ARCBEST CORP /DE/ (ARCB)

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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ArcBest Corporation™ (together with its subsidiaries, the “Company,” “ArcBest®,” “we,” “us,” and “our”) is a multibillion-dollar integrated logistics company that leverages technology and a full suite of solutions to meet our customers’ supply chain needs. Our operations are conducted through two reportable operating segments:

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For more information, see additional segment descriptions in Part I, Item 1 (Business) and in Note N to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

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On February 28, 2023, the Company sold FleetNet America, Inc. (“FleetNet”), a wholly owned subsidiary of the Company, for an aggregate adjusted cash purchase price of $100.9 million, including post-closing adjustments. Following the sale, FleetNet® was reported as discontinued operations. As such, historical results of FleetNet have been excluded from both continuing operations and segment results for all periods presented. Unless otherwise indicated, all amounts in this Annual Report on Form 10-K refer to continuing operations, including comparisons to the prior year. For more information on our discontinued operations, see Note D to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

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ORGANIZATION OF INFORMATION

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Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided to assist readers in understanding our financial performance during the periods presented and significant trends which may impact our future performance, including the principal factors affecting our results of operations, liquidity and capital resources, and critical accounting policies. MD&A includes additional information about significant accounting policies, practices, and the transactions that underlie our financial results. This discussion should be read in conjunction with our consolidated financial statements and the related notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K. MD&A includes forward-looking statements that are subject to risks and uncertainties. Actual results may differ materially from the statements made in this section due to a number of factors that are discussed in Part I (Forward-Looking Statements) and Part I, Item 1A (Risk Factors) of this Annual Report on Form 10-K. MD&A is comprised of the following:

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RESULTS OF OPERATIONS

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This Results of Operations section of MD&A generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in the Results of Operations section of MD&A in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

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Consolidated Results

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ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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ArcBest Corporation™ (together with its subsidiaries, the “Company,” “ArcBest®,” “we,” “us,” and “our”) is a multibillion-dollar integrated logistics company that leverages our technology and a full suite of solutions to meet our customers’ supply chain needs. Our operations are conducted through two reportable operating segments:

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For more information, see additional segment descriptions in Part I, Item 1 (Business) and in Note O to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

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On February 28, 2023, the Company sold FleetNet America, Inc. (“FleetNet”), a wholly owned subsidiary of the Company, for an aggregate adjusted cash purchase price of $100.9 million, including post-closing adjustments. Following the sale, FleetNet was reported as discontinued operations. As such, historical results of FleetNet have been excluded from both continuing operations and segment results for all periods presented, and reclassifications have been made to the prior-period financial statements to conform to the current-year presentation. Unless otherwise indicated, all amounts in this Annual Report on Form 10-K refer to continuing operations, including comparisons to the prior year. For more information on our discontinued operations, see Note D to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

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ORGANIZATION OF INFORMATION

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Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided to assist readers in understanding our financial performance during the periods presented and significant trends which may impact our future performance, including the principal factors affecting our results of operations, liquidity and capital resources, and critical accounting policies. MD&A includes additional information about significant accounting policies, practices, and the transactions that underlie our financial results. This discussion should be read in conjunction with our consolidated financial statements and the related notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K. MD&A includes forward-looking statements that are subject to risks and uncertainties. Actual results may differ materially from the statements made in this section due to a number of factors that are discussed in Part I (Forward-Looking Statements) and Part I, Item 1A (Risk Factors) of this Annual Report on Form 10-K. MD&A is comprised of the following:

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RESULTS OF OPERATIONS

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This Results of Operations section of MD&A generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in the Results of Operations section of MD&A in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

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Consolidated Results

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ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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ArcBest Corporation™ (together with its subsidiaries, the “Company,” “ArcBest®,” “we,” “us,” and “our”) is a multibillion-dollar integrated logistics company that leverages technology and a full suite of shipping and logistics solutions to meet our customers’ supply chain needs. Our operations are conducted through three reportable operating segments:

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The ArcBest and the FleetNet reportable segments combined represent our Asset-Light operations. For more information, see additional segment descriptions in Part I, Item 1 (Business) and in Note N to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. References to the Company, including “we,” “us,” and “our,” in this Annual Report on Form 10-K, are primarily to the Company and its subsidiaries on a consolidated basis.

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ORGANIZATION OF INFORMATION

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Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided to assist readers in understanding our financial performance during the periods presented and significant trends which may impact our future performance, including the principal factors affecting our results of operations, liquidity and capital resources, and critical accounting policies. MD&A includes additional information about significant accounting policies, practices, and the transactions that underlie our financial results. This discussion should be read in conjunction with our consolidated financial statements and the related notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K. MD&A includes forward-looking statements that are subject to risks and uncertainties. Actual results may differ materially from the statements made in this section due to a number of factors that are discussed in Part I (Forward-Looking Statements) and Part I, Item 1A (Risk Factors) of this Annual Report on Form 10-K. MD&A is comprised of the following:

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RESULTS OF OPERATIONS

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This Results of Operations section of MD&A generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in the Results of Operations section of MD&A in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

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Consolidated Results

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Our consolidated revenues, which totaled $5.3 billion for 2022, increased 33.8% compared to 2021, reflecting increased customer demand and higher pricing for our broad service offerings, primarily during the first half of 2022, as well as revenues from the acquired operations of MoLo. Our annual revenue growth was partially offset by the impact of weakening economic conditions during the second half of 2022, compared to the strong market environment in the same prior-year period. The year-over-year increase in consolidated revenues for 2022 reflects a 17.0% increase in our Asset-Based revenues and a 59.7% increase in revenues of our Asset-Light operations. The increased elimination of revenues reported in the “Other and eliminations” line of consolidated revenues in 2022, compared to 2021, includes the impact of increased intersegment business levels among our operating segments, reflecting continued integration of our logistics services.

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Our Asset-Based revenue improvement reflects a 14.5% increase in billed revenue per hundredweight, including fuel surcharges, a 1.6% increase in tonnage per day, and a 1.5% increase in shipments per day in 2022, compared to 2021, reflecting solid customer demand in a rational pricing environment. The increase in revenues of our Asset-Light operations for 2022, compared to 2021, reflects a 58.3% increase in shipments per day due to increased customer demand and the addition of MoLo and a 3.8% increase in revenue per shipment associated with higher market pricing in a tighter truckload capacity environment in the first half of 2022 (with metrics excluding managed transportation shipments). Increased market demand and improved pricing for managed transportation services within our ArcBest segment and increases in revenue per event and service event volume for our FleetNet segment also contributed to our revenue improvement for 2022. Our 2022 revenue improvement was partially offset by the impact of a softening market environment in the second half of the year, including decelerating demand trends in our Asset-Based business and a slowdown in customer shipping volumes, combined with an increase in available truckload capacity which lowered market rates, in our ArcBest segment. Our Asset-Light operations, on a combined basis, generated approximately 45% and 38% of total revenues before other revenues and intercompany eliminations for 2022 and 2021, respectively, as we advanced toward our goal of achieving a more balanced revenue mix and ultimately toward a revenue mix that is more reflective of our customers’ needs for logistic services.

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Consolidated operating income increased $118.3 million in 2022, compared to 2021, primarily due to the improved operating results of our operating segments (further described within the Asset-Based Segment Results and the Asset-

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Light Results sections). The year-over-year comparison of consolidated operating income was also impacted by items described in the following paragraphs, including costs related to investments in innovative technology, costs related to the MoLo acquisition, gains on the sale of a subsidiary, and costs associated with enhancements to our nonunion vacation policy.

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Innovative technology costs related to our freight handling pilot test program at ABF Freight are discussed in the Asset-Based Segment Results section. Initiatives to optimize our performance through technological innovation, including certain costs related to the pilot program at ABF Freight and costs related to our investment in human-centered remote operation software, are reported in the “Other and eliminations” line of consolidated operating income. These combined costs impacted consolidated results by $40.8 million (pre-tax), or $30.8 million (after-tax) and $1.21 per diluted share, for 2022, compared to $32.8 million (pre-tax), or $24.9 million (after-tax) and $0.93 per diluted share, for 2021.

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The MoLo acquisition impacted consolidated operating results in 2022 and 2021, including the change in the liability for contingent earnout consideration, the amortization of acquired intangible assets related to the acquisition, and, in 2021, transaction costs associated with the acquisition. The liability for contingent consideration recorded for the MoLo acquisition is remeasured at each quarterly reporting date, and any change in fair value as a result of the recurring assessments is recognized in operating income. The quarterly remeasurement of the contingent consideration reduced the consolidated results for 2022, by a total of $18.3 million (pre-tax), or $13.6 million (after-tax) and $0.54 per diluted share. (The contingent earnout consideration is further discussed in Note D to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.) Transaction costs associated with the MoLo acquisition impacted consolidated results by $6.0 million (pre-tax), or $4.4 million (after-tax) and $0.16 per diluted share, for 2021. The amortization of acquired intangible assets related to the acquisition of MoLo and previously acquired businesses in the ArcBest segment impacted consolidated operating results for 2022 by $12.9 million (pre-tax), or $9.6 million (after-tax) and $0.38 per diluted share. For 2021, these costs impacted consolidated results by $5.3 million (pre-tax), or $3.9 million (after-tax) and $0.15 per diluted share.

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Consolidated operating results benefited from the sale of a portion of our ArcBest segment’s moving labor services business in second quarter 2021, for which a gain of $0.4 million (pre-tax), or $0.3 million (after-tax) and $0.01 per diluted share, was recognized for 2022 upon release of the funds related to the sale from escrow in second quarter 2022, compared to the gain of $6.9 million (pre-tax), or $5.4 million (after-tax) and $0.20 per diluted share, in 2021. Consolidated operating results for 2022 were also impacted by a one-time, noncash charge of $2.1 million (pre-tax), or $1.5 million (after-tax) and $0.06 per diluted share, for enhancements to our nonunion vacation policy which were effective in third quarter 2022.

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In addition to the above items, consolidated net income and earnings per share were impacted by changes in the cash surrender value of variable life insurance policies, tax benefits from the vesting of share-based compensation awards, tax credits, and other changes in the effective tax rate as described within the Income Taxes section of MD&A. A portion of our variable life insurance policies have investments, through separate accounts, in equity and fixed income securities and, therefore, are subject to market volatility. Changes in the cash surrender value of life insurance policies, which are reported below the operating income line in the consolidated statements of operations, increased consolidated net income by $2.7 million and $0.11 per diluted share in 2022, and decreased consolidated net income by $4.1 million and $0.15 per diluted share in 2021.

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The vesting of restricted stock units resulted in a tax benefit of $8.1 million and $0.32 per diluted share for 2022, compared to a tax benefit of $7.6 million and $0.29 per diluted share in 2021. The year-over-year comparisons of consolidated net income and earnings per share for 2022 and 2021 were also impacted by tax benefits and credits, as well as other changes in the effective tax rates, which are further described within the Income Taxes section of MD&A and in Note F to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

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Consolidated Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (“Adjusted EBITDA”)

We report our financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). However, management believes that certain non-GAAP performance measures and ratios, such as Adjusted EBITDA, utilized for internal analysis provide analysts, investors, and others the same information that we use internally for purposes of assessing our core operating performance and provides meaningful comparisons between current and prior period results, as well as important information regarding performance trends. Accordingly, using these measures improves comparability in analyzing our performance because it removes the impact of items from operating results that, in management’s opinion, do not reflect our core operating performance. Management uses Adjusted EBITDA as a key measure of performance and for business planning. The measure is particularly meaningful for analysis of our operating performance, because it excludes amortization of acquired intangibles and software of the Asset-Light businesses, changes in the fair value of contingent earnout consideration, gain on sale of subsidiary, and transaction costs, which are significant expenses or gains resulting from strategic decisions rather than core daily operations. Additionally, Adjusted EBITDA is a primary component of the financial covenants contained in our Fourth Amended and Restated Credit Agreement (see Note H to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K). Other companies may calculate Adjusted EBITDA differently; therefore, our calculation of Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results. Adjusted EBITDA should not be construed as a better measurement than operating income, operating cash flow, net income, or earnings per share, as determined under GAAP. The following table presents a reconciliation of Adjusted EBITDA to our net income, which is the most directly comparable GAAP measure for the periods presented.

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Asset-Based Operations

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Asset-Based Segment Overview

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The Asset-Based segment consists of ABF Freight System, Inc., a wholly owned subsidiary of ArcBest Corporation, and certain other subsidiaries. Our Asset-Based segment operates one of North America’s largest less-than-truckload (“LTL”) networks providing freight transportation services. Our customers trust the LTL solutions ABF Freight has provided for 100 years and rely on us to solve their transportation challenges. We are strategically investing in our Asset-Based operations to utilize technology to improve freight handling processes and provide better experiences for our customers.

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Our Asset-Based operations are affected by general economic conditions, as well as a number of other competitive factors that are more fully described in Item 1 (Business) and in Item 1A (Risk Factors) of Part I of this Annual Report on Form 10-K. See Note N to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for a description of the Asset-Based segment and additional segment information, including revenues, operating expenses, and operating income for the years ended December 31, 2022, 2021, and 2020.

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The key indicators necessary to understand the operating results of our Asset-Based segment are outlined below. These key indicators are used by management to evaluate segment operating performance and measure the effectiveness of strategic initiatives in the results of our Asset-Based segment. We quantify certain key indicators using key operating statistics, which are important measures in analyzing segment operating results from period to period. These statistics are defined within the key indicators below and referred to throughout the discussion of the results of our Asset-Based segment:

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Pounds or Tonnage – total weight of shipments processed during the period in U.S. pounds or U.S. tons.

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Pounds per day or Tonnage per day (average daily shipment weight) – pounds or tonnage divided by the number of workdays in the period.

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Shipments per day – total number of shipments moving through the Asset-Based freight network during the period divided by the number of workdays in the period.

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Pounds per shipment (weight per shipment) – total pounds divided by the number of shipments during the period.

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Average length of haul (miles) – total miles between origin and destination service centers for all shipments (including shipments moved with purchased transportation) during the period, with miles based on the size of shipments.

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Billed revenue per hundredweight, including fuel surcharges (yield) – revenue per 100 pounds of shipment weight, including fuel surcharges, systematically calculated as shipments are processed in the Asset-Based freight network. Revenue for undelivered freight is deferred for financial statement purposes in accordance with our revenue recognition policy. Billed revenue used for calculating revenue per hundredweight measurements is not adjusted for the portion of revenue deferred for financial statement purposes.

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Operating ratio – the percent of operating expenses to revenue levels.

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We also quantify certain key operating statistics which are used by management to evaluate productivity of operations within the Asset-Based freight network and to measure the effectiveness of strategic initiatives to manage the segment’s cost structure from period to period. These measures are defined below and further discussed in the Asset-Based Operating Expenses section within Asset-Based Segment Results:

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Other companies within our industry may present different key performance indicators or operating statistics, or they may calculate their measures differently; therefore, our key performance indicators or operating statistics may not be comparable to similarly titled measures of other companies. Key performance indicators or operating statistics should

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be viewed in addition to, and not as an alternative for, our reported results. Our key performance indicators or operating statistics should not be construed as better measurements of our results than operating income, operating cash flow, net income, or earnings per share, as determined under GAAP.

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As of December 2022, approximately 82% of our Asset-Based segment’s employees were covered under the ABF National Master Freight Agreement (the “2018 ABF NMFA”), the collective bargaining agreement with the International Brotherhood of Teamsters (the “IBT”), which will remain in effect through June 30, 2023. Under the 2018 ABF NMFA, the contractual wage and benefits costs, including the ratification bonuses and vacation restoration, are estimated to increase approximately 2.0% on a compounded annual basis through the end of the agreement. Profit-sharing bonuses based on the Asset-Based segment’s annual GAAP operating ratios for any full calendar year under the contract represent an additional increase in costs under the 2018 ABF NMFA. A profit-sharing bonus totaling $16.2 million and $15.1 million for the year ended December 31, 2022 and 2021, respectively, was earned by qualifying union-represented employees under the 2018 ABF NMFA upon the Asset-Based segment achieving an annual GAAP operating ratio of 87.3% for 2022 and 89.9% for 2021.

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The major economic provisions of the 2018 ABF NMFA include:

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Tonnage

The level of freight tonnage managed by the Asset-Based segment is directly affected by industrial production and manufacturing; distribution; residential and commercial construction; consumer spending, primarily in the North American economy; and capacity in the trucking industry. Operating results are affected by economic cycles and conditions, customers’ business cycles, and changes in customers’ business practices. The Asset-Based segment actively competes for freight business based primarily on price, service, and availability of flexible shipping options to customers. ArcBest seeks to offer value through identifying specific customer needs and providing operational flexibility and seamless access to the services of our Asset-Based segment and our Asset-Light operations in order to respond with customized solutions.

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Pricing

The industry pricing environment, another key factor impacting our Asset-Based results, influences the ability to obtain appropriate margins and price increases on customer accounts. Generally, freight is rated by a class system, which is established by the National Motor Freight Traffic Association, Inc. Light, bulky freight typically has a higher class and is priced at a higher revenue per hundredweight than dense, heavy freight. Changes in the rated class and packaging of the freight, along with changes in other freight profile factors, such as average shipment size; average length of haul; freight density; and customer and geographic mix, can affect the average billed revenue per hundredweight measure.

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Approximately 20% to 25% of our Asset-Based business is subject to base LTL tariffs, which are affected by general rate increases, combined with individually negotiated discounts. Rates on the remaining Asset-Based business, including business priced in the spot market, are subject to individual pricing arrangements negotiated at various times throughout the year. The majority of the business that is subject to negotiated pricing arrangements is associated with larger customer accounts with annually negotiated pricing arrangements. The remaining business is priced on an individual shipment basis considering each shipment’s unique profile, value provided to the customer, and current market conditions. Since pricing is established individually by account, the Asset-Based segment focuses on individual account profitability rather than a single measure of billed revenue per hundredweight when considering customer account or market evaluations. This is

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due to the difficulty of quantifying, with sufficient accuracy, the impact of changes in freight profile characteristics, which is necessary in estimating true price changes.

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We allow shippers without negotiated published rates to instantly access competitive LTL rates through an online portal, matching their shipping needs with capacity available in the ABF Freight network at the time of the shipment. The market has been receptive to this dynamic pricing option for transactional LTL shipments, and this program has been beneficial in optimizing our business levels by improving capacity utilization in the Asset-Based network. In a softer market environment, such as the conditions we experienced in the second half of 2022, our dynamic pricing option allows us to strategically fill empty capacity, enabling us to avoid furloughs or layoffs and be better positioned for a market rebound of higher freight demand, as well as provide a more sustainable service offering by reducing “empty miles” (or the number of miles we move empty or near-empty equipment for repositioning purposes).

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We also utilize a space-based pricing approach for shipments subject to LTL tariffs to align our pricing with freight shipping trends in the industry, including the overall growth and ongoing profile shift to bulkier, yet often lighter, shipments across the supply chain, the acceleration in e-commerce, and the unique requirements of many shipping and logistics solutions. Space-based pricing involves the use of freight dimensions (length, width, and height) to determine applicable cubic minimum charges (“CMC”) that supplement weight-based metrics when appropriate. Traditional LTL pricing is generally weight-based, while our linehaul costs are generally space-based (i.e., costs are impacted by the volume of space required for each shipment). We believe space-based pricing better aligns our pricing mechanisms with the metrics which affect our resources and, therefore, our costs to provide logistics services. We seek to provide logistics solutions to our customers’ businesses and the unique shipment characteristics of their various products and commodities, and we believe that we are particularly experienced in handling complicated freight. The CMC is an additional pricing mechanism to better capture the value we provide in transporting these shipments.

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Fuel

The transportation industry is dependent upon the availability of adequate fuel supplies. The Asset-Based segment assesses a fuel surcharge based on the index of national on-highway average diesel fuel prices published weekly by the U.S. Department of Energy. To better align fuel surcharges to fuel- and energy-related expenses and provide more stability to account profitability as fuel prices change, we may, from time to time, revise our standard fuel surcharge program, which impacts approximately one-third of Asset-Based shipments and primarily affects noncontractual customers. While fuel surcharge revenue generally more than offsets the increase in direct diesel fuel costs when applied, the total impact of energy prices on other nonfuel-related expenses is difficult to ascertain. Management cannot predict, with reasonable certainty, future fuel price fluctuations, the impact of energy prices on other cost elements, recoverability of fuel costs through fuel surcharges, and the effect of fuel surcharges on the overall rate structure or the total price that the segment will receive from its customers. While the fuel surcharge is one of several components in the overall rate structure, the actual rate paid by customers is governed by market forces and the overall value of services provided to the customer.

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During periods of changing diesel fuel prices, the fuel surcharge and associated direct diesel fuel costs also vary by different degrees. Depending upon the rates of these changes and the impact on costs in other fuel- and energy-related areas, operating margins could be impacted. Fuel prices have fluctuated significantly in recent years. Whether fuel prices fluctuate or remain constant, operating results may be adversely affected if competitive pressures limit our ability to recover fuel surcharges. Throughout 2022, the fuel surcharge mechanism generally continued to have market acceptance among customers; however, certain nonstandard pricing arrangements have limited the amount of fuel surcharge recovered. The negative impact on operating margins of capped fuel surcharge revenue during periods of increasing fuel costs is more evident when fuel prices remain above the maximum levels recovered through the fuel surcharge mechanism on certain accounts. In periods of declining fuel prices, fuel surcharge percentages also decrease, which negatively impacts the total billed revenue per hundredweight measure and, consequently, revenues. The revenue decline may be disproportionate to our fuel costs. Asset-Based revenues for 2022, compared to 2021, were positively impacted by higher fuel surcharge revenue due to an increase in the nominal fuel surcharge rate, while total fuel costs also increased. The segment’s operating results will continue to be impacted by further changes in fuel prices and the related fuel surcharges.

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Labor Costs

Our Asset-Based labor costs, including retirement and healthcare benefits for contractual employees that are provided by a number of multiemployer plans (see Note J to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K), are impacted by contractual obligations under the 2018 ABF NMFA and other related supplemental agreements. Total salaries, wages, and benefits, amounted to 43.0% and 46.6% of revenues for 2022 and 2021, respectively. Changes in salaries, wages, and benefits expense and shared services expenses, which include labor

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costs related to ABF Freight’s portion of company-wide functions, as a percentage of revenues are discussed in the following Asset-Based Segment Results section.

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ABF Freight operates in a highly competitive industry comprised primarily of nonunion motor carriers. Nonunion competitors have a lower fringe benefit cost structure and less stringent labor work rules, and certain carriers also have lower wage rates for their freight-handling and driving personnel. Wage and benefit concessions granted to certain union competitors also allow for a lower cost structure. ABF Freight has continued to address with the IBT the effect of the segment’s wage and benefit cost structure on its operating results. Lower cost increases throughout the 2018 ABF NMFA contract period and increased flexibility in labor work rules are essential factors in bringing ABF Freight’s labor cost structure closer in line with that of its competitors. However, under its current labor agreement, ABF Freight continues to pay some of the highest benefit contribution rates in the industry. The terms of the 2018 ABF NMFA allowed the Asset-Based segment to maintain low-cost inflation in the current tight labor market while providing some of the best wages and benefits in the industry to our employees.

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ABF Freight’s benefit contributions for its contractual employees include contributions to multiemployer plans, a portion of which are used to fund benefits for individuals who were never employed by ABF Freight. ABF Freight’s multiemployer pension contributions totaled $154.6 million and $146.9 million for 2022 and 2021, respectively. As previously outlined, the 2018 ABF NMFA provided for ABF Freight’s contributions to multiemployer pension plans to remain at the rates that were paid under the prior labor agreement with the IBT, while wage rates and health and welfare contribution rates for most plans increased annually in accordance with the terms of the 2018 ABF NMFA. The contractual wage rate increased 1.9% and 1.7% effective July 1, 2022 and 2021, respectively. The average health, welfare, and pension benefit contribution rate increased approximately 2.5% and 2.4% effective primarily on August 1, 2022 and 2021, respectively.

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On March 11, 2021, H.R.1319, the American Rescue Plan Act of 2021 (the “American Rescue Plan Act”) was signed into law. The American Rescue Plan Act includes the Butch Lewis Emergency Pension Plan Relief Act of 2021 (the “Pension Relief Act”). The Pension Relief Act includes provisions to improve funding for multiemployer pension plans, including financial assistance provided through the Pension Benefit Guarantee Corporation (the “PBGC”) to qualifying underfunded plans to secure pension benefits for plan participants. Without the funding to be provided by the Pension Relief Act, many of the multiemployer pension funds to which we contribute could become insolvent in the near future.

On July 9, 2021, the PBGC announced an interim final rule implementing a Special Financial Assistance Program (the “SFA Program”) to administer funds to severely underfunded eligible multiemployer pension plans under the Pension Relief Act. Certain multiemployer pension plans to which ABF Freight contributes have applied for or received funds under the SFA Program which will allow them to avoid insolvency and improve their funded status. Under the American Rescue Plan Act and in accordance with regulations of the PBGC, the plans receiving funding under the SFA Program are not permitted to reduce employer contributions to their funds. We will continue to evaluate the impact of the assistance provided by the SFA Program on ABF Freight’s multiemployer pension plan contributions. Through the term of the 2018 ABF NMFA, which extends through June 30, 2023, ABF Freight’s multiemployer pension contribution obligations generally will be satisfied by making the specified contributions when due. Future contribution rates will be determined through the negotiation process for contract periods following the term of the current collective bargaining agreement. While we cannot determine with any certainty the contributions that will be required under future collective bargaining agreements for ABF Freight’s contractual employees, our future contribution rates to multiemployer pension plans may be less likely to increase as a result of the provisions of the Pension Relief Act. If ABF Freight were to completely withdraw from certain multiemployer pension plans, under current law, ABF Freight would have material liabilities for its share of the unfunded vested liabilities of each such plan. Further, ABF Freight could also trigger complete or partial withdrawal liability from certain multiemployer pension plans through, among other things, mergers and other fundamental corporate transactions and as a result of operational changes, site closures and job losses, which could result in material liabilities.

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Asset-Based Segment Results

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The following table sets forth a summary of operating expenses and operating income as a percentage of revenue for the Asset-Based segment:

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The following table provides a comparison of key operating statistics for the Asset-Based segment, as previously defined in the Asset-Based Segment Overview:

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Asset-Based Revenues

Asset-Based segment revenues totaled $3.0 billion and $2.6 billion for the year ended December 31, 2022 and 2021, respectively. Billed revenue (as described in the Asset-Based Segment Overview) increased 16.2% on a per-day basis in 2022 compared to 2021, primarily reflecting a 14.5% increase in total billed revenue per hundredweight, including fuel surcharges, and a 1.6% increase in tonnage per day.

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The 14.5% increase in total billed revenue per hundredweight for 2022, including fuel surcharges, compared to 2021, was primarily due to a solid pricing environment and changes in freight profile and business mix to optimize revenue on shipments in the Asset-Based network. Higher fuel surcharge revenues associated with increased fuel prices also positively impacted the total billed revenue per hundredweight measure in 2022, compared to 2021. The Asset-Based segment’s average nominal fuel surcharge rate for 2022 increased approximately 16 percentage points from 2021 levels. On-going yield management initiatives, including general rate increases, also contributed to the year-over-year improvement in billed revenue per hundredweight. Excluding the impact of fuel surcharges, the percentage increase in billed revenue per hundredweight on our traditional core LTL-rated freight was in the low-double digits for 2022, compared to 2021. Prices on accounts subject to deferred pricing agreements and annually negotiated contracts that were renewed during 2022 increased an average of 7.3%, compared to the prior year. Pricing on contractual business reflected the second highest

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average increase we have secured in company history, following the highest average increase in 2021, primarily due to tight market capacity which continued through the first half of 2022. The Asset-Based segment implemented nominal general rate increases on its LTL base rate tariffs of 5.9%, 6.9% and 5.95% effective on November 7, 2022, November 15, 2021, and January 25, 2021, respectively, although the rate changes vary by lane and shipment characteristics.

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The 1.6% increase in tonnage per day for 2022, compared to 2021, reflects higher daily shipment levels due to customer demand. Total shipments increased 1.5% on a per-day basis, reflecting an increase in LTL-rated shipments, partially offset by a decrease in truckload-rated shipments. Year-over-year tonnage and shipment growth is attributable to an emphasis on allocating network resources to serving core LTL customers, from which we experienced solid demand in 2022, despite softening market conditions in the second half of 2022.  The reduction in truckload-rated shipments reflects the intentional moderation of spot-quoted truckload-rated shipments in order to better serve core LTL customers in 2022. We began to experience a deceleration in demand trends during third quarter 2022 which continued through the end of the year. In this softer market environment, our dynamic pricing option for LTL-rated shipments allowed us to strategically fill empty network capacity, which contributed to the increase in LTL-rated shipments for 2022.

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Current economic conditions and the Asset-Based segment’s pricing approach, as previously discussed in the Pricing section of the Asset-Based Segment Overview within Results of Operations, will continue to impact the segment’s tonnage levels and the prices it receives for its services and, as such, there can be no assurance that our Asset-Based segment will maintain or achieve improvements in its current operating results. The marketplace pricing environment has been positive and rational in support of our efforts to secure needed price increases; however, the competitive environment could limit the Asset-Based segment from securing adequate increases in base LTL freight rates and could limit the amount of fuel surcharge revenue recovered in future periods.

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Asset-Based Operating Income

The Asset-Based segment generated operating income of $381.1 million in 2022, compared to $260.7 million in 2021, with an operating ratio of 87.3% and 89.9%, respectively. The 2.6 percentage point improvement in the Asset-Based segment’s operating ratio for 2022, compared to 2021, primarily reflects the increased revenues and effective capacity utilization in the Asset-Based network.

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Innovative technology costs related to the freight handling pilot test program (the “pilot”) at ABF Freight impacted operating results of the Asset-Based segment by $27.2 million and $27.6 million for 2022 and 2021, respectively. The pilot test program, which began in 2019, is operating in various stages in a limited number of locations. While ArcBest believes the pilot has potential to provide safer and improved freight-handling, a number of factors will be involved in determining proof of concept and there can be no assurances that pilot testing will be successful.

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The segment’s operating ratio was also impacted by changes in operating expenses as discussed in the following paragraphs.

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Asset-Based Operating Expenses

Labor costs, which are reported in operating expenses as salaries, wages, and benefits, amounted to 43.0% and 46.6% of Asset-Based segment revenues for 2022 and 2021, respectively. The decrease in salaries, wages, and benefits as a percentage of revenue was partially offset by higher utilization of purchased transportation to meet customer demand for increased shipment levels. The improvement in salaries, wages, and benefits as a percentage of revenue was also influenced by the effect of higher revenues, including fuel surcharges, as a portion of operating costs are fixed in nature and decrease as a percent of revenue with increases in revenue levels. Salaries, wages, and benefits increased $95.2 million for 2022, compared to 2021, primarily reflecting higher headcount as additional drivers and service center personnel were hired to service increased business levels. The increase in labor costs also reflects year-over-year increases in contractual wage and benefit contribution rates under the 2018 ABF NMFA, as previously discussed in the Labor Costs section of the Asset-Based Segment overview; higher expenses for certain performance-based incentive plans, including long-term nonunion incentive plans impacted by shareholder returns relative to peers; and higher workers’ compensation expense reflecting an increase in the average number of claims and the severity of claims experience. As a result of the Asset-Based segment operating ratio achieved for 2022, salaries, wages, and benefits included the accrual of a 3% union profit-sharing bonus, which is the maximum amount provided in the collective bargaining agreement. The union profit-sharing bonus, which was paid to qualifying union-represented employees in February 2023, represents the fourth year in a row ABF Freight paid the bonus under the 2018 ABF NMFA, the maximum number of years allowed by the current labor contract.

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The Asset-Based segment manages costs with shipment levels; however, a number of factors pressured the efficiency of DSY tasks during 2022. Shipments per DSY hour declined 4.3% for 2022, compared to 2021, primarily due to personnel inefficiencies, including training a record number of new hires, and the effect of freight profile and mix changes, which contributed to the improved revenue per shipment. While the Asset-Based segment has added employees to service the business growth, the segment had to supplement resources with increased utilization of higher-cost purchased transportation in certain locations to manage service levels during 2022.

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Fuel, supplies, and expenses as a percentage of revenue increased 2.3 percentage points in 2022, for a $112.4 million increase, compared to 2021, primarily due to higher fuel costs and higher repairs and maintenance costs. The Asset-Based segment’s average fuel price per gallon (excluding taxes) increased approximately 68% during 2022, compared to 2021. More miles driven as a result of the increase in business levels from 2021 also contributed to the year-over-year increase in fuel, supplies, and expenses. The increase in repairs and maintenance costs reflects the impact of an increasing city fleet age due, in part, to delays in receiving new revenue equipment, combined with higher market-driven costs to repair and maintain revenue equipment units.

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Rents and purchased transportation as a percentage of revenue increased 0.4 percentage points in 2022, compared to 2021, primarily due to higher rates and increased utilization of local delivery agents and linehaul purchased transportation necessary to serve the needs of our customers. The year-over-year increase in purchased transportation costs was also impacted by higher fuel surcharges related to these services due to higher fuel costs. Rail miles decreased approximately 2% in 2022, compared to 2021, driven by the focused reduction of rail usage during the fourth quarter of 2022 as market conditions continued to soften.

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Shared services as a percentage of revenue decreased 0.8 percentage points in 2022, compared to 2021. The decrease in shared services as a percentage of revenue was influenced by the effect of higher revenues. These costs increased $18.2 million in 2022, compared to the prior year, due to the impact of higher business levels and higher expense accruals for certain performance-based incentive plans, including long-term incentive plans impacted by shareholder returns relative to peers.

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Asset-Light Operations

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Asset-Light Overview

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The ArcBest and FleetNet reportable segments, combined, represent our Asset-Light operations. Our Asset-Light operations are a key component of our strategy to offer a single source of integrated logistics solutions, designed to satisfy customers’ complex supply chain needs and unique shipping requirements. We are focused on growing and making strategic investments in our Asset-Light operations that enhance our service offerings and strengthen our customer relationships. Our acquisition of MoLo, which was completed on November 1, 2021, demonstrates our commitment to grow our Asset-Light operations as we work to align our overall revenue mix with our customers’ transportation spend. Throughout our operations, we are seeking opportunities to expand our revenues by deepening existing customer relationships, securing new customers, and adding capacity options for our customers. In recent years, we have experienced significant growth in shipment levels and revenues of our managed transportation solutions reflecting results of our strategic efforts to cross-sell our service offerings and the increasing demand for these services that include supply chain optimization. We expect to benefit from these and other strategic initiatives as we continue to deliver innovative solutions to customers.

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Our acquisition of MoLo accelerates the growth of our company by increasing the scale of truckload brokerage services offered within our ArcBest segment and by advancing our position in the large and growing domestic transportation management market. The addition of MoLo’s significant capabilities and talent to our truckload brokerage service offering allows us to better respond to the critical needs of our customers with comprehensive supply chain solutions, improves our ability to serve larger customers, and expands our access to truckload capacity partners. Our acquisition of MoLo, including detail regarding the initial consideration payment and provision for certain additional cash consideration based on the achievement of certain targets, is discussed further in Note D to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

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Our Asset-Light operations are affected by general economic conditions, as well as several other competitive factors that are more fully described in Part I, Item 1 (Business) and in Part I, Item 1A (Risk Factors) of this Annual Report on

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Form 10-K. See Note N to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for descriptions of the ArcBest and FleetNet segments and additional segment information, including revenues, operating expenses, and operating income for the years ended December 31, 2022, 2021, and 2020.

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The key indicators necessary to understand our Asset-Light operating results are outlined below. These key indicators are used by management to evaluate segment operating performance and measure the effectiveness of strategic initiatives in the results of our Asset-Light segments. We quantify certain key indicators using key operating statistics which are important measures in analyzing segment operating results from period to period. These statistics are defined within the key indicators below and referred to throughout the discussion of the results of our Asset-Light operations:

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Shipments per day – total shipments (excluding managed transportation solutions as discussed below) divided by the number of working days during the period, compared to the same prior-year period, for the ArcBest segment.

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Service events – roadside, preventative maintenance, or total service events during the period, compared to the same prior-year period, for the FleetNet segment.

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Revenue per shipment or event – total segment revenue divided by total segment shipments or events during the period (excluding managed transportation solutions for the ArcBest segment as discussed below), compared to the same prior-year period.

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Purchased transportation costs as a percentage of revenue – the expense incurred for third-party transportation providers to haul or deliver freight during the period, divided by segment revenues for the period, expressed as a percentage.

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Operating ratio – the percent of operating expenses to revenue levels.

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Presentation and discussion of the key operating statistics of revenue per shipment and shipments per day for the ArcBest segment exclude statistical data of our managed transportation solutions transactions. Growth in managed transportation solutions has increased the number of shipments for these services to approximately 40% of the ArcBest segment’s total shipments, while the business represents approximately 15% of segment revenues for the year ended December 31, 2022. Due to the nature of our managed transportation solutions which typically involve a larger number of shipments at a significantly lower revenue per shipment level than the segment’s other service offerings, inclusion of the managed transportation solutions data would result in key operating statistics which are not representative of the operating results of the segment as a whole. As such, the key operating statistics management uses to evaluate performance of the ArcBest segment exclude managed transportation services transactions.

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Other companies within our industry may present different key performance indicators or they may calculate their key performance indicators differently; therefore, our key performance indicators may not be comparable to similarly titled measures of other companies. Key performance indicators should be viewed in addition to, and not as an alternative for, our reported results. Our key performance indicators should not be construed as better measurements of our results than operating income, operating cash flow, net income, or earnings per share, as determined under GAAP.

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Asset-Light Results

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For the year ended December 31, 2022 and 2021, the combined revenues of our Asset-Light operations totaled $2.5 billion and $1.6 billion, respectively, accounting for approximately 45% and 38% of our total revenues before other revenues and

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intercompany eliminations in 2022 and 2021, respectively. Our Asset-Light results for 2022, compared to 2021, reflect the acquired operations of MoLo combined with strong customer demand and higher market rates, primarily during the first half of 2022. The ArcBest segment has been impacted by market softening in the second half of 2022, which, combined with changes in business mix, led to a decline in revenue per shipment in the fourth quarter of 2022 versus the same prior-year period. Our Asset-Light combined operating income improved to $58.6 million in 2022, compared to $50.9 million in 2021, primarily reflecting revenue growth and changes in costs as described in the following paragraphs.

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ArcBest Segment

The following table sets forth a summary of operating expenses and operating income as a percentage of revenue for the ArcBest segment:

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ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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ArcBest Corporation™ (together with its subsidiaries, the “Company,” “we,” “us,” and “our”) provides a comprehensive suite of freight transportation and integrated logistics services to deliver innovative solutions. Our operations are conducted through our three reportable operating segments:

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The ArcBest and FleetNet reportable segments combined represent our Asset-Light operations. See additional segment descriptions in Part I, Item 1 (Business) and in Note N to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. References to the Company, including “we,” “us,” and “our,” in this Annual Report on Form 10-K are primarily to the Company and its subsidiaries on a consolidated basis.

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ORGANIZATION OF INFORMATION

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Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided to assist readers in understanding our financial performance during the periods presented and significant trends which may impact our future performance. This discussion should be read in conjunction with our consolidated financial statements and the related notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K. MD&A includes forward-looking statements that are subject to risks and uncertainties. Actual results may differ materially from the statements made in this section due to a number of factors that are discussed in Part I (Forward-Looking Statements) and Part I, Item 1A (Risk Factors) of this Annual Report on Form 10-K. MD&A is comprised of the following:

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RESULTS OF OPERATIONS

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This Results of Operations section of MD&A generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020. Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 that are not included in this Form 10-K can be found in the Results of Operations section of MD&A in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

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Consolidated Results

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