<PAGE> 1
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, 1997
[ ] 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 jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code No.) Identification No.)
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 July 15, 1997
- ---------------------------- ----------------------------
Common Stock, $.01 par value 19,504,473 shares
<PAGE> 2
ARKANSAS BEST CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets --
June 30, 1997 and December 31, 1996 ................................................... 3
Consolidated Statements of Operations --
For the Three and Six Months Ended June 30, 1997 and 1996 .............................. 5
Condensed Consolidated Statements of Cash Flows --
For the Six Months Ended June 30, 1997 and 1996 ........................................ 7
Notes to Consolidated Financial Statements - June 30, 1997 ............................... 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .................................................... 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ........................................................................ 20
Item 2. Changes in Securities .................................................................... 20
Item 3. Defaults Upon Senior Securities .......................................................... 20
Item 4. Submission of Matters to a Vote of Security Holders ...................................... 20
Item 5. Other Information ........................................................................ 20
Item 6. Exhibits and Reports on Form 8-K ......................................................... 20
SIGNATURES ..................................................................................... 21
EXHIBITS
Exhibit 11. Statement Re: Computation of Earnings Per Share .......................................... 23
</TABLE>
2
<PAGE> 3
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ARKANSAS BEST CORPORATION
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1997 1996
------------ ------------
(UNAUDITED) (NOTE)
($ THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents .................................. $ -- $ 1,806
Trade receivables, less allowances for doubtful accounts
(1997 -- $5,368,000; 1996 -- $6,118,000) ................ 192,705 186,065
Inventories -- Note C ...................................... 32,865 33,831
Prepaid expenses ........................................... 15,047 13,593
Federal and state income taxes refundable .................. 7,018 7,320
Deferred federal income taxes .............................. 15,641 16,490
Other ...................................................... 3,296 --
------------ ------------
TOTAL CURRENT ASSETS ................................... 266,572 259,105
PROPERTY, PLANT AND EQUIPMENT
Land and structures ........................................ 218,130 228,051
Revenue equipment .......................................... 248,576 268,270
Manufacturing equipment .................................... 18,693 18,815
Service, office and other equipment ........................ 67,548 65,532
Leasehold improvements ..................................... 8,028 9,273
------------ ------------
560,975 589,941
Less allowances for depreciation and amortization .......... (230,779) (222,308)
------------ ------------
330,196 367,633
OTHER ASSETS .................................................... 50,231 57,160
NET ASSETS HELD FOR SALE ........................................ 5,233 9,148
GOODWILL, less amortization
(1997 -- $30,474,000; 1996 -- $28,006,000) ................. 147,558 150,154
------------ ------------
$ 799,790 $ 843,200
============ ============
</TABLE>
3
<PAGE> 4
ARKANSAS BEST CORPORATION
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1997 1996
------------ ------------
(UNAUDITED) (NOTE)
($ THOUSANDS)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft .............................................. $ 3,082 $ --
Bank drafts payable ......................................... 334 646
Trade accounts payable ...................................... 81,870 79,140
Accrued expenses ............................................ 181,335 182,011
Current portion of long-term debt ........................... 26,158 39,082
------------ ------------
TOTAL CURRENT LIABILITIES ............................... 292,779 300,879
LONG-TERM DEBT, less current portion ............................. 283,104 326,950
OTHER LIABILITIES ................................................ 22,774 21,416
DEFERRED FEDERAL INCOME TAXES .................................... 28,415 22,505
MINORITY INTEREST ................................................ 32,746 34,020
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
1997: 19,504,473 shares; 1996: 19,512,250 shares ........ 195 195
Additional paid-in capital .................................. 192,328 192,328
Retained earnings (deficit) ................................. (52,566) (55,108)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY .............................. 139,972 137,430
CONTINGENCIES -- Note F
------------ ------------
$ 799,790 $ 843,200
============ ============
</TABLE>
Note: The balance sheet at December 31, 1996 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.
See notes to consolidated financial statements.
4
<PAGE> 5
ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1997 1996 1997 1996
-------- -------- -------- --------
(UNAUDITED)
($ THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
OPERATING REVENUES
LTL motor carrier operations ....... $311,489 $298,886 $608,024 $593,809
Truckload motor carrier operations . 20,345 18,917 39,366 36,755
Intermodal operations .............. 48,629 45,001 93,418 86,767
Logistics operations ............... 12,089 14,245 24,223 27,475
Tire operations .................... 41,014 35,505 73,108 67,118
Service and other .................. 2,203 1,908 4,376 3,912
-------- -------- -------- --------
435,769 414,462 842,515 815,836
-------- -------- -------- --------
OPERATING EXPENSES AND COSTS - Note E
LTL motor carrier operations ....... 294,178 305,529 579,263 608,994
Truckload motor carrier operations . 18,814 17,465 37,304 33,877
Intermodal operations .............. 47,228 43,415 92,451 84,094
Logistics operations ............... 13,943 14,506 27,262 28,281
Tire operations .................... 40,801 36,827 75,439 70,065
Service and other .................. 2,266 2,440 4,492 4,776
-------- -------- -------- --------
417,230 420,182 816,211 830,087
-------- -------- -------- --------
OPERATING INCOME (LOSS) ............... 18,539 (5,720) 26,304 (14,251)
OTHER INCOME (EXPENSE)
Gain (loss) on sales of property and
non-revenue equipment ............ (1,130) 594 (1,816) 2,721
Interest ........................... (6,969) (7,603) (14,234) (15,404)
Minority interest in subsidiary .... 29 486 1,054 1,127
Other .............................. (1,293) (1,919) (3,099) (3,192)
-------- -------- -------- --------
(9,363) (8,442) (18,095) (14,748)
-------- -------- -------- --------
INCOME (LOSS)
BEFORE INCOME TAXES ................. 9,176 (14,162) 8,209 (28,999)
FEDERAL AND STATE
INCOME TAXES (CREDIT)
Current ............................ 876 (1,201) 96 (4,842)
Deferred ........................... 3,292 (4,175) 3,422 (5,812)
-------- -------- -------- --------
4,168 (5,376) 3,518 (10,654)
-------- -------- -------- --------
NET INCOME (LOSS) ..................... $ 5,008 $ (8,786) $ 4,691 $(18,345)
Preferred stock dividends ............. 1,075 1,074 2,149 2,149
-------- -------- -------- --------
NET INCOME (LOSS) APPLICABLE
TO COMMON SHAREHOLDERS .............. $ 3,933 $ (9,860) $ 2,542 $(20,494)
======== ======== ======== ========
</TABLE>
5
<PAGE> 6
ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS -- (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1997 1996 1997 1996
----------- ----------- ----------- -----------
(UNAUDITED)
($ THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
NET INCOME (LOSS) PER
COMMON SHARE ........... $ 0.20 $ (0.51) $ 0.13 $ (1.05)
=========== =========== =========== ===========
AVERAGE COMMON
SHARES OUTSTANDING ..... 19,570,220 19,512,367 19,538,521 19,514,453
=========== =========== =========== ===========
CASH DIVIDENDS PAID
PER COMMON SHARE ....... $ -- $ -- $ -- $ 0.01
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 7
ARKANSAS BEST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
1997 1996
---------- ----------
(UNAUDITED)
($ THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided by operating activities .......... $ 35,426 $ 1,236
INVESTING ACTIVITIES
Purchase of property, plant and equipment,
less capitalized leases .......................... (5,387) (15,455)
Proceeds from asset sales .......................... 26,575 37,177
---------- ----------
NET CASH PROVIDED BY INVESTING ACTIVITIES ............... 21,188 21,722
FINANCING ACTIVITIES
Deferred financing costs and expenses .............. (898) (3,290)
Borrowings under revolving credit facilities ....... 216,585 98,660
Payments under revolving credit facilities ......... (233,885) (119,660)
Payments on long-term debt ......................... (8,887) (9,487)
Payments under term loan facilities ................ (32,048) (6,496)
Dividends paid ..................................... (2,149) (2,344)
Other, net ......................................... 2,862 3,310
---------- ----------
NET CASH USED BY FINANCING ACTIVITIES ................... (58,420) (39,307)
---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS ............... (1,806) (16,349)
Cash and cash equivalents at beginning of period ... 1,806 16,945
========== ==========
CASH AND CASH EQUIVALENTS AT END OF PERIOD .............. $ -- $ 596
========== ==========
</TABLE>
7
<PAGE> 8
ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1997
- -------------------------------------------------------------------------------
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 operations,
intermodal operations and truck tire retreading and sales. Principal
subsidiaries are ABF Freight System, Inc., ("ABF"), Treadco, Inc. ("Treadco"),
and Clipper Exxpress Company, CaroTrans International, Inc. ("CaroTrans"), and
related companies ("Clipper Worldwide"), Cardinal Freight Carriers, Inc.
("Cardinal"), G.I. Trucking Company ("G.I. Trucking"), The Complete Logistics
Company ("Complete Logistics"), Integrated Distribution, Inc., and FleetNet
America, Inc. (formerly Carolina Breakdown Service, Inc.).
Approximately 80% of ABF's employees are covered under a collective bargaining
agreement with the International Brotherhood of Teamsters which expires on
March 31, 1998.
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 and six months ended June
30, 1997, are not necessarily indicative of the results that may be expected
for the year ending December 31, 1997. 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, 1996.
Motor carrier revenue equipment gains and losses are reported as operating
expenses and costs in 1997. The 1996 Statement of Operations has been
reclassified to conform to the 1997 presentation. (See Note E.)
NOTE C - SALE OF CARDINAL FREIGHT CARRIERS, INC.
On July 15, 1997, the Company sold Cardinal for approximately $38 million in
cash. The sale resulted in a pre-tax gain, which will be reported in the third
quarter of 1997, of approximately $8.5 million, subject to adjustments in the
purchase price under the terms of the definitive agreement. The net proceeds
from the sale of Cardinal were used to pay down bank debt. Results of
operations for Cardinal are summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue ................. $ 20,345 $ 18,917 $ 39,366 $ 36,755
Operating income ........ 1,546 1,446 2,087 2,872
Net income .............. 836 739 1,027 1,481
</TABLE>
8
<PAGE> 9
ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- -------------------------------------------------------------------------------
NOTE D - INVENTORIES
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1997 1996
------------ ------------
($ THOUSANDS)
<S> <C> <C>
Finished goods .............................. $ 23,321 $ 24,029
Materials ................................... 6,050 6,267
Repair parts, supplies and other ............ 3,494 3,535
------------ ------------
$ 32,865 $ 33,831
============ ============
</TABLE>
NOTE E - OPERATING EXPENSES AND COSTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1997 1996 1997 1996
-------- -------- -------- --------
(UNAUDITED)
($ THOUSANDS)
<S> <C> <C> <C> <C>
LTL Motor Carrier Operations:
Salaries and wages .................... $204,237 $209,000 $402,216 $418,297
Supplies and expenses ................. 30,403 33,673 60,156 65,222
Operating taxes and licenses .......... 10,589 12,545 20,986 25,102
Insurance ............................. 6,214 6,625 12,824 13,151
Communications and utilities .......... 6,977 7,406 13,690 15,241
Depreciation and amortization ......... 8,348 10,704 17,466 22,760
Rents and purchased transportation .... 26,217 21,918 49,734 43,948
Other ................................. 1,957 3,916 3,796 5,818
Gain on sale of revenue equipment ..... (764) (258) (1,605) (545)
-------- -------- -------- --------
294,178 305,529 579,263 608,994
Truckload Motor Carrier Operations:
Salaries and wages .................... 7,390 6,890 14,310 12,988
Supplies and expenses ................. 3,570 3,175 7,257 6,233
Operating taxes and licenses .......... 1,788 1,797 3,543 3,570
Insurance ............................. 764 673 1,677 1,318
Communications and utilities .......... 306 234 589 467
Depreciation and amortization ......... 953 895 1,910 1,761
Rents and purchased transportation .... 3,975 3,713 7,741 7,351
Other ................................. 68 88 275 189
Loss on sale of revenue equipment ..... -- -- 2 --
-------- -------- -------- --------
18,814 17,465 37,304 33,877
Intermodal Operations:
Cost of services ...................... 40,300 38,396 78,472 70,639
Selling, administrative and general ... 6,928 5,019 13,979 13,467
Gain on sale of revenue equipment ..... -- -- -- (12)
-------- -------- -------- --------
47,228 43,415 92,451 84,094
</TABLE>
9
<PAGE> 10
ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1997 1996 1997 1996
-------- -------- -------- --------
(UNAUDITED)
($ THOUSANDS)
<S> <C> <C> <C> <C>
NOTE E - OPERATING EXPENSES AND COSTS - continued
Logistics Operations:
Cost of services ....................... 12,305 12,932 24,041 25,331
Selling, administrative and general .... 1,575 1,579 3,158 2,967
Gain (loss)on sale of revenue equipment ... 63 (5) 63 (17)
-------- -------- -------- --------
13,943 14,506 27,262 28,281
Tire Operations:
Cost of sales .......................... 30,051 31,483 54,526 56,398
Selling, administrative and general .... 10,750 5,344 20,913 13,667
-------- -------- -------- --------
40,801 36,827 75,439 70,065
Service and other: ........................ 2,266 2,440 4,492 4,776
-------- -------- -------- --------
$417,230 $420,182 $816,211 $830,087
======== ======== ======== ========
</TABLE>
NOTE F - LEGAL PROCEEDINGS AND ENVIRONMENTAL MATTERS AND OTHER EVENTS
Various legal actions, the majority of which arise in the normal course of
business, are pending. None of these legal actions are 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 138 underground tanks located in 33 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 $200,000 over the last six 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, 1997, the Company has accrued approximately $2.8 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
10
<PAGE> 11
ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- -------------------------------------------------------------------------------
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.
NOTE G - RECENT ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings Per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for computing primary earnings per share, the dilutive effect of
stock options will be excluded. The impact of Statement No. 128 on the
calculation of primary earnings per share and fully diluted earnings per share
for these quarters is not expected to be material.
In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive
Income. The Statement establishes standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The Statement is effective for the Company in 1998. The
Company does not anticipate that adoption of this Statement will have a
material impact on the current presentation of its financial statements.
In June 1997, the FASB issued Statement No. 131, Disclosures about Segments of
an Enterprise and Related Information. The Statement changes the way public
companies report segment information in annual financial statements and also
requires those companies to report selected segment information in interim
financial reports to shareholders. The proposal superseded FASB Statement No.
14 on segments. The Statement is effective for the Company in 1998. The Company
is currently evaluating the impact that the Statement will have on its segment
of business reporting.
11
<PAGE> 12
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, freight intermodal operations, truck tire
retreading and new tire sales and logistics operations. Principal subsidiaries
owned are ABF Freight System, Inc. ("ABF"), Treadco, Inc. ("Treadco"), and
Clipper Exxpress Company and affiliates ("Clipper Group") and including
CaroTrans International, Inc. ("CaroTrans"), ("Clipper Worldwide"), and
Cardinal Freight Carriers, Inc. ("Cardinal"), G.I. Trucking Company ("G.I.
Trucking"), The Complete Logistics Company ("Complete Logistics"), Integrated
Distribution, Inc., and FleetNet America, Inc., formerly Carolina Breakdown
Service, Inc.
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.
OPERATING RESULTS
The discussion and analysis of results of operations reflects information
generally prepared on a business segment basis with motor carrier operations
further separated between LTL and truckload, based on the primary business of
the subsidiary. LTL subsidiaries also handle some truckload freight. Operating
expenses include the 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 expenses (which include amortization expense),
except for interest expense and minority interest, have been allocated to
individual segments for the purpose of calculating operating profit on a
segment basis.
During 1996, the Company changed the name of its forwarding operations segment
to the intermodal operations segment.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1997 1996 1997 1996
-------- -------- -------- --------
($ THOUSANDS)
<S> <C> <C> <C> <C>
OPERATING REVENUES
LTL motor carrier operations ......... $311,489 $298,886 $608,024 $593,809
Truckload motor carrier operations ... 20,345 18,917 39,366 36,755
Intermodal operations ................ 48,629 45,001 93,418 86,767
Logistics operations ................. 12,089 14,245 24,223 27,475
Tire operations ...................... 41,014 35,505 73,108 67,118
Other ................................ 2,203 1,908 4,376 3,912
-------- -------- -------- --------
$435,769 $414,462 $842,515 $815,836
======== ======== ======== ========
</TABLE>
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- (Continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1997 1996 1997 1996
-------- -------- -------- --------
($ THOUSANDS)
<S> <C> <C> <C> <C>
OPERATING PROFIT (LOSS)
LTL motor carrier operations ......... $ 15,550 $ (7,124) $ 25,476 $(16,452)
Truckload motor carrier operations ... 1,531 1,451 2,060 2,876
Intermodal operations ................ 964 1,175 92 1,856
Logistics operations ................. (1,816) (245) (3,040) (771)
Tire operations ...................... 140 (1,328) (2,545) (3,090)
Other ................................ (253) (974) (654) 859
-------- -------- -------- --------
TOTAL OPERATING PROFIT (LOSS) ........... 16,116 (7,045) 21,389 (14,722)
INTEREST EXPENSE ........................ (6,969) (7,603) (14,234) (15,404)
MINORITY INTEREST ....................... 29 486 1,054 1,127
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES ....... $ 9,176 $(14,162) $ 8,209 $(28,999)
======== ======== ======== ========
</TABLE>
The following table sets forth for the periods indicated a summary of the
Company's operations as a percentage of revenues with other income and expenses
allocated on a business segment basis. 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 ("D.O.T.").
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
LTL MOTOR CARRIER OPERATIONS
Salaries and wages ...................... 65.6% 69.9% 66.2% 70.4%
Supplies and expenses ................... 9.8 11.3 9.9 11.0
Operating taxes and licenses ............ 3.4 4.2 3.5 4.2
Insurance ............................... 2.0 2.2 2.1 2.2
Communications and utilities ............ 2.2 2.5 2.3 2.6
Depreciation and amortization ........... 2.7 3.6 2.9 3.8
Rents and purchased transportation ...... 8.4 7.3 8.2 7.4
Other ................................... 0.6 1.3 0.6 1.0
Gain on sale of revenue equipment ....... (0.2) (0.1) (0.3) (0.1)
Other non-operating (net) ............... 0.5 0.2 0.4 0.3
----- ----- ----- -----
95.0% 102.4% 95.8% 102.8%
TRUCKLOAD MOTOR CARRIER OPERATIONS
Salaries and wages ...................... 36.3% 36.4% 36.4% 35.3%
Supplies and expenses ................... 17.5 16.8 18.4 17.0
Operating taxes and licenses ............ 8.8 9.5 9.0 9.7
Insurance ............................... 3.8 3.6 4.3 3.6
Communications and utilities ............ 1.5 1.2 1.5 1.3
Depreciation and amortization ........... 4.7 4.7 4.9 4.8
Rents and purchased transportation ...... 19.5 19.6 19.7 20.0
Other ................................... 0.4 0.5 0.6 0.5
----- ----- ----- -----
92.5% 92.3% 94.8% 92.2%
===== ===== ===== =====
</TABLE>
13
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- (Continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTERMODAL OPERATIONS
Cost of services .......................... 82.9% 78.1% 84.0% 77.7%
Selling, administrative and general ....... 14.2 18.4 15.0 19.3
Gain on sale of revenue equipment ......... -- (0.1) 0.0 (0.1)
Other non-operating (net) ................. 0.9 1.0 0.9 1.0
----- ----- ----- -----
98.0% 97.4% 99.9% 97.9%
LOGISTICS OPERATIONS
Cost of services .......................... 101.8% 90.8% 99.2% 92.2%
Selling, administrative and general ....... 13.0 11.1 13.0 10.8
(Gain) loss on sale of revenue equipment .. 0.5 0.0 0.3 (0.1)
Other non-operating (net) ................. (0.3) (0.2) 0.1 (0.1)
----- ----- ----- -----
115.0% 101.7% 112.6% 102.8%
===== ===== ===== =====
TIRE OPERATIONS
Cost of sales ............................. 73.3% 78.0% 74.6% 78.4%
Selling, administrative and general ....... 26.2 25.7 28.6 26.0
Other non-operating (net) ................. 0.2 0.0 0.3 0.2
----- ----- ----- -----
99.7% 103.7% 103.5% 104.6%
===== ===== ===== =====
</TABLE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 AS COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1996
Consolidated revenues of the Company for the three months ended June 30, 1997
were $436 million compared to $414 million for the three months ended June 30,
1996. The Company had an operating profit (segment basis) of $16.1 million for
the three months ended June 30, 1997 compared to an operating loss of $7.0
million for the three months ended June 30, 1996. For the three months ended
June 30, 1997, the Company had net income of $5.0 million or $.20 per common
share, compared to a net loss of $8.8 million, or a loss of $.51 per common
share for the three months ended June 30, 1996.
Earnings per common share for the three months ended June 30, 1997 and 1996
give consideration to preferred stock dividends of $1.1 million. Average common
shares outstanding for the three months ended June 30, 1997 were 19.6 million
compared to 19.5 million for the three months ended June 30, 1996. 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. The Company's LTL motor carrier
operations are conducted by ABF and G.I. Trucking.
Revenues from LTL motor carrier operations for the three months ended June 30,
1997 were $311 million, with an operating profit of $15.5 million compared to
revenues of $299 million and an operating loss of $7.1 million for the three
months ended June 30, 1996.
14
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- (Continued)
- -------------------------------------------------------------------------------
For the three months ended June 30, 1997, ABF accounted for 91% of LTL
revenues. ABF's revenue increased 2.5% for the three months ended June 30, 1997
compared to the same period in 1996. ABF's revenue per hundred weight increased
to $17.20 for the three months ended June 30, 1997, a 7.4% increase from the
second quarter of 1996. This increase was offset by a decrease in tonnage
resulting from ABF's emphasis on account profitability. ABF's 1997 second
quarter tonnage per day decreased 5.0% from the 1996 second quarter.
The LTL revenue increase for the three months ended June 30, 1997 can also be
attributed to G.I. Trucking's revenue increasing 29.2% over the three months
ended June 30, 1996. G.I. Trucking has continued to replace revenues lost as a
result of the ABF/Carolina Freight Carriers merger in September 1995. G.I.
Trucking's tonnage increased 25.4% for the three months ended June 30, 1997
from the same period in 1996. G.I.'s Trucking's operating ratio was 98.8% for
the second quarter of 1997 compared to 107.1% for the second quarter of 1996.
During 1996, ABF discontinued 12 of the regional distribution terminal
operations that it had acquired through the ABF/Carolina merger. These
closings, which occurred during the first two quarters of 1996, returned ABF to
its historical terminal system configuration. This reconfiguration allowed ABF
to gradually reduce its direct labor costs, improve its weight per trailer and
reduce its empty miles. ABF's operating ratio as reported to the D.O.T. was
94.0% in the second quarter of 1997 compared to 101.9% in the second quarter of
1996.
The decrease in salaries and wages as a percent of revenue was the result of
productivity improvements by both ABF and G.I. Trucking. ABF's salaries, wages
and benefits increased 3.8% annually effective April 1, 1996, pursuant to a
collective bargaining agreement with its Teamsters employees. Effective April
1, 1997, for the final year of the Teamsters' agreement, ABF's salaries, wages
and benefits increased 3.9%.
The decrease in operating supplies and expenses as a percent of revenue was due
in part to fewer miles travelled by company-owned revenue equipment which
resulted in decreased maintenance and fuel expenses. In addition, the disposal
of revenue equipment to balance equipment needs to revenue levels throughout
1996 also resulted in decreased operating supplies and expenses, decreased
operating taxes and licenses and decreased depreciation and amortization.
A decrease in depreciation and amortization also resulted from ABF's
reconfiguration of its terminal system which allowed for improved asset
utilization. Also, ABF increased its use of outside alternate modes of
transportation as reflected in the increase in rents and purchased
transportation as a percent of revenue.
TRUCKLOAD MOTOR CARRIER OPERATIONS. The Company's truckload motor carrier
operations are conducted through Cardinal.
On July 15, 1997, the Company announced the completion of the sale of Cardinal.
See Note C to the unaudited consolidated financial statements.
For the three months ended June 30, 1997, Cardinal produced revenues of $20.3
million, a 7.5% increase over the $18.9 million in revenues for the second
quarter of 1996. Operating profit for the 1997
15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- (Continued)
- -------------------------------------------------------------------------------
second quarter totalled $1.53 million, compared to $1.45 million for the 1996
second quarter. Supplies and expenses as a percent of revenue increased as a
result of higher maintenance expenses due to aging of revenue equipment.
INTERMODAL OPERATIONS. The Company's intermodal operations are conducted
primarily by Clipper Worldwide.
Revenues from the intermodal operations for the three months ended June 30,
1997 totalled $48.6 million, an increase of 8.1% over the three months ended
June 30, 1996, resulting from a 13.1% increase in revenues for the Clipper
Group and a 3.6% decrease in revenues for CaroTrans. Throughout 1996, the
Clipper Group experienced an increase in average weight per shipment, resulting
in a decline in revenue per hundredweight without a proportionate reduction in
cost per hundredweight, resulting in a decline in margins on higher revenues.
The Clipper Group is focusing on smaller shipment sizes to improve the margins,
and effective January 1, 1997, the Clipper Group implemented a 5.9% rate
increase to help offset the reduction in revenue per hundredweight.
CaroTrans expanded into some higher cost markets during 1996 and also
experienced a shift in market mix to more full-container-load freight. Also,
ocean container costs increased. These factors negatively impacted operating
results. The decline in revenue was expected due to actions taken in late 1996
and early 1997 to enhance profitability.
LOGISTICS OPERATIONS. The Company's logistics operations are conducted through
Integrated Distribution, Inc. and Complete Logistics.
Revenues for the logistics operations segment decreased by $2.1 million for the
three months ended June 30, 1997 compared to June 30, 1996. The decline in
revenues was primarily the result of the loss of customers caused by rate
increases, the lack of new business and the closing of Complete Logistics'
facility in Atlanta, Georgia.
TIRE OPERATIONS. Treadco's revenues for the three months ended June 30, 1997
increased 15.5% to $41.0 million from $35.5 million for the three months ended
June 30, 1996. For the second quarter of 1997, "same store" sales increased
6.5% and "new store" sales increased 7.4%. "Same store" sales include both
production locations and sales locations that have been in existence for the
entire periods presented. "New store" sales resulted from one new production
facility and three new sales locations. Revenues from retreading for the three
months ended June 30, 1997 increased 9.2% when compared to the same period in
1996. Revenues from new tire sales increased 16.0% for the second quarter 1997
when compared to the first quarter of 1997. Service revenues for the 1997
second quarter increased 25.9%.
Treadco faces increased competition as Bandag, Inc. has granted additional
franchises in some locations currently being served by Treadco. This has led to
increased pricing pressures in the marketplace. As anticipated, Bandag
continues to target Treadco's customers, which has caused the loss of a
substantial amount of national account business, and in many cases, the
business retained is at lower margins.
During September 1996, Treadco completed the conversion of its production
facilities that were under Bandag retread franchises to Oliver Rubber Company
("Oliver") licensed facilities. The conversion was
16
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- (Continued)
- -------------------------------------------------------------------------------
completed in phases throughout the first three quarters of 1996, with
approximately one-third of its production facilities converted each quarter.
The decrease in cost of sales as a percent of revenue resulted primarily from
lower tread rubber costs with Oliver. The increase in selling, administrative,
and general expenses resulted from several factors, including salaries and wage
expense increases for employees added for new locations, cost-of-living raises,
and the lower selling price per retread tire.
INTEREST. Interest expense was $7.0 million for three months ended June 30,
1997 compared to $7.6 million for three months ended June 30, 1996 primarily
due to a reduction of outstanding debt.
INCOME TAXES. The difference between the effective tax rate for 1997 and the
federal statutory rate resulted primarily from state income taxes, amortization
of goodwill, minority interest, and other nondeductible expenses.
SIX MONTHS ENDED JUNE 30, 1997 AS COMPARED TO THE SIX MONTHS ENDED JUNE 30,
1996
Consolidated revenues of the Company for the six months ended June 30, 1997
were $842 million compared to $816 million for the six months ended June 30,
1996. The Company had an operating profit of $21.4 million (segment basis) for
the six months ended June 30, 1997 compared to an operating loss of $14.7
million for the six months ended June 30, 1996. For the six months ended June
30, 1997, the Company had net income of $4.7 million or $.13 per common share,
compared to a net loss of $18.3 million, or a loss of $1.05 per common share
for the six months ended June 30, 1996.
Earnings per common share for the six months ended June 30, 1997 and 1996 give
consideration to preferred stock dividends of $2.2 million. Average common
shares outstanding for the six months ended June 30, 1997 and June 30, 1996
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. The Company's LTL motor carrier
operations are conducted by ABF and G.I. Trucking.
Revenues from the LTL motor carrier operations segment for the six months ended
June 30, 1997 were $608 million, with an operating profit of $25.4 million
compared to $594 million of revenue and an operating loss of $16.4 million for
the six months ended June 30, 1996.
For the six months ended June 30, 1997, ABF accounted for 90% of LTL revenues.
ABF's revenue increased .5% for the six months ended June 30, 1997 compared to
the same period in 1996. ABF's revenue per hundredweight increased to $17.17
for the six months ended June 30, 1997, a 7.0% increase from the first six
months of 1996. This increase was offset by a decrease in tonnage resulting
from ABF's emphasis on account profitability. ABF's 1997 tonnage per day for
the six months ended June 30, 1997 decreased 6.8% from the same period in 1996.
17
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- (Continued)
- -------------------------------------------------------------------------------
The LTL revenue increase for the six months ended June 30, 1997 can also be
attributed to G.I. Trucking's revenue increasing 33.1% over the six months
ended June 30, 1996. G.I. Trucking has continued to replace revenues lost as a
result of the ABF/Carolina Freight Carriers merger in September 1995. G.I.
Trucking's tonnage increased 31.8% for the six months ended June 30, 1997 from
the same period in 1996. G.I. Trucking's operating ratio was 99.7% for the six
months ended June 30, 1997 compared to 110.9% for the six months ended June 30,
1996.
During 1996, ABF discontinued 12 of the regional distribution terminal
operations that it had acquired through the ABF/Carolina merger. These
closings, which occurred during the first two quarters of 1996, returned ABF to
its historical terminal system configuration. This reconfiguration allowed ABF
to gradually reduce its direct labor costs, improve its weight per trailer and
reduce its empty miles. ABF's operating ratio as reported to the D.O.T. was
94.9% for the six months ended June 30, 1997 compared to 102.1% for the same
period in 1996.
The decrease in salaries and wages as a percent of revenue was the result of
productivity improvements by both ABF and G.I. Trucking. ABF's salaries, wages
and benefits increased 3.8% annually effective April 1, 1996, pursuant to a
collective bargaining agreement with its Teamsters employees. Effective April
1, 1997, for the final year of the Teamsters' agreement, ABF's salaries, wages
and benefits increased 3.9%.
The decrease in operating supplies and expenses as a percent of revenue was due
in part to fewer miles travelled by company-owned revenue equipment which
resulted in decreased maintenance and fuel expenses. In addition, the disposal
of revenue equipment to balance equipment needs to revenue levels throughout
1996 also resulted in decreased operating supplies and expenses, decreased
operating taxes and licenses and decreased depreciation and amortization.
A decrease in depreciation and amortization also resulted from ABF's
reconfiguration of its terminal system which allowed for improved asset
utilization. Also, ABF increased its use of outside alternate modes of
transportation as reflected in the increase in rents and purchased
transportation as a percent of revenue.
TRUCKLOAD MOTOR CARRIER OPERATIONS. The Company's truckload motor carrier
operations are conducted through Cardinal.
On July 15, 1997 the Company announced the completion of the sale of Cardinal.
See Note C of the unaudited consolidated financial statements.
For the six months ended June 30, 1997, Cardinal produced revenues of $39.4
million, a 7.1% increase over the $36.8 million in revenues for the six months
ended June 30, 1996. Supplies and expenses as a percent of revenue increased as
a result of higher maintenance expenses due to aging of revenue equipment.
Insurance expense as a percent of revenue has increased for the six months
ended June 30, 1997 when compared to the same period in 1996, reflecting
increased claims costs.
INTERMODAL OPERATIONS. The Company's intermodal operations are conducted
primarily through Clipper Worldwide.
18
<PAGE> 19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- (Continued)
- -------------------------------------------------------------------------------
Revenues from the intermodal operations segment for the six months ended June
30, 1997 increased 7.7% over the six months ended June 30, 1996, resulting from
an 11.4% increase in revenues for the Clipper Group and a .9% decrease in
revenues for CaroTrans. Throughout 1996, the Clipper Group experienced an
increase in average weight per shipment, resulting in a decline in revenue per
hundredweight without a proportionate reduction in cost per hundredweight,
resulting in a decline in margins on higher revenues. The Clipper Group is
focusing on smaller shipment sizes to improve the margins, and effective
January 1, 1997, the Clipper Group implemented a 5.9% rate increase to help
offset the reduction in revenue per hundredweight.
CaroTrans expanded into some higher cost markets during 1996 and also
experienced a shift in market mix to more full-container-load freight. Also,
ocean container costs increased. These factors negatively impacted operating
results. The decline in revenue was expected due to actions taken in late 1996
and early 1997 to enhance profitability.
LOGISTICS OPERATIONS. The Company's logistics operations are conducted through
Integrated Distribution, Inc. and Complete Logistics.
Revenues for the logistics operations segment decreased by $3.3 million for the
six months ended June 30, 1997 compared to June 30, 1996. The decline in
revenues was primarily the result of the loss of customers caused by rate
increases, the lack of new business and the closing of Complete Logistics'
facility in Atlanta, Georgia.
TIRE OPERATIONS. Treadco's revenues for the six months ended June 30, 1997
increased 8.92% to $73.1 million from $67.1 million for the six months ended
June 30, 1996. For the first six months of 1997, "same store" sales increased
1.2% and "new store" sales increased 7.7%. "Same store" sales include both
production locations and sales locations that have been in existence for the
entire periods presented. Revenues from retreading for the six months ended
June 30, 1997 increased 2.0% when compared to the same period in 1996. Revenues
from new tire sales increased 13.0% for the six months ended June 30, 1997 when
compared to the six months ended June 30, 1996. Service revenues for the first
six months of 1997 increased 22.0%.
Treadco faces increased competition as Bandag, Inc. has granted additional
franchises in some locations currently being served by Treadco. This has led to
increased pricing pressures in the marketplace. As anticipated, Bandag
continues to target Treadco's customers, which has caused the loss of a
substantial amount of national account business, and in many cases, the
business retained is at lower margins.
During September 1996, Treadco completed the conversion of its production
facilities that were under Bandag retread franchises to Oliver Rubber Company
("Oliver") licensed facilities. The conversion was completed in phases
throughout the first three quarters of 1996, with approximately one-third of
its production facilities converted each quarter.
The decrease in cost of sales as a percent of revenue resulted primarily from
lower tread rubber costs with Oliver. The increase in selling, administrative,
and general expenses resulted from several factors, including salaries and wage
expense increases for employees added for new locations, cost-of-living raises,
and the lower selling price per retread tire.
19
<PAGE> 20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- (Continued)
- -------------------------------------------------------------------------------
INTEREST. Interest expense was $14.2 million for six months ended June 30, 1997
compared to $15.4 million for six months ended June 30, 1996 primarily due to a
reduction of outstanding debt.
INCOME TAXES. The difference between the effective tax rate for 1997 and the
federal statutory rate resulted primarily from state income taxes, amortization
of goodwill, minority interest, and other nondeductible expenses.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the six months ended June 30,
1997 was $35.4 million compared to net cash provided of $1.2 million for the
six months ended June 30, 1996. The increase is due primarily to net income and
an increase in accounts payables offset in part by an increase in receivables.
In addition to cash provided by operations, sale of excess property and
equipment provided cash of $26.6 million for the six months ended June 30,
1997.
The Company is party to a $347 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 14 other participating banks. The Credit Agreement originally included
a $72 million term loan and provides for up to $275 million of revolving credit
loans (including letters of credit).
At June 30, 1997, there were $170.0 million of Revolver Advances, $9.9 million
of Term Advances and approximately $68.9 million of letters of credit
outstanding. Net proceeds from the Cardinal sale of approximately $35 million
were used to pay the Term loan in full on July 15, 1997, with the remaining
proceeds paid on the Revolver Advances.
The Credit Agreement contains various covenants which limit, among other
things, indebtedness, distributions, capital expenditures, asset sales,
restricted payments, investments, loans and advances, as well as requiring the
Company to meet certain financial tests. On January 31, 1997, the Company
obtained a first amendment to the Credit Agreement which included revised
financial covenants with which the Company was in compliance. The Credit
Agreement had previously been amended in February 1996, including a revision of
financial covenants. As a part of the February 1996 amendment, the Company
obtained an additional credit agreement which provided for borrowings of up to
$30 million. In connection with the January 1997 amendment, the available
borrowings were reduced to $15 million. The additional credit agreement was
terminated by the Company on June 30, 1997.
At June 30, 1997, the Company had approximately $36.0 million of availability
under the Credit Agreement.
Concurrent with the closing of the sale of Cardinal on July 15, 1997, the
Company and its banks agreed to a second amendment to the Credit Agreement, the
primary effect of which was to extend the maturity from August 1998 to August
1999.
Treadco is a party to a revolving credit facility with Societe Generale (the
"Treadco Credit Agreement"), providing for borrowings up to $20 million.
20
<PAGE> 21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- (Continued)
- -------------------------------------------------------------------------------
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. The
Treadco Credit Agreement was amended in March 1997, restating certain financial
requirements which the Company is in compliance with.
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 scheduled debt service
requirements.
SEASONALITY
Motor carrier operations are 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. Intermodal operations are similar to motor carrier
operations 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.
FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis Section of this report contains
forward-looking statements that are based on current expectations and are
subject to a number of risks and uncertainties. Actual results could differ
materially from current expectations due to a number of factors, including
general economic conditions; competitive initiatives and pricing pressures;
union relations; availability and cost of capital; shifts in market demand;
weather conditions; the performance and needs of industries served by the
Company's businesses; actual future costs of operating expenses such as fuel
and related taxes; self-insurance claims and employee wages and benefits;
actual costs of continuing investments in technology; and the timing and amount
of capital expenditures.
21
<PAGE> 22
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 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.
The Company's Annual Meeting of Shareholders was held on May 9, 1997. The
first proposal considered at the Annual Meeting was to elect two persons
to serve as directors of the Company. The results on this proposal are as
follows:
Directors Votes For Votes Withheld
Arthur J. Fritz 15,179,877 1,426,180
John H. Morris 15,181,294 1,424,763
The second proposal was to ratify the appointment of Ernst & Young LLP as
independent auditors for fiscal year 1997. This proposal received
16,465,563 votes for adoption, 85,682 votes against adoption, 54,812
abstentions and -0- broker non-votes.
The third proposal was to approve an amendment to the Arkansas Best
Corporation 1992 Stock Option Plan. This proposal received 9,533,597 votes
for adoption, 3,789,219 against adoption, 171,661 withheld and 3,111,580
broker non-votes.
22
<PAGE> 23
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.
Exhibit 27 - Financial Data Schedule
(b) REPORTS ON FORM 8-K.
Form 8-K dated August 1, 1997
Item 5. On July 15, 1997, Arkansas Best Corporation's (the
"Company's") existing $346,971,312 Amended and Restated Credit
Agreement with Societe Generale, Southwest Agency as Managing Agent
and Administrative Agent, NationsBank of Texas, N.A., as
Documentation Agent, and certain other banks was amended.
23
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ARKANSAS BEST CORPORATION
(Registrant)
Date: August 1, 1997 /s/ David E. Loeffler
----------------------------------
David E. Loeffler
Vice President-Treasurer, Chief
Financial Officer and Principal
Accounting Officer
24
<PAGE> 25
EXHIBIT INDEX
ARKANSAS BEST CORPORATION
The following exhibits are filed with this report.
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<S> <C>
11 Statement Re: Computation of Earnings per Share
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
ARKANSAS BEST CORPORATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1997 1996 1997 1996
------------ ------------ ------------ ------------
($ THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
PRIMARY:
Average shares outstanding ............... 19,504,473 19,512,367 19,504,473 19,514,453
Net effect of dilutive stock options -
Based on the treasury stock method
using average market price ........... 65,747 -- 34,048 --
------------ ------------ ------------ ------------
Average common shares outstanding ........ 19,570,220 19,512,367 19,538,521 19,514,453
============ ============ ============ ============
Net income (loss) ........................ $ 5,008 $ (8,786) $ 4,691 $ (18,345)
Less: Preferred stock dividends .......... 1,075 1,074 2,149 2,149
------------ ------------ ------------ ------------
Net income (loss) applicable
to common shareholders ................. $ 3,933 $ (9,860) $ 2,542 $ (20,494)
============ ============ ============ ============
Per common and common equivalent share:
Net income (loss) per common share ..... $ .20 $ (0.51) $ .13 $ (0.51)
============ ============ ============ ============
</TABLE>
Fully diluted earnings per common share are not presented, as such calculations
would be anti-dilutive.
<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,
1997 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-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 192,705
<ALLOWANCES> 5,368
<INVENTORY> 32,865
<CURRENT-ASSETS> 266,572
<PP&E> 560,975
<DEPRECIATION> 230,779
<TOTAL-ASSETS> 799,790
<CURRENT-LIABILITIES> 292,779
<BONDS> 283,104
0
15
<COMMON> 195
<OTHER-SE> 139,762
<TOTAL-LIABILITY-AND-EQUITY> 799,790
<SALES> 73,108
<TOTAL-REVENUES> 842,515
<CGS> 54,526
<TOTAL-COSTS> 816,211
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</TABLE>
