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.

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, which has now been renamed Transportation Management (ABF Logistics), combining the Company’s transportation brokerage operations, worldwide ocean shipping solutions, and transportation and warehouse management services. 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 “Other and eliminations” for the six months ended June 30, 2013. 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 as a result, 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 of the Company. The operations of ABF Freight include, national, inter-regional, and regional transportation of general commodities through standard, expedited, and guaranteed LTL services. Freight transportation related to consumer household goods self-move services provided by ABF Freight are also reported in the ABF Freight segment.

ABF Freight 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. ABF Freight’s first quarter 2014 operating results were adversely impacted by severe winter weather in comparison to the same prior-year period.

· The Premium Logistics (Panther) segment, which was formerly named Premium Logistics and Expedited Freight Services, 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. Revenue and expense associated with these intersegment transactions are eliminated in consolidation.

Operations of the Panther 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.

· 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. For 2014, since the acquisition date, FleetNet includes the results of the privately-owned business acquired on April 30, 2014 (see Note A). The segment provides services to the ABF Freight and Panther segments. Revenue and expense associated with these intersegment transactions are eliminated in consolidation.

Emergency roadside services are favorably impacted by severe weather conditions that affect commercial vehicle operations, and the segment’s results of operations will be influenced by seasonal variations in service event volume.

· Transportation Management (ABF Logistics), which was formerly named Domestic & Global Transportation Management, 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 business 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. 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.

· 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. For 2014 and 2013, since the acquisition date, ABF Moving includes the results of the privately-owned business acquired on May 31, 2013 (see Note A). Certain costs incurred by ABF Moving in support of consumer self-move services provided by ABF Freight are allocated to the ABF Freight segment at cost. Revenue and expense associated with these intersegment allocations are eliminated in consolidation.

Operations of ABF Moving 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 ArcBest Corporation, the parent holding company, and 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 table reflects reportable operating segment information for the three and six months ended June 30:

	Three Months Ended						Six Months Ended
	June 30						June 30
	2014			2013			2014			2013
	(in thousands)

REVENUES
Freight Transportation (ABF Freight)	$	492,857		$	446,750		$	921,728		$	854,031
Premium Logistics (Panther)	81,425			60,431			153,651			113,683
Emergency & Preventative Maintenance (FleetNet)	38,307			32,935			80,006			65,457
Transportation Management (ABF Logistics)	35,493			24,267			65,210			45,885
Household Goods Moving Services (ABF Moving)	22,855			21,252			37,605			34,828
Other and eliminations	(12,291		)	(8,736		)	(21,650		)	(16,298		)
Total consolidated revenues	$	658,646		$	576,899		$	1,236,550		$	1,097,586

OPERATING EXPENSES
Freight Transportation (ABF Freight)
Salaries, wages, and benefits	$	279,372		$	272,641		$	540,527		$	539,819
Fuel, supplies, and expenses	93,277			82,441			184,067			165,773
Operating taxes and licenses	11,770			10,939			23,263			21,929
Insurance	5,966			6,068			11,361			10,552
Communications and utilities	3,731			3,879			7,973			7,812
Depreciation and amortization	16,841			18,967			33,178			38,541
Rents and purchased transportation	55,549			44,260			102,969			82,729
Gain on sale of property and equipment	(40		)	(182		)	(243		)	(394		)
Pension settlement expense	708			—			3,598			—
Other	2,848			2,240			4,382			4,322
Total Freight Transportation (ABF Freight)	470,022			441,253			911,075			871,083

Premium Logistics (Panther)

Purchased transportation	60,185			46,233			114,759			87,270
Depreciation and amortization(1)	2,838			2,594			5,574			5,144
Salaries, benefits, insurance, and other	14,044			10,098			25,596			20,627
Total Premium Logistics (Panther)	77,067			58,925			145,929			113,041

Emergency & Preventative Maintenance (FleetNet)	37,607			32,125			77,905			63,935
Transportation Management (ABF Logistics)	34,639			23,761			63,821			44,862
Household Goods Moving Services (ABF Moving)	22,232			20,304			37,823			34,111
Other and eliminations	(9,873		)	(7,886		)	(18,253		)	(14,512		)
Total consolidated operating expenses	$	631,694		$	568,482		$	1,218,300		$	1,112,520

OPERATING INCOME (LOSS)
Freight Transportation (ABF Freight)	$	22,835		$	5,497		$	10,653		$	(17,052	)
Premium Logistics (Panther)	4,358			1,506			7,722			642
Emergency & Preventative Maintenance (FleetNet)	700			810			2,101			1,522
Transportation Management (ABF Logistics)	854			506			1,389			1,023
Household Goods Moving Services (ABF Moving)	623			948			(218		)	717
Other and eliminations	(2,418		)	(850		)	(3,397		)	(1,786		)
Total consolidated operating income (loss)	$	26,952		$	8,417		$	18,250		$	(14,934	)

OTHER INCOME (EXPENSE)
Interest and dividend income	$	194		$	161		$	384		$	332
Interest expense and other related financing costs	(725		)	(1,079		)	(1,533		)	(2,286		)
Other, net(2)	950			366			1,315			1,450
Total other income (expense)	419			(552		)	166			(504		)
INCOME (LOSS) BEFORE INCOME TAXES	$	27,371		$	7,865		$	18,416		$	(15,438	)

(1) Depreciation and amortization consists primarily of amortization of intangibles, including customer relationships and software.

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