Arkansas Best Corporation (the "Company") is a freight transportation services and solutions provider with five reportable operating segments. The Company's principal operations are conducted through its Freight Transportation segment, which consists of ABF Freight System, Inc. and certain other subsidiaries of the Company (collectively "ABF"). The Company's other reportable operating segments are the following non-asset-based businesses: Premium Logistics and Expedited Freight Services, Truck Brokerage and Management, Emergency and Preventative Maintenance, and Household Goods Moving Services. The Company's non-asset-based segments represent emerging lines of business which provide a complementary set of transportation, logistics, and related solutions to the Freight Transportation segment. (See additional segment description in Note N to the Company's consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.)

ORGANIZATION OF INFORMATION

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is provided to assist readers in understanding the Company's financial performance during the periods presented and significant trends which may impact the future performance of the Company. This discussion should be read in conjunction with the Consolidated Financial Statements of the Company 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 we make in this section due to a number of factors that are discussed in "Forward-Looking Statements" of Part I and "Risk Factors" of Part I, Item 1A of this Annual Report on Form 10-K. MD&A is comprised of three major sections:

† Results of Operations includes:

† an overview of consolidated results with 2012 compared to 2011 and 2011 compared to 2010, including the disclosure of certain non-GAAP performance measures which impacted consolidated results in 2012 and an EBITDA schedule presented as a measure of consolidated financial performance and ability to service debt obligations;

† a financial summary and analysis of the Freight Transportation segment results of 2012 compared to 2011 and 2011 compared to 2010, including a discussion of key actions and events that impacted the results; and

† a financial summary and analysis of the Company's non-asset-based reportable operating segments, including a discussion of key actions and events that impacted the results.

† a discussion of other matters impacting operating results including seasonality, effects of inflation, economic conditions, environmental and legal matters, and information technology and cybersecurity.

†

† Liquidity and Capital Resources provides an analysis of key elements of the cash flow statements, borrowing capacity and contractual cash obligations, including a discussion of financing arrangements and financial commitments.

†

† Critical Accounting Policies discusses those accounting policies that are important to understanding certain of the material judgments and assumptions incorporated in the reported financial results.

Income Taxes and Recent Accounting Pronouncements are discussed within separate sections of MD&A.

The key indicators necessary to understand the Company's operating results include:

†          For the Freight Transportation segment:

†          the overall customer demand for ABF's freight transportation
services;

†          the volume of transportation services provided by ABF, primarily

† the prices ABF obtains for its services, primarily measured by yield ("revenue per hundredweight"), including fuel surcharges; and

† ABF's ability to manage its cost structure, primarily in the area of salaries, wages, and benefits ("labor"), with the total cost structure measured by the percent of operating expenses to revenue levels ("operating ratio").

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - continued

A key factor in ABF's ability to manage labor costs is the terms of its collective bargaining agreement with the International Brotherhood of Teamsters ("IBT"), which covered approximately 75% of ABF's employees as of December 2012. Contract negotiations for the period subsequent to March 31, 2013, the expiration date of ABF's current collective bargaining agreement, began in late December 2012. The negotiation of terms of the collective bargaining agreement is very complex. As further discussed in "Risk Factors" of Part I, Item 1A of this Annual Report on Form 10-K, the inability to agree on acceptable terms for the next period prior to the expiration of ABF's current agreement could result in a work stoppage, the loss of customers, or other events that could have a material adverse effect on the Company's competitive position, results of operations, cash flows, and financial position in 2013 and subsequent years.

In an ongoing effort to manage its cost structure to business levels, the Company routinely evaluates and modifies the ABF network to reflect changes in customer demands and to reconcile ABF's infrastructure with tonnage levels and the proximity of customer freight. In consideration of ABF's recent operating results, the Company is currently evaluating adjustments to the ABF network, including the closure of certain terminals and distribution centers, which is largely dependent upon ABF's labor cost structure which is impacted by its contractual obligations under its collective bargaining agreement with the IBT. The costs to relocate certain operations in connection with the potential ABF network adjustments are not expected to be material. Any network changes will be made in consideration of customer service levels and other relevant factors while focusing on returning ABF to profitability. There can be no assurances that these changes, if any, will result in a material improvement of ABF's results of operations.

† For the non-asset-based reportable segments, primarily customer demand for logistics services combined with economic factors which influence the number of shipments or events used to measure changes in business levels.

RESULTS OF OPERATIONS

Consolidated Results



                                                           Year Ended December 31
                                                     2012             2011           2010
                                                   (in thousands, except per share data)
OPERATING REVENUES
Freight Transportation                         $    1,725,134    $  1,730,773    $ 1,514,108
Premium Logistics and Expedited Freight
Services                                              132,326               -              -
Truck Brokerage and Management                         42,710          25,429         19,241
Emergency and Preventative Maintenance                115,968          92,554         74,927
Household Goods Moving Services                        77,619          85,611         63,733
Other and eliminations                                (27,758 )       (26,758 )      (14,145 )
Total consolidated operating revenues          $    2,065,999    $  1,907,609    $ 1,657,864

OPERATING INCOME (LOSS)
Freight Transportation                         $      (19,410 )  $      3,609    $   (59,740 )

Premium Logistics and Expedited Freight
Services                                                2,402               -              -
Truck Brokerage and Management                          2,623           1,890          1,373
Emergency and Preventative Maintenance                  1,935           2,982          2,719
Household Goods Moving Services                           692           2,718          1,719
Other and eliminations                                 (2,810 )        (1,440 )         (616 )
Total consolidated operating income (loss)     $      (14,568 )  $      9,759    $   (54,545 )

NET INCOME (LOSS) ATTRIBUTABLE TO ARKANSAS
BEST CORPORATION                               $       (7,732 )  $      6,159    $   (32,693 )

DILUTED EARNINGS (LOSS) PER SHARE              $        (0.31 )  $       0.23    $     (1.30 )

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - continued

Consolidated revenues, which totaled $2.1 billion for 2012, increased 8.3% compared to 2011, preceded by a 15.1% increase in 2011 revenues compared to 2010. The year-over-year increase in consolidated revenues for 2012 primarily reflects the revenues reported in the Premium Logistics and Expedited Freight Services segment since the June 15, 2012 acquisition of Panther Expedited Services, Inc. ("Panther"). In addition, higher volume-driven revenues reported by the Truck Brokerage and Management segment and the Emergency and Preventative Maintenance segment contributed to the consolidated revenue growth. With the addition of Panther, total non-asset-based segments generated approximately 18% of 2012 and approximately 22% of fourth quarter 2012 total revenues before other revenues and intercompany eliminations. Freight Transportation revenues were relatively comparable in 2012 and 2011.

The increase in consolidated revenues for 2011 compared to 2010 was primarily attributable to year-over-year increases in tonnage and billed revenue per hundredweight, including fuel surcharges, of the Freight Transportation segment. Consolidated revenue growth was also impacted by higher revenues reported by the Truck Brokerage and Management, the Emergency and Preventative Maintenance, and the Household Goods Moving Services segments.

The consolidated operating loss was $14.6 million in 2012 compared to operating income of $9.8 million in 2011. Consolidated operating income increased $64.3 million in 2011 compared to 2010. The changes in consolidated operating results and per share amounts for 2012, 2011, and 2010 primarily reflect the operations of the Freight Transportation segment.

Consolidated operating results and earnings per share were also impacted by the items identified in the non-GAAP table(1) shown below.

                                                            Year Ended December 31
                                                     2012            2011             2010
                                                     (in thousands, except per share data)

Operating Income (Loss)
Amounts on a GAAP basis                         $      (14,568 )  $     9,759    $      (54,545 )
Transaction costs(2)                                     2,129              -                 -
Operating income (loss), as adjusted            $      (12,439 )  $     9,759    $      (54,545 )

Net Income (Loss) Attributable to Arkansas
Best Corporation
Amounts on a GAAP basis                         $       (7,732 )  $     6,159    $      (32,693 )
Tax benefits(3)                                         (3,333 )            -                 -
Transaction costs, after-tax(2)                          1,294              -                 -
Net income (loss) attributable to Arkansas
Best Corporation, as adjusted                   $       (9,771 )  $     6,159    $      (32,693 )

Diluted Earnings (Loss) Per Share
Amounts on a GAAP basis                         $        (0.31 )  $      0.23    $        (1.30 )
Tax benefits(3)                                          (0.13 )            -                 -
Transaction costs, after-tax(2)                           0.05              -                 -
Diluted earnings (loss) per share, as
adjusted                                        $        (0.39 )  $      0.23    $        (1.30 )

(1) The Company reports its financial results in accordance with generally accepted accounting principles ("GAAP"). However, management believes that certain non-GAAP performance measures and ratios utilized for internal analysis provide financial statement users meaningful comparisons between current and prior-period results, as well as important information regarding performance trends. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results.

(2) Transaction costs are due to the June 15, 2012 acquisition of Panther. (See Note D to the Company's consolidated financial statements included in

(3) Tax benefits relate to reductions in deferred tax asset valuation allowances. (See the Income Taxes section within MD&A for further discussion of deferred tax valuation allowances.)

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - continued

Operating results for 2012 compared to 2011 were also impacted by certain items that did not change in accordance with business levels:

† $14.2 million increase in costs associated with sales, customer service, and information technology. The Company has invested in additional sales personnel and information technology to enhance customer service levels in the Freight Transportation segment and to more fully develop the Company's non-asset-based businesses.

† $11.8 million increase in depreciation and amortization expense and a $2.3 million increase in amortization expense of acquired intangible assets related to Panther. Depreciation expense in the Freight Transportation segment increased in 2012 due to a higher number of road tractors and trailers acquired in 2011 at higher per-unit costs. Depreciation and amortization expense of the Premium Logistics and Expedited Freight Services segment, which totaled $3.2 million since the June 15, 2012 acquisition date, also impacted the 2012 results. A substantial portion of Panther's depreciation and amortization expense was related to amortization of software valued at the purchase date of Panther. The additional $2.3 million increase in amortization expense is associated with the definite-lived intangible assets acquired in the Panther acquisition and is based on acquisition date fair values.

† $7.4 million increase in pension and retirement expenses. The increase in pension and retirement expenses includes the impact of higher expenses for the Company's nonunion defined benefit pension plan in 2012, resulting from a lower discount rate used to remeasure plan obligations at December 31, 2011 versus the prior year and lower than expected returns on pension investments in prior years.

Consolidated Earnings Before Interest, Taxes, Depreciation, and Amortization
("EBITDA")

Consolidated EBITDA decreased 5.2% in 2012 compared to 2011, following a significant increase in 2011 from 2010. The changes in consolidated EBITDA were driven primarily by changes in consolidated earnings.

                                                      Year Ended December 31
                                                  2012        2011         2010
                                                          (in thousands)

CONSOLIDATED EBITDA
Net income (loss) attributable to Arkansas
Best Corporation                                $ (7,732 )  $   6,159    $ (32,693 )
Interest expense and other related financing
fees                                               5,273        3,953        2,852
Income tax provision (benefit)                    (9,260 )      3,160      (21,376 )
Depreciation and amortization(1)                  87,754       73,742       71,565
Amortization of share-based compensation           6,068        6,450        5,690
Amortization of net actuarial losses of
benefit plans                                     11,385        7,361        7,888
EBITDA                                          $ 93,488    $ 100,825    $  33,926

(1) Includes amortization of intangibles which totaled $2.3 million in 2012 (see Note E to the Company's consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K).

EBITDA is a primary component of the financial covenants to the Company's Term Loan (See Financing Arrangements within the Liquidity and Capital Resources section of MD&A). Management believes EBITDA to be relevant and useful information, as EBITDA is a standard measure commonly reported and widely used by analysts, investors, and others to measure financial performance and ability to service debt obligations. However, these financial measures should not be construed as better measurements than operating income (loss), operating cash flow, net income (loss) or earnings (loss) per share, as defined by GAAP. Other companies may calculate EBITDA differently; therefore, the Company's EBITDA may not be comparable to similarly titled measures of other companies.

Freight Transportation Segment: ABF Overview

ABF represented approximately 82% of the Company's total revenues before other revenues and intercompany eliminations for the year ended December 31, 2012 and approximately 90% of such amounts for each of the years ended December 31, 2011 and 2010. ABF's operations are affected by general economic conditions, as well as a number of other competitive factors that are more fully described in "Business" in Item 1 and "Risk Factors" in Item 1A of Part I of this Annual Report on Form 10-K. The key performance factors, as previously described in the Organization of Information section of MD&A, and operating results for ABF are discussed in the following paragraphs.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - continued

During the year ended December 31, 2012, ABF's revenues decreased 0.3% on a per-day basis compared to 2011. ABF's 2011 revenues increased 14.3% on a per-day basis compared to 2010 revenues. The decline in revenue for 2012 compared to 2011 reflects decreases in tonnage levels, offset in part by a 4.4% increase in total billed revenue per hundredweight, including fuel surcharges. The revenue improvement experienced in 2011 versus 2010 reflects increases in tonnage levels and a 10.0% increase in total billed revenue per hundredweight, including fuel surcharges. ABF's 2012 operating ratio worsened to 101.1% from 99.8% in 2011, preceded by an improvement from 103.9% in 2010, as more fully discussed below and in ABF Results within the Freight Transportation Segment section of Results of Operations.

Tonnage

ABF's tonnage levels declined 4.6% on a per-day basis in 2012 compared to 2011, preceded by year-over-year increases of 4.0% and 10.1% on a per-day basis in 2011 and 2010, respectively. ABF experienced quarterly decreases in year-over-year tonnage per day from third quarter 2011 through third quarter 2012, which followed year-over-year quarterly increases from first quarter 2010 through second quarter 2011. The effect of weak general economic conditions in 2012 and comparison to significant tonnage growth experienced in the second half of 2010 through the first half of 2011 have influenced the 2012 tonnage comparisons to the prior year. The tonnage declines throughout the first nine months of 2012 were also impacted by ABF's initiatives to improve account profitability, which led to year-over-year increases in billed revenue per hundredweight for each quarter of 2012. In fourth quarter 2012, ABF experienced a slight increase in tonnage levels versus fourth quarter 2011, despite the negative impact of Hurricane Sandy on business levels at the end of October 2012. Quarter-to-date through late-February 2013, average daily total tonnage for ABF increased approximately 6% to 7% compared to the same period last year; however, the year-over-year tonnage improvement is influenced by comparison to lower tonnage levels experienced in the first quarter of 2012. ABF's revenues through late-February were approximately 3% to 4% above the same prior year period resulting from increased tonnage in the 2013 period, partially offset by decreases in billed revenue per hundredweight, including fuel surcharges, which was impacted by unfavorable changes in customer mix and freight profile. Tonnage levels are seasonally lower during January and February while March provides a disproportionately higher amount of the first quarter's business. The first quarter of each year generally has the highest operating ratio of the year, although other factors, including the state of the economy, may influence quarterly comparisons. The impact of general economic conditions and ABF's pricing initiatives, as further discussed in the following Pricing section of the ABF Overview, may continue to impact ABF's tonnage levels and, as such, there can be no assurances that ABF will maintain or achieve improvements in its current operating results.

Pricing

Another key factor to ABF's operating performance is the industry pricing environment which influences ABF's ability to obtain appropriate margins and price increases on customer accounts. Externally, ABF's pricing is typically measured by billed revenue per hundredweight, which is a reasonable, although approximate, measure of price change. 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.

Approximately 40% of ABF's business is subject to ABF's base less-than-truckload ("LTL") tariffs, which are affected by general rate increases, combined with individually negotiated discounts. Rates on the other 60% of ABF's business are subject to individual pricing arrangements that are negotiated at various times throughout the year. The majority of the tonnage related to this business is associated with larger customer accounts with annually negotiated pricing arrangements, and the remaining business is priced on an individual shipment basis considering each shipment's unique profile, value provided by ABF to the customer, and current market conditions.

Since pricing is established individually by account, ABF focuses on individual account profitability rather than billed revenue per hundredweight when considering customer account or market evaluations. This is 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. Obtaining overall base rate increases involves a lengthy process to address the pricing and resulting profitability of individual customer accounts. In addition, industry pricing has been negatively impacted during the recent recessionary periods of lower available tonnage, particularly in 2010 and 2009, when pricing became a primary driver of competition as many carriers attempted to either gain market share or minimize tonnage losses through price discounting. Pricing on ABF's traditional LTL business was adversely impacted during this time in which ABF was not able to adequately

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - continued

secure base LTL rate increases. Prolonged periods with insufficient base LTL rate improvements result in higher operating ratios as elements of unit cost, including contractual wage and benefit rates, continue to increase.

Since the second quarter of 2011, ABF has experienced improvement in the overall pricing environment. ABF's pricing improvement was influenced by retention of general rate increases and improvements in contractual and deferred pricing agreements, as further discussed in ABF Results within the Freight Transportation Segment section of Results of Operations.

ABF continues its efforts to increase pricing on underperforming accounts, and management believes these actions have had a significant adverse impact on tonnage levels experienced in 2012. There can be no assurances that the current price improvement trend will continue or that efforts to improve pricing will offset the impact of tonnage losses on ABF's operating results. A competitive environment could limit ABF from securing adequate increases in base LTL freight rates and could limit the amount of fuel surcharge revenue recovered.

Fuel

The transportation industry is dependent upon the availability of adequate fuel supplies. The Company has not experienced a lack of available fuel but could be adversely impacted if a fuel shortage develops. ABF charges a fuel surcharge based on changes in diesel fuel prices compared to a national index. The ABF fuel surcharge rate in effect is available on the ABF Web site at abf.com. (The information contained on the ABF Web site is not a part of this Annual Report on Form 10-K nor shall it be deemed incorporated by reference into this Annual Report on Form 10-K.) Although revenues from fuel surcharges generally more than offset increases in direct diesel fuel costs, other operating costs have been, and may continue to be, impacted by fluctuating fuel prices. The total impact of energy prices on other nonfuel-related expenses is difficult to ascertain. ABF 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 ABF's overall rate structure or the total price that ABF will receive from its customers. While the fuel surcharge is one of several components in ABF's overall rate structure, the actual rate paid by customers is governed by market forces based on value provided to the customer.

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 results could be impacted. Fuel prices have fluctuated significantly in recent years. Whether fuel prices fluctuate or remain constant, ABF's operating income may be adversely affected if competitive pressures limit its ability to recover fuel surcharges. Throughout 2012, the fuel surcharge mechanism generally continued to have market acceptance among ABF 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 as fuel prices remain above maximum levels recovered through the fuel surcharge mechanism on certain accounts. ABF's operating results will continue to be . . .