OPERATING SEGMENT DATA

6 Months Ended

Jun. 30, 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 and six months ended June 30, 2022, the Company’s operations have not been as heavily impacted by seasonal fluctuations, due in part to strategic initiatives undertaken to enable profitable growth through seasons and cycles. The acquired operations of MoLo on November 1, 2021 resulted in increased business levels for the ArcBest segment for the three and six months ended June 30, 2022, compared to the same periods 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, 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, 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.

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				Six Months Ended
	June 30				June 30
	2022		2021		2022		2021
	(in thousands)
REVENUES
Asset-Based	$	802,622	$	652,832	$	1,507,933	$	1,209,124
ArcBest(1)		549,655		270,748		1,144,939		523,084
FleetNet		82,132		59,547		160,510		118,710
Other and eliminations		(41,480)		(34,154)		(85,379)		(72,732)
Total consolidated revenues	$	1,392,929	$	948,973	$	2,728,003	$	1,778,186
OPERATING EXPENSES
Asset-Based
Salaries, wages, and benefits	$	328,068	$	302,370	$	641,565	$	588,064
Fuel, supplies, and expenses		99,296		64,689		184,127		125,530
Operating taxes and licenses		12,823		12,303		25,316		24,551
Insurance		12,197		9,454		22,628		18,393
Communications and utilities		4,648		4,663		9,335		9,633
Depreciation and amortization		24,463		23,308		48,768		46,792
Rents and purchased transportation		121,550		95,082		224,535		170,670
Shared services		75,584		69,372		142,734		125,238
Gain on sale of property and equipment(2)		(1,370)		71		(4,065)		(8,624)
Innovative technology costs(3)		7,954		7,532		14,914		14,400
Other		753		77		1,386		511
Total Asset-Based		685,966		588,921		1,311,243		1,115,158
ArcBest(1)
Purchased transportation		448,160		226,603		956,540		437,598
Supplies and expenses		4,263		2,476		7,529		5,044
Depreciation and amortization(4)		5,468		2,366		10,648		4,752
Shared services		57,986		29,078		108,183		55,150
Gain on sale of subsidiary(5)		(402)		(6,923)		(402)		(6,923)
Other		6,701		2,021		13,846		4,071
Total ArcBest		522,176		255,621		1,096,344		499,692
FleetNet		80,540		58,409		157,201		116,549
Other and eliminations		(33,099)		(28,277)		(69,059)		(59,703)
Total consolidated operating expenses	$	1,255,583	$	874,674	$	2,495,729	$	1,671,696

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

(2) The six months ended June 30, 2021 include an $8.6 million gain on the sale of an unutilized service center property. The 2022 amounts primarily consist of gains on sale of replaced equipment.

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

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

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

	Three Months Ended				Six Months Ended
	June 30				June 30
	2022		2021		2022		2021
	(in thousands)
OPERATING INCOME
Asset-Based	$	116,656	$	63,911	$	196,690	$	93,966
ArcBest(1)		27,479		15,127		48,595		23,392
FleetNet		1,592		1,138		3,309		2,161
Other and eliminations		(8,381)		(5,877)		(16,320)		(13,029)
Total consolidated operating income	$	137,346	$	74,299	$	232,274	$	106,490
OTHER INCOME (COSTS)
Interest and dividend income	$	361	$	322	$	467	$	714
Interest and other related financing costs		(1,863)		(2,274)		(3,802)		(4,702)
Other, net(2)		(2,807)		1,111		(3,633)		2,303
Total other costs		(4,309)		(841)		(6,968)		(1,685)
INCOME BEFORE INCOME TAXES	$	133,037	$	73,458	$	225,306	$	104,805

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

(2) 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				Six Months Ended
	June 30				June 30
	2022		2021		2022		2021
	(in thousands)
Revenues from customers
Asset-Based	$	788,973	$	630,145	$	1,464,491	$	1,159,869
ArcBest(1)		538,780		268,038		1,130,502		518,279
FleetNet		68,204		49,951		135,187		98,385
Other		(3,028)		839		(2,177)		1,653
Total consolidated revenues(1)	$	1,392,929	$	948,973	$	2,728,003	$	1,778,186
Intersegment revenues
Asset-Based	$	13,649	$	22,687	$	43,442	$	49,255
ArcBest		10,875		2,710		14,437		4,805
FleetNet		13,928		9,596		25,323		20,325
Other and eliminations		(38,452)		(34,993)		(83,202)		(74,385)
Total intersegment revenues	$	—	$	—	$	—	$	—
Total segment revenues
Asset-Based	$	802,622	$	652,832	$	1,507,933	$	1,209,124
ArcBest(1)		549,655		270,748		1,144,939		523,084
FleetNet		82,132		59,547		160,510		118,710
Other and eliminations		(41,480)		(34,154)		(85,379)		(72,732)
Total consolidated revenues(1)	$	1,392,929	$	948,973	$	2,728,003	$	1,778,186

(1) The 2022 periods include 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				Six Months Ended
	June 30				June 30
	2022(1)		2021		2022(1)		2021
	(in thousands)
OPERATING EXPENSES
Salaries, wages, and benefits	$	449,404	$	389,146	$	870,047	$	748,541
Rents, purchased transportation, and other costs of services		610,877		347,760		1,257,756		657,098
Fuel, supplies, and expenses		119,378		80,020		218,925		153,169
Depreciation and amortization(2)		35,330		30,282		70,153		60,636
Other(3)		40,594		27,466		78,848		52,252
	$	1,255,583	$	874,674	$	2,495,729	$	1,671,696

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

(2) Includes amortization of intangible assets.

(3) The three and six months ended June 30, 2021 include a $6.9 million gain related to the sale of a subsidiary within the ArcBest segment. The  six months ended June 30, 2021 also includes an $8.6 million gain on the sale of an unutilized service center property within the Asset-Based segment, compared to $4.1 million of gains on the sale of replaced equipment within the Asset-Based segment for the same period of 2022.