA

3 Months Ended

Mar. 31, 2022

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 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 which affect tonnage, shipment or service event levels, and demand for services, as described below; therefore, operating results for the interim periods presented may not necessarily be indicative of the results for the fiscal year. In recent periods, including the three months ended March 31, 2022, our operations have not been as heavily impacted by seasonal fluctuations, due in part to strategic initiatives we have undertaken to enable profitable growth through seasons and cycles. The acquired operations of MoLo resulted in increased business levels for the ArcBest segment for the three months ended March 31, 2022, compared to the same period of 2021.

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 provides services to the ArcBest segment, including freight transportation related to certain consumer household goods self-move services.

Freight shipments and operating costs of the Asset-Based segment can be adversely affected by inclement weather conditions. Historically, 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; available capacity in the market; the impact of yield initiatives; and the impact of adverse external events or conditions, including the COVID-19 pandemic and geopolitical conflicts, may influence quarterly freight tonnage levels.

● 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 provides services to the Asset-Based segment.

ArcBest segment operations are influenced by seasonal fluctuations that impact customers’ supply chains. Historically, 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; available capacity in the market; and the impact of adverse external events or conditions, including the COVID-19 pandemic and geopolitical conflicts, may impact quarterly business levels. Shipments of the ArcBest segment may decline during winter months because of post-holiday slowdowns, but expedite shipments can be subject to short-term increases depending on the impact of weather or other disruptions to customers’ supply chains. Plant shutdowns during summer months may affect shipments for automotive and manufacturing customers of the ArcBest segment, but disruptive events can result in higher demand for expedite services. Moving services of the ArcBest segment are 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.

● 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 provides services to the Asset-Based and ArcBest segments.

Emergency roadside service events of the FleetNet segment are favorably impacted by extreme weather conditions that affect commercial vehicle operations, and the segment’s results of operations are influenced by seasonal variations in service event volume and the impact of other external events or conditions, including the COVID-19 pandemic.

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 tables reflect reportable operating segment information:

	Three Months Ended
	March 31
	2022		2021
	(in thousands)
REVENUES
Asset-Based	$	705,311	$	556,292
ArcBest(1)		595,284		252,336
FleetNet		78,378		59,163
Other and eliminations		(43,899)		(38,578)
Total consolidated revenues	$	1,335,074	$	829,213
OPERATING EXPENSES
Asset-Based
Salaries, wages, and benefits	$	313,497	$	285,694
Fuel, supplies, and expenses		84,831		60,841
Operating taxes and licenses		12,493		12,248
Insurance		10,431		8,939
Communications and utilities		4,687		4,970
Depreciation and amortization		24,305		23,484
Rents and purchased transportation		102,985		75,588
Shared services		67,150		55,866
Gain on sale of property and equipment(2)		(2,695)		(8,695)
Innovative technology costs(3)		6,960		6,868
Other		633		434
Total Asset-Based		625,277		526,237
ArcBest(1)
Purchased transportation		508,380		210,995
Supplies and expenses		3,266		2,568
Depreciation and amortization		5,180		2,386
Shared services		50,197		26,072
Other		7,145		2,050
Total ArcBest		574,168		244,071
FleetNet		76,661		58,140
Other and eliminations		(35,960)		(31,426)
Total consolidated operating expenses	$	1,240,146	$	797,022
OPERATING INCOME
Asset-Based	$	80,034	$	30,055
ArcBest(1)		21,116		8,265
FleetNet		1,717		1,023
Other and eliminations		(7,939)		(7,152)
Total consolidated operating income	$	94,928	$	32,191
OTHER INCOME (COSTS)
Interest and dividend income	$	106	$	392
Interest and other related financing costs		(1,939)		(2,428)
Other, net(4)		(826)		1,192
Total other income (costs)		(2,659)		(844)
INCOME BEFORE INCOME TAXES	$	92,269	$	31,347

(1) The 2022 period includes the operations of MoLo, which was acquired on November 1, 2021.

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

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

(4) Includes the components of net periodic benefit cost other than service cost related to the Company’s SBP and postretirement plans (see Note H) and proceeds and changes in cash surrender value of life insurance policies.

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

	Three Months Ended
	March 31
	2022		2021
	(in thousands)
Revenues from customers
Asset-Based	$	675,518	$	529,724
ArcBest(1)		591,722		250,241
FleetNet		66,983		48,434
Other		851		814
Total consolidated revenues(1)	$	1,335,074	$	829,213
Intersegment revenues
Asset-Based	$	29,793	$	26,568
ArcBest		3,562		2,095
FleetNet		11,395		10,729
Other and eliminations		(44,750)		(39,392)
Total intersegment revenues	$	—	$	—
Total segment revenues
Asset-Based	$	705,311	$	556,292
ArcBest(1)		595,284		252,336
FleetNet		78,378		59,163
Other and eliminations		(43,899)		(38,578)
Total consolidated revenues(1)	$	1,335,074	$	829,213

(1) The 2022 period includes the operations of MoLo, which was acquired on November 1, 2021.

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

	Three Months Ended
	March 31
	2022(1)		2021
	(in thousands)
OPERATING EXPENSES
Salaries, wages, and benefits	$	420,643	$	359,395
Rents, purchased transportation, and other costs of services		646,879		309,338
Fuel, supplies, and expenses		99,547		73,149
Depreciation and amortization(2)		34,823		30,354
Other		38,254		24,786
	$	1,240,146	$	797,022

(1) The 2022 period includes the operations of MoLo, which was acquired on November 1, 2021.

(2) Includes amortization of intangible assets.