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, shipment levels, and demand for its services, and, consequently, revenues and operating results of the segment. Freight shipments and operating costs of ABF Freight are adversely affected by inclement weather conditions. 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 influence quarterly freight 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, 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 maintenance-related services for commercial vehicles through a network of third-party service providers. FleetNet provides services to the ABF Freight and Panther segments.

Emergency roadside service 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, 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.

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				Six Months Ended
	June 30				June 30
	2016		2015		2016		2015
	(in thousands)
REVENUES
Freight Transportation (ABF Freight)	$	486,731	$	504,371	$	926,239	$	945,578
Premium Logistics (Panther)		69,705		80,271		135,783		155,563
Transportation Management (ABF Logistics)		67,955		50,419		134,902		97,791
Emergency & Preventative Maintenance (FleetNet)		41,780		42,015		85,344		84,504
Household Goods Moving Services (ABF Moving)		25,742		32,225		43,886		50,793
Other and eliminations		(15,286)		(13,186)		(28,072)		(24,838)
Total consolidated revenues	$	676,627	$	696,115	$	1,298,082	$	1,309,391

OPERATING EXPENSES
Freight Transportation (ABF Freight)
Salaries, wages, and benefits	$	303,693	$	301,639	$	600,300	$	580,010
Fuel, supplies, and expenses		72,279		79,647		138,968		158,673
Operating taxes and licenses		12,154		12,322		24,134		24,318
Insurance		7,660		6,267		14,126		12,052
Communications and utilities		4,279		3,766		8,651		7,751
Depreciation and amortization		20,911		18,286		41,303		35,686
Rents and purchased transportation		47,800		52,380		87,496		94,224
Gain on sale of property and equipment		(2,197)		(594)		(2,369)		(838)
Pension settlement expense(1)		424		448		1,101		1,288
Other		2,356		2,118		4,156		4,279
Total Freight Transportation (ABF Freight)		469,359		476,279		917,866		917,443

Premium Logistics (Panther)
Purchased transportation		52,007		58,510		100,858		114,554
Depreciation and amortization		2,868		2,939		5,705		5,863
Salaries, benefits, insurance, and other		13,728		13,984		27,862		29,113
Total Premium Logistics (Panther)		68,603		75,433		134,425		149,530

Transportation Management (ABF Logistics)		67,459		48,611		133,740		95,208
Emergency & Preventative Maintenance (FleetNet)		41,184		40,998		83,764		82,317
Household Goods Moving Services (ABF Moving)		24,872		30,228		43,765		49,159
Other and eliminations(1)		(11,504)		(8,900)		(22,867)		(19,012)
Total consolidated operating expenses(1)	$	659,973	$	662,649	$	1,290,693	$	1,274,645

⁽¹⁾

Pre-tax pension settlement expense totaled $0.6 million on a consolidated basis for the three months ended June 30, 2016 and 2015, of which $0.4 million was reported by ABF Freight, $0.1 million was reported in Other and eliminations, and less than $0.1 million was reported by the asset-light logistics operating segments. For the six months ended June 30, 2016 and 2015, pre-tax pension settlement expense totaled $1.5 million and $1.7 million, respectively, of which $1.1 million and $1.3 million, respectively, was reported by ABF Freight, $0.3 million was reported in Other and eliminations, and $0.1 million was reported by the asset-light logistics operating segments.


	Three Months Ended				Six Months Ended
	June 30				June 30
	2016		2015		2016		2015
	(in thousands)
OPERATING INCOME
Freight Transportation (ABF Freight)	$	17,372	$	28,092	$	8,373	$	28,135
Premium Logistics (Panther)		1,102		4,838		1,358		6,033
Transportation Management (ABF Logistics)		496		1,808		1,162		2,583
Emergency & Preventative Maintenance (FleetNet)		596		1,017		1,580		2,187
Household Goods Moving Services (ABF Moving)		870		1,997		121		1,634
Other and eliminations		(3,782)		(4,286)		(5,205)		(5,826)
Total consolidated operating income	$	16,654	$	33,466	$	7,389	$	34,746

OTHER INCOME (COSTS)
Interest and dividend income	$	387	$	271	$	788	$	505
Interest and other related financing costs		(1,231)		(1,025)		(2,478)		(2,027)
Other, net(2)		571		197		937		597
Total other costs		(273)		(557)		(753)		(925)
INCOME BEFORE INCOME TAXES	$	16,381	$	32,909	$	6,636	$	33,821

⁽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				Six Months Ended
	June 30				June 30
	2016		2015		2016		2015
	(in thousands)
OPERATING EXPENSES
Salaries, wages, and benefits	$	335,094	$	332,510	$	664,563	$	639,426
Rents, purchased transportation, and other costs of services		199,352		200,619		382,440		378,585
Fuel, supplies, and expenses		70,406		78,127		134,626		154,029
Depreciation and amortization(1)		25,748		22,616		50,899		44,848
Other		29,373		28,777		58,165		57,757
	$	659,973	$	662,649	$	1,290,693	$	1,274,645

⁽¹⁾

Includes amortization of intangible assets.