OPERATING SEGMENT DATA

12 Months Ended

Dec. 31, 2020

OPERATING SEGMENT DATA

OPERATING SEGMENT DATA

NOTE M – 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.

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 ArcBest 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.

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 (“ABF Freight”). 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.

● 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.

● 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 and certain other 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.

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:

	2020		2019		2018
	(in thousands)
REVENUES
Asset-Based	$	2,092,031	$	2,144,679	$	2,175,585
ArcBest		779,115		738,392		781,123
FleetNet		205,049		211,738		195,126
Other and eliminations		(136,032)		(106,499)		(58,046)
Total consolidated revenues	$	2,940,163	$	2,988,310	$	3,093,788
OPERATING EXPENSES
Asset-Based
Salaries, wages, and benefits	$	1,095,694	$	1,148,761	$	1,128,030
Fuel, supplies, and expenses		209,095		257,133		255,655
Operating taxes and licenses		49,300		50,209		48,792
Insurance		33,568		32,516		32,887
Communications and utilities		17,916		18,614		16,983
Depreciation and amortization		94,326		89,798		85,951
Rents and purchased transportation		250,159		221,479		242,247
Shared services		217,258		212,773		215,302
Multiemployer pension fund withdrawal liability charge(1)		—		—		37,922
Gain on sale of property and equipment		(3,309)		(5,892)		(410)
Innovative technology costs(2)		22,458		13,739		3,810
Other		6,701		3,488		4,554
Total Asset-Based		1,993,166		2,042,618		2,071,723
ArcBest
Purchased transportation		649,933		606,113		631,501
Supplies and expenses		9,627		10,789		13,329
Depreciation and amortization		9,714		11,344		13,750
Shared services		90,983		93,961		91,266
Other		9,203		9,860		9,143
Asset impairment(3)		—		26,514		—
Restructuring costs(4)		—		—		491
Gain on sale of subsidiaries(5)		—		—		(1,945)
Total ArcBest		769,460		758,581		757,535
FleetNet		201,682		206,932		190,741
Other and eliminations		(122,423)		(83,591)		(35,309)
Total consolidated operating expenses	$	2,841,885	$	2,924,540	$	2,984,690

(1) ABF Freight recorded a one-time charge in 2018 for the multiemployer pension fund withdrawal liability resulting from the transition agreement it entered into with the New England Pension Fund (see Note I).

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

(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 D).

(4) Restructuring costs relate to the realignment of the Company’s corporate structure (see Note N).

(5) Gain recognized in 2018 relates to the sale of the ArcBest segment’s military moving business in December 2017.

	For the Year Ended December 31
	2020		2019		2018
	(in thousands)
OPERATING INCOME (LOSS)
Asset-Based	$	98,865	$	102,061	$	103,862
ArcBest		9,655		(20,189)		23,588
FleetNet		3,367		4,806		4,385
Other and eliminations		(13,609)		(22,908)		(22,737)
Total consolidated operating income	$	98,278	$	63,770	$	109,098
OTHER INCOME (COSTS)
Interest and dividend income	$	3,616	$	6,453	$	3,914
Interest and other related financing costs		(11,697)		(11,467)		(9,468)
Other, net(1)		2,299		(7,285)		(19,158)
Total other costs		(5,782)		(12,299)		(24,712)
INCOME BEFORE INCOME TAXES	$	92,496	$	51,471	$	84,386

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

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

	2020		2019		2018
	(in thousands)
Revenues from customers
Asset-Based	$	1,998,549	$	2,077,287	$	2,131,571
ArcBest		770,560		731,366		773,968
FleetNet		166,654		175,055		182,861
Other		4,400		4,602		5,388
Total consolidated revenues	$	2,940,163	$	2,988,310	$	3,093,788
Intersegment revenues
Asset-Based	$	93,482	$	67,392	$	44,014
ArcBest		8,555		7,026		7,155
FleetNet		38,395		36,683		12,265
Other and eliminations		(140,432)		(111,101)		(63,434)
Total intersegment revenues	$	—	$	—	$	—
Total segment revenues
Asset-Based	$	2,092,031		2,144,679		2,175,585
ArcBest		779,115		738,392		781,123
FleetNet		205,049		211,738		195,126
Other and eliminations		(136,032)		(106,499)		(58,046)
Total consolidated revenues	$	2,940,163	$	2,988,310	$	3,093,788

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

	For the year ended December 31
	2020		2019		2018
	(in thousands)
CAPITAL EXPENDITURES, GROSS
Asset-Based(1)	$	85,135	$	122,437	$	116,505
ArcBest		1,258		3,909		5,174
FleetNet		675		590		1,365
Other and eliminations(2)(3)		17,983		33,748		14,631
	$	105,051	$	160,684	$	137,675

	For the year ended December 31
	2020		2019		2018
	(in thousands)
DEPRECIATION AND AMORTIZATION EXPENSE(2)
Asset-Based	$	94,326	$	89,798	$	85,951
ArcBest(4)		9,714		11,344		13,750
FleetNet(5)		1,622		1,341		1,140
Other and eliminations(2)		12,729		9,983		7,794
	$	118,391	$	112,466	$	108,635

(1) Includes assets acquired through notes payable of $61.8 million, $67.6 million, and $86.8 million in 2020, 2019, and 2018, 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 and $6.9 million in 2019 and 2018, respectively.

(4) Includes amortization of intangibles of $3.7 million, $4.2 million, and $4.3 million in 2020, 2019, and 2018, respectively.

(5) Includes amortization of intangibles which totaled $0.2 million in 2020, 2019, and 2018.

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

	For the year ended December 31
	2020		2019		2018
	(in thousands)
OPERATING EXPENSES
Salaries, wages, and benefits	$	1,368,588	$	1,408,409	$	1,398,348
Rents, purchased transportation, and other costs of services		974,835		934,958		989,006
Fuel, supplies, and expenses		250,221		316,047		325,126
Depreciation and amortization(1)		118,391		112,466		108,635
Other		129,850		126,146		123,998
Asset impairment(2)		—		26,514		—
Multiemployer pension fund withdrawal liability charge(3)		—		—		37,922
Restructuring costs(4)		—		—		1,655
	$	2,841,885	$	2,924,540	$	2,984,690

(1) Includes amortization of intangible assets.

(2) 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 D).

(3) ABF Freight recorded a one-time charge in 2018 for the multiemployer pension fund withdrawal liability resulting from the transition agreement it entered into with the New England Pension Fund (see Note I).

(4) Restructuring costs relate to the realignment of the Company’s corporate structure (see Note N).