OPERATING SEGMENT DATA

12 Months Ended

Dec. 31, 2023

OPERATING SEGMENT DATA

OPERATING SEGMENT DATA

NOTE O – 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 (loss), and key operating statistics to evaluate performance and allocate resources to the Company’s operations.

On February 28, 2023, the Company sold FleetNet, a wholly owned subsidiary and reportable operating segment of the Company. Following the sale, FleetNet is reported as discontinued operations. As such, historical results of FleetNet have been excluded from both continuing operations and segment results for all periods presented, and reclassifications have been made to the prior-period financial statements to conform to the current-year presentation.

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 Asset-Light segment, including freight transportation related to managed transportation solutions and other services.

As previously discussed in Note A, the Asset-Based segment’s contractual employees are covered under the 2023 ABF NMFA, which was implemented on July 16, 2023, effective retroactive to July 1, 2023, and will remain in effect through June 30, 2028. The major economic provisions of the 2023 ABF NMFA include wage and mileage rate increases in each year of the contract, with the initial increase effective retroactive to July 1, 2023; profit-sharing bonuses upon the Asset-Based segment’s achievement of certain annual operating ratios for any full calendar year under the contract; an additional paid holiday; two additional paid sick days; and a new non-CDL employee classification. The 2023 ABF NMFA and the related supplemental agreements provide for annual contribution rate increases to multiemployer health and welfare and pension funds to which ABF Freight contributed under the previous agreement.

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

The Company’s other business activities and operations that are not reportable segments 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 operating 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 reportable operating segments are predominantly allocated based upon estimated and planned resource utilization-related metrics such as estimated shipment levels 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 reportable 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 from continuing operations for the years ended December 31:

	2023		2022		2021
	(in thousands)
REVENUES
Asset-Based	$	2,871,004	$	3,010,900	$	2,573,773
Asset-Light		1,680,645		2,139,272		1,300,626
Other and eliminations		(124,206)		(121,164)		(108,214)
Total consolidated revenues	$	4,427,443	$	5,029,008	$	3,766,185
OPERATING EXPENSES
Asset-Based
Salaries, wages, and benefits	$	1,379,756	$	1,293,487	$	1,198,253
Fuel, supplies, and expenses		361,355		378,558		266,139
Operating taxes and licenses		55,918		52,290		49,461
Insurance		52,025		47,382		37,800
Communications and utilities		19,288		18,949		18,773
Depreciation and amortization		104,165		97,322		93,799
Rents and purchased transportation		338,575		441,167		364,345
Shared services		279,248		281,698		263,532
(Gain) loss on sale of property and equipment and lease impairment charges(1)		982		(12,468)		(8,676)
Innovative technology costs(2)		21,711		27,207		27,631
Other		4,829		4,175		2,009
Total Asset-Based		2,617,852		2,629,767		2,313,066
Asset-Light
Purchased transportation		1,435,604		1,784,668		1,097,332
Supplies and expenses(3)		12,094		13,955		8,661
Depreciation and amortization(4)		20,370		20,730		11,387
Shared services		194,296		218,133		132,137
Contingent consideration(5)		(19,100)		18,300		—
Lease impairment charges(6)		14,407		—		—
Legal settlement(7)		9,500		—		—
Gain on sale of subsidiary(8)		—		(402)		(6,923)
Other(3)		25,745		31,163		11,635
Total Asset-Light		1,692,916		2,086,547		1,254,229
Other and eliminations		(55,944)		(81,832)		(78,088)
Total consolidated operating expenses	$	4,254,824	$	4,634,482	$	3,489,207
OPERATING INCOME (LOSS)
Asset-Based	$	253,152	$	381,133	$	260,707
Asset-Light		(12,271)		52,725		46,397
Other and eliminations(9)		(68,262)		(39,332)		(30,126)
Total consolidated operating income	$	172,619	$	394,526	$	276,978
OTHER INCOME (COSTS)
Interest and dividend income	$	14,728	$	3,873	$	1,226
Interest and other related financing costs		(9,094)		(7,726)		(8,914)
Other, net(10)		8,662		(2,370)		3,797
Total other income (costs)		14,296		(6,223)		(3,891)
INCOME BEFORE INCOME TAXES	$	186,915	$	388,303	$	273,087

(1) For 2023, includes a $0.7 million noncash lease-related impairment charge for an Asset-Based service center. For 2022, includes a $4.3 million noncash gain on a like-kind property exchange of a service center, with the remaining gains related primarily to sales of replaced equipment. For 2021, includes an $8.6 million gain on the sale of unutilized service center property.

(2) Represents costs associated with the freight handling pilot test program at ABF Freight, for which the decision was made to pause the pilot during third quarter 2023.

(3) For 2022 and 2021, amounts have been adjusted from those previously reported to reclass certain facility rent expense between line items within the Asset-Light segment. Adjustments made are not material.

(4) Depreciation and amortization includes amortization of intangibles associated with acquired businesses.

(5) Represents the change in fair value of the contingent earnout consideration to the MoLo acquisition (see Note C).

(6) Represents noncash lease-related impairment charges for certain Asset-Light office spaces that were made available for sublease.

(7) Represents estimated expenses to settle a claim related to the classification of certain Asset-Light employees under the Fair Labor Standards Act.

(8) Gain recognized relates to the sale of the labor services portion of the Asset-Light segment’s moving business in second quarter 2021, including the contingent amount recognized in second quarter 2022 when the funds were released from escrow.

(9) For 2023, “Other and eliminations” includes $15.1 million of noncash lease-related impairment charges for a freight handling pilot facility.

(10) Includes the components of net periodic benefit cost (credit) other than service cost related to the Company’s SBP and postretirement plans (see Note K) and proceeds and changes in cash surrender value of life insurance policies. For 2023, includes a $3.7 million fair value increase related to the Company’s equity investment in Phantom Auto, based on an observable price change during second quarter 2023 (see Note C).

The following table reflects information about revenues from customers and intersegment revenues for the years ended December 31:

	2023		2022		2021
	(in thousands)
Revenues from customers
Asset-Based	$	2,749,803	$	2,896,284	$	2,470,529
Asset-Light		1,673,399		2,128,394		1,291,679
Other		4,241		4,330		3,977
Total consolidated revenues	$	4,427,443	$	5,029,008	$	3,766,185
Intersegment revenues
Asset-Based	$	121,201	$	114,616	$	103,244
Asset-Light		7,246		10,878		8,947
Other and eliminations		(128,447)		(125,494)		(112,191)
Total intersegment revenues	$	—	$	—	$	—
Total segment revenues
Asset-Based	$	2,871,004		3,010,900	$	2,573,773
Asset-Light		1,680,645		2,139,272		1,300,626
Other and eliminations		(124,206)		(121,164)		(108,214)
Total consolidated revenues	$	4,427,443	$	5,029,008	$	3,766,185

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

	For the year ended December 31
	2023		2022		2021
	(in thousands)
CAPITAL EXPENDITURES, GROSS
Asset-Based(1)	$	207,072	$	137,117	$	96,180
Asset-Light		7,587		14,372		9,565
Other and eliminations(2)(3)		37,752		77,720		11,193
	$	252,411	$	229,209	$	116,938

	For the year ended December 31
	2023		2022		2021
	(in thousands)
DEPRECIATION AND AMORTIZATION EXPENSE(2)
Asset-Based	$	104,165	$	97,322	$	93,799
Asset-Light(4)		20,370		20,730		11,387
Other and eliminations(2)		20,814		20,107		17,374
	$	145,349	$	138,159	$	122,560

(1) Includes assets acquired through notes payable of $33.5 million, $79.0 million, and $59.7 million in 2023, 2022, and 2021, respectively.

(2) Other and eliminations includes certain assets held for the benefit of multiple segments, including information systems equipment. For 2022, also includes the purchase of a property for $37.5 million. 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 $3.4 million in 2022.

(4) Includes amortization of intangibles of $12.8 million, $12.9 million, and $5.3 million in 2023, 2022, and 2021, respectively.

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 $52.4 million and $40.8 million for the year ended December 31, 2023 and 2022, respectively, related to innovative technology initiatives.

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

	For the year ended December 31
	2023		2022		2021
	(in thousands)
OPERATING EXPENSES
Salaries, wages, and benefits	$	1,781,304	$	1,728,653	$	1,527,533
Rents, purchased transportation, and other costs of services		1,642,669		2,100,663		1,349,106
Fuel, supplies, and expenses(1)		479,688		488,009		360,657
Depreciation and amortization(2)		145,349		138,159		122,560
Contingent consideration(3)		(19,100)		18,300		—
Lease impairment charges(4)		30,162		—		—
Other(1)(5)		194,752		160,698		129,351
	$	4,254,824	$	4,634,482	$	3,489,207

(1) For 2022 and 2021, amounts have been adjusted from those previously reported to reclass certain facility rent expense between line items within the Asset-Light segment. Adjustments made are not material.

(2) Includes amortization of intangibles assets.

(3) Represents the change in fair value of the contingent earnout consideration related to the MoLo acquisition (see Notes C and E).

(4) Represents noncash lease-related impairment charges for a freight handling pilot facility, a service center, and office spaces that were made available for sublease.

(5) For 2023, includes estimated expenses of $9.5 million to settle a claim related to the classification of certain Asset-Light employees under the Fair Labor Standards Act. For 2022, includes a $12.5 million gain related to the sale of property and equipment within

the Asset-Based segment and the sale of replaced equipment and a like-kind exchange of a service center property in the prior year. For 2021, includes a $6.9 million gain related to the sale of a subsidiary within the Asset-Light segment and an $8.6 million gain related to the sale of an unutilized service center property within the Asset-Based segment. For 2023, 2022, and 2021, also includes innovative technology costs of $52.4 million, $40.8 million, and $32.8 million, respectively, associated with the freight handling pilot program at ABF Freight, costs related to the Company’s customer pilot offering of Vaux^TM, and initiatives to optimize performance through technological innovation.