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 operating segment and certain support costs related to these services are allocated to ABF Freight from the ABF Moving operating segment.

ABF Freight is impacted by seasonal fluctuations which affect tonnage and shipment levels and, consequently, revenues and operating results. Earnings of the ABF Freight segment are adversely affected by the impact of inclement weather conditions on freight shipments and operating costs. 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 (Panther) provides expedited freight transportation services to commercial and government customers and offers premium logistics services that include 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 operating 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 automotive and manufacturing customers, but severe 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. FleetNet provides services to the ABF Freight and Panther segments.

Emergency roadside services 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.

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 influence 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.

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. Certain costs incurred by ABF Moving in support of consumer self-move services provided by ABF Freight are allocated to the ABF Freight operating segment.

Operating results for ABF Moving are impacted by the state of the national economy, including housing, unemployment, and U.S. mobility, as well as decisions made by the U.S. military which affect personnel moves. Operations of the segment are also impacted by seasonal fluctuations, resulting in higher business levels in the second and third quarters 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 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 for the three and six months ended June 30:

	Three Months Ended						Six Months Ended
	June 30						June 30
	2015			2014			2015			2014
	(in thousands)
REVENUES
Freight Transportation (ABF Freight)	$	504,371		$	492,857		$	945,578		$	921,728
Premium Logistics (Panther)	80,271			81,425			155,563			153,651
Emergency & Preventative Maintenance (FleetNet)	42,015			38,307			84,504			80,006
Transportation Management (ABF Logistics)	50,419			35,493			97,791			65,210
Household Goods Moving Services (ABF Moving)	32,225			22,855			50,793			37,605
Other and eliminations	(13,186		)	(12,291		)	(24,838		)	(21,650		)

Total consolidated revenues	$	696,115		$	658,646		$	1,309,391		$	1,236,550

OPERATING EXPENSES
Freight Transportation (ABF Freight)
Salaries, wages, and benefits	$	301,639		$	279,372		$	580,010		$	540,527
Fuel, supplies, and expenses	79,647			93,277			158,673			184,067
Operating taxes and licenses	12,322			11,770			24,318			23,263
Insurance	6,267			5,966			12,052			11,361
Communications and utilities	3,766			3,731			7,751			7,973
Depreciation and amortization	18,286			16,841			35,686			33,178
Rents and purchased transportation	52,380			55,549			94,224			102,969
Gain on sale of property and equipment	(594		)	(40		)	(838		)	(243		)
Pension settlement expense(1)	448			708			1,288			3,598
Other	2,118			2,848			4,279			4,382

Total Freight Transportation (ABF Freight)	476,279			470,022			917,443			911,075
Premium Logistics (Panther)
Purchased transportation	58,510			60,185			114,554			114,759
Depreciation and amortization(2)	2,939			2,838			5,863			5,574
Salaries, benefits, insurance, and other	13,984			14,044			29,113			25,596

Total Premium Logistics (Panther)	75,433			77,067			149,530			145,929
Emergency & Preventative Maintenance (FleetNet)	40,998			37,607			82,317			77,905
Transportation Management (ABF Logistics)	48,611			34,639			95,208			63,821
Household Goods Moving Services (ABF Moving)	30,228			22,232			49,159			37,823
Other and eliminations(1)	(8,900		)	(9,873		)	(19,012		)	(18,253		)

Total consolidated operating expenses	$	662,649		$	631,694		$	1,274,645		$	1,218,300

⁽¹⁾

Pension settlement expense totaled $0.6 million (pre-tax) and $0.9 million (pre-tax) on a consolidated basis for the three months ended June 30, 2015 and 2014, respectively, of which $0.4 million and $0.7 million was reported by ABF Freight, $0.1 million and $0.2 million was reported in Other and eliminations, and less than $0.1 million was reported by the asset-light logistics operating segments, for the respective periods. Pension settlement expense totaled $1.7 million (pre-tax) and $4.6 million (pre-tax) on a consolidated basis for the six months ended June 30, 2015 and 2014, respectively, of which $1.3 million and $3.6 million was reported by ABF Freight, $0.3 million and $0.9 million was reported in Other and eliminations, and $0.1 million was reported by the asset-light logistics operating segments, for the respective periods.

⁽²⁾

Depreciation and amortization consists primarily of amortization of intangibles, including customer relationships and software associated with the June 15, 2012 acquisition of Panther.

	Three Months Ended						Six Months Ended
	June 30						June 30
	2015			2014			2015			2014
	(in thousands)
OPERATING INCOME
Freight Transportation (ABF Freight)	$	28,092		$	22,835		$	28,135		$	10,653
Premium Logistics (Panther)	4,838			4,358			6,033			7,722
Emergency & Preventative Maintenance (FleetNet)	1,017			700			2,187			2,101
Transportation Management (ABF Logistics)	1,808			854			2,583			1,389
Household Goods Moving Services (ABF Moving)	1,997			623			1,634			(218		)
Other and eliminations	(4,286		)	(2,418		)	(5,826		)	(3,397		)

Total consolidated operating income	$	33,466		$	26,952		$	34,746		$	18,250

OTHER INCOME (COSTS)
Interest and dividend income	$	271		$	194		$	505		$	384
Interest and other related financing costs	(1,025		)	(725		)	(2,027		)	(1,533		)
Other, net	197			950			597			1,315

Total other income (costs)	(557		)	419			(925		)	166

INCOME BEFORE INCOME TAXES	$	32,909		$	27,371		$	33,821		$	18,416

The following table presents operating expenses by category on a consolidated basis for the three and six months ended June 30:

	Three Months Ended				Six Months Ended
	June 30				June 30
	2015		2014		2015		2014
	(in thousands)
OPERATING EXPENSES
Salaries, wages, and benefits	$	332,510	$	305,977	$	639,426	$	592,778
Rents, purchased transportation, and other costs of services	200,619		184,179		378,585		348,305
Fuel, supplies, and expenses	78,127		91,291		154,029		180,064
Depreciation and amortization	22,616		21,224		44,848		41,677
Other	28,777		29,023		57,757		55,476

	$	662,649	$	631,694	$	1,274,645	$	1,218,300