UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)of the Securities
Exchange Act of 1934
For the Quarter Ended March 31, 1994
----------------
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
------------- -------------
Commission file number 0-19969
--------
ARKANSAS BEST CORPORATION
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 6711 71-0673405
- ------------------------- ------------------------- ----------------------
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code No.)
organization)
1000 South 21st Street
Fort Smith, Arkansas 72901
(501) 785-6000
- -----------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code, of
the registrant's principal executive offices)
Not Applicable
- -----------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of The Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 1994
--------------------------------- --------------------------------
Common Stock, $.01 par value 19,200,077 shares
<PAGE>
ARKANSAS BEST CORPORATION
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -- March 31, 1994
and December 31, 1993 3
Consolidated Statements of Income -- For
the Three Months Ended March 31, 1994 and 1993 5
Consolidated Statements of Cash Flows -- For
the Three Months Ended March 31, 1994 and 1993 7
Notes to Consolidated Financial Statements --
March 31, 1994 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
<PAGE>
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
ARKANSAS BEST CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31 December 31
1994 1993
(unaudited) (note)
($ thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 15,676 $ 6,962
Trade receivables, less allowances for
doubtful accounts (1994 -- $2,451,000;
1993 -- $2,220,000) 110,693 104,598
Inventories -- Note C 29,290 29,086
Prepaid expenses 10,699 9,916
--------- ---------
TOTAL CURRENT ASSETS 166,358 150,562
PROPERTY, PLANT AND EQUIPMENT
Land and structures 107,955 108,422
Revenue equipment 170,591 169,573
Manufacturing equipment 6,078 5,997
Service, office and other equipment 35,466 33,913
Leasehold improvements 8,373 8,096
Construction in progress 2,013 -
--------- ---------
330,476 326,001
Less allowances for depreciation
and amortization (151,862) (147,799)
--------- ---------
178,614 178,202
OTHER ASSETS 12,322 12,839
GOODWILL, less amortization (1994 --
$17,047,000; 1993 -- $16,267,000) -- 105,372 106,130
--------- ---------
$ 462,666 $ 447,733
========= =========
</TABLE>
<PAGE>
<TABLE>
ARKANSAS BEST CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31 December 31
1994 1993
(unaudited) (note)
($ thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank drafts payable $ 11,738 $ 7,661
Trade accounts payable 39,199 36,143
Accrued expenses 77,503 71,278
Federal and state income taxes 10,155 6,398
Deferred federal income taxes 3,503 3,503
Current portion of long-term debt 11,611 15,239
--------- ---------
TOTAL CURRENT LIABILITIES 153,709 140,222
LONG-TERM DEBT, less current portion 41,603 43,731
OTHER LIABILITIES 4,047 3,933
DEFERRED FEDERAL INCOME TAXES 24,975 26,158
MINORITY INTEREST 32,034 31,699
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value,
authorized 10,000,000 shares; issued
1,495,000 shares 15 15
Common stock, $.01 par value, authorized
70,000,000 shares; issued and outstanding
1994: 19,200,077 shares; 1993:
19,185,325 shares 192 192
Additional paid-in capital 206,661 206,457
Stock payable to employee benefit plans - 205
Predecessor basis adjustment (15,371) (15,371)
Retained earnings 14,801 10,492
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 206,298 201,990
CONTINGENCIES -- Note F
--------- ---------
$ 462,666 $ 447,733
========= =========
<FN>
<F1>
Note: The balance sheet at December 31, 1993 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
<F2>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended
March 31
1994 1993
(unaudited)
($ thousands, except
per share data)
<S> <C> <C>
OPERATING REVENUES
Carrier operations $ 234,326 $ 207,053
Tire operations 29,405 20,967
Service and other 1,250 1,190
----------- -----------
264,981 229,210
----------- -----------
OPERATING EXPENSES AND COSTS -- Note E
Carrier operations 223,263 200,634
Tire operations 27,581 19,406
Service and other 1,519 1,375
----------- -----------
252,363 221,415
----------- -----------
OPERATING INCOME 12,618 7,795
OTHER INCOME
Gains on asset sales 318 252
Other 148 114
----------- -----------
466 366
OTHER EXPENSES
Interest 1,344 2,333
Other 1,014 898
Minority interest in subsidiary 490 469
----------- -----------
2,848 3,700
----------- -----------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM 10,236 4,461
FEDERAL AND STATE INCOME
TAXES (CREDIT) -- Note D
Current 5,843 3,827
Deferred (1,182) (1,528)
----------- -----------
4,661 2,299
----------- -----------
<PAGE>
ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Continued)
<CAPTION>
Three Months Ended
March 31
1994 1993
(unaudited)
($ thousands, except
per share data)
<S> <C> <C>
INCOME BEFORE EXTRAORDINARY ITEM $ 5,575 $ 2,162
EXTRAORDINARY ITEM
Loss on extinguishment of debt - (167)
----------- -----------
NET INCOME $ 5,575 $ 1,995
=========== ===========
EARNINGS PER SHARE:
INCOME BEFORE EXTRAORDINARY ITEM $ .23 $ .08
EXTRAORDINARY ITEM
Loss on extinguishment of debt - (.01)
----------- -----------
NET INCOME $ .23 $ .07
=========== ===========
CASH DIVIDENDS PAID PER COMMON SHARE $ .01 $ .01
=========== ===========
AVERAGE SHARES OUTSTANDING 19,339,389 19,194,595
=========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended
March 31
1994 1993
(unaudited)
($ thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 5,575 $ 1,995
Adjustments to reconcile
net income to net cash provided
by operating activities:
Loss on extinguishments of debt - 167
Depreciation and amortization 6,658 7,626
Amortization of intangibles 779 760
Amortization of other expenses 111 71
Provision for losses on
accounts receivable 770 660
Provision for deferred
income taxes (1,182) (1,528)
Gain on asset sales (318) (252)
Gain on issuance of
subsidiary stock (45) -
Minority interest in
subsidiary 490 469
Changes in operating
assets and liabilities:
Accounts receivable (6,865) (2,176)
Inventories and
prepaid expenses (987) (1,965)
Other assets 404 1,121
Accounts payable, bank
drafts payable, taxes
payable, accrued expenses
and other liabilities 17,229 3,507
--------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 22,619 10,455
INVESTING ACTIVITIES
Purchases of property,
plant and equipment,
less capitalized leases (8,387) (2,085)
Proceeds from asset sales 1,635 2,520
--------- ---------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (6,752) 435
<PAGE>
ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<CAPTION>
Three Months Ended
March 31
1994 1993
(unaudited)
($ thousands)
<S> <C> <C>
FINANCING ACTIVITIES
Deferred financing costs
and expenses incurred in
borrowing activities $ - $ (28)
Net proceeds from the
issuance of preferred stock - 71,899
Proceeds from commercial paper
agreement 1,000 -
Borrowings under revolving
credit facilities 2,000 10,000
Principal payments under
term loan facility - (50,000)
Payments under revolving
credit facilities (2,000) (25,000)
Principal payments on
other long-term debt (6,777) (7,842)
Dividends paid to minority
shareholders of subsidiary (109) (107)
Dividends paid (1,267) (190)
--------- ---------
NET CASH USED BY
FINANCING ACTIVITIES (7,153) (1,268)
--------- ---------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 8,714 9,622
Cash and cash equivalents
at beginning of period 6,962 5,644
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 15,676 $ 15,266
========= =========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1994
NOTE A -- ORGANIZATION
Arkansas Best Corporation (the "Company") is a diversified holding company
engaged through its subsidiaries primarily in motor carrier operations and
truck tire retreading and sales. Principal subsidiaries owned are ABF
Freight System, Inc., ("ABF"), Treadco, Inc. ("TREADCO"), and ABC Treadco,
Inc. ("ABC Treadco").
On February 3, 1993, the Company completed its public offering of 1,495,000
shares of $2.875 Series A Cumulative Convertible Exchangeable Preferred Stock
at $50 per share.
NOTE B -- FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three months ended March 31, 1994, are not necessarily indicative of the
results that may be expected for the year ending December 31, 1994. For
further information, refer to the Company's financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1993.
NOTE C -- INVENTORIES
<TABLE>
<CAPTION>
March 31 December 31
1994 1993
($ thousands)
<S> <C> <C>
Finished goods $ 22,041 $ 20,240
Materials 5,424 6,784
Repair parts, supplies and other 1,825 2,062
-------- --------
$ 29,290 $ 29,086
======== ========
</TABLE>
<PAGE>
NOTE D -- FEDERAL AND STATE INCOME TAXES
<TABLE>
<CAPTION>
Three Months Ended
March 31
1994 1993
($ thousands)
<S> <C> <C>
Income tax at regular rates $ 3,583 $ 1,517
Percent 35.0% 34.0 %
State taxes less federal benefits 596 381
Percent 5.8% 8.5 %
Amortization of goodwill 265 251
Percent 2.6% 5.6 %
Minority interest 167 159
Percent 1.6% 3.6 %
Other items 50 (9)
Percent 0.5% (0.2)%
--------- ---------
Income tax expense $ 4,661 $ 2,299
Percent 45.5% 51.5 %
========= =========
</TABLE>
NOTE E -- OPERATING EXPENSES AND COSTS
<TABLE>
<CAPTION>
Three Months Ended
March 31
1994 1993
($ thousands)
<S> <C> <C>
Carrier Operations:
Salaries and wages $155,442 $141,120
Supplies and expenses 24,502 23,386
Operating taxes and licenses 9,238 8,116
Insurance 4,368 4,031
Communications and utilities 5,726 5,999
Depreciation and amortization 5,889 7,051
Rents 16,762 9,807
Other 1,336 1,124
-------- --------
223,263 200,634
-------- --------
Tire Operations:
Cost of sales 21,548 14,942
Selling, administrative and
general 6,033 4,464
-------- --------
27,581 19,406
-------- --------
Service and Other 1,519 1,375
-------- --------
$252,363 $221,415
======== ========
</TABLE>
<PAGE>
NOTE F -- LEGAL PROCEEDINGS AND ENVIRONMENTAL MATTERS
Various legal actions, the majority of which arise in the normal course of
business, are pending. None of these other legal actions is expected to have
a material adverse effect on the Company's financial condition. The Company
maintains liability insurance against risks arising out of the normal course
of its business.
ABF stores some fuel for its tractors and trucks in 103 underground tanks
located in 27 states. Maintenance of such tanks is regulated at the federal
and, in some cases, state levels. ABF believes that it is in substantial
compliance with all such regulations. ABF is not aware of any leaks from such
tanks that could reasonably be expected to have a material adverse effect on
the Company. Environmental regulations have been adopted by the United States
Environmental Protection Agency ("EPA") that will require ABF to upgrade its
underground tank systems by December 1998. ABF currently estimates that such
upgrades, which are currently in process, will not have a material adverse
effect on the Company.
The Company has received notices from the EPA and others that it has been
identified as a potentially responsible party under the Comprehensive
Environmental Response Compensation and Liability Act or other federal or
state environmental statutes at several hazardous waste sites. After
investigating the Company's or its subsidiaries' involvement in waste
disposal or waste generation at such sites, the Company has either agreed to
de minimis settlements (aggregating approximately $210,000 over the last five
years), or believes its obligations with respect to such sites would involve
immaterial monetary liability, although there can be no assurances in this
regard.
NOTE G -- NEW ACCOUNTING STANDARDS
In November 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits." This Statement addresses the accounting for
benefits to former or inactive employees after employment but before
retirement. The Company's accounting for such benefits was not affected by
the Statement.
NOTE H -- SUBSEQUENT EVENTS
ABF's labor agreement with the International Brotherhood of Teamsters ("IBT")
expired on March 31, 1994. On April 6, 1994, when the terms of a new
agreement had not been agreed to between the industry's bargaining group,
Trucking Management, Inc. ("TMI"), and the IBT, the Teamster employees of ABF
and 20 other carriers went on strike. On April 29, 1994, TMI and the IBT
reached a tentative agreement on a new four year contract. ABF Teamster
employees began returning to work at 12:01 a.m. on April 30, 1994. Before
the new contract is effective, it will have to be voted on and ratified by
the IBT membership.
<PAGE>
The Company experienced a consolidated net loss (unaudited) of
$12,688,000 for the month of April, 1994 and expects to have a loss
for the second quarter due to the labor strike. The Company has
identified accounts where it believes business has been lost to non-union
carriers as a result of the strike. However, despite this lost business,
management anticipates post-strike business for May and June to be at least
equal to last year's business for the same months due to new business secured
during the six months prior to the strike and growth in existing accounts due
to the economy.
NOTE I -- LONG-TERM DEBT
The Company entered into a $20 million credit agreement, dated as of
April 25, 1994, with Nationsbank of Texas, N.A. as agent and Societe Generale
Southwest Agency. The proceeds from the agreement will be used in financing
the construction of the Company's corporate office which is expected to be
completed by January 1995. Amounts advanced and unpaid shall bear interest
of 8.07% per annum. The Company shall repay the outstanding principal amount
in 40 equal installments, each in the amount of $500,000, due and payable on
the fifteenth day of each January, April, July, and October hereafter
commencing on July 15, 1994.
On March 2, 1994, ABF, Renaissance Asset Funding Corp. ("Renaissance") and
Societe Generale entered into a receivables purchase agreement. The
agreement allows ABF to sell to Renaissance interest of up to $55 million in
a pool of receivables. At March 31, 1994, ABF had financed $1 million of
receivables through this facility. ABF expects to use this facility from
time to time throughout the year for various corporate needs, including
working capital.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Arkansas Best Corporation (the "Company") is primarily engaged, through its
motor carrier subsidiaries, in less-than-truckload ("LTL") shipments of
general commodities. The Company is also engaged through its approximately
46%-owned consolidated subsidiary, Treadco, Inc. ("TREADCO"), in truck tire
retreading and new tire sales.
The Company in 1991 reduced its ownership in TREADCO, through an initial
public offering of TREADCO common stock, to approximately 46%, while
retaining control of TREADCO by reason of its stock ownership, board
representation and agreement to provide management services. As a result,
TREADCO is consolidated with the Company for financial reporting purposes,
with the ownership interests of the other stockholders reflected as minority
interest.
Segment Data
The following tables reflect information prepared on a business segment
basis, which includes reclassification of certain expenses and costs between
the Company and its subsidiaries and elimination of the effects of
intercompany transactions. Operating profit on a business segment basis
differs from operating income as reported in the Company's Consolidated
Financial Statements. Other income and other expenses (which include
amortization expense), except for interest expense and minority interest in
subsidiary, which appears below the operating income line in the Company's
Statement of Operations, have been allocated to individual segments for the
purpose of calculating operating profit on a segment basis.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
March 31
1994 1993
($ thousands)
<S> <C> <C>
OPERATING REVENUES
Carrier operations $234,326 $207,053
Tire operations 29,405 20,967
Other 1,250 1,190
-------- --------
$264,981 $229,210
======== ========
OPERATING EXPENSES AND COSTS
CARRIER OPERATIONS
Salaries and wages $155,442 $141,120
Supplies and expenses 24,502 23,386
Operating taxes and licenses 9,238 8,116
Insurance 4,368 4,031
Communications and utilities 5,726 5,999
Depreciation and amortization 5,889 7,051
Rents 16,762 9,807
Other 1,336 1,124
Other non-operating (net) 179 372
-------- --------
223,442 201,006
TIRE OPERATIONS
Cost of sales 21,548 14,942
Selling, administrative and general 6,033 4,464
Other non-operating (net) 197 29
-------- --------
27,778 19,435
SERVICE AND OTHER 1,691 1,506
-------- --------
$252,911 $221,947
======== ========
OPERATING PROFIT (LOSS)
Carrier operations $ 10,884 $ 6,047
Tire operations 1,627 1,532
Other (441) (316)
-------- --------
TOTAL OPERATING PROFIT 12,070 7,263
MINORITY INTEREST 490 469
INTEREST EXPENSE 1,344 2,333
-------- --------
INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM $ 10,236 $ 4,461
======== ========
</TABLE>
<PAGE>
The following table sets forth for the periods indicated a summary of the
Company's operations as a percentage of revenues presented on a business
segment basis as shown in the table on the preceding page. The basis of
presentation for business segment data differs from the basis of presentation
for data the Company provides to the ICC.
<TABLE>
<CAPTION>
Three Months Ended
March 31
1994 1993
<S> <C> <C>
CARRIER OPERATIONS
Salaries and wages 66.3% 68.2%
Supplies and expenses 10.5 11.3
Operating taxes and licenses 3.9 3.9
Insurance 1.9 1.9
Communications and utilities 2.4 2.9
Depreciation and amortization 2.5 3.4
Rents 7.2 4.7
Other 0.6 0.5
Other non-operating (net) 0.1 0.3
---- ----
Total Carrier Operations 95.4% 97.1%
==== ====
TIRE OPERATIONS
Cost of sales 73.3% 71.3%
Selling, administrative and general 20.5 21.3
Other non-operating (net) 0.7 0.1
---- ----
Total Tire Operations 94.5% 92.7%
==== ====
</TABLE>
Results of Operations
Three Months Ended March 31, 1994 As Compared With Three Months Ended
March 31, 1993
Consolidated revenues of the Company for the three months ended March 31,
1994 were $265.0 million compared to $229.2 million for the three months
ended March 31, 1993. Operating profit for the Company was $12.1 million for
the three months ended March 31, 1994 compared to $7.3 million for the three
months ended March 31, 1993. Net income for the three months ended March 31,
1994 was $5.6 million, or $.23 per common share, compared to a net income of
$2.0 million, or $.07 per common share for the three months ended March 31,
1993. Income before extraordinary item was $5.6 million, or $.23 per common
share for the three months ended March 31, 1994, compared to income before
extraordinary item of $2.2 million, or $.08 per common share for the three
months ended March 31, 1993. During the first three months of 1993, the
Company recorded an extraordinary loss of $(167,000) (net of income tax
benefit of $102,000), or $(.01) per common share for the net loss on
extinguishment of debt. Earnings per common share for the three months ended
March 31, 1994 give consideration to preferred stock dividends of $1.1
million. Average common shares outstanding for the three months ended
March 31, 1994 were 19.3 million shares compared to 19.2 million shares for
the three months ended March 31, 1993.
<PAGE>
Motor Carrier Operations Segment. Revenues for the motor carrier operations
segment increased 13.2% to $234.3 million for the three months ended
March 31, 1994 from $207.1 million for the three months ended March 31, 1993,
reflecting primarily an 11.8% increase in total tonnage and a 1.6% increase
in revenue per hundredweight. The increase in total tonnage consisted of a
12.2% increase in LTL tonnage and a 10.5% increase in a truckload tonnage.
During the first three months of 1994, the economy continued to improve
resulting in an increase in available freight. Also during the first three
months of 1993, competitive pressure on pricing had a negative impact on
tonnage and rates. Effective January 1, 1994, ABF implemented a general
freight rate increase of 4.5%. Management believes the rate increase
resulted in approximately a 2.6% impact on revenues during the first three
months of 1994. The diminished effect was the result of pricing that is on a
contract basis which can only be increased when the contract is renewed.
Motor carrier segment operating expenses as a percent of revenues was 95.4%
for the three months ended March 31, 1994 compared to 97.1% for the three
months ended March 31, 1993. Salaries and wages for motor carrier operations
as a percent of revenues decreased to 66.3% for the three months ended
March 31, 1994 from 68.2% for the three months ended March 31, 1993. The
decrease resulted primarily from the covering of the fixed portion of
salaries and wages expense by the higher level of revenues and the
utilization of alternate modes of outside transportation during periods of
peak activity. Supplies and expenses for motor carrier operations as a
percent of revenues decreased to 10.5% for the three months ended March 31,
1994 from 11.3% for the three months ended March 31, 1993. The decrease
resulted primarily from a 10% decrease in fuel cost per gallon and the
covering of the fixed costs by the higher level of revenues.
Depreciation and amortization expense for motor carrier operations as a
percent of revenues decreased to 2.5% for the three months ended March 31,
1994 from 3.4% for the three months ended March 31, 1993. During the last
three years, ABF financed its road tractor replacement program with operating
leases instead of capital leases, which decreased both interest and
depreciation expense and increased rent expense. Rent expense for motor
carrier operations as a percent of revenues increased to 7.2% for the three
months ended March 31, 1994 from 4.7% for the three months ended March 31,
1993. The additional rent expense was incurred primarily as a result of the
operating leases discussed above and the utilization of alternate modes of
outside transportation during periods of peak activity.
Tire Operations Segment. TREADCO's revenues for the three months ended
March 31, 1994 increased 40.2% to $29.4 million from $21.0 million for the
three months ended March 31, 1993. The increase resulted primarily from
internal growth and the addition of five facilities through the August 30,
1993 acquisition of Trans-World Tire Corporation in Florida. Revenues from
retreading for the three months ended March 31, 1994 increased 36.3% to $16.6
million from $12.2 million for the three months ended March 31, 1993.
Revenues from new tire sales increased 45.8% to $12.8 million for the three
months ended March 31, 1994 from $8.8 million for the three months ended
March 31, 1993.
Tire operations segment operating expenses as a percent of revenues were
94.5% for the three months ended March 31, 1994 compared to 92.7% for the
three months ended March 31, 1993. Cost of sales for the tire operations
segment as a percent of revenues increased to 73.3% for the three months
ended March 31, 1994 from 71.3% for the three months ended March 31, 1993
<PAGE>
resulting primarily from integrating last fall's acquisition of five Florida
facilities into TREADCO. Although the integration is progressing as planned,
the costs of sales as a percent of revenues are higher at the Florida
locations. Also, late in the fourth quarter of 1992, TREADCO was able to
purchase a large quantity of tires at a larger than normal discount which had
a positive impact on the cost of new tires sold during the first three months
of 1993.
Selling, administrative and general expenses for the tire operations segment
decreased to 20.5% for the three months ended March 31, 1994 from 21.3% for
the three months ended March 31, 1993. The decrease resulted primarily from
the covering of the fixed portion of selling, administrative and general
expenses by the increase in sales.
Interest. Interest expense decreased 42.1% to $1.3 million for the three
months ended March 31, 1994 from $2.3 million during the three months ended
March 31, 1993. A reduction in long-term debt outstanding, lower interest
rates and utilization of operating leases resulted in the decrease in
interest expense. The reduction in long-term debt consisted primarily of
retiring $50 million in principal of a term loan under its existing Credit
Agreement, maintaining a lesser average balance outstanding under the
revolving credit facilities, and financing a portion of its revenue equipment
with operating leases.
Income Taxes. The difference between the effective tax rate for the three
months ended March 31, 1994 and the federal statutory rate resulted primarily
from state income taxes, amortization of goodwill, minority interest,
undistributed earnings of TREADCO and other nondeductible expenses (see Note
D to the consolidated financial statements).
Liquidity and Capital Resources
The ratio of current assets to current liabilities was 1.08:1 at March 31,
1994 compared to 1.07:1 at December 31, 1993. The improvement in the current
ratio resulted primarily from an increase in cash and trade receivables and a
decrease in the current portion of long-term debt. Net cash provided by
operating activities for the three months ended March 31, 1994 was $22.6
million compared to $10.5 million for the three months ended March 31, 1993.
The increase is due primarily to higher net income and changes in operating
assets and liabilities.
The Company and certain banks are parties to a Credit Agreement with Societe
Generale, as Agent and NationsBank of Texas a Co-Agent (the "Credit
Agreement") which provides funds available under a three-year Revolving
Credit Facility of $100 million, including $40 million for letters of credit.
There are no borrowings outstanding under the Revolving Credit Facility and
approximately $37.4 million of letters of credit outstanding at March 31,
1994. The Revolving Credit Facility is payable on June 30, 1996.
Outstanding revolving credit advances may not exceed a borrowing base
calculated using the Company's revenue equipment, real property and the
Treadco common stock owned by the Company. At March 31, 1994, the borrowing
base was $97.8 million. The Company has paid and will continue to pay
certain customary fees for such commitments and loans. Amounts advanced
under the revolving credit facility bear interest, at the Company's option,
at a rate per annum of either: (i) the greater of (a) the agent bank's prime
rate and (b) the Federal Funds Rate plus 1/2%; or (ii) LIBOR plus 1 1/2%.
<PAGE>
The Credit Agreement contains various covenants which limit, among other
things, dividends, indebtedness, capital expenditures, loans and investments,
as well as requiring the Company to meet certain financial tests. As of
March 31, 1994, these covenants have been met. If there is an event of
default which is not remedied or waived within 10 days, the Credit Agreement
will become secured to the extent of amounts then outstanding of all of the
Company's revenue equipment, real property and common stock included in the
borrowing base (subject to certain exceptions).
The Company entered into a $20 million credit agreement, dated as of
April 25, 1994, with Nationsbank of Texas, N.A. as agent and Societe Generale
Southwest Agency. The proceeds from the agreement will be used in financing
the construction of the Company's corporate office which is expected to be
completed by January 1995. Amounts advanced and unpaid shall bear interest
of 8.07% per annum. The Company shall repay the outstanding principal amount
in 40 equal installments, each in the amount of $500,000, due and payable on
the fifteenth day of each January, April, July, and October hereafter
commencing on July 15, 1994.
On March 2, 1994, ABF, Renaissance Asset Funding Corp. ("Renaissance") and
Societe Generale entered into a receivables purchase agreement. The
agreement allows ABF to sell to Renaissance interest of up to $55 million in
a pool of receivables. At March 31, 1994, ABF had financed $1 million of
receivables through this facility. ABF expects to use this facility from
time to time throughout the year for various corporate needs, including
working capital.
Management believes, based upon the Company's current levels of operations
and anticipated growth, the Company's cash, capital resources, borrowings
available under the Credit Agreement and cash flow from operations will be
sufficient to finance current and future operations and meet all present and
future debt service requirements.
Seasonality
The motor carrier segment is affected by seasonal fluctuations, which affect
tonnage to be transported. Freight shipments, operating costs and earnings
are also affected adversely by inclement weather conditions. The third
calendar quarter of each year usually has the highest tonnage levels while
the first quarter has the lowest. TREADCO's operations are somewhat seasonal
with the last six months of the calendar year generally having the highest
levels of sales.
New Accounting Standards
In November 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits." This Statement addresses the accounting for
benefits to former or inactive employees after employment but before
retirement. The Company's accounting for such benefits was not affected by
the Statement.
<PAGE>
Subsequent Events
ABF's labor agreement with the International Brotherhood of Teamsters ("IBT")
expired on March 31, 1994. On April 6, 1994, when the terms of a new
agreement had not been agreed to between the industry's bargaining group,
Trucking Management, Inc. ("TMI"), and the IBT, the Teamster employees of ABF
and 20 other carriers went on strike. On April 29, 1994, TMI and the IBT
reached a tentative agreement on a new four year contract. ABF Teamster
employees began returning to work at 12:01 a.m. on April 30, 1994. Before
the new contract is effective, it will have to be voted on and ratified by
the IBT membership.
The Company experienced a consolidated net loss (unaudited) of
$12,688,000 for the month of April, 1994 and expects to have a loss
for the second quarter due to the labor strike. The Company has
identified accounts where it believes business has been lost to non-union
carriers as a result of the strike. However, despite this lost business,
management anticipates post-strike business for May and June to be at least
equal to last year's business for the same months due to new business secured
during the six months prior to the strike and growth in existing accounts due
to the economy.
<PAGE>
PART II.
OTHER INFORMATION
ARKANSAS BEST CORPORATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, the Company is named as a defendant in legal actions,
the majority of which arise out of the normal course of its business. The
Company is not a party to any pending legal proceeding which the Company's
management believes to be material to the financial condition of the Company.
The Company maintains liability insurance against risks arising out of the
normal course of its business (see Note F to the Company's Unaudited
Consolidated Financial Statements).
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit 11 - Statement Re: Computation of Earnings Per Share.
(b) Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
ARKANSAS BEST CORPORATION
(Registrant)
Date: May 13 1994 s/Donald L. Neal
----------------- ------------------------------------
Donald L. Neal - Senior Vice
President - Chief Financial Officer,
and Principal Accounting Officer
EXHIBIT 11
<TABLE>
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
ARKANSAS BEST CORPORATION
<CAPTION>
Three Months Ended
March 31
1994 1993
($ thousands, except
per share data)
<S> <C> <C>
PRIMARY:
Average shares outstanding 19,195,794 19,058,472
Net effect of dilutive stock
options -- Based on the
treasury stock method using
average market price 143,595 136,123
---------- ----------
Average common shares outstanding 19,339,389 19,194,595
========== ==========
Income before extraordinary item $ 5,575 $ 2,162
Less: Preferred stock dividend 1,075 681
---------- ----------
4,500 1,481
Extraordinary item:
Loss on extinguishments of debt - (167)
---------- ----------
Net income available for common $ 4,500 $ 1,314
========== ==========
Per common and common equivalent share:
Income (loss) before extra-
ordinary item $ .23 $ .08
Extraordinary item:
Loss on extinguishments of debt .00 (.01)
---------- ----------
Net income per common share $ .23 $ .07
========== ==========
</TABLE>
Fully-diluted earnings per share are not presented, as such calculations
would be anti-dilutive.
