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 and shipment levels and, consequently, revenues and operating results. Earnings of the ABF Freight segment are adversely affected by the impact of inclement weather conditions on freight shipments and operating costs. 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 impact quarterly 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 (routing a shipment across a mandatory, defined route with satellite monitoring and automated alerts concerning any deviation from the route), 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 tonnage and shipment levels and, consequently, revenues and operating results of the segment. 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 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 equipment services for commercial vehicles through a network of third-party service providers. FleetNet provides services to the ABF Freight and Panther segments.

Emergency roadside services 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, resulting in higher business levels in the second and third quarters as the demand for moving services is typically higher 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
	March 31
	2016		2015
	(in thousands)
REVENUES
Freight Transportation (ABF Freight)	$	439,508	$	441,207
Premium Logistics (Panther)		66,078		75,292
Transportation Management (ABF Logistics)		66,947		47,372
Emergency & Preventative Maintenance (FleetNet)		43,564		42,489
Household Goods Moving Services (ABF Moving)		18,144		18,568
Other and eliminations		(12,786)		(11,652)
Total consolidated revenues	$	621,455	$	613,276

OPERATING EXPENSES
Freight Transportation (ABF Freight)
Salaries, wages, and benefits	$	296,607	$	278,371
Fuel, supplies, and expenses		66,689		79,026
Operating taxes and licenses		11,980		11,996
Insurance		6,466		5,785
Communications and utilities		4,372		3,985
Depreciation and amortization		20,392		17,400
Rents and purchased transportation		39,696		41,844
Gain on sale of property and equipment		(172)		(244)
Pension settlement expense(1)		677		840
Other		1,800		2,161
Total Freight Transportation (ABF Freight)		448,507		441,164

Premium Logistics (Panther)
Purchased transportation		48,851		56,044
Depreciation and amortization		2,837		2,924
Salaries, benefits, insurance, and other		14,134		15,129
Total Premium Logistics (Panther)		65,822		74,097

Transportation Management (ABF Logistics)		66,281		46,597
Emergency & Preventative Maintenance (FleetNet)		42,580		41,319
Household Goods Moving Services (ABF Moving)		18,893		18,931
Other and eliminations(1)		(11,363)		(10,112)
Total consolidated operating expenses(1)	$	630,720	$	611,996

⁽¹⁾

Pre-tax pension settlement expense totaled $0.9 million and $1.1 million on a consolidated basis for the three months ended March 31, 2016 and 2015, respectively. For the three months ended March 31, 2016, pre-tax pension settlement expense of $0.7 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 three months ended March 31, 2015, pre-tax pension settlement expense of $0.8 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.


	Three Months Ended
	March 31
	2016		2015
	(in thousands)
OPERATING INCOME (LOSS)
Freight Transportation (ABF Freight)	$	(8,999)	$	43
Premium Logistics (Panther)		256		1,195
Transportation Management (ABF Logistics)		666		775
Emergency & Preventative Maintenance (FleetNet)		984		1,170
Household Goods Moving Services (ABF Moving)		(749)		(363)
Other and eliminations		(1,423)		(1,540)
Total consolidated operating income (loss)	$	(9,265)	$	1,280

OTHER INCOME (COSTS)
Interest and dividend income		401		234
Interest and other related financing costs		(1,247)		(1,002)
Other, net(2)		366		400
Total other costs		(480)		(368)
INCOME (LOSS) BEFORE INCOME TAXES	$	(9,745)	$	912

⁽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
	March 31
	2016		2015
	(in thousands)
OPERATING EXPENSES
Salaries, wages, and benefits	$	329,469	$	306,916
Rents, purchased transportation, and other costs of services		183,088		177,966
Fuel, supplies, and expenses		64,220		75,902
Depreciation and amortization(1)		25,151		22,232
Other		28,792		28,980
	$	630,720	$	611,996

⁽¹⁾

Includes amortization of intangible assets.