<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 8-K/A No. 2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 25, 1995
(August 10, 1995)
ARKANSAS BEST CORPORATION
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-19969 71-0673405
- ------------------------- ------------------------- ----------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation or
organization)
3801 Old Greenwood Road
Fort Smith, Arkansas 72903
(501) 785-6000
- -----------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code, of
the registrant's principal executive offices)
<PAGE>
Items 7(a) and (b) of the Registrant's Current Report on Form 8-K filed with
the Securities and Exchange Commission on August 17, 1995 and amended by
Amendment No. 1 on October 13, 1995 are hereby amended to read as set forth
below. Also, Item 7(c) of such Current Report on Form 8-K filed with the
Securities and Exchange Commission on August 17, 1995 is hereby amended to
read as set forth below. Accordingly, Items 7(a),(b) and (c) of such Current
Report on Form 8-K, amended and restated, reads as follows:
Item 7. Financial Statements and Exhibits.
(a) Financial statments of businesses acquired.
Audited financial statements of the Company for the years ended
December 31, 1994 and 1993.
Unaudited financial statements of the Company for the twenty-four weeks
ended June 17, 1995 and June 18, 1994.
(b) Pro forma financial information.
Pro forma condensed consolidated statements of operations for the year
ended December 31, 1994 and the six months ended June 30, 1995 and the
pro forma condensed consolidated balance sheet as of June 30, 1995.
(c) Exhibits.
Exhibit 2 - Agreement and Plan of Merger, dated as of July 8, 1995,
among the Company, the Purchaser and Registrant
(incorporated herein by reference to Exhibit (c)(1) to the
Tender Offer Statement on Schedule 14D-1 filed with the
Commission on July 14, 1995).
Exhibit 20 Press release issued by the Registrant on August 11, 1995
announcing the expiration of the Offer at 12:00 midnight
New York City time, August 10, 1995, is incorporated
herein by reference from Exhibit (a)(12) to Amendment No.
2 (Final Amendment and Schedule 13D) dated August 11, 1995
to the Schedule 14D-1.
Exhibit 23.1 Consent of Arthur Andersen LLP, Independent Public
Accountants
Exhibit 99.1 Offer to Purchase dated July 14, 1995 by the Purchaser to
purchase all outstanding shares of Common Stock, par value
$0.50 per share of the Company is incorporated herein by
reference from Exhibit (a)(1) to the Schedule 14D-1.
Exhibit 99.2 Audited financial statements of the Company for the years
ended December 31, 1994 and 1993.
Exhibit 99.3 Unaudited financial statements of the Company for the
twenty-four weeks ended June 17, 1995 and June 18, 1994.
Exhibit 99.4 Pro forma condensed consolidated statements of operations
for the year ended December 31, 1994 and the six months
ended June 30, 1995 and the pro forma condensed
consolidated balance sheet as of June 30, 1995.
<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: October 25, 1995 /s/ Donald L. Neal
----------------- ------------------------------------
Donald L. Neal - Senior Vice
President - Chief Financial Officer,
and Principal Accounting Officer
<PAGE>
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Exhibit Page
- --------- -------- --------------
2 Agreement and Plan of Merger, dated as of July 8, -
1995, among the Company, the Purchaser and
Registrant (incorporated herein by reference to
Exhibit (c)(1) to the Tender Offer Statement on
Schedule 14D-1 filed with the Commission on July
14, 1995).
20 Press release issued by the Parent on August 11, -
1995 announcing the expiration of the Offer at
12:00 midnight New York City time, August 10,
1995, is incorporated herein by reference from
Exhibit (a)(12) to Amendment No. 2 (Final
Amendment and Schedule 13D) dated August 11, 1995
to the Schedule 14D-1.
23.1 Consent of Arthur Andersen LLP, Independent Public -
Accountants
99.1 Offer to Purchase dated July 14, 1995 by the -
Purchaser to purchase all outstanding shares of
Common Stock, par value $0.50 per share of the
Company is incorporated herein by reference from
Exhibit (a)(1) to the Schedule 14D-1.
99.2 Audited financial statements of the Company for -
the years ended December 31, 1994 and 1993.
99.3 Unaudited financial statements of the Company for -
the twenty-four weeks ended June 17, 1995 and
June 18, 1994.
99.4 Pro forma condensed consolidated statements of -
operations for the year ended December 31, 1994
and the six months ended June 30, 1995 and the pro
forma condensed consolidated balance sheet as of
June 30, 1995.
EXHIBIT 23.1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation of
our report dated January 31, 1995, with respect to WorldWay Corporation,
(formerly known as Carolina Freight Corporation) included in this Form 8-K/A-
2, into Arkansas Best Corporation's previously filed S-8 Registration
Statements related to the Arkansas Best Corporation Stock Option Plan and
Arkansas Best Corporation disinterested Director Stockholder Plan dated July
29, 1993 (File No. 33-66694); the Arkansas Best Corporation Employees'
Investment Plan dated March 30, 1994; and the Carolina Freight Corporation
Employee Savings and Protection Plan, Complete Leasing Concepts, Inc.
Employee Savings & Profit Sharing Plan and IDI 401(k) Savings Plan dated
October 20, 1995. It should be noted that we have not audited any financial
statements of WorldWay Corporation subsequent to December 31, 1994.
Arthur Andersen LLP
Charlotte, North Carolina,
October 23, 1995
EXHIBIT 99.2
Consolidated Financial Statements
Carolina Freight Corporation *
December 31, 1994 and 1993 with
Report of Independent Public Accountants
* Shareholders of Carolina Freight Corporation approved a name change to
WorldWay Corporation in April 1995.
<PAGE>
CONSOLIDATED BALANCE SHEETS
Carolina Freight Corporation
<TABLE>
<CAPTION>
December 31,
----------------------
(Dollars in thousands) 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 4,710 $ 6,502
Temporary investments 5,011 -
Investments restricted under letter of credit
arrangements (at cost, which approximates market) 1,383 1,370
Customer and interline receivables, net 16,924 10,091
Customer receivables held by trust, net 38,782 35,787
Other receivables, net 13,260 6,985
Reinsurance balances receivable 12,149 13,815
Prepayments -
Tires on equipment in use 12,869 13,632
Other 6,871 5,755
Inventories of operating supplies 2,882 2,869
- -------------------------------------------------------------------------------
Total current assets 114,841 96,806
- -------------------------------------------------------------------------------
Plant and Equipment, at cost:
Revenue and service equipment 260,378 267,112
Land and structures 180,706 179,220
Other equipment 63,947 57,356
Leasehold improvements 2,048 1,512
- -------------------------------------------------------------------------------
507,079 505,200
Less - Accumulated depreciation and amortization (275,145) (258,772)
- -------------------------------------------------------------------------------
Net plant and equipment 231,934 246,428
- -------------------------------------------------------------------------------
Investments restricted under letter of credit
arrangements (at cost, which approximates market) 8,492 8,799
Other Assets 15,047 11,905
- -------------------------------------------------------------------------------
$ 370,314 $ 363,938
===============================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31,
------------------
(Dollars in thousands, except share data) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 34,525 $ 33,266
Accrued wages, salaries and vacation pay 36,114 34,191
Claims and insurance accruals 31,860 33,084
Income taxes
Current 1,439 522
Deferred -- --
Other payables and accrued expenses 13,779 11,496
Current maturities of long-term debt 3,206 5,494
- --------------------------------------------------------------------------------
Total current liabilities 120,923 118,053
- --------------------------------------------------------------------------------
Long-Term Debt:
6.25% Convertible Subordinated Debentures, Due 2011 49,994 49,994
Other long-term debt 18,283 21,182
- --------------------------------------------------------------------------------
Total long-term debt 68,277 71,176
- --------------------------------------------------------------------------------
Reserves and Deferred Credits:
Income taxes 17,779 15,168
Other deferred liabilities 7,813 8,211
Insurance claims 27,176 29,718
- --------------------------------------------------------------------------------
Total reserves and deferred credits 52,768 53,097
- --------------------------------------------------------------------------------
Leases, Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $100 par value, 4% cumulative, authorized
25,000 shares, outstanding 22,112 shares 2,211 2,211
Common stock, $.50 par value, authorized 20,000,000
shares, outstanding 6,561,672 shares in 1994 and 1993 3,281 3,281
Paid-in capital 44,393 44,349
Retained earnings 78,461 71,771
- --------------------------------------------------------------------------------
Total stockholders' equity 128,346 121,612
- --------------------------------------------------------------------------------
$370,314 $363,938
================================================================================
</TABLE>
The notes to consolidated financial statements are an integral part of these
balance sheets.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Carolina Freight Corporation
<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------------
(Dollars in thousands, except share data) 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUE $935,940 $845,350 $801,138
- ---------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Employee compensation
Linehaul 156,790 149,514 139,474
Pickup and delivery 145,356 141,033 134,257
Platform and terminal 188,489 181,192 169,370
Other 73,960 66,388 62,894
- ---------------------------------------------------------------------------------------------------------
Total employee compensation 564,595 538,127 505,995
Fuel and fuel taxes 46,611 43,364 41,035
Tires, repair parts and other operating expenses 43,482 39,523 35,524
Operating taxes and licenses 12,610 12,352 11,962
Insurance premiums and claims 24,103 24,386 26,413
Communications and utilities 11,825 11,185 11,545
Depreciation and amortization, net of gain
(loss) on disposition of operating assets
{1994-($15); 1993-$3,222; 1992-($886)} 34,690 31,887 40,670
Purchased transportation 124,496 100,717 88,233
Equipment and building rents 5,463 5,041 5,063
General supplies and expenses 40,831 33,730 30,905
Nonrecurring charges 1,026 4,408
- ---------------------------------------------------------------------------------------------------------
Total operating expenses 909,732 840,312 801,753
- ---------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) FROM OPERATIONS 26,208 5,038 (615)
- ---------------------------------------------------------------------------------------------------------
OTHER INCOME AND (EXPENSES):
Interest expense (6,232) (6,553) (6,565)
Interest income 764 415 509
Other expense, net (5,912) (4,229) (3,229)
- ---------------------------------------------------------------------------------------------------------
(11,380) (10,367) (9,285)
- ---------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES 14,828 (5,329) (9,900)
INCOME TAX PROVISION (BENEFIT) 6,828 (1,167) (3,712)
- ---------------------------------------------------------------------------------------------------------
Net earnings (loss) before cumulative effect
of changes in accounting principles 8,000 (4,162) (6,188)
Cumulative effect of changes in accounting principles (1,222) 9,836
- ---------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) $ 6,778 ($ 4,162) $ 3,648
=========================================================================================================
Net earnings (loss) per share before cumulative
effect of changes in accounting principles $ 1.21 ($ .65) ($ .96)
Cumulative effect of changes in accounting principles (.19) - 1.50
- ---------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) PER SHARE $ 1.02 ($ .65) $ .54
=========================================================================================================
<PAGE>
</TABLE>
The notes to consolidated financial statements are an integral part of these
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Carolina Freight Corporation
<TABLE>
<CAPTION>
For the years ended December 31,
-------------------------------------------
(Dollars in thousands) 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) for the year $ 6,778 $ (4,162) $ 3,648
Noncash items included in earnings (loss):
Depreciation and amortization 34,675 35,109 39,784
Deferred income taxes 1,095 (3,612) (3,439)
Cumulative effect of accounting principle
change on deferred tax accounts (777) - (12,203)
Net proceeds from sales of receivables - 25,000 -
Increase in customer and interline receivables (9,828) (14,445) (5,055)
Increase in accounts payable 1,259 909 7,344
Increase (decrease) in claims payable and insurance accruals (3,766) 2,500 11,331
Net increase (decrease) in other working capital items 135 2,457 (253)
Other, net (414) (3,187) (345)
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 29,157 40,569 40,812
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of plant and equipment:
Revenue and service equipment (17,392) (17,283) (22,235)
Land and structures (4,048) (4,665) (10,152)
Other equipment and leasehold improvements (6,907) (7,354) (4,192)
Proceeds from disposal of plant and equipment 7,685 13,497 2,570
- -----------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (20,662) (15,805) (34,009)
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 812 578 1,567
Repayment of long-term debt (6,000) (6,265) (3,258)
Net proceeds from (repayments of)
revolving credit agreements - (18,000) (500)
Common stock issued - - 6
Dividends on common and preferred stock (88) (1,401) (3,369)
- -----------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (5,276) (25,088) (5,554)
- -----------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND TEMPORARY INVESTMENTS 3,219 (324) 1,249
CASH AND TEMPORARY INVESTMENTS AT BEGINNING OF YEAR 6,502 6,826 5,577
- -----------------------------------------------------------------------------------------------------------------
CASH AND TEMPORARY INVESTMENTS AT END OF YEAR $ 9,721 $ 6,502 $ 6,826
=================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION
Cash paid during the year for:
Interest $ 5,374 $ 6,563 $ 6,511
Income taxes 5,593 682 831
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
A capital lease obligation of $3,196,000 was incurred
in 1992 when the Company entered into a lease for
new computer equipment.
=================================================================================================================
<PAGE>
</TABLE>
The notes to consolidated financial statements are an integral part of these
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
Carolina Freight Corporation
<TABLE>
<CAPTION>
Preferred Common Paid-in Retained
(Dollars in thousands) Stock Stock Capital Earnings
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances at December 31, 1991 $2,211 $3,281 $44,343 $77,055
Net earnings for the year - - - 3,648
Dividends declared:
Preferred stock - $4.00 per share - - - (88)
Common stock - $.50 per share - - - (3,281)
Debentures converted (126 shares) - - 6 -
- ------------------------------------------------------------------------------
Balances at December 31, 1992 2,211 3,281 44,349 77,334
Net loss for the year - - - (4,162)
Dividends declared:
Preferred stock - $4.00 per share - - - (88)
Common stock - $.20 per share - - - (1,313)
- ------------------------------------------------------------------------------
Balances at December 31, 1993 2,211 3,281 44,349 71,771
Net earnings for the year - - - 6,778
Dividends declared:
Preferred stock - $4.00 per share - - - (88)
Contributed capital - - 44 -
- ------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1994 $2,211 $3,281 $44,393 $78,461
==============================================================================
</TABLE>
The notes to consolidated financial statements are an integral part of these
statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Carolina Freight Corporation
December 31, 1994, 1993 and 1992
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
- --------------------------------------------------------------------------------
Principles of Consolidation:
The accompanying consolidated financial statements include the accounts of
Carolina Freight Corporation (the Corporation) and its wholly owned
subsidiaries, Carolina Freight Carriers Corporation (CFCC), Red Arrow Freight
Lines, Inc. (Red Arrow), G.I. Trucking Company (G.I.), Cardinal Freight
Carriers, Inc., CaroTrans International, Inc., Carrier Computer Services, Inc.,
The Complete Logistics Company, Innovative Logistics Incorporated, Carolina
Breakdown Services, Inc., Carolina Freight Funding Corporation, Motor Carrier
Insurance, Ltd. (MCI), CaroTrans Canada, Ltd., and Carolina Freight de Mexico,
S.A. de C.V. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Certain amounts for prior years have been reclassified to conform with
statement presentations for 1994. The reclassifications have no effect on
stockholders' equity or net income as previously reported.
- --------------------------------------------------------------------------------
Securitization of Receivables:
In December 1993, the Corporation entered into an agreement to sell, on a
revolving basis, a $60 million ownership interest in a designated pool of its
customer receivables. The pool of receivables eligible for sale is held by a
trust in which the Corporation retains the residual ownership interest. As of
December 31, 1994 and 1993, customer and interline receivables are shown net of
$98,782,000 and $95,786,000 respectively of receivables transferred to the
trust. The Corporations interest in the pool of receivables held by the trust
is included in customer receivables held by trust, net, on the accompanying
1994 and 1993 balance sheets.
The agreement for this revolving sale of receivables expires in December
2000. Investment banking, legal and other costs associated with executing this
transaction of $750,000 are included in other expense, net, on the accompanying
1993 statement of operations.
The Corporation maintains an allowance for doubtful accounts ($5,683,000
in 1994 and $5,182,000 in 1993) based upon the expected collectibility of all
customer and interline receivables, including receivables sold.
The ongoing cost of these programs of $3,937,000 in 1994 and $1,494,000
in 1993 are included in other expense, net, on the accompanying statements of
operations.
- --------------------------------------------------------------------------------
Reinsurance Receivables:
Reinsurance receivables represent amounts due to MCI, the Corporations
wholly-owned captive insurance subsidiary, from United Insurance Company
(United) for reinsurance premiums and amounts advanced to United for payment of
insurance claims.
- --------------------------------------------------------------------------------
<PAGE>
Plant and Equipment:
The cost of revenue equipment does not include the cost of tires, which is
carried as a prepaid expense and amortized over the estimated tire lives.
Depreciation of plant and equipment is computed on the straight-line basis for
financial statement purposes over the following estimated useful lives: revenue
and service equipment (3 to 10 years, 5-15% salvage); structures (15 to 50
years); other equipment (3 to 10 years, 0-10% salvage); and leasehold
improvements (lease term).
- --------------------------------------------------------------------------------
Maintenance and Repairs:
Expenditures for normal maintenance and repairs are expensed, whereas those for
renewals or betterments that affect the nature of an asset or increase its
useful life are capitalized. Upon the retirement of fixed assets, the related
accumulated depreciation is removed from the accounts and any gain or loss is
reflected in the Corporation's statement of earnings with the exception of gains
on trade-ins, which are included in the bases of the new assets.
- --------------------------------------------------------------------------------
Claims and Insurance Accruals:
Claims and insurance accruals reflect the Corporation's estimated cost of
uninsured claims incurred but not paid prior to year-end for cargo loss and
damage, bodily injury and property damage, workers compensation, noncontractual
employees medical expenses, and revenue adjustments. The present value of such
claims is accrued using a risk free treasury rate that averaged 7.7% for 1994
and a discount rate of 7% for 1993. The total undiscounted liability (both
current and long-term) was $67,715,000 as of December 31, 1994, and $73,474,000
as of December 31, 1993.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Carolina Freight Corporation
- --------------------------------------------------------------------------------
Environmental Accruals:
Costs incurred to remediate environmental contamination, caused primarily by
defective underground storage tanks, are recorded when it is probable that a
liability has been incurred and the related amount can be reasonably estimated.
In situations where a single estimate of such costs cannot be developed, it is
the Corporations policy to record its estimated minimum exposure. Losses
resulting from environmental liabilities are reduced by claims for potential
recoveries from third parties when collection of the recoverable amounts is
probable.
- --------------------------------------------------------------------------------
Income Taxes:
The Corporation recognizes income taxes in accordance with Financial Accounting
Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes", which utilizes an asset and liability method
of accounting for income taxes. Under the asset and liability method, deferred
income taxes are recognized for the tax consequences of temporary differences
by applying enacted statutory tax rates to differences between financial
statement carrying amounts and tax bases of existing assets and liabilities.
Under SFAS No. 109, the effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date. The
Company recorded an additional $580,000 deferred tax in 1993 to reflect the
corporate tax rate increase to 35%.
- --------------------------------------------------------------------------------
Post-retirement Benefits Other Than Pensions:
The Corporation recognizes post-retirement benefits in accordance with SFAS No.
106, "Employers Accounting for Post-retirement Benefits Other than Pensions".
Under SFAS No. 106, the Corporation is required to accrue the estimated cost of
post-retirement benefits other than pensions during its employees active
service periods.
- --------------------------------------------------------------------------------
Post-employment Benefits:
Effective January 1, 1994, the Corporation adopted SFAS No. 112, "Employers
Accounting for Post-employment Benefits". Under SFAS No. 112, the Corporation is
required to accrue the estimated cost of post-employment benefits during its
employees' active service periods. Prior to January 1, 1994, the Corporation
expensed the cost of these benefits when paid.
- --------------------------------------------------------------------------------
Insurance Reserves Discount Rate:
Effective January 1, 1994, the Corporation adopted the Securities and Exchange
Commission directive for publicly held corporations that insurance liabilities
be reduced to present values at a "risk free" rate. Prior to January 1, 1994 the
Corporation used a 7% interest rate.
- --------------------------------------------------------------------------------
<PAGE>
Recognition of Revenue:
The Corporation's revenue recognition policy is to recognize revenue on a
percentage-of-completion basis.
- --------------------------------------------------------------------------------
Earnings Per Share:
Earnings per share have been computed based on the weighted average number of
common shares outstanding, which was 6,563,705 in 1994, 6,561,672 in 1993, and
6,561,634 in 1992.
- --------------------------------------------------------------------------------
Statement of Cash Flows:
The Corporation considers all highly liquid investments with a maturity of
three months or less when purchased to be temporary investments.
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES:
As discussed in the Accounting Policies footnote, the Corporation changed its
methods of accounting for post-employment benefits as of January 1, 1994. The
cumulative effect of this change in 1994 is immaterial. The Corporation also
changed the interest rate used to reduce insurance reserves to their present
value to a "risk free" rate effective January 1, 1994. The cumulative effect of
this change on 1994 net earnings is a reduction of $1,222,000. The Corporation
changed its methods of accounting for income taxes, post-retirement benefits
other than pensions and revenue recognition as of January 1, 1992. The
cumulative effect of each of these changes on 1992 net earnings is discussed in
the following footnotes and is summarized as follows (in thousands):
<TABLE>
<S> <C>
Change in accounting for
deferred tax liabilities $12,203
Record liability for post-retirement
benefits, net of related income taxes (570)
Change in method of revenue recognition,
net of related income taxes (1,797)
- --------------------------------------------------------------------------------
$ 9,836
================================================================================
</TABLE>
<PAGE>
INCOME TAXES:
The Corporation adopted SFAS No. 109, "Accounting for Income Taxes", effective
January 1, 1992. The cumulative effect on prior years of this change in
accounting principle increases 1992 net earnings by $12,203,000 or $1.86 per
share, and is reported as part of the cumulative effect of changes in
accounting principles in the accompanying 1992 consolidated statements of
operations.
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
(in thousands) 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Current provision (benefit)
Federal $ 3,887 $ 1,856 $ (276)
State 1,846 589 3
- -------------------------------------------------------------------------------
5,733 2,445 (273)
- -------------------------------------------------------------------------------
Deferred taxes arising from
Accelerated depreciation
and other book/tax
differences for plant
and equipment (2,172) (1,542) 616
Prepaid tires expensed
for tax purposes (293) (18) (137)
Reserves not currently
deductible (1,530) (3,493) (1,905)
Revenue not currently
taxable 115 531 413
Effect of alternative
minimum tax 4,859 839 (1,668)
Effect of increase
in tax rate - 580 -
Other, net 116 (509) (496)
- -------------------------------------------------------------------------------
1,095 (3,612) (3,177)
Investment tax credit-
Amortization - - (262)
- -------------------------------------------------------------------------------
Total provision (benefit) $ 6,828 $(1,167) $(3,712)
===============================================================================
</TABLE>
<PAGE>
The total provision for income taxes varies from the statutory corporate
tax rate for the following reasons:
<TABLE>
<CAPTION>
(in thousands) 1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal tax rate 35.0% (35.0%) (34.0%)
Increase(reduction) in
taxes resulting from:
Increase in tax rate to 35% - 10.9 -
Amortization of investment
tax credit,net of tax basis
reduction impact - - (2.6)
Nondeductible business
expenses 5.2 6.4 1.9
Nontaxable life insurance
(proceeds) costs, net (1.1) (2.9) (1.7)
State income taxes,
net of federal tax benefit 4.4 (3.4) (3.9)
Other items, net 2.5 2.1 2.8
- ------------------------------------------------------------------------------
Actual tax rate 46.0% (21.9%) (37.5%)
==============================================================================
</TABLE>
The tax effect of temporary differences giving rise to the Company's
consolidated deferred tax liability at December 31, 1994 and December 31, 1993
are as follows:
<TABLE>
<CAPTION>
1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Claims and insurance reserves $ 19,481 $ 17,878
Alternative minimum tax
credit carryforward 843 5,702
Allowance for bad debts 2,218 2,010
Accrued vacation payable 5,658 5,049
Deferred compensation costs 1,281 1,921
Other 2,024 215
- -------------------------------------------------------------------------------
Deferred tax assets 31,505 32,775
Deferred tax liabilities
Depreciation and other
differences for plant
and equipment (29,365) (31,192)
Accrued pension costs (6,791) (5,862)
Prepaid tires (5,070) (5,303)
Unearned revenue (4,933) (4,754)
- -------------------------------------------------------------------------------
Deferred tax liabilities (46,159) (47,111)
Net deferred tax liabilities $(14,654) $(14,336)
===============================================================================
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Carolina Freight Corporation
The Company did not record any valuation allowances against deferred
tax assets. In the opinion of management, the reversal of taxable temporary
differences will allow the realization of the deferred tax assets.
In 1992, the Corporation was in an alternative tax position as the
Corporation's alternative minimum tax benefit was less than its regular tax
benefit by $1,668,000. In 1994 and 1993, the Corporation was in a regular tax
position and was able to partially utilize its existing minimum tax credit
carryforward. The cumulative alternative minimum tax in excess of regular tax
of $843,000 at December 31, 1994 is available as a credit in future years when
regular tax exceeds alternative minimum tax.
The Internal Revenue Service (IRS) has substantially completed its
examinations of the Company's federal income tax returns for the three years
ended December 31, 1991, and has raised potential adjustments in several areas.
The IRS is expected to issue a statutory Notice of Deficiency in 1995 for
additional taxes, plus interest, relating to those years. The most significant
issue raised relates to the deductibility of certain pension payments made by
the Company to underfunded multi-employer pension plans, deductions that in
managements opinion have been consistently taken throughout the industry. The
Company disagrees with the IRS on the matter of the pensions and intends to
pursue its judicial remedies as necessary. Full loss of the disputed pension
matter, plus interest costs through December 31, 1994, would result in a charge
to net earnings of approximately $2,500,000 or $.38 per share. In the opinion
of management, adequate provision has been made for all income taxes and
related interest; any liability that may arise for prior periods, as a result
of the proposed IRS adjustments (excluding the final resolution of the pension
issue), will not have a material effect on the Company's consolidated financial
position or its results of operations.
<PAGE>
LONG-TERM DEBT:
Long-term debt at December 31, 1994 and 1993 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1994 1993
- ---------------------------------------------------------------------------------------------------------
Long term Current Long-term Current
Portion Portion Portion Portion
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6.25% Convertible Subordinated Debentures,
Due 2011, issued in April 1986 $49,994 $ - $49,994 $ -
9.4% Note - due $365,000 quarterly through January 1995
with balance of $545,000 due April 1995 - - - 2,370
7.25% to 8.125% Industrial Revenue Bonds due through 1996,
collateralized by certain terminal properties - - 236 294
Industrial Revenue Bonds due through October 2001,
bearing interest at 65% to 88% of prime rate,
collateralized by certain terminal properties 6,449 969 7,418 732
Industrial Revenue Bonds due through October 1998,
bearing interest at 65.6% of prime rate plus 2%,
collateralized by certain terminal properties 528 189 740 188
8% to 10% Notes - due monthly through August 2003,
collateralized by certain terminal properties
and computer equipment 271 66 337 60
Capitalized Computer Leases expiring December 31, 1997
with interest of 6.91% 4,394 1,978 6,372 1,846
Other (primarily borrowings against life insurance
policies bearing interest at 7.40% to 11.75%) 6,641 4 6,079 4
- ---------------------------------------------------------------------------------------------------------
Total $68,277 $3,206 $71,176 $5,494
=========================================================================================================
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Carolina Freight Corporation
The 6.25% Convertible Subordinated Debentures may be converted into common
stock at $47.50 per share. The price of the common stock of the Corporation on
the date of issue was $38. The Corporation may redeem the debentures at a price
of 101.25% declining to 100% at April 15, 1996. FASB 107, "Disclosures about
Fair Value of Financial Instruments" requires that the fair value of the
debentures be disclosed. The debentures had a quoted market value of
$33,371,000 at December 31, 1994, and $42,995,000 at December 31, 1993. At
December 31, 1994 the Corporation had other fixed rate obligations of
$13,354,000. In the opinion of management, based on the borrowing rates
currently available to the Corporation for loans with similar terms and
maturities, the recorded amounts closely approximate fair value.
On March 17, 1994, Carolina Freight Carriers Corporation and Red Arrow
Freight Lines entered into a new $45,000,000 revolving credit agreement with a
group of banks. Under this agreement, which currently provides approximately
$10,000,000 ($15,000,000 at December 31, 1994) of revolving line of credit
availability, $35,000,000 of letters of credit and expires June 30, 1996,
substantially all of their revenue and service equipment, $45.8 million of
their land and structures and the Corporation's customer receivables held by
trust, are pledged as collateral. This agreement and existing agreements
contain restrictions regarding the maintenance of specified debt, tangible net
worth, and cash flow ratios. CFCC paid off the 9.40% note and $456,000 of
certain other debt with amounts borrowed under this agreement. The interest
rate for borrowings under this agreement will be, at the Corporation's option,
the lead banks base rate or another variable rate which fluctuates (in part)
based on changes in certain financial ratios of the Corporation. This agreement
states that the occurrence of a material adverse change in the Corporations
financial condition, as determined by the participating banks, is an event of
default. If an event of default occurs, then the lenders may declare the
outstanding borrowings under the agreement, certain other debt, and all
interest thereon to be due and payable. At December 31, 1994 there was no
indebtedness under the revolving line of credit availability.
At December 31, 1993, Carolina had a loan commitment of $25 million under
an unsecured revolving credit agreement (credit agreement) with a group of
banks. The credit commitment was reduced by $10 million on December 29, 1993.
There was no indebtedness under the credit agreement as of Decem ber 31, 1993.
This agreement expired in March 1994 and was replaced by the $45 million
revolving credit agreement discussed above.
The maximum amount outstanding under the agreement at any month-end, the
average amount outstanding during the year, and the weighted average interest
rates were (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum amount
outstanding at
month-end $12,000 $35,000 $25,500
Average amount
outstanding 3,305 27,592 22,668
Average
interest rate 6.1% 4.8% 4.4%
</TABLE>
<PAGE>
The agreement carries a commitment fee which varies depending on changes
in certain financial ratios. Unused commitment fee was .375% in 1994.
The aggregate annual maturities of long-term debt for each of the five
years ending December 31 are as follows: 1995-$3,206,000; 1996-$3,945,000;
1997-$6,489,000; 1998-$3,754,000; and 1999-$3,489,000.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Carolina Freight Corporation
EMPLOYEE RETIREMENT PLANS:
The Corporation has three pension plans to provide retirement benefits to
employees not covered by collective bargaining agreements.
The following table sets forth the defined benefit plans' funded status at
December 31 (in thousands):
<TABLE>
<CAPTION>
1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value
of benefit obligations -
Vested benefits $ 55,523 $ 51,594
Nonvested benefits 2,342 2,636
Accumulated benefit obligations 57,865 54,230
Effect of projected future
compensation levels 16,263 13,950
Projected benefit obligations 74,128 68,180
Plans assets at fair market value 72,969 73,046
- -------------------------------------------------------------------------------
Plans assets in excess of projected
benefit obligations $ (1,159) $ 4,866
===============================================================================
Consisting of:
Unrecognized net assets at
January 1, 1986 net of
amortization over 13-19 years $ 2,137 $ 2,636
Unrecognized net gain due to
past experience different from
assumptions made 7,381 13,356
Less: Unfunded accrued
pension cost (10,677) (11,126)
- -------------------------------------------------------------------------------
Total $ (1,159) $ 4,866
===============================================================================
</TABLE>
The plans assets consist primarily of corporate stocks, United States
government securities, common trust bond funds and real estate investments. The
plans hold approximately 38,000 shares of the Corporation's common stock. A 7.5%
weighted average discount rate and a 5.5% rate of increase in future payroll
costs were used in determining the actuarial present value of the projected
benefit obligations. The expected long-term rate of return on assets was 7.5%.
<PAGE>
The net periodic pension cost of defined benefit plans include the
following components (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service costs (benefits
earned during the year) $4,226 $4,466 $4,447
Interest cost on projected
benefit obligations 5,073 4,686 4,619
Actual return on
plan assets 1,458 (8,135) (3,921)
Net amortization
and deferral (7,702) 2,225 (2,977)
Net periodic
pension cost 3,055 3,242 2,168
===============================================================================
</TABLE>
An additional benefit plan provides certain death and retirement
benefits for the officers and directors of the Corporation. As of December 31,
1993, the projected and accumulated benefit obligations of the plan were
$2,823,000, of which $2,662,000 represented vested benefits. The plan is not
funded; however, the Corporation has accrued a liability in an amount
approximating the projected benefit obligation. The unrecognized net liability
and unrecognized net gain components of the above are not significant. The
Corporation has purchased insurance on the participants lives (face coverage
amount - $20,240,000) which will effectively be used to fund the payment of plan
benefits. The Corporation is the owner and beneficiary of these policies.
In 1994, the Corporation terminated its Executive Deferred Compensation
Plan agreement with certain directors and officers. Plan benefits were accrued
and paid using the prime rate as the annual return on compensation that had
been deferred. The Corporation is owner and beneficiary of insurance policies
on the participants lives. This insurance will be retained and used to fund the
payment of certain death and retirement benefits as discussed in the preceding
paragraph.
Carolina and Red Arrow contributed $31,842,000 in 1994, $30,810,000 in
1993, and $28,343,000 in 1992, to multi-employer pension plans for employees
covered by collective bargaining agreements.
As discussed in the Summary of Significant Accounting Policies, the
Corporation adopted SFAS No. 106, "Employees Accounting for Post-retirement
Benefits Other than Pensions", effective January 1, 1992. Until July 1, 1993
employees retiring from the Corporation after attaining age 62 who had
rendered at least 12 years of service to the Corporation were entitled to
post-retirement health care and dental benefit coverage until age 65. These
benefits are subject to deductibles and other limitations. This program was
discontinued effective with retirements after July 1, 1993. The accumulated
post-retirement benefit obligation at January 1, 1992 of $920,000 (net of
related income taxes of $350,000) was recognized by the Corporation as a
cumulative effect of change in accounting principle in 1992. This change
decreased 1992 net earnings by $570,000 or $.09 per share.
In determining the present value of the accumulated post-retirement
benefit obligations, the company used a 13% health care cost trend rate for
1994 and a 14% rate for 1993 and 1992 decreasing 1% per year until leveling off
at 5%. A 1% increase in the trend rate would increase the accumulated benefit
obligation as of December 31, 1994,
<PAGE>
1993 and 1992 by approximately 2%. The weighted average discount rate used in
calculating the obligation for 1994, 1993 and 1992 was 7 1/2%
On September 1, 1992 the Corporation offered a Retirement Incentive
Program to eligible employees which provided for enhanced pension benefits and
extended health care, dental coverage and life insurance until age 65. Of the
172 individuals eligible, 112 elected to participate prior to its expiration in
late 1992. The implementation of the Retirement Incentive Program resulted in a
nonrecurring charge of $4,408,000 in 1992, which is comprised of a $3,331,000
increase in the post-retirement benefit obligation and $1,077,000 increase in
the net pension liability. The Corporation's post-retirement benefit obligations
are not funded.
In November of 1992, the Financial Accounting Standards Board issued a
new standard on accounting for postemployment benefits (FASB 112). This
standard requires that the expected costs of these benefits be charged to
expense during the years that the employees render service. The change was
adopted as of January 1, 1994 with an immaterial cumulative effect on the
Corporations reported financial position and results of operations.
CAPITAL STOCK:
The 4% cumulative preferred stock is redeemable by the Corporation, in whole or
in part, at any time at $104 per share plus accrued dividends. There are no
dividends in arrears on the preferred stock. The Corporation has established
four incentive stock option plans for its key personnel. These plans allow for
acceleration of option exercises in the event of a change in control of the
Corporation.
A summary of changes in stock options for the three-year period ended
December 31, 1994 follows:
<TABLE>
<CAPTION>
Price Number
Ranges of Shares
- -------------------------------------------------------------------------------
<S> <C> <C>
Under option at December 31, 1991
(243,915 shares exercisable) 14.50 to 34.38 345,350
Granted 20.00 1,000
Lapsed 14.50 to 19.63 (12,350)
Under option at December 31, 1992
(274,780 shares exercisable) 16.38 to 34.38 334,000
Granted 13.38 to 14.50 314,250
Lapsed 17.31 to 20.00 (65,800)
Cancelled 16.38 to 34.38 (164,400)
Under option at December 31, 1993
(215,300 shares exercisable) 13.38 to 19.63 418,050
Granted 9.13 to 11.25 290,000
Lapsed 11.25 to 19.63 (151,600)
Under option at December 31, 1994
(202,020 shares exercisable) 9.13 to 19.63 556,450
- -------------------------------------------------------------------------------
</TABLE>
At December 31, 1994, 662,838 shares were reserved for issuance under the stock
option plans.
<PAGE>
LEASES, COMMITMENTS AND CONTINGENCIES:
The Corporation leases certain terminals and equipment under operating lease
agreements expiring at various dates through 2009. Aggregate future minimum
rentals payable under these operating leases are as follows (in thousands):
<TABLE>
<S> <C>
1995 $14,458
1996 13,249
1997 11,300
1998 6,258
1999 737
2000-2009 2,359
- --------------------------------------------------------------------------------
Total $48,361
================================================================================
</TABLE>
The Corporation is contingently liable under letters of credit for
$36,577,000 in connection with its insurance programs and industrial revenue
bond terminal financings. As of December 31, 1994, the Corporation has pledged
approximately $9,875,000 of investments ($1,383,000 temporary and $8,492,000
long-term) as collateral under such letter of credit agreements at MCI. The
letters of credit serve to guarantee the payment of insurance claims by
Carolina, G.I., Red Arrow and MCI, which are provided for on their respective
balance sheets.
The Corporation has been named by the Environmental Protection Agency and
by several state environmental agencies as a potentially responsible part at
six federal and state Superfund sites. CFCC's exposure in these matters is
either de minimis or is not expected to be material.
The Corporation is involved in various litigation arising in the normal
course of business. In the opinion of management, the ultimate recovery or
liability, if any, resulting from such matters will not materially affect the
financial position or results of operations of the Corporation.
RECOGNITION OF REVENUE:
The Corporation changed its revenue recognition policy effective January 1,
1992. The cumulative effect of this change in accounting principle created an
after-tax charge of approximately $1,800,000 or $.27 per share in the first
quarter of 1992 and is reported as part of the cumulative effect of changes in
accounting principles in the 1992 consolidated statements of earnings.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Carolina Freight Corporation
SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table presents certain financial information for each quarter
during 1994 and 1993 (in thousands except per share data):
<TABLE>
<CAPTION>
1994
---------------------------------------------------------
First Second Third Fourth Total
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenue $192,630 $263,203 $203,340 $276,767 $935,940
Operating Income (1,922) 18,974 4,545 4,611 26,208
Net earnings (loss) before cumulative
effect of change in accounting principle (2,918) 9,640 1,010 268 8,000
Cumulative effect of change
in accounting principle (1,222) - - - (1,222)
Net earnings (loss) (4,140) 9,640 1,010 268 6,778
=======================================================================================================
Net earnings (loss) per share
before cumulative effect of change
in accounting principle $ (0.44) $ 1.46 $ 0.15 $ 0.04 $ 1.21
Cumulative effect of change
in accounting principle (0.19) - - - (0.19)
Earning (loss) per share (0.63) 1.46 0.15 0.04 1.02
=======================================================================================================
<CAPTION>
1993
---------------------------------------------------------
First Second Third Fourth Total
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating revenue $187,331 $196,773 $198,557 $262,689 $845,350
Operating income 1,357 1,403 1,159 1,119 5,038
Net loss (390) (548) (1,583) (1,641) (4,162)
- -------------------------------------------------------------------------------------------------------
Loss per share $ (0.06) $ (0.09) $ (0.24) $ (0.26) $ (0.65)
- -------------------------------------------------------------------------------------------------------
</TABLE>
The Corporation's fiscal year consists of three quarters of 12 weeks each and a
final quarter of 16 weeks.
Operating results for the full year were impacted by a number of unusual
events. In the first quarter, G.I. Trucking (GITC), the Corporation's West Coast
less-than-truckload (LTL) subsidiary, was negatively impacted by a large earth-
quake in Southern California. Carolina Freight Carriers Corporation (CFCC), the
Corporations less-than-truckload subsidiary covering the Midwest, Northeast and
Southeast, experienced severe winter weather. Both of these factors reduced
revenue and decreased productivity.
During the second quarter, the International Brotherhood of Teamsters
(IBT) imposed a strike on most unionized trucking companies. CFCC and Red Arrow
Freight Lines, Inc., the Company's two unionized subsidiaries, avoided the work
<PAGE>
stoppage by signing an interim agreement with the IBT. Business levels for all
of the Corporation's LTL subsidiaries increased significantly during the strike.
In the fourth quarter, most of the senior management team at CFCC was
replaced. James R. Hertwig, formerly a vice president of the holding company,
was named president of CFCC. As a result of these changes and other
retirements, the Company incurred nonrecurring charges relating to severance
and retirement benefits.
Fourth quarter results were favorably impacted by reductions in overcharge
and discount reserves in our LTL operations due to the positive impact on
post-invoice adjustments as a result of the Negotiated Rates Act of 1994 and
actual claim experience settling more favorably than anticipated in the first
half of the year. In addition, increasing discount rates reduced the level of
self-insurance reserves, therefore lowering insurance expenses in the fourth
quarter. Finally, the Corporation received notice of the preliminary results of
an ongoing Internal Revenue Service audit.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Stockholders
of Carolina Freight Corporation:
We have audited the accompanying consolidated balance sheets of Carolina
Freight Corporation (a North Carolina corporation) and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated statements of
operations, cash flows and stockholders' equity for each of the three years in
the period ended December 31, 1994. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Carolina Freight
Corporation and subsidiaries as of December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally accepted
accounting principles.
As discussed in the notes to the consolidated financial statements,
effective January 1, 1994, the Corporation changed its method of utilizing
interest rates in its discounted insurance liabilities calculation.
Additionally effective January 1, 1992, the Corporation changed its methods of
accounting for revenue recognition, post-retirement benefits other than
pensions, reinsurance of insurance contracts, and income taxes.
Arthur Andersen LLP
Charlotte, North Carolina,
January 31, 1995.
37
EXHIBIT 99.3
Consolidated Financial Statements
WorldWay Corporation
Twenty-Four Weeks ended June 17, 1995 and
June 18, 1994
<PAGE>
WORLDWAY CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
Twelve and Twenty-four Weeks Ended June 17, 1995 and June 18, 1994
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in Thousands, except share data)
Twelve Weeks Ended Twenty-four Weeks Ended
-------------------- -----------------------
June 17, June 18, June 17, June 18,
1995 1994 1995 1994
-------------------- --------------------
<S> <C> <C> <C> <C>
Operating revenue $182,823 $263,203 $374,160 $455,833
-------------------- --------------------
Operating expenses:
Employee compensation 119,370 148,916 241,293 271,607
Purchased transportation 27,529 39,428 54,220 62,068
Fuel and fuel taxes 9,530 11,728 19,686 22,399
Tires, repair parts and other operating supplies 10,369 10,945 20,770 20,576
Depreciation and amortization 7,760 8,080 15,688 16,189
Insurance premiums and claims 5,424 7,351 11,199 12,957
Communications and utilities 2,747 2,906 5,603 5,647
Operating taxes and licenses 2,810 2,877 5,674 5,638
Equipment and building rents 1,661 1,303 2,991 2,535
Gain on disposition of operating assets (1,149) (97) (5,485) (148)
General supplies and expenses 11,781 10,792 22,227 19,313
-------------------- --------------------
Total operating expenses 197,832 244,229 393,866 438,781
-------------------- --------------------
Earnings from operations (15,009) 18,974 (19,706) 17,052
Interest and other expense, net 2,891 2,933 5,550 5,336
-------------------- --------------------
Earnings (Loss) before income taxes (17,900) 16,041 (25,256) 11,716
Income tax (benefit) (6,537) 6,401 (9,047) 4,994
-------------------- --------------------
Net earnings (loss) before cumulative effect of change in
accounting principle (11,363) 9,640 (16,209) 6,722
Cumulative effect of change in accounting principle - - - (1,222)
-------------------- --------------------
Net earnings (loss) ($11,363) $9,640 ($16,209) $5,500
==================== ====================
Earnings (Loss) per share before cumulative
effect of change in accounting principle ($1.73) $1.46 ($2.47) $1.02
Cumulative effect of change in
accounting principle - - - ($0.19)
Earnings (Loss) per share ($1.73) $1.46 ($2.47) $0.83
Average common stock and common stock
equivalent shares outstanding 6,564,710 6,561,672 6,569,466 6,561,672
Cash dividends per common share $0.00 $0.00 $0.00 $0.00
</TABLE>
-2-
<PAGE>
WORLDWAY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
June 17, December 31,
1995 1994
-------------------------
<S> <C> <C>
Assets
- -------
Current assets:
Cash $ 1,837 $4,710
Temporary investments 2,150 5,011
Investments restricted under letter of credit arrangements
(at cost, which approximates market) 1,249 1,383
Customer and interline receivables, net 19,998 16,924
Customer receivables held by trust, net 24,878 38,782
Other receivables, net 17,725 13,260
Reinsurance balances receivable 10,729 12,149
Prepayments -
Tires on equipment in use 12,635 12,869
Other 12,978 6,871
Inventories of operating supplies 2,040 2,882
-----------------------
Total current assets 106,219 114,841
-----------------------
Plant and equipment, at cost:
Revenue and service equipment 251,026 260,378
Land and structures 165,036 180,706
Other equipment 66,408 63,947
Leasehold improvements 2,319 2,048
-----------------------
484,789 507,079
Less - accumulated depreciation and amortization (266,774) (275,145)
-----------------------
Net plant and equipment 218,015 231,934
-----------------------
Investments restricted under letter of credit arrangements
(at cost, which approximates market) 7,675 8,492
Other assets 16,167 15,047
-----------------------
$348,076 $370,314
=======================
</TABLE>
-3-
<PAGE>
WORLDWAY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
June 17, December 31,
1995 1994
-----------------------
<S> <C> <C>
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 35,190 $ 34,525
Accrued wages, salaries and vacation pay 37,289 36,114
Claims and insurance accruals 24,735 31,860
Income taxes
Current (7,978) 1,439
Deferred 0 -
Other payables and accrued expenses 13,177 13,779
Current maturities of long-term debt 3,448 3,206
-----------------------
Total current liabilities 105,861 120,923
-----------------------
Long-term debt:
6 1/4% Convertible Subordinated Debentures, due 2011 49,994 49,994
Other long-term debt 19,669 18,283
-----------------------
Total long-term debt 69,663 68,277
-----------------------
Reserves and Deferred Credits:
Income taxes 17,656 17,779
Other deferred liabilities 8,557 7,813
Insurance claims 34,246 27,176
-----------------------
Total reserves and deferred credits 60,459 52,768
-----------------------
Stockholders' equity:
Preferred stock, $100 par value, 4% cumulative, authorized
25,000 shares, outstanding 22,112 shares 2,211 2,211
Common stock, $.50 par value, authorized 20,000,000
shares, outstanding 6,561,672 in 1995 and 1994 3,281 3,281
Paid-in capital 44,393 44,393
Retained earnings 62,208 78,461
-----------------------
Total stockholders' equity 112,093 128,346
-----------------------
$348,076 $370,314
=======================
</TABLE>
-4-
<PAGE>
WORLDWAY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Twenty-four Weeks Ended June 17, 1995 and June 18, 1994
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in Thousands)
Twenty-four Weeks Ended
-----------------------
June 17, June 18,
1995 1994
--------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) ($16,209) $ 5,500
Noncash items included in income:
Depreciation and amortization 15,688 16,189
Deferred income taxes (123) (5,919)
(Increase) Decrease in customer and interline receivables 10,830 (29,996)
Increase (Decrease) in accounts payable 665 18,552
Increase (Decrease) in claims payable and insurance accruals (54) 7,489
Net increase (decrease) in other working capital items (15,537) 14,965
Other, net (6,141) (4,068)
--------------------
Net cash provided by (used for) operating activities (10,881) 22,712
--------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of plant and equipment:
Revenue and service equipment (10,069) (5,259)
Land and structures (2,079) (1,072)
Other equipment and leasehold improvements (3,429) (1,343)
Proceeds from disposal of plant and equipment 20,389 1,469
--------------------
Net cash used for investing activities 4,812 (6,205)
--------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 1,666 15
Repayment of long-term debt (2,537) (4,112)
Net proceeds from (repayments of) revolving credit agreement 2,500 -
Common stock issued - -
Dividends on common and preferred stock (44) (44)
--------------------
Net cash provided by financing activities 1,585 (4,141)
--------------------
NET INCREASE IN CASH AND TEMPORARY INVESTMENTS (4,484) 12,366
CASH AND TEMPORARY INVESTMENTS AT BEGINNING OF YEAR 9,721 6,502
--------------------
CASH AND TEMPORARY INVESTMENTS AT END OF QUARTER $ 5,237 $ 18,868
====================
</TABLE>
- 5 -
<PAGE>
WORLDWAY CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The accompanying consolidated condensed financial statements contain all
adjustments and eliminations which, in the opinion of management, are necessary
to present fairly the results of operations for the twelve and twenty-four
weeks ended June 17, 1995 and June 18, 1994, the financial position as of June
17, 1995 and December 31, 1994, and the cash flows for the twenty-four weeks
ended June 17, 1995 and June 18, 1994.
During the first quarter of 1994, the Securities and Exchange Commission issued
a new directive to publicly held corporations regarding the discount rates used
on reserves reported in the liabilities section of their balance sheets. This
directive requires that the discount rates used to reduce these obligations to
their present value be stated at a "risk free" rate. The effect of this change
is to reduce the discount rates used in computing the reserves on the
consolidated balance sheet of WorldWay Corporation from 7% to risk free rates.
The effect of this change is shown as a change in accounting principle of
$1,222,000 on the consolidated statement of earnings.
EXHIBIT 99.4
Pro Forma Financial Information
<PAGE>
Arkansas Best Corporation
ARKANSAS BEST CORPORATION AND SUBSIDIARIES
PRO FORMA FINANCIAL INFORMATION
(in thousands, except per share amounts)
On August 14, 1995, Arkansas Best Corporation ("ABC") commenced payment for
all validly tendered shares of WorldWay Corporation ("WorldWay") pursuant to
a tender offer which expired on August 11, 1995. Approximately 91% of
WorldWay's outstanding common shares were tendered. Remaining outstanding
common shares were acquired pursuant to a merger.
The following pro forma condensed consolidated statements of operations for
the year ended December 31, 1994 and the six months ended June 30, 1995 and
the pro forma condensed consolidated balance sheets as of June 30, 1995 are
unaudited and have been prepared on a pro forma basis to give effect to the
acquisition of WorldWay (the "WorldWay Acquisition"). The statement of
operations for the year ended December 31, 1994 also gives effect to the
acquisitions of the Clipper Exxpress Company and two affiliated companies
(the "Clipper Group") and Traveller Enterprises and Commercial Warehouse
Company (the "Traveller Group"). The Clipper Group was purchased effective
September 30, 1994 and the Traveller Group on October 12, 1994. The pro
forma condensed consolidated statements of operations for the year ended
December 31, 1994 and the six months ended June 30, 1995 give effect to the
acquisitions as if they had occurred on January 1, 1994. The pro forma
condensed consolidated balance sheet has been prepared to give effect to the
WorldWay Acquisition as if it had occurred on June 30, 1995.
The pro forma statements do not purport to represent what ABC's results of
operations or financial condition for the indicated periods or date would
actually have been had the acquisitions occurred on the aforementioned dates,
or to project ABC's results of operations for any future periods. The pro
forma adjustments are based upon currently available information and upon
certain assumptions that management believes are reasonable under the
circumstances.
<PAGE>
<TABLE>
ARKANSAS BEST CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<CAPTION>
Pro Forma
Arkansas Best
Corporation
Historical Including Pro Forma Pro Forma
Arkansas Clipper & Historical Adjustments as Adjusted
Best Traveller WorldWay for the for the
Corporation (1) Corporation Acquisition Acquisitions
<S> <C> <C> <C> <C> <C>
Operating revenues $1,098,421 $1,209,054 $ 935,940 $ - $2,144,994
Operating expenses and costs 1,050,306 1,152,858 909,732 (6,461) (3) 2,055,358
(771) (7)
---------- ---------- ---------- ---------- ----------
Operating income 48,115 56,196 26,208 7,232 89,636
Interest expense 6,985 9,715 6,232 5,504 (4) 21,451
Minority interest in subsidiary 3,523 3,523 - - 3,523
Other expenses 4,573 5,656 5,912 1,476 (4) 13,044
Other income (3,605) (3,605) (764) - (4,369)
---------- ---------- ---------- ---------- ----------
Income before income taxes and
cumulative effect of
accounting change 36,639 40,907 14,828 252 55,987
Provision for income taxes 17,932 19,592 6,828 98 (5) 26,518
---------- ---------- ---------- ---------- -----------
Income before cumulative effect
of accounting change $ 18,707 $ 21,315 $ 8,000 $ 154 $ 29,469
========== ========== ========== ========== ==========
Income per common share before
cumulative effect of
accounting change $ 0.74 $ 1.30
========== ==========
Average common shares outstanding 19,352 19,352
========== ==========
<FN>
See notes to pro forma condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ARKANSAS BEST CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Six Months Ended June 30, 1995
<CAPTION>
Historical Pro Forma Pro Forma
Arkansas WorldWay Adjustments as Adjusted
Best Corporation for the for the
Corporation (9) Acquisition Acquisition
<S> <C> <C> <C> <C>
Operating revenues $ 623,301 $ 374,160 $ - $ 997,461
Costs and expenses 602,743 393,866 (3,231) (3) 993,251
(127) (7)
---------- ---------- ---------- ----------
Operating income (loss) 20,558 (19,706) 3,358 4,210
Interest expense 4,649 2,511 2,752 (4) 9,912
Minority interest in subsidiary 1,074 - - 1,074
Other expenses 2,893 3,039 738 (4) 6,670
Other income (2,101) - - (2,101)
---------- ---------- ---------- ----------
Income (loss) before income taxes 14,043 (25,256) (132) (11,345)
Provision for income taxes 7,218 (9,047) (51) (5) (1,880)
---------- ---------- ---------- ----------
Net income (loss) $ 6,825 $ (16,209) $ (81) $ (9,465)
========== ========== ========== ==========
Income (loss) per common share $ .24 $ (0.59)
========== ==========
Average common shares outstanding 19,541 19,541
========== ==========
<FN>
See notes to pro forma condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ARKANSAS BEST CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 1995
<CAPTION>
Historical Pro Forma Pro Forma
Arkansas Adjustments as Adjusted
Best WorldWay for the for the
Corporation Corporation Acquisition Acquisition
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 5,414 $ 5,236 $ (3,329) (8) $ 7,251
Receivables 132,496 73,330 - 205,826
Inventories 37,150 2,040 - 39,190
Prepaid expenses 11,316 25,613 (12,635) (2) 24,294
---------- ---------- ---------- ----------
Total current assets 186,376 106,219 (16,034) (2) 276,561
Property, plant and
equipment, net 236,301 218,015 (29,114) (2) 398,586
(26,616) (6)
Goodwill, net 149,677 - - 149,677
Other assets 14,657 23,842 (764) (2) 41,134
3,399 (8)
Net assets held for sale - - 26,616 (6) 26,616
---------- ---------- ---------- ----------
Total assets $ 587,011 $ 348,076 $ (42,513) $ 892,574
========== ========== ========== ==========
<PAGE>
<CAPTION>
Historical Pro Forma Pro Forma
Arkansas Adjustments as Adjusted
Best WorldWay for the for the
Corporation Corporation Acquisition Acquisition
<S> <C> <C> <C> <C>
Current Liabilities:
Accounts and bank drafts payable $ 61,783 $ 35,190 10,855 (2) $ 107,828
Accrued expenses 89,888 75,201 8,552 (2) 207,887
34,246 (8)
Federal and state income taxes 3,004 (7,978) (887) (2) (5,861)
Deferred income taxes 4,159 - - 4,159
Current portion of
long-term debt 59,463 3,448 1,807 (2) 64,718
---------- ---------- ---------- ----------
Total current liabilities 218,297 105,861 54,573 378,731
Long-term debt 79,741 69,663 72,178 (2) 218,177
(3,405) (2)
Other liabilities 6,342 42,803 (3,000) (2) 11,899
(34,246) (8)
Deferred income taxes 25,919 17,656 (18,731) (2) 24,844
Minority interest 35,822 - 2,211 (2) 38,033
Shareholders' equity:
Preferred stock 15 2,211 (2,211) (2) 15
Common stock 195 3,281 (3,281) (2) 195
Additional paid-in capital 207,636 44,393 (44,393) (2) 207,636
Retained earnings 28,415 62,208 (62,208) (2) 28,415
Other (15,371) - - (15,371)
---------- ---------- ---------- ----------
Total shareholders' equity 220,890 112,093 (112,093) 220,890
---------- ---------- ---------- ----------
Total liabilities and
shareholders' equity $ 587,011 $ 348,076 $ (42,513) $ 892,574
========== ========== ========== ==========
<FN>
See notes to pro forma condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
[1] The acquisition of the Clipper and Traveller Groups were effective as of
September 30, 1994 and October 12, 1994, respectively. Purchase
accounting adjustments related to these acquisitions are immaterial to
the statement of operations and therefore have not been separately
disclosed.
[2] The total purchase price of WorldWay was $72.2 million (6,561,672 shares
at $11 per common share). Reflects the allocation of the purchase price
($72.2 million) and related debt to fund the acquisition.
The preliminary allocation of the purchase cost to the historical assets
and liabilities of WorldWay is as follows:
Net assets at historical amounts $ 112,093
Prepaid expenses (12,635) a)
Property, plant and equipment (29,114) b)
Other assets (764) c)
Accounts payable (10,855) d)
Federal and state income taxes 887 e)
Accrued expenses (8,552) f)
Debt 1,598 g)
Other liabilities 3,000 h)
Deferred taxes 18,731 i)
Minority interest (2,211) j)
--------
Total Purchase Price $ 72,178
========
a) Represents write-off of prepaid tires to conform to the accounting
policies used by ABC, whereby tires on revenue equipment are included in
the cost of revenue equipment.
b) Reflects preliminary write-up of property, plant and equipment of
$24,668,000 to estimated fair value. Fair values are based on
preliminary estimates of the fair value of acquired assets. Finalization
of the valuation may result in a final allocation amount which is
different from that shown.
Also, reflects a proportionate reduction of property, plant and equipment
by $53,782,000 representing the excess of the fair value of assets
acquired less liabilities assumed and costs incurred over the purchase
price (negative goodwill).
c) Represents write-off of debt discount associated with 6.25% WorldWay
Convertible Subordinated Debentures.
d) Represents accruals of various liabilities including payments of
severance pay to terminated WorldWay employees, accruals for payments due
under employment contracts, Director Fee continuation agreements, and
fees to ABC's financial and business advisors in connection with the
acquisition.
e) Represents effect of pro forma adjustments on current income taxes
payable.
<PAGE>
f) Represents adjustments of insurance claims reserves to reflect the
undiscounted liability to conform to the accounting policy used by the
ABC.
g) Reflects adjustment of debt to fair values based on current rates;
current portion increases $1,807,000 while non-current decreases
$3,405,000.
h) Represents adjustment of the net pension liability based on the
difference between plan assets of the WorldWay defined benefit pension
plans and the estimated projected benefit obligation.
i) Reflects adjustment of deferred income tax liabilities based on the
difference between the tax basis and purchase accounting basis of assets
and liabilities.
j) Represents reclassification of WorldWay's preferred stock to minority
interest.
[3] Represents adjustment of depreciation expense to reflect purchase
accounting basis of property, plant and equipment.
[4] Reflects interest on the funds borrowed to finance the WorldWay
Acquisition; $72.2 million at an assumed rate of 7.625% and amortization
of financing costs over the life of the Credit Agreement. A one/eighth
of one percent fluctuation in the interest rate would change interest
expense $90,000 annually.
[5] Reflects adjustment of income tax expense at the marginal tax rate of 38%
for the effect of the pro forma adjustments.
[6] Represents reclassification of property, plant and equipment, which as a
result of the acquisition will not be used in ongoing operations, to net
ssets held for sale.
[7] Represents the impact on the statement of operations for the change in
accounting principle to ABC's method of reporting claim liabilities on an
undiscounted basis.
[8] Represents reclassification of assets and liabilities to conform to ABC's
method of reporting.
[9] The historical statement of operations of WorldWay reflects gains on
sales of property, plant and equipment of $5.5 million for the 1995
period which ended on June 17, 1995. Gains on sales of property, plant
and equipment were not significant for the year ended December 31, 1994.
