<PAGE>
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, 1995
--------------------
[ ] 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)
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)
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 May 1, 1995
--------------------------------- --------------------------------
Common Stock, $.01 par value 19,513,708 shares
<PAGE>
ARKANSAS BEST CORPORATION
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -- March 31, 1995
and December 31, 1994 3
Consolidated Statements of Operations -- For the
Three Months Ended March 31, 1995 and 1994 5
Consolidated Statements of Cash Flows --
For the Three Months Ended
March 31, 1995 and 1994 7
Notes to Consolidated Financial Statements --
March 31, 1995 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
EXHIBITS
Exhibit 11. Statement Re: Computation of Earnings Per Share 22
<PAGE>
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
ARKANSAS BEST CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31 December 31
1995 1994
(unaudited) (note)
($ thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8,796 $ 3,458
Trade receivables, less allowances for
doubtful accounts (1995 -- $2,848,000;
1994 -- $2,825,000 128,118 136,144
Inventories -- Note C 35,292 32,463
Prepaid expenses 12,043 13,734
--------- ---------
TOTAL CURRENT ASSETS 184,249 185,799
PROPERTY, PLANT AND EQUIPMENT
Land and structures 127,598 110,424
Revenue equipment 201,968 200,250
Manufacturing equipment 7,747 7,467
Service, office and other equipment 44,957 40,516
Leasehold improvements 9,447 9,421
Construction in progress - 13,939
--------- ---------
391,717 382,017
Less allowances for depreciation
and amortization (173,449) (166,436)
--------- ---------
218,268 215,581
OTHER ASSETS 14,224 15,705
GOODWILL, less amortization (1995 --
$20,970,000; 1994 --$19,794,000) 150,844 151,960
--------- ---------
$ 567,585 $ 569,045
========= =========
</TABLE>
<PAGE>
<TABLE>
ARKANSAS BEST CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31 December 31
1995 1994
(unaudited) (note)
($ thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft $ - $ 5,989
Bank drafts payable 10,915 10,779
Trade accounts payable 50,294 49,368
Accrued expenses 86,667 82,157
Federal and state income taxes 6,301 5,786
Deferred federal income taxes 4,159 4,159
Current portion of long-term debt 64,472 65,161
--------- ---------
TOTAL CURRENT LIABILITIES 222,808 223,399
LONG-TERM DEBT, less current portion 57,016 59,295
OTHER LIABILITIES 5,979 5,915
DEFERRED FEDERAL INCOME TAXES 25,958 28,842
MINORITY INTEREST 35,348 34,989
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
19,513,708 shares 195 195
Additional paid-in capital 207,636 207,636
Predecessor basis adjustment (15,371) (15,371)
Retained earnings 28,001 24,130
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 220,476 216,605
CONTINGENCIES -- Note F
--------- ---------
$ 567,585 $ 569,045
========= =========
<FN>
<F1>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended
March 31
1995 1994
(unaudited)
($ thousands,except
per share data)
<S> <C> <C>
OPERATING REVENUES
Carrier operations $ 244,477 $ 234,326
Forwarding operations 28,768 -
Tire operations 33,214 29,405
Service and other 4,748 1,250
--------- ---------
311,207 264,981
OPERATING EXPENSES AND
COSTS -Note E
Carrier operations 233,123 223,263
Forwarding operations 28,143 -
Tire operations 31,497 27,581
Service and other 5,090 1,519
--------- ---------
297,853 252,363
--------- ---------
OPERATING INCOME 13,354 12,618
OTHER INCOME
Gain on asset sales 313 318
Other 157 148
--------- ---------
470 466
OTHER EXPENSES
Interest 2,128 1,344
Other 1,449 1,014
Minority interest in subsidiary 489 490
--------- ---------
4,066 2,848
--------- ---------
INCOME BEFORE INCOME TAXES 9,758 10,236
FEDERAL AND STATE INCOME
TAXES (CREDIT) - Note D
Current 7,500 5,843
Deferred (2,884) (1,182)
--------- ---------
4,616 4,661
--------- ---------
NET INCOME $ 5,142 $ 5,575
========= =========
<PAGE>
<CAPTION>
ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
Three Months Ended
March 31
1995 1994
(unaudited)
($ thousands, except
per share data)
<S> <C> <C>
EARNINGS PER COMMON SHARE:
NET INCOME $ 0.21 $ 0.23
========= =========
AVERAGE COMMON SHARES OUTSTANDING: 19,566,404 19,339,389
========== ==========
CASH DIVIDENDS PAID PER COMMON SHARE $ 0.01 $ 0.01
========= =========
<FN>
<F1>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended
March 31
1995 1994
(unaudited)
($ thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 5,142 $ 5,575
Adjustments to reconcile net income
to net cash provided
by operating activities:
Depreciation and amortization 7,792 6,658
Amortization of intangibles 1,176 779
Other amortization 161 111
Provision for losses on
accounts receivable 597 770
Provision for deferred
income taxes (2,884) (1,182)
Gain on asset sales (313) (318)
Gain on issuance of
subsidiary stock (20) (45)
Minority interest in
subsidiary 489 490
Changes in operating
assets and liabilities:
Accounts receivable 7,429 (6,865)
Inventories and
prepaid expenses (1,138) (987)
Other assets 1,260 404
Accounts payable, bank
drafts payable, taxes
payable, accrued expenses
and other liabilities 6,151 17,229
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 25,842 22,619
INVESTING ACTIVITIES
Purchases of property,
plant and equipment,
less capitalized leases (10,565) (8,387)
Proceeds from asset sales 2,112 1,635
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (8,453) (6,752)
<PAGE>
<CAPTION>
ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Three Months Ended
March 31
1995 1994
(unaudited)
($ thousands)
<S> <C> <C>
FINANCING ACTIVITIES
Proceeds from commercial paper
agreement $ - $ 1,000
Borrowings under revolving
credit facilities 5,000 2,000
Principal payments under
term loan facility (500) -
Payments under revolving
credit facilities (6,000) (2,000)
Principal payments on
other long-term debt (3,182) (6,777)
Dividends paid to minority
shareholders of subsidiary (110) (109)
Dividends paid (1,270) (1,267)
Net decrease
in cash overdrafts (5,989) -
--------- ---------
NET CASH USED BY
FINANCING ACTIVITIES (12,051) (7,153)
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 5,338 8,714
Cash and cash equivalents
at beginning of period 3,458 -
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,796 $ 8,714
========= =========
<FN>
<F1>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1995
NOTE A -- ORGANIZATION
Arkansas Best Corporation (the "Company") is a diversified holding company
engaged through its subsidiaries primarily in motor carrier operations,
freight forwarding operations and truck tire retreading and sales. Principal
subsidiaries owned are ABF Freight System, Inc., ("ABF"), Treadco, Inc.
("TREADCO"), and, effective September 30, 1994, Clipper Exxpress Company
("Clipper").
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, 1995, are not necessarily indicative of the
results that may be expected for the year ending December 31, 1995. 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, 1994.
NOTE C -- INVENTORIES
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
($ thousands)
<S> <C> <C>
Finished goods $ 26,878 $ 22,764
Materials 6,200 7,487
Repair parts, supplies and other 2,214 2,212
-------- --------
$ 35,292 $ 32,463
======== ========
</TABLE>
<PAGE>
NOTE D -- FEDERAL AND STATE INCOME TAXES
<TABLE>
<CAPTION>
Three Months Ended
March 31
1995 1994
($ thousands)
<S> <C> <C>
Income tax at regular rates $ 3,415 $ 3,583
Percent 35.0% 35.0%
State taxes less federal benefits 685 596
Percent 7.0% 5.8%
Amortization of nondeductible goodwill 266 265
Percent 2.7% 2.6%
Minority interest 166 167
Percent 1.7% 1.6%
Other items 84 50
Percent 0.9% 0.5%
------- -------
Income tax expense $ 4,616 $ 4,661
Percent 47.3% 45.5%
======= =======
</TABLE>
<PAGE>
NOTE E -- OPERATING EXPENSES AND COSTS
<TABLE>
<CAPTION>
Three Months Ended
March 31
1995 1994
(unaudited)
($ thousands)
<S> <C> <C>
Carrier Operations:
Salaries and wages $165,175 $155,442
Supplies and expenses 26,372 24,502
Operating taxes and licenses 10,335 9,238
Insurance 4,485 4,368
Communications and utilities 5,802 5,726
Depreciation and
amortization 6,393 5,889
Rents and purchased transportation 13,615 16,762
Other 946 1,336
-------- --------
233,123 223,263
Forwarding Operations:
Cost of services 24,488 -
Selling, administrative and
general 3,655 -
-------- --------
28,143 -
Tire Operations:
Cost of sales 24,781 21,548
Selling, administrative and
general 6,716 6,033
-------- --------
31,497 27,581
Service and Other 5,090 1,519
-------- --------
$297,853 $252,363
======== ========
</TABLE>
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
generally maintains liability insurance against risks arising out of the
normal course of its business, subject to certain self-insured retention
limits.
ABF stores some fuel for its tractors and trucks in 98 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
<PAGE>
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 $250,000 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.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The Company is engaged, through its motor carrier subsidiaries, in LTL
shipments of general commodities. The Company is also engaged through its
46%-owned subsidiary, Treadco, Inc., in truck tire retreading and new truck
tire sales and, through its freight forwarding subsidiaries, in intermodal
marketing and freight logistics services.
The Company owns approximately 46% of Treadco, whose shares are traded on
the Nasdaq Stock Exchange. Treadco is consolidated with the Company for
financial reporting purposes as a result of its control of Treadco by reason
of its stock ownership, board representation and provision of management
services. The ownership interests of the other stockholders are reflected as
minority interest.
On September 30, 1994, the Company purchased all the outstanding stock of
Clipper Exxpress Company ("Clipper") and two affiliated companies
collectively (the "Clipper Group"). Beginning October 1, 1994, the
operations of the Clipper Group are presented in the forwarding operations
segment.
On October 12, 1994, the Company issued 310,191 shares of common stock for
all the outstanding stock of Traveller Enterprises and subsidiaries and
Commercial Warehouse Company, collectively (the "Traveller Group").
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,
which appear 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
1995 1994
($ thousands)
<S> <C> <C>
OPERATING REVENUES
Carrier operations $244,477 $234,326
Forwarding operations 28,768 -
Tire operations 33,214 29,405
Other 4,748 1,250
-------- --------
$311,207 $264,981
======== ========
OPERATING EXPENSES AND COSTS
CARRIER OPERATIONS
Salaries and wages $165,175 $155,442
Supplies and expenses 26,372 24,502
Operating taxes and licenses 10,335 9,238
Insurance 4,485 4,368
Communications and utilities 5,802 5,726
Depreciation and amortization 6,393 5,889
Rents and purchased transportation 13,615 16,762
Other 946 1,336
Other non-operating (net) 319 179
-------- --------
233,442 223,442
FORWARDING OPERATIONS
Cost of services 24,488 -
Selling, administrative
and general 3,655 -
Other non-operating (net) 426 -
-------- --------
28,569 -
TIRE OPERATIONS
Cost of sales 24,781 21,548
Selling, administrative
and general 6,716 6,033
Other non-operating (net) 125 197
-------- --------
31,622 27,778
SERVICE AND OTHER 5,199 1,691
-------- --------
$298,832 $252,911
======== ========
<PAGE>
<CAPTION>
Three Months Ended
March 31
1995 1994
($ thousands)
<S> <C> <C>
OPERATING PROFIT (LOSS)
Carrier operations $ 11,035 $ 10,884
Forwarding operations 199 -
Tire operations 1,592 1,627
Other (451) (441)
-------- --------
TOTAL OPERATING PROFIT 12,375 12,070
MINORITY INTEREST 489 490
INTEREST EXPENSE 2,128 1,344
-------- --------
INCOME BEFORE INCOME
TAXES $ 9,758 $ 10,236
======== ========
</TABLE>
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 Interstate Commerce Commission.
<TABLE>
<CAPTION>
Three Months Ended
March 31
1995 1994
<S> <C> <C>
CARRIER OPERATIONS
Salaries and wages 67.6% 66.3%
Supplies and expenses 10.8 10.5
Operating taxes and licenses 4.2 3.9
Insurance 1.8 1.9
Communications and utilities 2.4 2.4
Depreciation and amortization 2.6 2.5
Rents and purchased transportation 5.6 7.2
Other 0.4 0.6
Other non-operating (net) 0.1 0.1
---- ----
Total Carrier Operations 95.5% 95.4%
==== ====
FORWARDING OPERATIONS
Cost of sales 85.1% -
Selling, administrative
and general 12.7 -
Other non-operating (net) 1.5 -
---- ----
Total Forwarding Operations 99.3% -
==== ====
TIRE OPERATIONS
Cost of sales 74.6% 73.3%
Selling, administrative
and general 20.2 20.5
Other non-operating (net) 0.4 0.7
---- ----
Total Tire Operations 95.2% 94.5%
==== ====
</TABLE>
<PAGE>
Results of Operations
Three Months Ended March 31, 1995 as Compared with Three Months Ended
March 31, 1994
Consolidated revenues of the Company for the three months ended March 31,
1995 were $311.2 million compared to $265.0 million for the first three
months of 1994. Operating profit for the Company was $12.4 million for the
three months ended March 31, 1995 compared to operating profit of $12.1
million for the first three months of 1994. Net income for the three months
ended March 31, 1995 was $5.1 million, or $.21 per common share, compared to
net income of $5.6 million, or $.23 per common share for the first three
months of 1994. Earnings per common share for the three months ended March
31, 1995 and 1994 give consideration to preferred stock dividends of $1.1
million. Average common shares outstanding for the three months ended
March 31, 1995 were 19.6 million shares compared to 19.3 million shares for
the first three months of 1994. Outstanding shares for the three months
ended March 31, 1995 and 1994 do not assume conversion of preferred stock to
common shares, because conversion would be anti-dilutive for these periods.
Motor Carrier Operations Segment. Revenues from the carrier operations
segment for the three months ended March 31, 1995 were $244.5 million,
compared to $234.3 million for the first three months of 1994. ABF Freight
System, Inc. ("ABF"), the Company's largest subsidiary, accounted for 98% of
the carrier operations segment revenues. For the three months ended
March 31, 1995, ABF's total tonnage increased 2.1%, consisting of a 3.0%
increase in less-than-truckload ("LTL") tonnage and a 0.9% decrease in
truckload tonnage compared to the first three months of 1994. ABF's tonnage
levels during the first three months of 1995 were negatively affected by a
soft economy, while March 1994 was favorably impacted by a pre-strike surge
in business. For the three months ended March 31, 1995, ABF's revenue per
hundredweight increased 2.4% over the first three months of 1994. Effective
January 1, 1995, ABF implemented a general freight rate increase of 4%. The
diminished effect is primarily 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 increased
to 95.5% for the three months ended March 31, 1995 from 95.4% during the
first three months of 1994. Salaries and wages expense as a percent of
revenues increased to 67.6% for the three months ended March 31,1995 compared
to 66.3% for the first three months of 1994, resulting primarily from
contractual wage increases which went into effect in April 1994 under the new
collective bargaining agreement. Under the new agreement, employee wages and
benefits will increase an average of 3.3% annually effective April 1, 1995,
3.8% on April 1, 1996 and 3.9% on April 1, 1997. Supplies and expenses as a
percent of revenues increased to 10.8% for the three months ended March 31,
1995 from 10.5% for the first three months of 1994 as fixed costs were not
covered by revenue growth. Operating taxes and licenses as a percent of
revenues increased to 4.2% for the three months ended March 31, 1995 from
3.9% for the first three months of 1994 resulting primarily from an increase
in fuel taxes. Rents and purchased transportation expense as a percent of
revenues decreased to 5.6% for the three months ended March 31, 1995 from
7.2% for the first three months of 1994 resulting primarily from a reduction
in the utilization of alternate modes of outside transportation.
<PAGE>
Forwarding Operations Segment. Effective September 30,1994, with the purchase
of the Clipper Group, the Company began reporting a new business segment,
forwarding operations. The Company's consolidated financial statements for
the three months ended March 31, 1995 include only current year financial
information for the forwarding operations segment and therefore, comparisons
of results of operations are not presented.
Tire Operations Segment. Treadco's revenues for the three months ended
March 31, 1995 increased 13.0% to $33.2 million from $29.4 million for the
first three months of 1994. For the three months ended March 31, 1995, "same
store" sales accounted for all of the increase from the three months ended
March 31, 1994. "Same store" sales include both production locations and
satellite sales locations that have been in existence for the three months
ended March 31, 1995 and 1994. "Same store" sales increased primarily as a
result of a higher demand for both new replacement and retreaded truck tires
during the period and an increase in market share in the areas served.
Revenues from retreading for the three months ended March 31, 1995 increased
6.9% to $17.7 million from $16.6 million for the first three months of 1994.
Revenues from new tire sales increased 20.8% to $15.5 million for the three
months ended March 31, 1995 from $12.8 million for the first three months of
1994.
In approximately one year, the first group of Treadco's existing Bandag, Inc.
franchise agreements will expire. Of Treadco's 26 Bandag franchise
agreements, seven expire in June 1996, one in August 1996, eight in the
summer of 1997 and the remaining ten in the summer of 1998. In the event the
first group of franchises are not renewed, Treadco believes that while short-
term operating inefficiencies might occur, it would be able to meet its
production needs. However, if the franchises are not renewed, Treadco
believes there could be a disruption in its relationship with some
customers because of Bandag's national marketing presence. Treadco's
margins continue to be squeezed primarily as a result of Bandag's three
tread rubber price increases which totaled 9.6% since the first quarter
of 1994. So far Treadco has been unsuccessful in fully passing along these
increased costs. Also during the same period, Treadco has seen increased
competition as Bandag has granted additional franchises in some locations
currently served by Treadco. Although Treadco believes Bandag is displeased
with Treadco's exploring alternative retreading processes, Treadco believes
it is in compliance with the terms of each franchise agreement and that
there is no existing cause for termination of any franchise agreement.
Tire operations segment operating expenses as a percent of revenues were
95.2% for the three months ended March 31, 1995 compared to 94.5% for the
first three months of 1994. Cost of sales for the tire operations segment as
a percent of revenues increased to 74.6% for the three months ended March 31,
1995 from 73.3% for the first three months of 1994, resulting primarily from
Bandag price increases on tread rubber, which Treadco has been unsuccessful,
so far, in fully passing along to its customers. Selling, administrative and
general expenses for the tire operations segment decreased to 20.2% for the
three months ended March 31, 1995 from 20.5% for the first three months of
1994. The decrease resulted primarily from the increase in sales and the
fact that a portion of selling, administrative and general expenses are fixed
costs.
<PAGE>
Interest. Interest expense was $2.1 million for the three months ended
March 31, 1995 compared to $1.3 million during 1994 as a result of increased
levels of debt outstanding. The increase in long-term debt consisted
primarily of debt incurred in the acquisition of the Clipper Group and a term
loan used to finance construction of the Company's corporate office building
which was completed in 1995.
Income Taxes. The difference between the effective tax rate for the three
months ended March 31, 1995 and the federal statutory rate resulted primarily
from state income taxes, amortization of nondeductible goodwill, minority
interest, and other nondeductible expenses (see Note D to the unaudited
consolidated financial statements).
Liquidity and Capital Resources
The Company and certain banks are parties to a Credit Agreement with Societe
Generale, as Agent and NationsBank of Texas as Co-Agent (the "Credit
Agreement") which provides funds available under a three-year Revolving
Credit Facility of $150 million, including $40 million for letters of
credit. There were no borrowings outstanding under the Revolving Credit
Facility and approximately $32.7 million of letters of credit outstanding at
March 31, 1995. The Revolving Credit Facility is payable on June 30, 1998.
Outstanding revolving credit advances may not exceed a borrowing base
calculated using the Company's revenue equipment, real property, the Treadco
common stock owned by the Company, eligible receivables and other eligible
assets. At March 31, 1995, the borrowing base was $128.2 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 3/4%.
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, 1995, 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 receivables (excluding receivables sold under the
receivables purchase agreement), revenue equipment, real property and common
stock included in the borrowing base (subject to certain exceptions).
The Company has outstanding 1,495,000 shares of Preferred Stock which is
convertible at the option of the holder into Common Stock at the rate of
2.5397 shares of Common Stock for each share of Preferred Stock. Annual
dividends are $2.875 and are cumulative. The Preferred Stock is redeemable
at the Company's option on or after February 15, 1996 at $52.0125 per share
plus accumulated unpaid dividends, and is exchangeable at the option of the
Company for the Company's 5 3/4% Convertible Subordinated Debentures due
February 15, 2018 at a rate of $50 principal amount of debentures for each
share of Preferred Stock. The holders of the Preferred Stock have no voting
rights unless dividends are in arrears six quarters or more, at which time
the holders have the right to elect two directors of the Company until all
dividends have been paid.
In March, 1994, ABF entered into a receivables purchase agreement which
allows ABF to sell an interest of up to $55 million in a pool of receivables.
At March 31, 1995, ABF had $40 million of receivables financed through this
facility.
<PAGE>
Treadco is a party to a revolving credit facility with Societe Generale (the
"Treadco Credit Agreement") providing for borrowings of up to the lesser of
$12 million or the applicable borrowing base. At March 31, 1995, the
borrowing base was $26.4 million. Borrowings under the Treadco Credit
Agreement are collateralized by accounts receivable and inventory.
Borrowings under the agreement bear interest, at Treadco's option, at 3/4%
above the bank's LIBOR rate, or at the higher of the bank's prime rate or
the "federal funds rate" plus 1/2%. At March 31, 1995, the interest rate
was 9%. At March 31, 1995, Treadco had $2 million outstanding under the
Treadco Credit Agreement. Treadco pays a commitment fee of 3/8% on the
unused amount under the Treadco Credit Agreement.
The Treadco Credit Agreement contains various covenants which limit, among
other things, dividends, disposition of receivables, indebtedness and
investments, as well as requiring Treadco to meet certain financial tests
which have been met. Under the Treadco Credit Agreement, Treadco's assets
are subject to pledge and, therefore, are available for use only by that
subsidiary.
On September 30, 1994, the Company paid an initial payment of $54 million to
the Clipper Group shareholders from cash on hand and funds provided under its
existing lines of credit. The final $6.8 million payment (subject to certain
closing audit and other contractual adjustments) which is due May 15, 1995
will be funded from cash and/or funds provided under its existing lines of
credit.
On October 12, 1994, the Company issued 310,191 shares of common stock for
all of the outstanding stock of the Traveller Group. The final number of
shares that will be issued in conjunction with this transaction are subject
to certain closing audit adjustments.
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. Forwarding operations are similar to the
motor carrier segment with revenues being weaker in the first quarter and
stronger during the months of September and October. Treadco's operations
are somewhat seasonal with the last six months of the calendar year
generally having the highest levels of sales.
<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 generally 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 11, 1995 s/Donald L. Neal
----------------- ------------------------------------
Donald L. Neal - Senior Vice
President - Chief Financial Officer,
and Principal Accounting Officer
<PAGE>
FORM 10-Q
LIST OF EXHIBITS
ARKANSAS BEST CORPORATION
The following exhibit is filed with this report.
Exhibit
No. Page
11 Statement Re: Computation of Earnings per Share
<PAGE>
EXHIBIT 11
<PAGE>
EXHIBIT 11
<TABLE>
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
ARKANSAS BEST CORPORATION
<CAPTION>
Three Months Ended
March 31
1995 1994
(Thousands, except per
share data)
<S> <C> <C>
PRIMARY:
Average shares
outstanding 19,513,708 19,195,794
Net effect of dilutive
stock options --
Based on the treasury
stock method using
average market price 52,696 143,595
---------- ----------
Average common shares
outstanding 19,566,404 19,339,389
========== ==========
Net income $ 5,142 $ 5,575
Less: Preferred stock dividend 1,075 1,075
---------- ----------
Net income available
for common $ 4,067 $ 4,500
========== ==========
Per common and common
equivalent share:
Income per common share $ 0.21 $ 0.23
========== ==========
<FN>
<F1>
Fully-diluted earnings per common share are not presented, as such
calculations would be anti-dilutive.
</FN>
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ARKANSAS
BEST CORPORATION FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000894405
<NAME> ARKANSAS BEST CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 8,796
<SECURITIES> 0
<RECEIVABLES> 130,966
<ALLOWANCES> 2,848
<INVENTORY> 35,292
<CURRENT-ASSETS> 184,249
<PP&E> 391,717
<DEPRECIATION> 173,449
<TOTAL-ASSETS> 567,585
<CURRENT-LIABILITIES> 222,808
<BONDS> 57,016
<COMMON> 195
0
15
<OTHER-SE> 220,266
<TOTAL-LIABILITY-AND-EQUITY> 567,585
<SALES> 33,214
<TOTAL-REVENUES> 311,207
<CGS> 31,497
<TOTAL-COSTS> 297,853
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 597
<INTEREST-EXPENSE> 2,128
<INCOME-PRETAX> 9,758
<INCOME-TAX> 4,616
<INCOME-CONTINUING> 5,142
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,142
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
<PAGE>
</TABLE>
