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 operating revenues, operating expense categories, operating ratios, operating income, and key operating statistics to evaluate performance and allocate resources to the Company’s operations.

Certain reclassifications have been made to the prior year’s operating segment data to conform to the current year presentation. Effective July 1, 2013, the Company formed a new operating segment, Domestic & Global Transportation Management, combining the Company’s transportation brokerage operations, worldwide ocean shipping solutions, and transportation and warehouse management services. The strategic alignment of the sales and logistics functions related to these services into one reportable segment under a single executive management operating team better supports the delivery of these solutions and allows customers to gain greater awareness for these service offerings in an evolving marketplace. The Company's transportation brokerage operations were previously reported as the Truck Brokerage and Management segment and the worldwide ocean shipping solutions and transportation and warehouse management services were previously reported within the Freight Transportation segment for the three and nine months ended September 30, 2012 and within "Other and eliminations" subsequent to December 31, 2012. There was no impact on consolidated amounts as a result of these reclassifications.

The Company’s reportable operating segments are impacted by seasonal fluctuations, as described below, and 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, the Company’s principal operating segment, includes the results of operations of ABF Freight System, Inc. and certain other subsidiaries of the Company (collectively “ABF”). ABF Freight System, Inc.’s self-move service operations provided by U-Pack Moving^® are also reported in the Freight Transportation segment.

ABF is impacted by seasonal fluctuations which affect tonnage and shipment levels and, consequently, revenues and operating results. 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 tonnage levels.

•

Premium Logistics & Expedited Freight Services includes the results of operations of Panther, which the Company acquired on June 15, 2012 (see Note C). The segment 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 Freight Transportation and Domestic & Global Transportation Management segments. Revenue and expense associated with these intersegment transactions are eliminated in consolidation.

Operations of the Premium Logistics & Expedited Freight Services segment 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 automotive and manufacturing customers, but hurricanes and other weather events can result in higher demand for expedited services.


•	Domestic & Global Transportation Management, operating as ABF Logistics, Inc., 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 transportation brokerage and domestic and global supply chain service industries are impacted by seasonal fluctuations which affect tonnage and shipment levels and, consequently, revenues and operating results. 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 tonnage and shipment levels. However, seasonal fluctuations are less apparent in the operating results of Domestic & Global Transportation Management than in the industry as a whole because of business growth in the segment.


•	Emergency & Preventative Maintenance 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.

Emergency roadside services are impacted by weather conditions that affect commercial vehicle operations, and results of operations will be influenced by seasonal variations in business levels.

•

Household Goods Moving Services includes the results of operations of Albert Companies, Inc. and Moving Solutions, Inc., the Company’s subsidiaries that provide transportation, warehousing, and delivery services to the consumer, corporate, and military household goods moving markets. For the three and nine months ended September 30, 2013, the Household Goods Moving Services segment includes the results of the logistics company acquired by Albert Companies, Inc. on May 31, 2013 (see Note C). Certain costs incurred by Household Goods Moving Services in support of ABF Freight System, Inc.’s self-move services are allocated to Freight Transportation at cost. Revenue and expense associated with these intersegment allocations are eliminated in consolidation.

Operations of the Household Goods Moving Services segments are impacted by seasonal fluctuations, resulting in higher business levels in the second and third calendar quarters of the year 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 Arkansas Best Corporation, the parent holding company, and other subsidiaries. A substantial portion of the 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 table reflects reportable operating segment information for the three and nine months ended September 30:



	Three Months Ended September 30						Nine Months Ended September 30
	2013			2012			2013			2012
	(in thousands)
OPERATING REVENUES
Freight Transportation⁽¹⁾	$	471,031		$	450,156		$	1,325,062		$	1,287,020
Premium Logistics & Expedited Freight Services⁽²⁾	65,851			60,445			179,533			71,280
Domestic & Global Transportation Management⁽¹⁾	28,669			17,342			74,554			44,954
Emergency & Preventative Maintenance	37,047			32,785			102,504			85,264
Household Goods Moving Services	30,530			25,702			65,358			61,233
Other and eliminations	(9,714		)	(8,884		)	(26,012		)	(20,795		)
Total consolidated operating revenues	$	623,414		$	577,546		$	1,720,999		$	1,528,956
OPERATING EXPENSES AND COSTS
Freight Transportation⁽¹⁾
Salaries, wages, and benefits	$	276,683		$	272,102		$	816,502		$	806,158
Fuel, supplies, and expenses	84,714			83,777			250,486			247,113
Operating taxes and licenses	10,864			10,890			32,793			32,514
Insurance	6,858			4,942			17,410			15,408
Communications and utilities	3,724			3,811			11,535			11,069
Depreciation and amortization	17,621			20,366			56,162			58,403
Rents and purchased transportation	50,507			44,015			133,236			116,912
Gain on sale of property and equipment	(93		)	(65		)	(487		)	(578		)
Pension settlement expense	1,612			—			1,612			—
Other	1,325			1,841			5,649			5,781
Total Freight Transportation	453,815			441,679			1,324,898			1,292,780
Premium Logistics & Expedited Freight Services⁽²⁾
Purchased transportation	50,220			46,260			137,489			54,507
Depreciation and amortization	2,665			2,491			7,809			2,965
Other	9,864			10,890			30,490			12,524
Total Premium Logistics & Expedited Freight Services	62,749			59,641			175,788			69,996
Domestic & Global Transportation Management⁽¹⁾	28,128			16,671			72,990			43,297
Emergency & Preventative Maintenance	36,202			31,913			100,137			83,834
Household Goods Moving Services	28,695			24,277			62,806			60,435
Other and eliminations⁽³⁾	(6,677		)	(8,868		)	(21,188		)	(17,833		)
Total consolidated operating expenses and costs	$	602,912		$	565,313		$	1,715,431		$	1,532,509
OPERATING INCOME (LOSS)
Freight Transportation⁽¹⁾	$	17,216		$	8,477		$	164		$	(5,760	)
Premium Logistics & Expedited Freight Services⁽²⁾	3,102			804			3,745			1,284
Domestic & Global Transportation Management⁽¹⁾	541			671			1,564			1,657
Emergency & Preventative Maintenance	845			872			2,367			1,430
Household Goods Moving Services	1,835			1,425			2,552			798
Other and eliminations⁽³⁾	(3,037		)	(16		)	(4,824		)	(2,962		)
Total consolidated operating income (loss)	$	20,502		$	12,233		$	5,568		$	(3,553	)
OTHER INCOME (EXPENSE)
Interest and dividend income⁽²⁾	167			155			499			623
Interest expense and other related financing costs⁽²⁾	(993		)	(1,609		)	(3,279		)	(3,863		)
Other, net⁽⁴⁾	1,328			997			2,778			2,117
Total other income (expense)	502			(457		)	(2		)	(1,123		)
INCOME (LOSS) BEFORE INCOME TAXES	$	21,004		$	11,776		$	5,566		$	(4,676	)


(1)	As previously discussed in this Note, certain reclassifications have been made to the prior year’s operating segment data to conform to the current year presentation which includes the Domestic & Global Transportation Management segment formed in third quarter 2013.


(2)	Includes operations of the Premium Logistics & Expedited Freight Services segment since the June 15, 2012 acquisition of Panther.


(3)	The 2013 periods include a $1.4 million workers' compensation expense adjustment.


(4)	Includes changes in cash surrender value and proceeds of life insurance policies.

The following table reflects assets by reportable operating segment:



	September 30 2013		December 31 2012
	(in thousands)
ASSETS
Freight Transportation⁽¹⁾	$	550,612	$	550,676
Premium Logistics & Expedited Freight Services	221,344		222,280
Domestic & Global Transportation Management⁽¹⁾	23,418		15,437
Emergency & Preventative Maintenance	21,128		18,413
Household Goods Moving Services	25,611		21,754
Other and eliminations⁽¹⁾	196,010		205,902
	$	1,038,123	$	1,034,462


(1)	As previously discussed in this Note, certain reclassifications have been made to the prior year’s operating segment data to conform to the current year presentation which includes the Domestic & Global Transportation Management segment formed in third quarter 2013.