<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 June 30, 1996
-----------------
[ ] 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 August 1, 1996
--------------------------------- --------------------------------
Common Stock, $.01 par value 19,508,620 shares
<PAGE>
ARKANSAS BEST CORPORATION
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets --
June 30, 1996 and December 31, 1995 3
Consolidated Statements of Operations --
For the Three and Six Months
Ended June 30, 1996 and 1995 5
Consolidated Statements of Cash Flows --
For the Six Months Ended June 30, 1996 and 1995 7
Notes to Consolidated Financial Statements --
June 30, 1996 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 26
Item 2. Changes in Securities 26
Item 3. Defaults Upon Senior Securities 26
Item 4. Submission of Matters to a Vote of Security Holders 26
Item 5. Other Information 26
Item 6. Exhibits and Reports on Form 8-K 26
SIGNATURES 27
EXHIBITS 28
Exhibit 11. Statement Re: Computation of Earnings Per Share
<PAGE>
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
ARKANSAS BEST CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30 December 31
1996 1995
(unaudited) (note)
($ thousands)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 596 $ 16,945
Trade receivables, less allowances for
doubtful accounts (1996 -- $12,438,000;
1995 -- $19,403,000) 202,384 205,196
Inventories -- Note C 33,622 36,850
Prepaid expenses 16,383 13,927
Federal and state income taxes 11,454 17,489
Deferred federal income taxes 32,080 32,080
--------- ---------
TOTAL CURRENT ASSETS 296,519 322,487
PROPERTY, PLANT AND EQUIPMENT
Land and structures 235,071 228,706
Revenue equipment 280,497 285,045
Manufacturing equipment 13,939 8,289
Service, office and other equipment 66,133 65,474
Leasehold improvements 9,557 10,631
Construction in progress - 44
Non-operating property 15,641 15,869
--------- ---------
620,838 614,058
Less allowances for depreciation
and amortization (212,762) (190,906)
--------- ---------
408,076 423,152
OTHER ASSETS 56,926 54,783
NET ASSETS HELD FOR SALE 16,905 39,937
GOODWILL, less amortization (1996 --
$26,338,000; 1995 -- $24,027,000) 141,796 145,478
--------- ---------
$ 920,222 $ 985,837
========= =========
<PAGE>
<CAPTION>
ARKANSAS BEST CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30 December 31
1996 1995
(unaudited) (note)
($ thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Bank overdraft $ 4,274 $ -
Bank drafts payable 5,931 12,999
Trade accounts payable 71,655 74,998
Accrued expenses 184,756 188,708
Current portion of long-term debt 37,742 26,634
--------- ---------
TOTAL CURRENT LIABILITIES 304,358 303,339
LONG-TERM DEBT, less current portion 360,521 399,144
OTHER LIABILITIES 19,936 18,665
DEFERRED FEDERAL INCOME TAXES 43,460 48,560
MINORITY INTEREST 34,826 38,265
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
1996: 19,512,250 shares; 1995: 19,519,061 195 195
Additional paid-in capital 207,753 207,807
Predecessor basis adjustment (15,371) (15,371)
Retained earnings (deficit) (35,471) (14,782)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 157,121 177,864
CONTINGENCIES -- Note F
--------- ---------
$ 920,222 $ 985,837
========= =========
<FN>
<F1>
Note: The balance sheet at December 31, 1995 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
<F2>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
(unaudited)
($ thousands, except per share data)
<S> <C> <C> <C> <C>
OPERATING REVENUES
LTL motor
carrier operations $ 298,886 $ 240,042 $ 593,809 $ 484,519
Forwarding operations 45,001 29,658 86,767 58,426
Truckload motor
carrier operations 18,917 - 36,755 -
Logistics operations 14,245 4,293 27,475 8,238
Tire operations 35,505 37,414 67,118 70,628
Service and other 1,908 687 3,912 1,490
--------- --------- --------- ---------
414,462 312,094 815,836 623,301
--------- --------- --------- ---------
OPERATING EXPENSES AND
COSTS -Note E
LTL motor
carrier operations 305,787 235,109 609,539 468,232
Forwarding operations 43,416 28,827 84,107 56,970
Truckload motor
carrier operations 17,465 - 33,877 -
Logistics operations 14,511 4,701 28,298 9,033
Tire operations 36,827 35,519 70,065 67,016
Service and other 2,439 734 4,775 1,492
--------- --------- --------- ---------
420,445 304,890 830,661 602,743
--------- --------- --------- ---------
OPERATING INCOME (LOSS) (5,983) 7,204 (14,825) 20,558
OTHER INCOME (EXPENSE)
Gain on asset sales 857 1,512 3,295 1,825
Interest (7,603) (2,521) (15,404) (4,649)
Minority interest
in subsidiary 486 (585) 1,127 (1,074)
Other, net (1,919) (1,325) (3,192) (2,617)
--------- --------- --------- ---------
(8,179) (2,919) (14,174) (6,515)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE
INCOME TAXES (14,162) 4,285 (28,999) 14,043
<PAGE>
<CAPTION>
ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
(unaudited)
($ thousands, except per share data)
<S> <C> <C> <C> <C>
FEDERAL AND STATE INCOME
TAXES (CREDIT) -Note E
Current (1,201) 2,642 (4,842) 10,142
Deferred (4,175) (40) (5,812) (2,924)
--------- --------- --------- ---------
(5,376) 2,602 (10,654) 7,218
--------- --------- --------- ---------
NET INCOME (LOSS) $ (8,786) $ 1,683 $ (18,345) $ 6,825
========= ========= ========= =========
NET INCOME (LOSS) PER SHARE $ (0.51) $ .03 $ (1.05) $ .24
========= ========= ========= =========
AVERAGE COMMON
SHARES OUTSTANDING: 19,512,367 19,515,132 19,514,453 19,540,768
========== ========== ========== ==========
CASH DIVIDENDS PAID
PER COMMON SHARE $ - $ 0.01 $ 0.01 $ 0.02
========== ========== ========== ==========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Six Months Ended
June 30
1996 1995
(unaudited)
($ thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (18,345) $ 6,825
Adjustments to reconcile net income
(loss) to net cash provided
by operating activities:
Depreciation and amortization 29,873 16,189
Amortization of intangibles 2,311 2,367
Other amortization 1,664 308
Provision for losses on
accounts receivable 4,114 1,486
Provision for deferred
income taxes (5,812) (2,924)
Gain on asset sales (3,294) (1,825)
Gain on issuance of
subsidiary stock - (20)
Minority interest in
subsidiary (1,377) 1,074
Changes in operating
assets and liabilities:
Accounts receivable 89 2,162
Inventories and
prepaid expenses 753 (2,269)
Other assets (1,575) 738
Accounts payable, bank
drafts payable, taxes
payable, accrued expenses
and other liabilities (7,165) 6,711
--------- ---------
NET CASH PROVIDED
BY OPERATING ACTIVITIES 1,236 30,822
INVESTING ACTIVITIES
Purchases of property,
plant and equipment,
less capitalized leases (15,455) (25,459)
Proceeds from asset sales 37,177 8,660
Adjustment to the acquisition
of the Clipper Group - (84)
--------- ---------
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES 21,722 (16,883)
<PAGE>
<CAPTION>
ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Six Months Ended
June 30
1996 1995
($ thousands)
<S> <C> <C>
FINANCING ACTIVITIES
Deferred financing costs and expenses
incurred in borrowing activities $ (3,512) $ -
Borrowings under revolving
credit facilities 98,660 17,000
Principal payments under
term loan facilities (6,496) (1,000)
Payments under revolving
credit facilities (119,660) (6,000)
Principal payments on
other long-term debt (9,487) (13,235)
Dividends paid to minority
shareholders of subsidiary (254) (220)
Dividends paid (2,344) (2,539)
Retirement of subsidiary preferred stock (371) -
Net increase (decrease)
in cash overdrafts 4,157 (5,989)
--------- ---------
NET CASH USED BY
FINANCING ACTIVITIES (39,307) (11,983)
--------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (16,349) 1,956
Cash and cash equivalents
at beginning of period 16,945 3,458
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 596 $ 5,414
========= =========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 1996
NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS
Arkansas Best Corporation (the "Company") is a diversified holding company
engaged through its subsidiaries primarily in motor carrier and freight
forwarding operations and truck tire retreading and sales. Principal
subsidiaries are ABF Freight System, Inc., ("ABF"), Treadco, Inc.
("Treadco"), and Clipper Exxpress Company and related companies (the "Clipper
Group") and, effective August 12, 1995, WorldWay Corporation ("WorldWay")
(see Note C). The principal subsidiaries of WorldWay included Carolina
Freight Carriers Corp. ("Carolina Freight") , Cardinal Freight Carriers, Inc.
("Cardinal"), G.I. Trucking Company ("G.I. Trucking"), CaroTrans
International, Inc. ("CaroTrans"), The Complete Logistics Company ("Complete
Logistics") and Innovative Logistics Incorporated ("Innovative Logistics").
Carolina Freight was merged into ABF on September 25, 1995.
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 and six months ended June 30, 1996, are not necessarily indicative
of the results that may be expected for the year ending December 31, 1996.
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, 1995.
NOTE C - INVENTORIES
<TABLE>
<CAPTION>
June 30 December 31
1996 1995
($ thousands)
<S> <C> <C>
Finished goods $ 23,460 $ 25,579
Materials 6,819 7,621
Repair parts, supplies and other 3,343 3,650
-------- --------
$ 33,622 $ 36,850
======== ========
</TABLE>
<PAGE>
NOTE D - FEDERAL AND STATE INCOME TAXES
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
($ thousands)
<S> <C> <C> <C> <C>
Income tax (credit) at regular rates $(4,957) $ 1,500 $(10,150) $ 4,915
Percent (35.0)% 35.0% (35.0)% 35.0%
State taxes less federal benefits (13) 446 (240) 1,130
Percent (0.1)% 10.4% (0.8)% 8.1%
Amortization of
nondeductible goodwill 223 266 503 532
Percent 1.6% 6.2% 1.7% 3.8%
Minority interest (170) 205 (394) 376
Percent (1.2)% 4.8% (1.4)% 2.7%
Other items (459) 185 (373) 265
Percent (3.3)% 4.3% (1.2)% 1.8%
------ ------ ------- ------
Income tax expense (benefit) $(5,376) $ 2,602 $(10,654) $ 7,218
Percent (38.0)% 60.7% (36.7)% 51.4%
====== ====== ======= ======
</TABLE>
NOTE E - OPERATING EXPENSES AND COSTS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
($ thousands)
<S> <C> <C> <C> <C>
LTL Motor Carrier Operations:
Salaries and wages $209,000 $166,751 $418,297 $331,926
Supplies and expenses 33,673 25,892 65,222 52,264
Operating taxes and licenses 12,545 9,691 25,102 20,026
Insurance 6,625 5,596 13,151 10,081
Communications and utilities 7,406 5,798 15,241 11,600
Depreciation and
amortization 10,704 6,810 22,760 13,203
Rents and purchased
transportation 21,918 13,496 43,948 27,111
Other 3,916 1,075 5,818 2,021
-------- -------- -------- --------
305,787 235,109 609,539 468,232
-------- -------- -------- --------
Forwarding Operations:
Cost of services 35,148 25,099 67,391 49,587
Selling, administrative and
general 8,268 3,728 16,716 7,383
-------- -------- -------- --------
43,416 28,827 84,107 56,970
-------- -------- -------- --------
<PAGE>
Truckload Motor Carrier
Operations:
Salaries and wages 6,890 - 12,988 -
Supplies and expenses 3,175 - 6,233 -
Operating taxes and licenses 1,797 - 3,570 -
Insurance 673 - 1,318 -
Communications and utilities 234 - 467 -
Depreciation and amortization 895 - 1,761 -
Rents and purchased
transportation 3,713 - 7,351 -
Other 88 - 189 -
-------- -------- -------- --------
17,465 - 33,877 -
-------- -------- -------- --------
Logistics Operations:
Cost of services 12,932 4,170 25,331 8,031
Selling, administrative
and general 1,579 531 2,967 1,002
-------- -------- -------- --------
14,511 4,701 28,298 9,033
-------- -------- -------- --------
Tire Operations:
Cost of sales 27,699 27,765 52,614 52,546
Selling, administrative
and general 9,128 7,754 17,451 14,470
-------- -------- -------- --------
36,827 35,519 70,065 67,016
-------- -------- -------- --------
Service and Other 2,439 734 4,775 1,492
-------- -------- -------- --------
$420,445 $304,890 $830,661 $602,743
======== ======== ======== ========
</TABLE>
NOTE F - LEGAL PROCEEDINGS AND ENVIRONMENTAL MATTERS AND OTHER EVENTS
In August 1990, a lawsuit was filed in the United States District Court for
the Southern District of New York, by Riverside Holdings, Inc., Riverside
Furniture Corporation ("Riverside") and MR Realty Associates, L.P.
("Plaintiffs") against the Company and a subsidiary. Plaintiffs asserted
state law, Employee Retirement Income Security Act of 1974 and securities
claims against the Company in connection with the Company's sale of Riverside
in April 1989. Plaintiffs sought approximately $4 million in actual damages
and $10 million in punitive damages.
On April 15, 1996, the Court partially granted the Company's motion for
Summary Judgment by dismissing Riverside's claims for punitive damages, ERISA
violations and common law breach of contract and fraud claims. The Court did
not dismiss Riverside's claim of violation of Section 10(b) of the Securities
Exchange Act of 1934 and Rule 10b-5 of that Act.
The Company is vigorously contesting the lawsuit. After consultation with
legal counsel, the Company has concluded that resolution of the foregoing
lawsuit is not expected to have a material adverse effect on the Company's
financial condition.
In November, 1995 Daily Transport Canada, Inc. ("Daily"), a Toronto-based LTL
carrier, and related companies served a Request for Arbitration against ABF,
<PAGE>
as successor to Carolina Freight Carriers Corporation ("CFCC"), for its lost
profits claimed to be in the amount of $15,000,000 resulting from the alleged
breach of a contract between CFCC and Daily. Based on information currently
available, the Company does not believe that the outcome of this matter will
have a material adverse effect on the Company's financial condition or
results of operations.
Various other legal actions, the majority of which arise in the normal course
of business, are pending. None of these other legal actions is expected to
have a material adverse effect on the Company's financial condition. The
Company maintains liability insurance against risks arising out of the normal
course of its business, subject to certain self-insured retention limits.
The Company's subsidiaries store some fuel for its tractors and trucks in
approximately 170 underground tanks located in 34 states. Maintenance of such
tanks is regulated at the federal and, in some cases, state levels. The
Company believes that it is in substantial compliance with all such
regulations. The Company 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 the Company to
upgrade its underground tank systems by December 1998. The Company currently
estimates that such upgrades, which are currently in process, will not have a
material adverse effect on the Company.
The Company has received notices from the EPA and others that it has been
identified as a potentially responsible party ("PRP") 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.
As of June 30, 1996, the Company has accrued approximately $2 million to
provide for environmental-related liabilities. The Company's environmental
accrual is based on management's best estimate of the actual liability. The
Company's estimate is founded on management's experience in dealing with
similar environmental matters and on actual testing performed at some sites.
Management believes that the accrual is adequate to cover environmental
liabilities based on the present environmental regulations.
On October 30, 1995, Treadco filed a lawsuit in Arkansas State Court alleging
that Bandag Incorporated ("Bandag") and certain of its officers and employees
have violated Arkansas statutory and common law in attempting to solicit
Treadco's employees to work for Bandag or its competing franchisees and
attempting to divert customers from Treadco. At Treadco's request, the Court
entered a Temporary Restraining Order barring Bandag, Treadco's former
officers J.J. Seiter, Ronald W. Toothaker, and Ronald W. Hawks and Bandag
officers Martin G. Carver and William Sweatman from soliciting or hiring
Treadco's employees to work for Bandag or any of its franchisees, from
diverting or soliciting Treadco's customers to buy from Bandag franchisees
other than Treadco, and from disclosing or using any of Treadco's
confidential information.
<PAGE>
On November 8, 1995, Bandag and the other named defendants asked the State
Court to stop its proceedings pending a decision by the United States
District Court, Western District of Arkansas, on a Complaint to Compel
Arbitration filed by Bandag in the Federal District Court on November 8,
1995.
The Federal District Court has ruled that under terms of Treadco's franchise
agreements with Bandag, all of the issues involved in Treadco's lawsuit
against Bandag are to be decided by arbitration. Treadco and Bandag are
conducting discovery in preparation for the arbitration hearing. A date for
the arbitration hearing has not yet been set.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Arkansas Best Corporation (the "Company") is a diversified holding company
engaged through its subsidiaries primarily in less-than-truckload ("LTL")
and truckload motor carrier operations, logistics and freight forwarding
operations and truck tire retreading and new tire sales. Principal
subsidiaries owned are ABF Freight System, Inc. ("ABF"), Treadco, Inc.
("Treadco"), and Clipper Exxpress Company ("Clipper"). Effective August 12,
1995, pursuant to its acquisition of WorldWay Corporation ("WorldWay"), the
Company acquired Cardinal Freight Carriers, Inc. ("Cardinal"), G.I. Trucking
Company ("G.I. Trucking"), CaroTrans International, Inc. ("CaroTrans"), The
Complete Logistics Company ("Complete Logistics") and Innovative Logistics
Incorporated ("ILI").
The Company in 1991 reduced its ownership in Treadco, through an initial
public offering of Treadco common stock, to approximately 46%, while
retaining control of Treadco by reason of its stock ownership, board
representation and provision of management services. As a result, Treadco is
consolidated with the Company for financial reporting purposes, with the
ownership interests of the other stockholders reflected as minority
interest.
Segment Data
The following tables reflect information prepared on a business segment
basis, which includes reclassification of certain expenses and costs between
the Company and its subsidiaries and elimination of the effects of
intercompany transactions. Operating profit on a business segment basis
differs from operating income as reported in the Company's Consolidated
Financial Statements. Other income and other expenses (which include
amortization expense), except for interest expense and minority interest,
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.
The segment information for prior periods has been restated to reflect the
Company's current reported business segments. In the current and future
periods, information that was previously reported in the service and other
business segment will be reported in the logistics operations segment.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
($ thousands)
<S> <C> <C> <C> <C>
OPERATING REVENUES
LTL motor carrier operations $298,886 $240,042 $593,809 $484,519
Forwarding operations 45,001 29,658 86,767 58,426
Truckload motor carrier
operations 18,917 - 36,755 -
Logistics operations 14,245 4,293 27,475 8,238
Tire operations 35,505 37,414 67,118 70,628
Other 1,908 687 3,912 1,490
-------- -------- -------- --------
$414,462 $312,094 $815,836 $623,301
======== ======== ======== ========
OPERATING EXPENSE AND COSTS
LTL MOTOR CARRIER OPERATIONS
Salaries and wages $209,000 $166,751 $418,297 $331,926
Supplies and expenses 33,673 25,892 65,222 52,264
Operating taxes and licenses 12,545 9,691 25,102 20,026
Insurance 6,625 5,596 13,151 10,081
Communications and utilities 7,406 5,798 15,241 11,600
Depreciation and amortization 10,704 6,810 22,760 13,203
Rents and purchased
transportation 21,918 13,496 43,948 27,111
Other 3,916 1,075 5,818 2,021
Other non-operating (net) 223 (679) 722 (360)
-------- -------- -------- --------
306,010 234,430 610,261 467,872
FORWARDING OPERATIONS
Cost of services 35,148 25,099 67,391 49,587
Selling, administrative
and general 8,268 3,728 16,716 7,383
Other non-operating (net) 410 434 804 860
-------- -------- -------- --------
43,826 29,261 84,911 57,830
TRUCKLOAD MOTOR CARRIER
OPERATIONS
Salaries and wages 6,890 - 12,988 -
Supplies and expenses 3,175 - 6,233 -
Operating taxes and licenses 1,797 - 3,570 -
Insurance 673 - 1,318 -
Communications and utilities 234 - 467 -
Depreciation and amortization 895 - 1,761 -
Rents and purchased
transportation 3,713 - 7,351 -
Other 88 - 189 -
Other non-operating (net) 1 - 2 -
-------- -------- -------- --------
17,466 - 33,879 -
<PAGE>
LOGISTICS OPERATIONS
Cost of services 12,932 4,170 25,331 8,031
Selling, administrative
and general 1,579 531 2,967 1,002
Other non-operating (net) (21) (14) (52) (23)
-------- -------- -------- --------
14,490 4,687 28,246 9,010
TIRE OPERATIONS
Cost of sales 27,699 27,765 52,614 52,546
Selling, administrative
and general 9,128 7,754 17,451 14,470
Other non-operating (net) 6 (5) 143 120
-------- -------- -------- --------
36,833 35,514 70,208 67,136
SERVICE AND OTHER 2,882 811 3,053 1,687
-------- -------- -------- --------
$421,507 $304,703 $830,558 $603,535
======== ======== ======== ========
OPERATING PROFIT (LOSS)
LTL motor carrier operations $ (7,124) $ 5,612 $(16,452) $ 16,647
Forwarding operations 1,175 397 1,856 596
Truckload motor carrier
operations 1,451 - 2,876 -
Logistics operations (245) (394) (771) (772)
Tire operations (1,328) 1,900 (3,090) 3,492
Other (974) (124) 859 (197)
-------- -------- -------- --------
TOTAL OPERATING PROFIT (LOSS) (7,045) 7,391 (14,722) 19,766
MINORITY INTEREST (486) 585 (1,127) 1,074
INTEREST EXPENSE 7,603 2,521 15,404 4,649
-------- -------- -------- --------
INCOME (LOSS)
BEFORE INCOME TAXES $(14,162) $ 4,285 $(28,999) $ 14,043
======== ======== ======== ========
</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 U.S. Department of
Transportation.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
LTL MOTOR CARRIER OPERATIONS
Salaries and wages 69.9% 69.5% 70.4% 68.5%
Supplies and expenses 11.3 10.8 11.0 10.8
Operating taxes and licenses 4.2 4.0 4.2 4.1
Insurance 2.2 2.3 2.2 2.1
Communications and utilities 2.5 2.4 2.6 2.4
Depreciation and amortization 3.6 2.8 3.8 2.7
Rents and purchased transportation 7.3 5.6 7.4 5.6
Other 1.3 0.4 1.0 0.4
Other non-operating (net) 0.1 (0.1) 0.2 -
----- ----- ----- -----
102.4% 97.7% 102.8% 96.6%
===== ===== ===== =====
FORWARDING OPERATIONS
Cost of services 78.1% 84.6% 77.7% 84.9%
Selling, administrative
and general 18.4 12.6 19.3 12.6
Other non-operating (net) 0.9 1.5 0.9 1.5
----- ----- ----- -----
97.4% 98.7% 97.9% 99.0%
===== ===== ===== =====
TRUCKLOAD MOTOR CARRIER OPERATIONS
Salaries and wages 36.4% - 35.3% -
Supplies and expenses 16.8 - 17.0 -
Operating taxes and licenses 9.5 - 9.7 -
Insurance 3.6 - 3.6 -
Communications and utilities 1.2 - 1.3 -
Depreciation and amortization 4.7 - 4.8 -
Rents and purchased transportation 19.6 - 20.0 -
Other 0.5 - 0.5 -
Other non-operating (net) - - - -
----- ----- ----- -----
92.3% - 92.2% -
===== ===== ===== =====
LOGISTICS OPERATIONS
Cost of services 90.8% 97.1% 92.2% 97.5%
Selling, administrative and
general 11.1% 12.4% 10.8% 12.2%
Other non-operating (net) (0.2) (0.3) (0.2) (0.3)
----- ----- ----- -----
101.7% 109.2% 102.8% 109.4%
===== ===== ===== =====
TIRE OPERATIONS
Cost of sales 78.0% 74.2% 78.4% 74.4%
Selling, administrative
and general 25.7 20.7 26.0 20.5
Other non-operating (net) - - 0.2 0.2
----- ----- ----- -----
103.7% 94.9% 104.6% 95.1%
===== ===== ===== =====
</TABLE>
<PAGE>
Results of Operations
Three Months Ended June 30, 1996 as Compared to the Three Months Ended
June 30, 1995
Consolidated revenues of the Company for the three months ended June 30, 1996
were $414 million compared to $312 million for the three months ended
June 30, 1995. The Company had an operating loss of $7.0 million for the
three months ended June 30, 1996 compared to an operating profit of $7.4
million for the three months ended June 30, 1995. For the three months ended
June 30, 1996, the Company had a net loss of $8.8 million, or a loss of $.51
per common share, compared to net income of $1.7 million, or $.03 per common
share for the three months ended June 30, 1995. Revenues for the first
quarter of 1996 increased due to the acquisition of WorldWay.
Earnings per common share for the three months ended June 30, 1996 and 1995
give consideration to preferred stock dividends of $1.1 million. Average
common shares outstanding for both periods were 19.5 million. Outstanding
shares for each period do not assume conversion of preferred stock to common
shares, because conversion would be anti-dilutive for these periods.
Less-Than-Truckload Motor Carrier Operations Segment. The Company's LTL motor
carrier operations are conducted primarily through ABF and, effective
August 12, 1995, through G.I. Trucking.
Revenues from the LTL motor carrier operations segment for the three months
ended June 30, 1996 were $299 million, with an operating loss of $7.1
million. For the three months ended June 30, 1996, ABF accounted for 92% of
LTL segment revenues. So far, ABF has been more successful in retaining its
January 1, 1996 freight rate increase of 5.8% than it has in previous years
which is part of the reason revenue increased 16.6% on a tonnage increase of
11.2%.
Following the acquisition of WorldWay, the operations of Carolina Freight
Carriers ("Carolina Freight") and Red Arrow Freight Lines ("Red Arrow") were
merged into ABF on September 24, 1995. Effective with the merger, ABF
inherited Carolina Freight's regional distribution terminal operations, which
reconfigured the way freight flowed through ABF's terminal system. This
reconfiguration created many operating inefficiencies in ABF's system. Labor
dollars as a percent of revenue increased, empty miles increased and weight
per trailer decreased, which all had an adverse impact on expenses.
During the quarter, ABF discontinued five of the inherited regional
distribution terminal operations. These closings have completed ABF's network
reconfiguration, returning ABF to its normal terminal system configuration.
Salaries, wages and benefits increased 3.8% annually effective April 1, 1996,
pursuant to ABF's collective bargaining agreement with its Teamsters
employees compared to a 3.3% annual increase effective April 1, 1995.
The total expenses as a percent of revenue were 102.4% for the second
quarter, 1996 compared to 103.2% for the first quarter, 1996. Salaries and
wages as a percent of revenue decreased primarily as a result of ABF's
terminal reconfiguration and G.I. Trucking's improved labor costs as they
continue to replace revenue lost during the merger of Carolina Freight into
ABF.
<PAGE>
Forwarding Operations Segment. The Company's forwarding operations are
conducted primarily through Clipper and, effective August 12, 1995,
CaroTrans.
Comparisons for the three months ended June 30, 1996 were affected by the
acquisition of WorldWay in August 1995. Therefore, comparisons of the results
of operations for the forwarding operations segment are not meaningful and
are not presented.
For the three months ended June 30, 1996, the forwarding operations segment
had revenues of $45.0 million with an operating profit of $1.2 million.
Forwarding operations were affected during the three months ended June 30,
1996 by soft economic conditions.
The total expenses as a percent of revenue were 97.4% for the second quarter,
1996 compared to 98.4% for the first quarter, 1996. The decrease resulted
primarily from the seasonal increase in revenue covering the fixed portion of
expenses.
Truckload Motor Carrier Operations Segment. Effective August 12, 1995, with
the acquisition of WorldWay, the Company began reporting a new business
segment, truckload motor carrier operations. The Company's truckload motor
carrier operations are conducted through Cardinal.
For the three months ended June 30, 1996, Cardinal had revenues of $18.9
million with an operating profit of $1.5 million. Cardinal's operations were
affected during the three months ended June 30, 1996 by soft economic
conditions.
The total expenses as a percent of revenue were 92.3% for the second quarter,
1996 compared to 92.0% for the first quarter, 1996 resulting primarily from
an increase in expenses relating to employee medical benefits.
Logistics Operations Segment. Effective August 12, 1995, with the acquisition
of WorldWay, the Company began reporting a new business segment, logistics
operations. The Company's logistics operations are conducted through
Integrated Distribution, Inc. and, effective August 12, 1995, through
Complete Logistics and Innovative Logistics, Inc.
For the three months ended June 30, 1996, the logistics operations segment
had operating revenues of $14.2 million with an operating loss of $245,000.
The total expenses as a percent of revenue were 101.7% for the second
quarter, 1996 compared to 104.0% for the first quarter, 1996. The decrease
resulted primarily from the seasonal increase in revenue covering the fixed
portion of expenses.
Tire Operations Segment. Treadco's revenues for the three months ended
June 30, 1996 decreased 5.1% to $35.5 million from $37.4 million for the
three months ended June 30, 1995. For the second quarter of 1996, "same
store" sales decreased 9.2% which was offset in part by a 4.1% increase in
"new store" sales. Same store sales include both production locations and
sales locations that have been in existence for the entire periods presented.
Treadco has seen increased competition as Bandag Incorporated ("Bandag") has
granted additional franchises in some locations currently being served by
Treadco. The new competition has led to increased pricing pressures in the
marketplace. As anticipated, Bandag continues to target Treadco's accounts
<PAGE>
which has caused difficulty in retaining the national account business and in
some cases the business retained is at lower profit margins.
Revenues from retreading for three months ended June 30, 1996 decreased 10.1%
to $17.7 million from $19.7 million for three months ended June 30, 1995.
Revenues from new tire sales were $17.8 million for three months ended
June 30, 1996 compared to $17.7 million for three months ended June 30, 1995.
Tire operations segment operating expenses as a percent of revenues were
103.7% for three months ended June 30, 1996 compared to 94.9% for three
months ended June 30, 1995. Cost of sales for the tire operations segment as
a percent of revenues increased to 78.0% for three months ended June 30, 1996
from 74.2% for three months ended June 30, 1995. The increase resulted
primarily from expenses incurred during the conversion and because tire
margins are less as a result of increased pricing pressures. Selling,
administrative and general expenses for the tire operations segment increased
to 25.7% for three months ended June 30, 1996 from 20.7% for three months
ended June 30, 1995. The increase resulted from several factors including
costs associated with the conversion from Bandag, higher insurance costs,
expenses associated with employee medical benefits and legal costs. Also, the
coverage of fixed costs at six new locations hasn't reached levels comparable
to Treadco's other locations.
Treadco converted seven of its production facilities that were under Bandag
retread franchises to Oliver Rubber Company ("Oliver") licensed facilities
during the first quarter of 1996 and nine facilities in the second quarter.
Treadco plans to complete the conversion of its remaining Bandag franchises
to the Oliver process by the end of the third quarter.
The conversion has resulted in up to two lost production days during each
conversion, some short-term operational inefficiencies and time lost as
production employees have familiarized themselves with the new equipment.
Also, management has been required to spend time with the conversion at the
expense of the normal daily operations.
Service and Other Segment. The increased operating loss for the other
operations segment resulted primarily from amortization of deferred financing
costs related to the Company's Credit Agreement.
Interest. Interest expense was $7.6 million for three months ended June 30,
1996 compared to $2.5 million for three months ended June 30, 1995 primarily
due to a higher level of outstanding debt. The increase in long-term debt
consisted primarily of debt incurred or assumed in the acquisition of
WorldWay and debt incurred for working capital requirements.
Income Taxes. The difference between the effective tax rate for 1996 and the
federal statutory rate resulted primarily from state income taxes,
amortization of goodwill, minority interest, and other nondeductible expenses
(see Note E to the consolidated financial statements).
Six Months Ended June 30, 1996 as Compared to the Six Months Ended
June 30, 1995
Consolidated revenues of the Company for the six months ended June 30, 1996
were $816 million compared to $623 million for the six months ended
June 30, 1995. The Company had an operating loss of $14.7 million for the six
months ended June 30, 1996 compared to an operating profit of $19.8 million
<PAGE>
for the six months ended June 30, 1995. For the six months ended June 30,
1996, the Company had a net loss of $18.3 million, or a loss of $1.05 per
common share, compared to net income of $6.8 million, or $.24 per common
share for the six months ended June 30, 1995. Revenues for the six months
ended June 30, 1996 increased due to the acquisition of WorldWay.
Earnings per common share for the six months ended June 30, 1996 and 1995
give consideration to preferred stock dividends of $2.2 million. Average
common shares outstanding for both periods were 19.5 million. Outstanding
shares for each period do not assume conversion of preferred stock to common
shares, because conversion would be anti-dilutive for these periods.
Less-Than-Truckload Motor Carrier Operations Segment. The Company's LTL motor
carrier operations are conducted primarily through ABF and, effective
August 12, 1995, through G.I. Trucking.
Revenues from the LTL motor carrier operations segment for the six months
ended June 30, 1996 were $594 million, with an operating loss of
$16.5 million. For the six months ended June 30, 1996, ABF accounted for 92%
of LTL revenue. So far, ABF has been more successful in retaining its
January 1, 1996 freight rate increase of 5.8% than it has in previous years
which is part of the reason revenue increased 15.1% on a tonnage increase of
9.0%.
Following the acquisition of WorldWay, the operations of Carolina Freight
Carriers ("Carolina Freight") and Red Arrow Freight Lines ("Red Arrow") were
merged into ABF on September 24, 1995. Effective with the merger, ABF
inherited Carolina Freight's regional distribution terminal operations, which
reconfigured the way freight flowed through ABF's terminal system. This
reconfiguration created many operating inefficiencies in ABF's system. Labor
dollars as a percent of revenue increased, empty miles increased and weight
per trailer decreased, which all had an adverse impact on expenses.
During 1996, ABF discontinued twelve of the inherited regional distribution
terminal operations. These closings have completed ABF's network
reconfiguration, returning ABF to its normal terminal system configuration.
Salaries, wages and benefits increased 3.8% annually effective April 1, 1996,
pursuant to ABF's collective bargaining agreement with its Teamsters
employees.
Forwarding Operations Segment. The Company's forwarding operations are
conducted primarily through Clipper and effective August 12, 1995, CaroTrans.
Comparisons for the six months ended June 30, 1996 were affected by the
acquisition of WorldWay in August 1995. Therefore, comparisons of the results
of operations for the forwarding operations segment are not meaningful and
are not presented.
For the six months ended June 30, 1996, the forwarding operations segment had
revenues of $86.8 million with an operating profit of $1.9 million.
Forwarding operations were affected during the six months ended June 30, 1996
by soft economic conditions.
Truckload Motor Carrier Operations Segment. Effective August 12, 1995, with
the acquisition of WorldWay, the Company began reporting a new business
segment, truckload motor carrier operations. The Company's truckload motor
carrier operations are conducted through Cardinal.
<PAGE>
For the six months ended June 30, 1996, Cardinal had revenues of $36.8
million with an operating profit of $2.9 million. Cardinal's operations were
affected during the six months ended June 30, 1996 by soft economic
conditions.
Logistics Operations Segment. Effective August 12, 1995, with the acquisition
of WorldWay, the Company began reporting a new business segment, logistics
operations. The Company's logistics operations are conducted through
Integrated Distribution, Inc. and effective August 12, 1995, through Complete
Logistics and Innovative Logistics, Inc.
For the six months ended June 30, 1996, the logistics operations segment had
operating revenues of $27.5 million with an operating loss of $771,000.
Tire Operations Segment. Treadco's revenues for the six months ended
June 30, 1996 decreased 5% to $67.1 million from $70.6 million for the six
months ended June 30, 1995. For the six months ended June 30, 1996, "same
store" sales decreased 8.2% which was offset in part by a 3.1% increase in
"new store" sales. Same store sales include both production locations and
sales locations that have been in existence for the entire periods presented.
Treadco has seen increased competition as Bandag Incorporated ("Bandag") has
granted additional franchises in some locations currently being served by
Treadco. The new competition has led to increased pricing pressures in the
marketplace. As anticipated, Bandag continues to target Treadco's accounts
which has caused difficulty in retaining the national account business and in
some cases the business retained is at lower profit margins.
Revenues from retreading for six months ended June 30, 1996 decreased 8.3% to
$34.3 million from $37.4 million for six months ended June 30, 1995. Revenues
from new tire sales decreased 1.2% to $32.8 million for six months ended
June 30, 1996 compared to $33.2 million for six months ended June 30, 1995.
Tire operations segment operating expenses as a percent of revenues were
104.6% for six months ended June 30, 1996 compared to 95.1% for six months
ended June 30, 1995. Cost of sales for the tire operations segment as a
percent of revenues increased to 78.4% for six months ended June 30, 1996
from 74.4% for six months ended June 30, 1995. The increase resulted
primarily from expenses incurred during the conversion and because tire
margins are less as a result of increased pricing pressures (see above).
Selling, administrative and general expenses for the tire operations segment
increased to 26.0% for six months ended June 30, 1996 from 20.5% for six
months ended June 30, 1995. The increase resulted from several factors
including costs associated with the conversion from Bandag, higher insurance
costs, expenses associated with employee medical benefits and legal costs.
Also, the coverage of fixed costs at six new locations hasn't reached levels
comparable to Treadco's other locations.
Treadco converted seven of its production facilities that were under Bandag
retread franchises to Oliver licensed facilities during the first quarter of
1996 and nine facilities in the second quarter. Treadco plans to complete the
conversion of its remaining Bandag franchises to the Oliver process by the
end of the third quarter.
The conversion has resulted in up to two lost production days during each
conversion, some short-term operational inefficiencies and time lost as
production employees have familiarized themselves with the new equipment.
Also, management has been required to spend time with the conversion at the
expense of the normal daily operations.
<PAGE>
Service and Other Segment. The difference in operating income for the other
operations segment relates primarily to gains of $2.6 million on the sale of
assets offset in part by $1.4 million of amortization of deferred financing
costs. The gains principally are recognized on the sale of excess terminal
properties which resulted from the ABF/Carolina Freight merger.
Interest. Interest expense was $15.4 million for six months ended June 30,
1996 compared to $4.6 million for six months ended June 30, 1995 primarily
due to a higher level of outstanding debt. The increase in long-term debt
consisted primarily of debt incurred or assumed in the acquisition of
WorldWay and debt incurred for working capital requirements.
Income Taxes. The difference between the effective tax rate for 1996 and the
federal statutory rate resulted primarily from state income taxes,
amortization of goodwill, minority interest, and other nondeductible expenses
(see Note E to the consolidated financial statements).
Liquidity and Capital Resources
The ratio of current assets to current liabilities was .97:1 at June 30, 1996
compared to 1.06:1 at December 31, 1995. Net cash provided by operating
activities for the six months ended June 30, 1996 was $1.2 million compared
to net cash provided of $30.8 million for the six months ended June 30, 1995.
The decrease is due primarily to the net loss from operations and reductions
in accounts payable and accrued expenses.
The Company is in the process of selling excess real estate which resulted
from the merger of Carolina Freight and Red Arrow into ABF. So far in 1996,
the Company has received net proceeds from the sale of real estate of $26
million and has approximately $6 million in pending sales which are projected
to close before the end of 1996.
On August 10, 1995 the Company entered into a $350 million credit agreement
(the "Credit Agreement") with Societe Generale, Southwest Agency as Managing
and Administrative Agent and NationsBank of Texas, N.A., as Documentation
Agent, and with 15 other participating banks. The Credit Agreement includes a
$75 million term loan and provides for up to $275 million of revolving credit
loans (including letters of credit).
Term Loan and Revolving Credit advances bear interest at one of the following
rates, at the Company's option: (a) Prime Rate advance or (b) Eurodollar Rate
advance. A Prime Rate advance bears an interest rate equal to the lesser of
(i) the Adjusted Prime Rate plus the Applicable Margin and (ii) the maximum
nonusurious interest rate under applicable law. The Adjusted Prime Rate is
equal to the greater of the prime rate offered by Societe Generale or the
Federal Funds Rate plus 1/2%. The Applicable Margin is determined as a
function of the ratio of the Company's consolidated indebtedness to its
consolidated earnings before interest, taxes, depreciation and amortization.
Eurodollar Rate advances shall bear an interest rate per annum equal to the
lesser of (i) the Eurodollar Rate offered by Societe Generale plus the
Applicable Margin and (ii) the maximum nonusurious interest rate under
applicable law. The Company has paid and will continue to pay certain
customary fees for such commitments and advances. At June 30, 1996, the
average interest rate on the Credit Agreement was 8%. The Company pays a
commitment fee at a rate per annum equal to the Applicable Margin on the
unused amount of the Company's revolving credit commitment.
<PAGE>
There were $186 million of Revolver Advances, $69.5 million of Term Advances
and approximately $69 million of letters of credit outstanding at June 30,
1996. Outstanding revolving credit advances may not exceed a borrowing base
calculated using the Company's revenue equipment, real property and other
equipment, the Treadco common stock owned by the Company and the Company's
eligible receivables.
The Term Advances are payable in varying installments commencing in November
1996.
The Credit Agreement contains various covenants which limit, among other
things, indebtedness, distributions, asset sales, restricted payments,
investments, loans and advances, as well as requiring the Company to meet
certain financial tests. As of June 30, 1996, these covenants have been met.
On February 21, 1996, the Company obtained an amendment to the Credit
Agreement which revised the agreement so that the Company was in compliance
with all covenants. Under the amended Credit Agreement, the Company has
pledged substantially all revenue equipment and real property not already
pledged under other debt obligations or capital leases.
The amendment also revised the maturity schedule of the term loan agreement
to revise the loans to be paid off in graduated principal installments
through August 1998. The amendment also requires that net proceeds received
from certain asset sales be applied against the term loan balance.
Also, on February 21, 1996, the Company obtained an additional credit
agreement which provides for borrowings of up to $30 million. This agreement
bears interest at either an adjusted prime rate plus 2% or a maximum rate as
defined in the agreement in the case of prime rate advances, or the
Eurodollar rate plus 3% or a maximum rate as defined in the agreement in the
case of Eurodollar rate advances. The maturity date of this agreement is
June 30, 1997. This agreement contains covenants that are substantially the
same as the covenants contained in the primary credit agreement.
The Company assumed the Subordinated Debentures of WorldWay which were issued
in April 1986. The debentures bear interest at 6.25% per annum, payable semi-
annually, on a par value of $50,000,000. The debentures are payable April 15,
2011. The Company may redeem the debentures at 100%. The Company is required
to redeem through a mandatory sinking fund commencing before April 15, in
each of the years from 1997 to 2010, an amount in cash sufficient to redeem
$2,500,000 annually of the aggregate principal amount of the debentures
issued.
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
$20 million or the applicable borrowing base. 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 June 30, 1996, the weighted average
interest rate was 6.2%. At June 30, 1996, Treadco had $6 million outstanding
under the Treadco Credit Agreement. The Treadco Credit Agreement is payable
in September 1998. Treadco pays a commitment fee of 3/8% on the unused amount
under the Treadco Credit Agreement.
<PAGE>
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.
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 the Treadco 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 LTL and truckload 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 LTL and truckload segments 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 maintains liability insurance against risks in excess of
retention levels arising out of the normal course of its business (see Note G
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: August 13, 1996 /s/Donald L. Neal
----------------- ------------------------------------
Donald L. Neal - Senior Vice
President - Chief Financial Officer,
and Principal Accounting Officer
<PAGE>
EXHIBIT INDEX
ARKANSAS BEST CORPORATION
The following exhibits are filed with this report.
Exhibit
No.
11 Statement Re: Computation of Earnings per Share
<PAGE>
EXHIBIT 11
<TABLE>
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
ARKANSAS BEST CORPORATION
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
($ thousands, except per share data)
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding 19,512,367 19,513,708 19,514,453 19,513,708
Net effect of dilutive
stock options --
Based on the treasury
stock method using
average market price - 1,424 - 27,060
--------- --------- --------- ---------
Average common
shares outstanding 19,512,367 19,515,132 19,514,453 19,540,768
========== ========== ========== ==========
Net income (loss) $ (8,786) $ 1,683 $ (18,345) $ 6,825
Less: Preferred
stock dividend 1,075 1,075 2,149 2,149
--------- --------- --------- ---------
Net income (loss)
available for common $ (9,861) $ 608 $ (20,494) $ 4,676
========== ========== ========== ==========
Per common and common
equivalent share:
Net income (loss)
per common share $ (0.51) $ 0.03 $ (1.05) $ 0.24
========== ========== ========== ==========
<FN>
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 QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30,
1996 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 596
<SECURITIES> 0
<RECEIVABLES> 202,384
<ALLOWANCES> 12,438
<INVENTORY> 33,622
<CURRENT-ASSETS> 296,519
<PP&E> 620,838
<DEPRECIATION> 212,762
<TOTAL-ASSETS> 920,222
<CURRENT-LIABILITIES> 304,358
<BONDS> 360,521
0
15
<COMMON> 195
<OTHER-SE> 156,911
<TOTAL-LIABILITY-AND-EQUITY> 920,222
<SALES> 67,118
<TOTAL-REVENUES> 815,836
<CGS> 52,614
<TOTAL-COSTS> 830,661
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,114
<INTEREST-EXPENSE> 15,404
<INCOME-PRETAX> (28,999)
<INCOME-TAX> (10,654)
<INCOME-CONTINUING> (18,345)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,345)
<EPS-PRIMARY> (1.05)
<EPS-DILUTED> (1.05)
<PAGE>
</TABLE>
