| OPERATING SEGMENT DATA |
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 (loss), and key operating statistics to evaluate performance and allocate resources to the Company’s operations. On February 28, 2023, the Company sold FleetNet, a wholly owned subsidiary and reportable operating segment of the Company. Following the sale, FleetNet is reported as discontinued operations. As such, historical results of FleetNet have been excluded from both continuing operations and segment results for all periods presented. The Company’s reportable operating segments are impacted by seasonal fluctuations which affect tonnage and shipment 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. Inclement weather conditions can adversely affect freight shipments and operating costs of the Asset-Based and Asset-Light segments. Shipments may decline during winter months because of post-holiday slowdowns and during summer months due to plant shutdowns affecting automotive and manufacturing customers of the Asset-Light segment; however, weather and other disruptive events can result in higher short-term demand for expedite services depending on the impact to customers' supply chains. Historically, the second and third calendar quarters of each year usually have the highest tonnage and 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; the impact of yield initiatives; and the impact of external events or conditions, may influence quarterly business levels. The Company’s yield initiatives, along with increased technology-driven intelligence and visibility with respect to demand, have allowed for shipment optimization in non-peak times, reducing the Company’s susceptibility to seasonal fluctuations in recent years, including the three and nine months ended September 30, 2024 and 2023. 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 Asset-Light segment, including freight transportation related to managed transportation solutions and other services. |
| ● | The Asset-Light segment includes the results of operations of the Company’s service offerings in truckload, ground expedite, dedicated, intermodal, household goods moving, managed transportation, warehousing and distribution, and international freight transportation for air, ocean, and ground. The Asset-Light segment provides services to the Asset-Based segment. |
The Company’s other business activities and operations that are not reportable segments 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 operating 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 reportable operating segments are predominantly allocated based upon estimated and planned resource utilization-related metrics, such as estimated shipment levels 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 reportable 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 the Company’s reportable operating segment information from continuing operations: | | | | | | | | | | | | | | | | Three Months Ended | | Nine Months Ended | | | | September 30 | | September 30 | | | | 2024 | | 2023 | | 2024 | | 2023 | | | | | (in thousands) | | REVENUES | | | | | | | | | | | | | | Asset-Based | | $ | 709,722 | | $ | 741,186 | | $ | 2,093,914 | | $ | 2,161,018 | | Asset-Light | | | 385,324 | | | 419,312 | | | 1,177,504 | | | 1,267,220 | | Other and eliminations | | | (31,922) | | | (32,148) | | | (94,044) | | | (90,330) | | Total consolidated revenues | | $ | 1,063,124 | | $ | 1,128,350 | | $ | 3,177,374 | | $ | 3,337,908 | | | | | | | | | | | | | | | | OPERATING EXPENSES | | | | | | | | | | | | | | Asset-Based | | | | | | | | | | | | | | Salaries, wages, and benefits | | $ | 358,469 | | $ | 357,582 | | $ | 1,056,146 | | $ | 1,037,725 | | Fuel, supplies, and expenses | | | 79,170 | | | 91,493 | | | 243,152 | | | 276,678 | | Operating taxes and licenses | | | 13,538 | | | 13,865 | | | 40,624 | | | 41,938 | | Insurance | | | 19,819 | | | 13,654 | | | 51,265 | | | 39,816 | | Communications and utilities | | | 4,793 | | | 4,729 | | | 14,004 | | | 14,586 | | Depreciation and amortization | | | 26,967 | | | 26,537 | | | 80,620 | | | 76,721 | | Rents and purchased transportation | | | 73,600 | | | 79,233 | | | 209,586 | | | 271,899 | | Shared services | | | 69,463 | | | 70,699 | | | 206,622 | | | 209,780 | | (Gain) loss on sale of property and equipment and lease impairment charges(1) | | | (1,688) | | | 540 | | | (1,630) | | | 905 | | Innovative technology costs(2) | | | — | | | 7,300 | | | — | | | 21,711 | | Other | | | 1,571 | | | 731 | | | 3,257 | | | 3,640 | | Total Asset-Based | | | 645,702 | | | 666,363 | | | 1,903,646 | | | 1,995,399 | | | | | | | | | | | | | | | | Asset-Light | | | | | | | | | | | | | | Purchased transportation | | | 331,107 | | | 365,217 | | | 1,014,476 | | | 1,078,482 | | Salaries, wages, and benefits(3) | | | 30,150 | | | 31,193 | | | 91,490 | | | 98,688 | | Supplies and expenses(3) | | | 2,702 | | | 2,625 | | | 8,279 | | | 9,159 | | Depreciation and amortization(4) | | | 5,037 | | | 5,097 | | | 15,154 | | | 15,250 | | Shared services(3) | | | 17,547 | | | 16,218 | | | 51,118 | | | 49,232 | | Contingent consideration(5) | | | (91,910) | | | (17,840) | | | (80,740) | | | (12,800) | | Lease impairment charges(6) | | | — | | | 14,407 | | | — | | | 14,407 | | Other(3) | | | 5,912 | | | 6,099 | | | 17,704 | | | 19,417 | | Total Asset-Light | | | 300,545 | | | 423,016 | | | 1,117,481 | | | 1,271,835 | | | | | | | | | | | | | | | | Other and eliminations(7) | | | (18,116) | | | (6,120) | | | (50,026) | | | (37,692) | | Total consolidated operating expenses | | $ | 928,131 | | $ | 1,083,259 | | $ | 2,971,101 | | $ | 3,229,542 | |
| (1) | The three and nine months ended September 30, 2023 include a $0.7 million noncash lease-related impairment charge for a service center. |
| (2) | Represents costs associated with the freight handling pilot test program at ABF Freight, for which the decision was made to pause the pilot during third quarter 2023. |
| (3) | For the three and nine months ended September 30, 2023, certain expenses have been reclassed to conform to the current year presentation, including amounts previously reported in “Shared services” that were reclassed to present “Salaries, wages, and benefits” expenses in a separate line item, and certain immaterial facility rent expenses which were reclassed between line items. |
| (4) | Depreciation and amortization includes amortization of intangibles associated with acquired businesses. |
| (5) | Represents the change in fair value of the contingent earnout consideration related to the MoLo acquisition (see Note B). |
| (6) | Represents noncash lease-related impairment charges for certain office spaces that were made available for sublease. |
| (7) | For the three and nine months ended September 30, 2023, “Other and eliminations” includes $15.1 million of noncash lease-related impairment charges for a freight handling pilot facility. |
| | | | | | | | | | | | | | | | Three Months Ended | | Nine Months Ended | | | | September 30 | | September 30 | | | | 2024 | | 2023 | | 2024 | | 2023 | | | | | (in thousands) | | OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS | | | | | | | | | | | | | | Asset-Based | | $ | 64,020 | | $ | 74,823 | | $ | 190,268 | | $ | 165,619 | | Asset-Light(1) | | | 84,779 | | | (3,704) | | | 60,023 | | | (4,615) | | Other and eliminations(2) | | | (13,806) | | | (26,028) | | | (44,018) | | | (52,638) | | Total consolidated operating income | | $ | 134,993 | | $ | 45,091 | | $ | 206,273 | | $ | 108,366 | | | | | | | | | | | | | | | | OTHER INCOME (COSTS) FROM CONTINUING OPERATIONS | | | | | | | | | | | | | | Interest and dividend income | | $ | 3,130 | | $ | 3,946 | | $ | 9,686 | | $ | 10,604 | | Interest and other related financing costs | | | (2,281) | | | (2,236) | | | (6,587) | | | (6,768) | | Other, net(3) | | | 862 | | | 89 | | | (28,118) | | | 6,907 | | Total other income (costs) | | | 1,711 | | | 1,799 | | | (25,019) | | | 10,743 | | INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | | $ | 136,704 | | $ | 46,890 | | $ | 181,254 | | $ | 119,109 | |
| (1) | Includes the change in fair value of the contingent earnout consideration related to the MoLo acquisition (see Note B). |
| (2) | For the three and nine months ended September 30, 2023, “Other and eliminations” includes $15.1 million of noncash lease-related impairment charges for a freight handling pilot facility. |
| (3) | The nine months ended September 30, 2024 includes a noncash impairment charge to write off the Company’s equity investment in Phantom Auto, as previously discussed. The nine months ended September 30, 2023 includes a $3.7 million fair value increase related to the Company’s investment in Phantom Auto, based on an observable price change during second quarter 2023 (see Note B). |
The following table reflects information about revenues from customers and intersegment revenues: | | | | | | | | | | | | | | | | Three Months Ended | | Nine Months Ended | | | | September 30 | | September 30 | | | | 2024 | | 2023 | | 2024 | | 2023 | | | | | (in thousands) | | Revenues from customers | | | | | | | | | | | | | | Asset-Based | | $ | 677,537 | | $ | 709,126 | | $ | 2,000,671 | | $ | 2,073,101 | | Asset-Light | | | 384,125 | | | 417,744 | | | 1,173,327 | | | 1,261,703 | | Other | | | 1,462 | | | 1,480 | | | 3,376 | | | 3,104 | | Total consolidated revenues | | $ | 1,063,124 | | $ | 1,128,350 | | $ | 3,177,374 | | $ | 3,337,908 | | | | | | | | | | | | | | | | Intersegment revenues | | | | | | | | | | | | | | Asset-Based | | $ | 32,185 | | $ | 32,060 | | $ | 93,243 | | $ | 87,917 | | Asset-Light | | | 1,199 | | | 1,568 | | | 4,177 | | | 5,517 | | Other and eliminations | | | (33,384) | | | (33,628) | | | (97,420) | | | (93,434) | | Total intersegment revenues | | $ | — | | $ | — | | $ | — | | $ | — | | | | | | | | | | | | | | | | Total segment revenues | | | | | | | | | | | | | | Asset-Based | | $ | 709,722 | | $ | 741,186 | | $ | 2,093,914 | | $ | 2,161,018 | | Asset-Light | | | 385,324 | | | 419,312 | | | 1,177,504 | | | 1,267,220 | | Other and eliminations | | | (31,922) | | | (32,148) | | | (94,044) | | | (90,330) | | Total consolidated revenues | | $ | 1,063,124 | | $ | 1,128,350 | | $ | 3,177,374 | | $ | 3,337,908 | |
The following table presents operating expenses by category on a consolidated basis: | | | | | | | | | | | | | | | | Three Months Ended | | Nine Months Ended | | | | September 30 | | September 30 | | | | 2024 | | 2023 | | 2024 | | 2023 | | | | | (in thousands) | | OPERATING EXPENSES | | | | | | | | | | | | | | Salaries, wages, and benefits | | $ | 455,685 | | $ | 456,022 | | $ | 1,348,491 | | $ | 1,342,123 | | Rents, purchased transportation, and other costs of services | | | 369,785 | | | 410,436 | | | 1,121,241 | | | 1,255,753 | | Fuel, supplies, and expenses(1) | | | 109,017 | | | 122,552 | | | 330,676 | | | 368,432 | | Depreciation and amortization(2) | | | 36,611 | | | 37,141 | | | 109,720 | | | 107,962 | | Contingent consideration(3) | | | (91,910) | | | (17,840) | | | (80,740) | | | (12,800) | | Lease impairment charges(4) | | | — | | | 30,162 | | | — | | | 30,162 | | Other(1) | | | 48,943 | | | 44,786 | | | 141,713 | | | 137,910 | | | | $ | 928,131 | | $ | 1,083,259 | | $ | 2,971,101 | | $ | 3,229,542 | |
| (1) | For the 2023 periods, certain facility rent expenses have been reclassed between line items to conform to the current year presentation. Adjustments made are not material. |
| (2) | Includes amortization of intangible assets. |
| (3) | Represents the change in fair value of the contingent earnout consideration related to the MoLo acquisition (see Note B). |
| (4) | Represents noncash lease-related impairment charges for a freight handling pilot facility, a service center, and office spaces that were made available for sublease. |
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