ARKANSAS BEST CORP /DE/, 10-K405, 1999-02-26

ARKANSAS BEST CORP /DE/
10-K405, 1999-02-26
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<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year December 31, 1998.

[ ] 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 71-0673405
------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

3801 Old Greenwood Road, Fort Smith, Arkansas 72903
- --------------------------------------------- -------------------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code 501-785-6000

Securities registered pursuant to Section 12(b) of the Act:

None
-------------------------------
(Title of Class)

Securities registered pursuant to Section 12(g) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
------------------------------- -------------------------------

<S> <C>
Common Stock, $.01 Par Value .................................................... Nasdaq Stock Market/NMS
$2.875 Series A Cumulative Convertible
exchangeable Preferred Stock, $.01 Par Value .................................... Nasdaq Stock Market/NMS
</TABLE>

Indicate by check mark whether the registrant (1) has 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 shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ X].

The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of February 16, 1999, was $127,123,797.

The number of shares of Common Stock, $.01 par value, outstanding as of February
16, 1999, was 19,610,213.

Documents incorporated by reference into the Form 10-K

1) The following sections of the 1998 Annual Report to Stockholders:
- Market and Dividend Information
- Selected Financial Data
- Management's Discussion and Analysis of Financial Condition and
Results of Operations
- Quantitative and Qualitative Disclosures About Market Risk
- Consolidated Financial Statements

2) Proxy Statement for the Annual Stockholder's meeting to be held May 6,
1999.

<PAGE> 2

ARKANSAS BEST CORPORATION
FORM 10-K

TABLE OF CONTENTS

ITEM PAGE
NUMBER NUMBER

PART I

<S> <C> <C>
Item 1. Business .................................................................................... 3
Item 2. Properties .................................................................................. 12
Item 3. Legal Proceedings ........................................................................... 13
Item 4. Submission of Matters to a Vote of Security Holders ......................................... 13

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters ....................... 14
Item 6. Selected Financial Data ..................................................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations .................................................................. 14
Item 7A. Quantitative and Qualitative Disclosures About Market Risk................................... 14
Item 8. Financial Statements and Supplementary Data ................................................. 14
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ........................................................ 14

PART III

Item 10. Directors and Executive Officers of the Registrant .......................................... 15
Item 11. Executive Compensation ...................................................................... 15
Item 12. Security Ownership of Certain Beneficial Owners and Management .............................. 15
Item 13. Certain Relationships and Related Transactions .............................................. 15

PART IV

Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K ............................. 16
</TABLE>

<PAGE> 3

PART I

Except for historical information contained herein, the following discussion
contains forward-looking statements that involve risks and uncertainties.
Arkansas Best Corporation's (the "Company") actual results could differ
materially from those discussed here. Factors that could cause or contribute to
such differences include, but are not limited to, those discussed in Item 1,
"Business."

ITEM 1. BUSINESS

(A) GENERAL DEVELOPMENT OF BUSINESS

CORPORATE PROFILE Arkansas Best Corporation (the "Company") is a diversified
holding company engaged through its subsidiaries primarily in motor carrier
transportation operations, intermodal and ocean transportation operations, and
truck tire retreading and new tire sales (see Note N of the Consolidated
Financial Statements appearing on pages 38 through 40 of the registrant's annual
report). Principal subsidiaries are ABF Freight System, Inc. ("ABF"); Treadco,
Inc. ("Treadco"); Clipper Exxpress Company and related companies ("Clipper
Domestic"); CaroTrans International, Inc. ("Clipper International"); G.I.
Trucking Company ("G.I. Trucking"); FleetNet America, Inc.; and, until July 15,
1997, Cardinal Freight Carriers, Inc., Inc. ("Cardinal").

HISTORICAL BACKGROUND The Company was publicly owned from 1969 until 1988, when
it was acquired in a leveraged buyout by a corporation organized by Kelso &
Company, L.P. ("Kelso").

In 1992, the Company completed an initial public offering of Common Stock par
value $.01 (the "Common Stock"). The Company also repurchased substantially all
the remaining shares of Common Stock beneficially owned by Kelso, thus ending
Kelso's investment in the Company.

In 1993, the Company completed a public offering of 1,495,000 shares of
preferred stock ("Preferred Stock").

In August 1995, pursuant to a tender offer, a wholly owned subsidiary of the
Company purchased the outstanding shares of common stock of WorldWay Corporation
("WorldWay"), at a price of $11 per share (the "Acquisition"). WorldWay was a
publicly-held company engaged through its subsidiaries in motor carrier
operations. The total purchase price of WorldWay amounted to approximately $76
million. Assets acquired had an estimated fair value of approximately $313.0
million and liabilities assumed had a fair value of approximately $252.0
million.

(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

The response to this portion of Item 1 is included in "Note N - Operating
Segment Data" appearing on pages 38 through 40 of the registrant's Annual Report
to Stockholders for the year ended December 31, 1998, and is incorporated herein
by reference under Item 14.

<PAGE> 4

ITEM 1. BUSINESS-continued

GENERAL
During the periods being reported on, the Company operated in six defined
reportable operating segments: 1) ABF; 2) G.I. Trucking; 3) Cardinal, which was
sold in July 1997; 4) Clipper Domestic; 5) Clipper International; and 6)
Treadco. Note N to the Consolidated Financial Statements contains additional
information regarding the Company's operating segments and appears on pages 38
through 40 of the registrant's Annual Report to Stockholders for the year ended
December 31, 1998, and is incorporated herein by reference under Item 14.

DISCONTINUED OPERATIONS
As of June 30, 1997 and prior periods since 1995, the Company was engaged in
providing logistics services, including warehousing and distribution, through
two wholly owned subsidiaries, The Complete Logistics Company ("CLC") and
Integrated Distribution, Inc. ("IDI"). CLC was sold on August 8, 1997. In
September, 1997, the Company completed a formal plan to exit the logistics
segment by disposing of IDI. The Company closed the sale of IDI on October 31,
1997.

EMPLOYEES
At December 31, 1998, the Company and its subsidiaries had a total of 14,829
employees of which approximately 62% are members of a labor union.

MOTOR CARRIER OPERATIONS

LESS-THAN-TRUCKLOAD MOTOR CARRIER OPERATIONS

GENERAL
The Company's less-than-truckload ("LTL") motor carrier operations are conducted
through ABF, ABF Freight System (B.C.), Ltd. ("ABF-BC"), ABF Freight System
Canada, Ltd. ("ABF-Canada"), ABF Cartage, Inc. ("Cartage"), and Land-Marine
Cargo, Inc. ("Land-Marine") (collectively "ABF") and G.I. Trucking Company
("G.I. Trucking").

LTL carriers offer services to shippers transporting a wide variety of large and
small shipments to geographically dispersed destinations. LTL carriers pick up
small shipments throughout the vicinity of a local terminal and consolidate them
at the terminal. Shipments are consolidated by destination for transportation by
intercity units to their destination cities or to distribution centers.
Shipments from various locations can be reconsolidated for transportation to
distant destinations, other distribution centers or local terminals. Once
delivered to a local terminal, a shipment is delivered to the customer by local
trucks operating from the terminal. In some cases, when a sufficient number of
different shipments at one origin terminal are going to a common destination,
they can be combined to make a full trailerload. A trailer is then dispatched to
that destination without the freight having to be rehandled.

COMPETITION, PRICING AND INDUSTRY FACTORS
The trucking industry is highly competitive. The Company's LTL motor carrier
subsidiaries actively compete for freight business with other national, regional
and local motor carriers and, to a lesser extent, with private carriage, freight
forwarders, railroads and airlines. Competition is based primarily on personal
relationships,

4
<PAGE> 5

ITEM 1. BUSINESS-continued

price and service. In general, most of the principal motor carriers use similar
tariffs to rate interstate shipments. Competition for freight revenue, however,
has resulted in discounting which effectively reduces prices paid by shippers.
In an effort to maintain and improve its market share, the Company's LTL motor
carrier subsidiaries offer and negotiate various discounts.

The trucking industry, including the Company's LTL motor carrier subsidiaries,
is directly affected by the state of the overall economy. The trucking industry
faces rising costs including government regulations on safety, maintenance and
fuel economy. In addition, seasonal fluctuations also affect tonnage to be
transported. Freight shipments, operating costs and earnings also are affected
adversely by inclement weather conditions.

INSURANCE AND SAFETY
Generally, claims exposure in the motor carrier industry consists of cargo loss
and damage, auto liability, property damage and bodily injury and workers'
compensation. The Company's motor carrier subsidiaries are effectively
self-insured for the first $100,000 of each cargo loss, $300,000 of each
workers' compensation loss and $200,000 of each general and auto liability loss,
plus an aggregate of $750,000 of auto liability losses between $200,000 and
$500,000. The Company maintains insurance adequate to cover losses in excess of
such amounts. The Company has been able to obtain adequate coverage and is not
aware of problems in the foreseeable future which would significantly impair its
ability to obtain adequate coverage at comparable rates for its motor carrier
operations.

ABF FREIGHT SYSTEM, INC.
Headquartered in Fort Smith, Arkansas, ABF is the largest subsidiary of the
Company. ABF currently accounts for approximately 71% of the Company's
consolidated revenues. ABF is the fourth largest national LTL motor carrier in
the United States, based on revenues for 1998 as reported to the U.S. Department
of Transportation ("D.O.T."). ABF provides direct service to over 98.7% of the
cities in the United States having a population of 25,000 or more. ABF provides
interstate and intrastate direct service to more than 43,000 points through 310
terminals in all 50 states, Canada and Puerto Rico. Through an alliance and
relationships with trucking companies in Mexico, ABF provides motor carrier
services to customers in that country as well. ABF was incorporated in Delaware
in 1982 and is the successor to Arkansas Motor Freight, a business originally
organized in 1935.

ABF concentrates on long-haul transportation of general commodities freight,
involving primarily LTL shipments. General commodities include all freight
except hazardous waste, dangerous explosives, commodities of exceptionally high
value, commodities in bulk and those requiring special equipment. ABF's general
commodities shipments differ from shipments of bulk raw materials which are
commonly transported by railroad, pipeline and water carrier.

General commodities transported by ABF include, among other things, food,
textiles, apparel, furniture, appliances, chemicals, non-bulk petroleum
products, rubber, plastics, metal and metal products, wood, glass, automotive
parts, machinery and miscellaneous manufactured products. During the year ended
December 31, 1998, no single customer accounted for more than 3% of ABF's
revenues, and the ten largest customers accounted for less than 8% of ABF's
revenues.

EMPLOYEES
At December 31, 1998, ABF employed 11,767 persons. Employee compensation and
related costs are the largest components of ABF's operating expenses. In 1998,
such costs amounted to 66.5% of ABF's

5
<PAGE> 6

ITEM 1. BUSINESS-continued

revenues. Approximately 79% of ABF's employees are covered under a collective
bargaining agreement with the International Brotherhood of Teamsters ("IBT").
The IBT voted in favor of a new labor contract on April 9, 1998. The contract
was effective April 1, 1998, and is for a five-year term. The contract provides
for an average annual wage and benefit increase during its term of approximately
2.3%, including a lump-sum payment of $750 for the first contract year for all
active employees who are IBT members. During 1997 and 1996, employee wages and
benefits increased an average of 3.9% and 3.8%, respectively. Under the terms of
the National Agreement, ABF is required to contribute to various multiemployer
pension plans maintained for the benefit of its employees who are members of the
IBT. Amendments to the Employee Retirement Income Security Act of 1974 ("ERISA")
pursuant to the Multiemployer Pension Plan Amendments Act of 1980 (the "MPPA
Act") substantially expanded the potential liabilities of employers who
participate in such plans. Under ERISA, as amended by the MPPA Act, an employer
who contributes to a multiemployer pension plan and the members of such
employer's controlled group are jointly and severally liable for their
proportionate share of the plan's unfunded liabilities in the event the employer
ceases to have an obligation to contribute to the plan or substantially reduces
its contributions to the plan (i.e., in the event of plan termination or
withdrawal by the Company from the multiemployer plans). Although the Company
has no current information regarding its potential liability under ERISA in the
event it wholly or partially ceases to have an obligation to contribute or
substantially reduces its contributions to the multiemployer plans to which it
currently contributes, management believes that such liability would be
material. The Company has no intention of ceasing to contribute or of
substantially reducing its contributions to such multiemployer plans.

Four of the five largest LTL carriers are unionized and generally pay comparable
amounts for wages and benefits. Non-union companies typically pay employees less
than union companies. Due to its national reputation and its high pay scale, ABF
has not historically experienced any significant difficulty in attracting or
retaining qualified drivers.

G.I. TRUCKING COMPANY
Headquartered in La Mirada, California, G.I. Trucking is a non-union regional
LTL motor carrier. G.I. Trucking offers one to three-day regional service
through 75 service centers in 15 western states including Hawaii and Alaska.
G.I. Trucking accounted for approximately 8% of the Company's consolidated
revenues. During the year ended December 31, 1998, G.I.'s largest customer and
its suppliers accounted for more than 22% of G.I. Trucking's revenues. G.I.
Trucking expanded its operations during 1998, opening new terminal locations in
Oklahoma City, OK; Tulsa, OK; Albuquerque, NM; El Paso, TX; and Kansas City, KS.
G.I. Trucking also added a southern California facility to relieve congestion at
their La Mirada, CA distribution center.

G.I. provides transcontinental service through a partnership with three other
regional carriers through six major hub terminals located in the Midwest and the
East Coast. Customer service is enhanced through EDI communications between the
partners.

G.I. Trucking's linehaul structure utilizes company solo drivers, company
sleeper teams, contract carriers and one-way carriers, providing flexibility in
maintaining customer service and lane balance. G.I. Trucking's family of
electronic services include EDI information, customer FAX capabilities, tracing,
rating and reporting interface.

6
<PAGE> 7

ITEM 1. BUSINESS-continued

CARDINAL
The Company's truckload motor carrier operations were conducted primarily
through Cardinal. On July 15, 1997, the Company closed the sale of Cardinal.

INTERMODAL AND OCEAN OPERATIONS

GENERAL
The Company's intermodal and ocean operations are conducted through Clipper
Domestic and Clipper International, headquartered in Lemont, Illinois. Clipper
Domestic operates through two business units: Clipper LTL and Clipper Freight
Management ("CFM"), and offers domestic intermodal freight services, utilizing a
variety of transportation modes including rail, over-the-road and air. Clipper
International provides international ocean freight services as a non-vessel
operating common carrier.

COMPETITION, PRICING AND INDUSTRY FACTORS
Clipper Domestic and Clipper International operate in highly competitive
environments. Competition is based on the most consistent transit times, freight
rates, damage-free shipments and on-time delivery of freight. Clipper Domestic
competes with other intermodal operations, freight forwarders, railroads and
airlines, as well as with other national and regional LTL and truckload motor
carrier operations.

Intermodal and ocean operations are akin to motor carrier operations in terms of
market conditions, with revenues being weaker in the first quarter and stronger
in the months of September and October. Freight shipments, operating costs and
earnings are also affected by inclement weather.

The reliability of rail services, a critical component of Clipper Domestic's
ability to provide service to its customers, was a significant problem during
1998, causing Clipper Domestic to experience lost revenue and higher operating
costs. In the fourth quarter of 1998, Clipper Domestic experienced some
improvements in the on-time service level of its rail suppliers. However, rail
service remained inconsistent and has not returned to acceptable levels across
all lanes. Clipper Domestic plans to pursue business lost as a result of rail
service issues. However, truckload carriers which benefited from rail problems
can be expected to compete aggressively to retain this business. Accordingly,
improvements in Clipper Domestic's results can be expected to occur gradually.

Exports are the primary source of Clipper International's revenues. Economic
problems in Asia, South America, and to a lesser extent, in other regions of the
world have adversely impacted U.S. exports to these regions. Imbalance in
export-import freight has resulted in reduced costs for ocean transportation of
exports as shipping lines compete for the smaller volume of traffic. In
addition, lower export volumes have created substantial price competition in
Clipper International's business, as all participants attempt to maintain
freight volume and revenue.

It is not currently expected that the adverse market conditions described will
change significantly in the immediate future. Therefore, Clipper International
will continue to experience difficult operating conditions in 1999.

CLIPPER DOMESTIC
Clipper Domestic's revenues accounted for approximately 7% of consolidated
revenues for 1998.

7
<PAGE> 8

ITEM 1. BUSINESS-continued

CLIPPER LTL
Clipper LTL operates primarily through Clipper Exxpress Company ("Clipper
Exxpress"). Management believes Clipper Exxpress is one of the ten largest
intermodal consolidators and forwarders of LTL shipments in the United States.
Clipper LTL accounts for 37% of Clipper Domestic's 1998 revenues.

Clipper LTL's collection and distribution network consists of 24 service centers
geographically dispersed throughout the United States. Clipper LTL's selection
of markets depends on size (lane density), availability of quality rail service
and truck line-haul service, length of haul and competitor profile. Traffic
moving between its ten most significant market pairs generates approximately 30%
of Clipper's LTL revenue. A majority all of Clipper's LTL revenue is derived
from long-haul, metro area-to-metro area transportation.

Although pickup and delivery and terminal handling is performed by agents,
Clipper LTL has an operations and customer service staff located at or near many
of its principal agents' terminals to monitor service levels and provide an
interface between customers and agents.

CFM
CFM provides services through Agricultural Express of America, Inc. (d/b/a/
Clipper Controlled Logistics), Agile Freight System, Inc. (d/b/a Clipper Highway
Services), and partially through Clipper Exxpress Company, accounting for
approximately 63% of Clipper Domestic's revenues during 1998.

CFM provides an extensive list of transportation services such as intermodal and
truck brokerage, warehousing, consolidation, transloading, repacking, and other
ancillary services. As an intermodal marketing operation, CFM arranges for loads
to be picked up by a drayage company, tenders them to a railroad, and then
arranges for a drayage company to deliver the shipment on the other end of the
move. CFM's role in this process is to select the most cost-effective means to
provide quality service, and to expedite movement of the loads at various
interface points to ensure seamless door-to-door transportation.

Clipper Controlled Logistics provides high quality, temperature-controlled
intermodal service to fruit and produce brokers, growers, shippers and receivers
and supermarket chains, primarily from the West to the Midwest, Canada, and the
eastern United States. At December 31, 1998, Clipper Controlled Logistics owns
or leases 517 temperature-controlled trailers that it deploys in the seasonal
fruit and vegetable markets. These markets are carefully selected in order to
take advantage of various seasonally high rates, which peak at different times
of the year. By focusing on the spot market for produce transport, Clipper
Controlled Logistics is able to generate, on average, a higher revenue per load
compared to standard temperature-controlled carriers that pursue more stable
year-round temperature-controlled freight. During 1998, Clipper Controlled
Logistics expanded its service offering to include transportation of non-produce
loads requiring protective services and leasing trailers during non-peak produce
seasons.

Clipper Highway Services is a non-asset intensive, premium service, long-haul
truckload carrier that primarily utilizes two-person driver teams provided by
contractors and provides truck brokering. Clipper Highway Services provides
expedited truckload service in tightly focused long-haul lanes that originate or
terminate near a Clipper LTL market. Clipper Highway Services moves full
truckloads of consolidated LTL shipments for Clipper LTL, as well as for other
shippers.

CLIPPER INTERNATIONAL
Clipper International's revenues accounted for approximately 3% of consolidated
revenues for 1998. Clipper International offers services through CaroTrans
International, Inc. ("CaroTrans").

8
<PAGE> 9

ITEM 1. BUSINESS-continued

CaroTrans is a neutral, non-vessel operating common carrier ("NVOCC"), providing
import and export, door-to-door and door-to-port service to more than 140
countries with 250 ports of discharge.

Overseas, Clipper International is recognized as a leader in international
transportation between North America and many worldwide destinations. In
addition to nine offices on the U.S. mainland, Clipper International maintains
offices in Rotterdam, Holland; United Kingdom; Singapore and San Juan. These
strategically located offices direct the operations and sales activities of the
carefully selected agents within its geographic region.

TREADCO

GENERAL
The Company's tire operations are conducted by Treadco, Inc. a 49% owned
subsidiary. Treadco is the nation's largest independent tire retreader for the
trucking industry and the fourth largest commercial truck tire dealer. Treadco
has 56 locations in the U.S. located primarily in the south, southwest, lower
midwest and west. Treadco's revenues currently account for approximately 11% of
the Company's consolidated revenues.

On January 22, 1999, the Company submitted a formal proposal to Treadco's Board
of Directors under which the outstanding shares of Treadco's common stock not
owned by the Company would be acquired for $9.00 per share in cash. The proposal
has the support of Shapiro Capital Management Company, Inc., Treadco's largest
independent stockholder, which beneficially owns 1,132,775 shares, or
approximately 22% of the common stock of Treadco.

Treadco's Board has formed a special committee of independent directors to
consider the Company's proposal. The proposal to acquire the remaining
outstanding shares of Treadco is subject to the approval of Treadco Board's
special committee and the negotiation of a definitive agreement, which will
include customary conditions to closing.

COMPETITION, PRICING AND INDUSTRY FACTORS
The trucking industry faces rising costs including government regulations on
safety, maintenance and fuel economy. As a result, trucking companies
continually seek ways to obtain more mileage from new tires and less expensive
ways to replace old tires. Retreading tires is significantly less expensive than
buying new tires. The retread tire market is highly competitive. Historically,
Treadco was a Bandag Incorporated ("Bandag") franchisee and competed primarily
against smaller independent dealers in a highly fragmented market. Following the
termination of the Bandag franchise agreements in 1996, Treadco has seen
increased competition as Bandag has granted additional franchises in some
locations currently being served by Treadco. This new competition has led to
increased pricing pressures in the marketplace. Bandag also continues to target
Treadco's customers which has caused the loss of a substantial amount of
national account business. Treadco's ability to offer excellent service to its
niche market customers, competitive pricing, central administration and
purchasing for its production facilities appeal to fleet customers and enables
Treadco to compete effectively against these dealers.

The new truck tire business is also highly competitive and includes various
manufacturers, dealers and retailers. Generally, demand for new truck tires is
closely related to the strength of regional and, ultimately national economies.

9
<PAGE> 10

ITEM 1. BUSINESS-continued

Treadco experiences reduced demand for retreads and new truck tires in the
winter months due to more difficult driving and tire maintenance conditions
resulting from the inclement weather. Treadco's operations are somewhat
seasonal, with the third quarter of the calendar year generally having the
highest sales.

INSURANCE AND SAFETY
Generally, claims exposure for Treadco consists of general and auto liability,
property damage and bodily injury and workers' compensation. Treadco is
effectively self-insured for the first $300,000 of each workers' compensation
loss and $200,000 of each general and auto liability loss. Treadco maintains
insurance adequate to cover losses in excess of such amounts. Treadco has been
able to obtain adequate coverage and is not aware of problems in the foreseeable
future which would significantly impair its ability to obtain adequate coverage
at comparable rates for its tire operations.

BUSINESS OPERATIONS
Treadco, Inc. uses the precure process to retread tires at all of its locations.
The precure process uses a specific tread design measured from strips of tread
rubber, cut and applied to the casing. A flexible rubber envelope then seals
each tire which is placed in a bonding chamber. Air pressure in the chamber
creates uniform force, applying pressure on all points of the tire. The tread is
bonded to the casing by using a combination of heat and air pressure to cure the
encased tire in the bonding chamber.

The principal raw material in manufacturing retreaded truck tires is synthetic
rubber, which is comprised of styrene and butadiene, both petroleum derivatives.
Thus, the commodity price of oil directly affects the price of the Company's
principal raw materials. However, because retreading uses roughly one-third of
the amount of oil that the manufacture of new tires requires, retreads maintain
a competitive price advantage in comparison to new tires, particularly when oil
prices increase.

In October 1995, Treadco reached an agreement with Oliver Rubber Company
("Oliver") to be a supplier of equipment and related materials for Treadco's
truck tire precure retreading business. Oliver agreed to supply Treadco with
retreading equipment and related materials for all production facilities which
ceased being Bandag franchised locations. During the first three quarters of
1996, Treadco converted its production facilities that were under Bandag retread
franchises to Oliver licensed facilities.

Under the Oliver license agreements, Treadco purchases from Oliver precured
tread rubber and bonding cushion gum and PNEUFLEX tread rubber (collectively
"Rubber Products"). Treadco's obligation to purchase Rubber Products from Oliver
is subject to (i) Oliver's continuing to produce Rubber Products of no less
quality and durability than it presently produces, and (ii) Oliver's overall
pricing program for Treadco.

Treadco's sales and marketing strategy is based on its service strengths,
network of production and sales facilities and strong regional reputation. None
of Treadco's customers for retreads and new tires, including ABF or other
affiliates, represent more than 3% of Treadco's revenues for 1998.

ENVIRONMENTAL AND OTHER GOVERNMENT REGULATIONS
The Company is subject to federal, state and local environmental laws and
regulations relating to, among other things, contingency planning for spills of
petroleum products, and its disposal of waste oil. In addition, the Company is
subject to significant regulations dealing with underground fuel storage tanks.
The Company's subsidiaries store some fuel for their tractors and trucks in
approximately 91 underground

10
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ITEM 1. BUSINESS-continued

tanks located in 26 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 were adopted by the
United States Environmental Protection Agency ("EPA") that required the Company
to upgrade its underground tank systems by December 1998. The Company
successfully completed the upgrades prior to the deadline set by the EPA.

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.

Treadco is affected by a number of governmental regulations relating to the
development, production and sale of retreaded and new tires, the raw materials
used to manufacture such products (including petroleum, styrene and butadiene),
and to environmental and safety matters. In addition, the retreading process
creates rubber particulate, or "dust," which requires gathering and disposal,
and Treadco disposes of used and nonretreadable tire casings, both of which
require compliance with environmental and disposal laws. In some situations,
Treadco could be liable for disposal problems, even if the situation resulted
from previous conduct of Treadco that was lawful at the time or from improper
conduct of, or conditions caused by, persons engaged by Treadco to dispose of
particulate and discarded casings. Such cleanup costs or costs associated with
compliance with environmental laws applicable to the tire retreading process
could be substantial and have a material adverse effect on Treadco's financial
condition. Treadco believes that it is in substantial compliance with all laws
applicable to such operations, however, and is not aware of any situation or
condition that could reasonably be expected to have a material adverse effect on
Treadco's operations or financial condition.

As of December 31, 1998, the Company has accrued approximately $3.6 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. Accruals for environmental liabilities
are included in the balance sheet as accrued expenses.

11
<PAGE> 12

ITEM 2. PROPERTIES

The Company owns its executive office building in Fort Smith, Arkansas which
contains approximately 196,000 square feet.

ABF

ABF currently operates out of 310 terminal facilities of which it owns 78,
leases 52 from an affiliate and leases the remainder from non-affiliates. ABF's
principal terminal facilities are as follows:

<TABLE>
<CAPTION>
No. of Doors Square Footage
------------ --------------
<S> <C> <C>
Owned:
Dayton, Ohio 315 218,000
Ellenwood, Georgia 228 109,845
South Chicago, Illinois 228 109,650
Carlisle, Pennsylvania (two structures) 241 82,960
Dallas, Texas 108 72,500

Leased from affiliate, Transport Realty:
North Little Rock, Arkansas 195 82,050
Pico Rivera, California 94 22,500

Leased from non-affiliate:
Winston-Salem, North Carolina 150 95,700
</TABLE>

G.I. TRUCKING

G.I. Trucking currently operates out of 75 terminal facilities of which 32 are
company operated and 43 are agent terminals. G.I. Trucking owns 9 facilities,
leases 3 facilities from an affiliate and the remainder of the service centers
are leased from non-affiliates.

CLIPPER DOMESTIC

Clipper Domestic operates from 24 service centers, geographically dispersed
throughout the United States. Clipper Domestic leases all of its facilities.

CLIPPER INTERNATIONAL

Clipper International operates from nine domestic and three international
locations, all of which are leased facilities.

TREADCO

Treadco currently operates from 56 locations. Treadco owns 16 production and 8
sales facilities and leases the remainder of its production and sales
facilities from non-affiliates.

12
<PAGE> 13

ITEM 3. LEGAL PROCEEDINGS

Various legal actions, the majority of which arise in the normal course of
business, are pending. None of these legal actions is expected to have a
material adverse effect on the Company's financial condition or results of
operations. The Company maintains liability insurance against most risks arising
out of the normal course of its business.

On October 30, 1995, Treadco filed a lawsuit in Arkansas State Court, alleging
that Bandag Incorporated ("Bandag") and certain of its officers and employees
had 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. 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 ruled
that under terms of Treadco's franchise agreements with Bandag, all of the
issues involved in Treadco's lawsuit against Bandag were to be decided by
arbitration. The arbitration hearing began September 21, 1998, and in December
1998, prior to the completion of the arbitration, Treadco entered into a
settlement with Bandag, and certain of Bandag's current and former employees.
Under the settlement terms, Treadco received a one-time payment of $9,995,000 in
settlement of all the Company's claims. The settlement resulted in other income
for Treadco of $9,124,000. The settlement payment was used to reduce Treadco's
outstanding borrowings under its Revolving Credit Agreement.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of stockholders during the fourth quarter
ended December 31, 1998.

13
<PAGE> 14

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The information set forth under the Caption "Market and Dividend Information" on
page 5 of the registrant's Annual Report to Stockholders for the year ended
December 31, 1998, is incorporated by reference under Item 14 herein.

ITEM 6. SELECTED FINANCIAL DATA

The information set forth under the caption "Selected Financial Data" on page 4
of the registrant's Annual Report to Stockholders for the year ended December
31, 1998, is incorporated by reference under Item 14 herein.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

"Management's Discussion and Analysis of Financial Condition and Results of
Operations," appearing on pages 6 through 17 of the registrant's Annual Report
to Stockholders for the year ended December 31, 1998, is incorporated by
reference under Item 14 herein.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

"Quantitative and Qualitative Disclosures About Market Risk," appearing on page
18 of the registrant's Annual Report to Stockholders for the year ended December
31, 1998, is incorporated by reference under Item 14 herein.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The report of independent auditors, consolidated financial statements and
supplementary information, appearing on pages 19 through 44 of the registrant's
Annual Report to Stockholders for the year ended December 31, 1998, are
incorporated by reference under Item 14 herein.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

14
<PAGE> 15

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The sections entitled "Election of Directors," "Directors of the Company,"
"Board of Directors and Committees," "Executive Officers of the Company" and
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's Proxy
Statement for the Annual Meeting of Stockholders to be filed by the Company with
the Securities and Exchange Commission ("Definitive Proxy Statement"), set forth
certain information with respect to the directors, nominees for election as
directors and executive officers of the Company and are incorporated herein by
reference.

ITEM 11. EXECUTIVE COMPENSATION

The sections entitled "Executive Compensation," "Aggregated Options/SAR
Exercises in Last Fiscal Year and Fiscal Year-End Options/SAR Values,"
"Options/SAR Grants Table," "Executive Compensation and Development Committee
Interlocks and Insider Participation," "Retirement and Savings Plan,"
"Employment Contracts and Termination of Employment and Change in Control
Arrangements" and the paragraph concerning directors' compensation in the
section entitled "Board of Directors and Committees" in the Company's Definitive
Proxy Statement, set forth certain information with respect to compensation of
management of the Company and are incorporated herein by reference, provided,
however, the information contained in the sections entitled "Report on Executive
Compensation by the Executive Compensation and Development Committee and Stock
Option Committee" and "Stock Performance Graph" are not incorporated herein by
reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The section entitled "Principal Stockholders and Management Ownership" in the
Company's Definitive Proxy Statement sets forth certain information with respect
to the ownership of the Company's voting securities and is incorporated herein
by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The section entitled "Certain Transactions and Relationships" in the Company's
Definitive Proxy Statement for the annual meeting of stockholders to be held on
May 6, 1999, sets forth certain information with respect to relations of and
transactions by management of the Company and is incorporated herein by
reference.

15
<PAGE> 16

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)(1) FINANCIAL STATEMENTS

The following information appearing in the 1998 Annual Report to Stockholders is
incorporated by reference in this Form 10-K Annual Report as Exhibit (13):
<TABLE>
<CAPTION>
Page
<S> <C>
Market for Registrant's Common Equity and
Related Stockholder Matters 5
Selected Financial Data 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-17
Quantitative and Qualitative Disclosures About Market Risk 18
Consolidated Financial Statements 19-44
Report of Independent Auditors 19
Quarterly Financial Information 43
</TABLE>

With the exception of the aforementioned information, the 1998 Annual Report to
Stockholders is not deemed filed as part of this report. Financial statements
other than those listed are omitted for the reason that they are not required or
are not applicable. The following additional financial data should be read in
conjunction with the consolidated financial statements in such 1998 Annual
Report to Stockholders.

<TABLE>
<CAPTION>
(a)(2) FINANCIAL STATEMENT SCHEDULES
Page
<S> <C>
For the years ended December 31, 1998, 1997 and 1996:
Schedule II - Valuation and Qualifying Accounts 18
</TABLE>

Schedules other than those listed are omitted for the reason that they are not
required or are not applicable, or the required information is shown in the
financial statements or notes thereto.

(a)(3) EXHIBITS

The exhibits filed with this report are listed in the Exhibit Index which is
submitted as a separate section of this report.

(b) REPORTS ON FORM 8-K

None

See Item 14(a)(3) above.

(d) FINANCIAL STATEMENTS SCHEDULES

The response to this portion of Item 14 is submitted as a separate
section of this report.

16
<PAGE> 17

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

ARKANSAS BEST CORPORATION

BY: /s/ David E. Loeffler
-----------------------------------
David E. Loeffler
Vice President - Chief Financial
Officer and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ William A. Marquard Chairman of the Board, Director 2/23/99
- ------------------------------------- ---------------------------
William A. Marquard

/s/ Robert A. Young, III Director, Chief Executive Officer 2/23/99
- ------------------------------------- and President (Principal ---------------------------
Robert A. Young, III Executive Officer)

/s/ David E. Loeffler Vice President - Chief Financial Officer 2/23/99
- ------------------------------------- and Treasurer ---------------------------
David E. Loeffler

/s/ Frank Edelstein Director 2/23/99
- ------------------------------------- ---------------------------
Frank Edelstein

/s/ Arthur J. Fritz Director 2/23/99
- ------------------------------------- ---------------------------
Arthur J. Fritz

/s/ John H. Morris Director 2/23/99
- ------------------------------------- ---------------------------
John H. Morris

/s/ Alan. J. Zakon Director 2/22/99
- ------------------------------------- ---------------------------
Alan J. Zakon
</TABLE>

17
<PAGE> 18

SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
ARKANSAS BEST CORPORATION

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ----------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
---------
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER ACCOUNTS DEDUCTIONS - BALANCE AT
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE END OF PERIOD
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1998:
Deducted from asset accounts:
Allowance for doubtful
accounts receivable $ 7,603 $ 3,957 $ 2,991(A) $ 7,030(B) $ 7,521
=========================================== ======= ======= ======= ======= =======

Year Ended December 31, 1997:
Deducted from asset accounts:
Allowance for doubtful $ 7,926(B)
accounts receivable $ 5,077 $ 7,245 $ 3,270(A) 63(D) $ 7,603
=========================================== ======= ======= ======= ======= =======

Year Ended December 31, 1996:
Deducted from asset accounts:
Allowance for doubtful 17,755(B)
accounts receivable $19,166 $ 8,408 $ 3,932(A) $ 8,674(C) $ 5,077
=========================================== ======= ======= ======= ======= =======
</TABLE>

Note A - Recoveries of amounts previously written off.

Note B - Uncollectible accounts written off.

Note C - Adjustment to WorldWay balance at date of acquisition.

Note D - The allowance for doubtful accounts for Cardinal Freight Carriers, Inc.
as of the date of sale.

NOTE: ALL INFORMATION REFLECTED IN THE ABOVE TABLE HAS BEEN RESTATED TO
EXCLUDE VALUATION ALLOWANCES OF DISCONTINUED OPERATIONS.

18
<PAGE> 19
FORM 10-K -- ITEM 14(c)
EXHIBIT INDEX
ARKANSAS BEST CORPORATION

The following exhibits are filed with this report or are incorporated by
reference to previously filed material.

EXHIBIT
NO.

3.1* Restated Certificate of Incorporation of the Company (previously
filed as Exhibit 3.1 to the Company's Registration Statement on Form
S-1 under the Securities Act of 1933 filed with the Commission on
March 17, 1992, Commission File No. 33-46483, and incorporated
herein by reference).

3.2* Amended and Restated Bylaws of the Company (previously filed as
Exhibit 3.2 to the Company's Registration Statement on Form S-1
under the Securities Act of 1933 filed with the Commission on March
17, 1992, Commission File No. 33-46483, and incorporated herein by
reference).

4.1* Form of Indenture, between the Company and Harris Trust and Savings
Bank, with respect to $2.875 Series A Cumulative Convertible
Exchangeable Preferred Stock (previously filed as Exhibit 4.4 to
Amendment No. 2 to the Company's Registration Statement on Form S-1
under the Securities Act of 1933 filed with the Commission on
January 26, 1993, Commission File No. 33-56184, and incorporated
herein by reference).

4.2* Indenture between Carolina Freight Corporation and First Union
National Bank, Trustee with respect to 6 1/4% Convertible
Subordinated Debentures Due 2011 (previously filed as Exhibit 4-A to
the Carolina Freight Corporation's Registration Statement on Form
S-3 filed with the Commission on April 11, 1986, Commission File No.
33-4742, and incorporated herein by reference).

10.1*# Stock Option Plan (previously filed as Exhibit 10.3 to the Company's
Registration Statement on Form S-1 under the Securities Act of 1933
filed with the Commission on March 17, 1992, Commission File No.
33-46483, and incorporated herein by reference).

10.2*# The Company's Supplemental Benefit Plan (previously filed as Exhibit
10.6 to the Company's Registration Statement on Form S-1 under the
Securities Act of 1933 filed with the Commission on March 17, 1992,
Commission File No. 33-46483, and incorporated herein by reference).

10.3* First Amendment dated as of January 31, 1997 to the $346,971,321
Amended and Restated Credit Agreement dated as of February 21, 1996,
among the Company as Borrower, Societe Generale, Southwest Agency as
Managing Agent and Administrative Agent, NationsBank of Texas, N.A.
as Documentation Agent and the Banks named herein as the Banks
(previously filed as Exhibit 10.1 to the Company's Current Report on
Form 8-K, filed with the Commission on February 27, 1997, Commission
File No. 0-19969, and incorporated herein by reference).

19
<PAGE> 20
FORM 10-K -- ITEM 14(c)
EXHIBIT INDEX
ARKANSAS BEST CORPORATION
(Continued)

EXHIBIT
NO.

10.4* First Amendment dated as of January 31, 1997 to the $30,000,000
Credit Agreement dated as of February 21, 1996 among the Company as
Borrower, Societe Generale, Southwest Agency as Agent, and the Banks
named herein as the Banks (previously filed as Exhibit 10.3 to the
Company's Current Report on Form 8-K, filed with the Commission on
February 27, 1997, Commission File No. 0-19969, and incorporated
herein by reference).

10.5*# Arkansas Best Corporation Performance Award Unit Program effective
January 1, 1996 (previously filed as Exhibit 10.6 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1995, Commission File No. 0-19969, and incorporated herein by
reference).

10.6 Second Amendment, dated July 15, 1997, to the $346,971,312 Amended
and Restated Credit Agreement among the Company as Borrower, Societe
Generale, Southwest Agency as Managing Agent and Administrative
Agent, NationsBank of Texas, N.A., as Documentation Agent, and the
Banks named herein as the Banks (previously filed as Exhibit 10.3 to
the Company's current Report on Form 8-K, filed with the Commission
on August 1, 1997, Commission File No. 0-19969, and incorporated
herein by reference).

10.7* Interest-Rate Swap Agreement effective April 1, 1998 on a notional
amount of $110,000,000 with Societe Generale, Southwest Agency
(previously filed as Exhibit 10.1 to the Company's Form 10-Q filed
with the Commission on May 13, 1998, Commission File No. 0-19969,
and incorporated herein by reference).

10.8* $250,000,000 Credit Agreement dated as of June 12, 1998 with Societe
Generale, Southwest Agency, as Administrative Agent and Bank of
America National Trust Savings Association and Wells Fargo Bank
(Texas), N.A., as Co-Documentation Agents (previously filed as
Exhibit 10.2 to the Company's Form 10-Q filed with the Commission on
August 6, 1998, Commission File No. 0-19969, and incorporated herein
by reference).

13 1998 Annual Report to Stockholders

21 List of Subsidiary Corporations

23 Consent of Ernst & Young LLP, Independent Auditors

27.1 Financial Data Schedule

* Previously filed with the Securities and Exchange Commission and incorporated
herein by reference.

# Designates a compensation plan for Directors or Executive Officers.

<PAGE> 1

EXHIBIT 13

Market for Registrant's Common Equity and Related Stockholder Matters

Selected Financial Data

Management's Discussion and Analysis of Financial Condition
and Results of Operations

Quantitative and Qualitative Disclosures About Market Risk

Financial Statements and Supplementary Data

<PAGE> 2

MARKET AND DIVIDEND INFORMATION
The Company's Common Stock trades on The Nasdaq Stock Market under the symbol
"ABFS." The following table sets forth the high and low recorded last sale
prices of the Common Stock during the periods indicated as reported by Nasdaq
and the cash dividends declared:

<TABLE>
<CAPTION>
CASH
HIGH LOW DIVIDEND
-----------------------------------------
<S> <C> <C> <C>
1998
First quarter ......................................................... $ 11.750 $ 9.625 $ -
Second quarter......................................................... 11.625 8.750 -
Third quarter.......................................................... 10.375 5.000 -
Fourth quarter......................................................... 6.125 4.813 -

1997
First quarter ......................................................... $ 5.500 $ 4.125 $ -
Second quarter......................................................... 9.250 4.625 -
Third quarter.......................................................... 12.625 8.875 -
Fourth quarter......................................................... 12.500 8.938 -
</TABLE>

At February 16, 1999, there were 19,610,213 shares of the Company's Common Stock
outstanding, which were held by 802 shareholders of record. The Company's Board
of Directors suspended payment of dividends on the Company's Common Stock during
the second quarter of 1996. The declaration and payment of and the timing,
amount and form of future dividends on the Common Stock will be determined based
on the Company's results of operations, financial condition, cash requirements,
certain corporate law requirements and other factors deemed relevant by the
Board of Directors.

The Company's credit agreement limits the total amount of "restricted payments"
that the Company may make, including dividends on its capital stock, to $9.0
million in any one calendar year. The annual dividend requirements on the
Company's Preferred Stock total approximately $4.3 million.

<PAGE> 3

SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997(4) 1996 1995(3) 1994
----------------------------------------------------------------------
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues ..................................... $ 1,651,453 $ 1,643,678 $ 1,604,335 $ 1,405,580 $ 1,090,908
Operating income (loss) ................................ 66,410 62,908 (18,008) (17,921) 50,970
Minority interest in subsidiary ........................ 3,257 (1,359) (1,768) 1,297 3,523
Other expenses, net .................................... 3,259 8,916 5,906 8,165 2,855
Gain on sale of Cardinal Freight Carriers, Inc. ........ -- 8,985 -- -- --
Settlement of litigation(5) ............................ 9,124 -- -- -- --
Interest expense ....................................... 18,438 23,978 30,843 16,352 6,681
Income (loss) from continuing
operations before income taxes ....................... 50,580 40,358 (52,989) (43,735) 37,911
Provisions (credit) for income taxes ................... 21,905 19,389 (18,782) (12,925) 18,445
Income (loss) from continuing
operations ........................................... 28,675 20,969 (34,207) (30,810) 19,466
Loss from discontinued
operations, net of tax ................................ -- (5,622) (2,396) (1,982) (759)
Net income (loss) ...................................... 28,675 15,347 (36,603) (32,792) 18,707
Income (loss) per common share
from continuing operations (diluted) ................. 1.21 0.84 (1.98) (1.80) 0.78
Net income (loss) per common
share (diluted) ...................................... 1.21 0.56 (2.10) (1.90) 0.74
Cash dividends paid per
common share(1) ...................................... -- -- 0.01 0.04 0.04

BALANCE SHEET DATA:
Total assets ........................................... 710,604 698,339 828,181 962,176 559,564
Current portion of long-term debt ...................... 17,504 16,484 37,197 25,018 64,092
Long-term debt (including capital leases
and excluding current portion) ....................... 196,079 202,604 317,874 391,475 53,637

OTHER DATA:
Gross capital expenditures(2) .......................... 86,446 14,135 41,599 74,808 64,098
Net capital expenditures(6) ............................ 70,243 (23,775) (23,713) 59,060 56,253
Depreciation and amortization .......................... 40,674 44,316 56,389 46,627 28,087
Goodwill amortization .................................. 4,515 4,629 4,609 5,135 3,527
Other amortization ..................................... 2,420 4,139 3,740 1,044 501
</TABLE>

(1) Cash dividends on the Company's Common Stock were indefinitely suspended
by the Company as of the second quarter of 1996.

(2) Does not include revenue equipment placed in service under operating
leases, which amounted to $21.9 million in 1997 and $24.6 million in 1995.
There were no operating leases for revenue equipment entered into for
1998, 1996 and 1994.

(3) 1995 selected financial data is not comparable to the prior years'
information due to the WorldWay acquisition effective August 12, 1995. In
conjunction with the WorldWay acquisition, assets with a fair value of
$313 million were acquired and liabilities of approximately $252 million
were assumed. Approximately $134 million in revenues for the period from
August 12, 1995 to December 31, 1995, are included in the 1995
consolidated statement of operations generated by subsidiaries acquired as
part of the WorldWay acquisition.

(4) Selected financial data is not comparable to the prior years' information
due to the sale of Cardinal on July 15, 1997 (see Note D to the
Consolidated Financial Statements).

(5) Income results from settlement of Treadco litigation (see Note L to the
Consolidated Financial Statements).

(6) Capital expenditures, net of proceeds from the sale of property, plant and
equipment.

<PAGE> 4

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 motor carrier transportation
operations, intermodal and ocean transportation operations, and truck tire
retreading and new tire sales. Principal subsidiaries are ABF Freight System,
Inc. ("ABF"); Treadco, Inc. ("Treadco"); Clipper Exxpress Company and related
companies ("Clipper Domestic"); CaroTrans International, Inc. ("Clipper
International"); G.I. Trucking Company ("G.I. Trucking"); FleetNet America,
Inc.; and, until July 15, 1997, Cardinal Freight Carriers, Inc. ("Cardinal").
(See discussion below.)

See Note A to the Consolidated Financial Statements regarding the consolidation
of Treadco in the Company's consolidated financial statements. See Note C
regarding the Company's discontinuation of its logistics segment. See Note D
regarding the sale of Cardinal.

YEAR 2000

The Year 2000 issue derives from computer programs being written using two
digits rather than four to determine the applicable year. The Company recognizes
that the approach of the Year 2000 brings a unique challenge to the ability of
computer systems to recognize the date change from December 31, 1999, to January
1, 2000. As a result, the arrival of the Year 2000 could result in system
failures or miscalculations, causing disruption of operations, including, among
other things, a temporary inability to process transactions or to conduct other
normal business activity.

Management of the Company began addressing the impact of the Year 2000 on its
business operations and cash flows during 1996. The Company concluded that the
Year 2000 would impact its internal information technology and non-information
technology systems. In addition, the Company believes that the Year 2000 will
impact its supplier chain environment and electronic data-interchange
environment. Beginning in 1996, and continuing since that time, the Company has
designated a group of personnel, who work primarily for the Company's
data-processing subsidiary, Data-Tronics Corp., to manage the conversion process
for its own internal systems, including purchased software, and to monitor the
conversion process for supplier chain environment systems and effects, as well
as for the Company's data-interchange environment. A discussion of the status of
each of these areas follows:

Internal IT and Non-IT Systems

Year 2000 conversions within the Company's mainframe environment are in process.
Mainframe environment conversions include the Company's hardware and operating
systems, its customized applications, and its purchased software. The Company
has completed the Year 2000 conversion of hardware and operating systems within
its mainframe environment. Year 2000 conversions for customized applications
within the mainframe environment included renovation and regression testing of
twenty million lines of code. The Year 2000 conversion for customized
applications is Year 2000 operational at the present time. The Company will
retain certain purchased software systems and replace certain other purchased
software systems. Installation of Year 2000 compliant versions of retained
software systems has been completed. The Company is negotiating the replacement
of certain purchased software packages for Year 2000 compliant software.
Negotiations should be complete and the software replaced by March 31, 1999. The
carrying value of software systems to be replaced for Year 2000 compliance is
nominal.

<PAGE> 5

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued
- --------------------------------------------------------------------------------

Year 2000 conversions of the Company's desk-top environment, which includes
network hardware and operating systems software, as well as the networked PC
hardware operating systems and applications inventory, are in process and are
expected to be completed by March 31, 1999.

The Company's embedded systems are those that are automated with embedded
computerized microprocessor chips. The Company has completed its conversion of
its general office embedded systems. The Company expects to complete all
conversions of embedded systems at field and subsidiary locations by March 31,
1999.

The Company has completed Year 2000 conversions of its electronic
data-interchange software.

External IT and Non-IT Systems

The Company is in the process of obtaining an inventory of critical exposure
arising from the Company's suppliers. The Company's list of suppliers includes
financial institutions, telecommunications providers, utility companies and
insurance providers, as well as basic suppliers critical to the operations of
the Company's subsidiaries and to the Company. The Company has sent and is
continuing to send questionnaires to suppliers considered to be significant to
operations to determine their status with respect to Year 2000 issues. The
Company continually updates its list of critical exposures.

The Company has completed an inventory of Year 2000 exposure with respect to
data communication business partners. The Company has finalized contract
negotiations with a supplier to eliminate Year 2000 exposure prior to the end of
this year.

The Company does not have any single customer that would be material to the
Company as a whole. However, the Company has some customers which, in the
aggregate, are significant to the Company's operations and financial results.
The Company is in the process of surveying significant customers' readiness for
Year 2000. The Company presently expects customer contacts will be initiated by
March 31, 1999. The information provided by significant customers with respect
to their Year 2000 readiness will be considered in the development of the
Company's contingency plan.

Year 2000 Costs

The Company is using existing personnel who work primarily for its data
processing subsidiary, Data-Tronics Corp., to perform Year 2000 conversions and
evaluations of third-party systems. Since the beginning of the process, the
Company estimates its expenditures at approximately $1.0 million, including
labor costs and costs that relate to equipment and software purchases. Since
1996, Year 2000 costs have been absorbed in the Company's normal operating
expenses which are funded with the Company's internally generated funds or its
revolving credit facility. The Company's cash flows have not been adversely
impacted to a material degree by Year 2000 costs. Costs incurred through the
current date for Year 2000 conversion represent less than 6% of total forecasted
1999 programming costs. It is management's conclusion that there have been no
significant projects deferred as a result of Year 2000 efforts.

The Company estimates it will spend an additional $.8 million in Year 2000
conversion costs. The Company expects to continue to expend these costs in
normal operations and to fund them by utilizing the Company's internally
generated funds or its revolving credit facility.

<PAGE> 6

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued
- --------------------------------------------------------------------------------

Contingency Planning

The Company is in the process of developing an assessment of its most reasonably
likely worst case Year 2000 scenario and its Year 2000 contingency plan. The
responses the Company receives from suppliers regarding their Year 2000
readiness will play a critical role in these determinations. The Company
currently plans to have made an assessment of its most reasonably likely worst
case Year 2000 scenario by March 31, 1999. This and other relevant information
will be utilized to develop the Company's contingency plan. It is presently
expected that the contingency plan will be developed by June 30, 1999.

Like virtually all other public and private companies, the Company's day-to-day
business is dependent on telecommunications services, banking services and
utility services provided by a large number of entities. At this time, the
Company is not aware of any of these entities or of any significant supplier
that has disclosed that it will not be Year 2000 compliant by January 1, 2000.
However, many of these entities are, like the Company, still engaged in the
process of attempting to become Year 2000 compliant. The Company plans to
attempt to obtain written assurance of Year 2000 compliance from all entities
which management considers critical to operations of the Company and its
subsidiaries. However, it is likely that some critical suppliers will not give
written assurance as to Year 2000 compliance because of concerns as to legal
liability.

Even where written assurance is provided by critical suppliers and a contingency
plan is developed by the Company to deal with possible non-compliance by other
critical suppliers, the Year 2000 conversion process will continue to create
risk to the Company which is outside the control of the Company. There can be no
assurance that a major Year 2000 disruption will not occur in a critical
supplier which would have an impact on the Company that could be material.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive Income.
The Statement requires the classification components of other comprehensive
income by their nature in financial statements and display of the accumulated
balance of other comprehensive income separately from retained earnings and
additional paid-in capital in the consolidated financial statements. The Company
adopted FASB Statement No. 130 in 1998.

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 Company adopted FASB Statement No. 131 in 1998.

In February 1998, the FASB issued Statement No. 132, Employers' Disclosures
About Pensions and Other Post Retirement Benefits. The Statement revises
employers' disclosures about pensions and other postretirement plans without
changing the measurement or recognition of those plans. The Company adopted FASB
Statement No. 132 in 1998.

<PAGE> 7

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued
- --------------------------------------------------------------------------------

in capitalization of costs related to internal computer software development.
All such costs are currently expensed. The amount of costs capitalized within
any period will be dependent on the nature of software development activities
and projects in that period.

In April 1998, AcSEC issued Statement of Position 98-5, Reporting on the Costs
of Start-Up Activities. Under the SOP, certain costs associated with start-up
activities are required to be expensed as incurred. The SOP will be effective
for the Company on January 1, 1999. The Company has historically expensed
start-up costs. Accordingly, the Company does not anticipate the adoption of
this SOP to have a material impact on the Company's financial statements.

In June 1998, the FASB issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities. The Statement addresses the accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, and hedging activities. The Statement will require the Company
to recognize all derivatives on the balance sheet at fair value. Derivatives
that are not hedges must be adjusted to fair value through income. If a
derivative is a hedge, depending on the nature of the hedge, changes in the fair
value of the derivative will either be offset against the change in fair value
of the hedged asset, liability, or firm commitment through earnings, or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The Statement is effective for the Company in 2000. The Company is
evaluating the impact the Statement will have on its financial statements and
related disclosures.

OPERATING SEGMENT DATA

The following table sets forth, for the periods indicated, a summary of the
Company's operating expenses by segment as a percentage of revenue for the
applicable segment. The Company has restated its 1997 and 1996 segment
information to conform to the current year's segment presentation, which is in
accordance with the requirements of FAS No. 131. Note N to the Consolidated
Financial Statements contains additional information regarding the Company's
operating segments.

YEAR ENDED DECEMBER 31
1998 1997 1996
------------------------------
<S> <C> <C> <C>
OPERATING EXPENSES AND COSTS

ABF FREIGHT SYSTEM, INC.
Salaries and wages .............................................................. 66.5 % 66.7 % 70.4 %
Supplies and expenses ........................................................... 10.8 11.2 12.1
Operating taxes and licenses .................................................... 3.1 3.4 4.0
Insurance ....................................................................... 1.7 1.8 2.3
Communications and utilities .................................................... 1.2 1.3 1.5
Depreciation and amortization ................................................... 2.2 2.1 3.0
Rents and purchased transportation .............................................. 8.4 7.8 6.9
Other ........................................................................... 0.5 0.5 0.7
(Gain) on sale of revenue equipment ............................................. (0.2) (0.2) (0.1)
------ ------ ------
94.2 % 94.6 % 100.8 %
====== ====== ======

G.I. TRUCKING COMPANY
Salaries and wages .............................................................. 47.2 % 48.2 % 53.5 %
Supplies and expenses ........................................................... 8.5 9.5 11.1
Operating taxes and licenses .................................................... 2.1 2.0 2.7
Insurance ....................................................................... 3.2 3.8 3.8
Communications and utilities .................................................... 1.3 1.3 1.8
Depreciation and amortization ................................................... 2.5 3.1 5.1
Rents and purchased transportation .............................................. 31.4 29.0 28.5
Other ........................................................................... 2.6 2.5 2.9
(Gain) on sale of revenue equipment ............................................. (0.1) -- --
------ ------ ------
98.7 % 99.4 % 109.4 %
====== ====== ======
</TABLE>

<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
-------------------------------
OPERATING EXPENSES AND COSTS (continued)

<S> <C> <C> <C>
CARDINAL FREIGHT CARRIERS, INC ..................................................... -- 94.7% 94.2%
===== ==== ====

CLIPPER DOMESTIC
Cost of services ................................................................ 87.6% 85.6% 86.1%
Selling, administrative and general ............................................. 13.4 11.8 11.3
(Gain) on sale of revenue equipment ............................................. (0.1) -- --
----- ---- ----
100.9% 97.4% 97.4%
===== ==== ====

CLIPPER INTERNATIONAL
Cost of services ................................................................ 81.3% 80.1% 80.8%
Selling, administrative and general ............................................. 26.7 22.9 23.5
----- ----- -----
108.0% 103.0% 104.3%
===== ===== =====

TREADCO, INC .......................................................................
Cost of services ................................................................ 70.6% 73.9% 77.4%
Selling, administrative and general ............................................. 28.0 27.7 26.1
----- ----- -----
98.6% 101.6% 103.5%
===== ===== =====

OPERATING PROFIT (LOSS)

ABF Freight System, Inc. ........................................................ 5.8% 5.4% (0.8)%
G.I. Trucking Company ........................................................... 1.3 0.6 (9.4)
Cardinal Freight Carriers, Inc. ................................................. -- 5.3 5.8
Clipper Domestic ................................................................ (0.9) 2.6 2.6
Clipper International ........................................................... (8.0) (3.0) (4.3)
Treadco, Inc. ................................................................... 1.4 (1.6) (3.5)
</TABLE>

RESULTS OF OPERATIONS

1998 COMPARED TO 1997

Consolidated revenues from continuing operations of the Company for 1998 were
$1,651.5 million compared to $1,643.7 million for 1997, representing a slight
increase of .5% primarily due to increases in revenues for ABF, G.I. Trucking
and Treadco. These increases were offset by declines in Clipper Domestic and
Clipper International revenues. The Company's operating income increased 5.6% to
$66.4 million for 1998 from $62.9 million of operating income from continuing
operations for 1997. Increases in operating income are attributable to improved
operations at ABF, G.I. Trucking and Treadco. Operating income for 1998 was
adversely impacted by the operating losses at Clipper Domestic and Clipper
International. Net income for 1998 was $28.7 million, or $1.21 per share
(diluted), compared to income from continuing operations of $21.0 million, or
$0.84 per share (diluted), for 1997. The improvement in net income for 1998, as
compared to 1997, reflects the improvement in operating income, along with lower
interest cost due to reductions in outstanding debt and lower interest rates. In
addition, non-operating income for 1998 includes $9.1 million of income from
Treadco's settlement of litigation (see Note L to the Consolidated Financial
Statements).

<PAGE> 9

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued
- --------------------------------------------------------------------------------

ABF FREIGHT SYSTEM, INC.
On January 1, 1999, ABF implemented an overall rate increase of 5.5%. The
effective rate increase is expected to be approximately 4.0% due to the fact
that a portion of ABF's customers have contracts over various periods.

Effective January 1, 1998 and 1997, ABF implemented overall rate increases of
5.3% and 5.5% respectively. Revenues for 1998 increased 1.8% to $1,175.2 million
from $1,154.3 million in 1997. Operating income for 1998 improved 8.0% to $67.6
million from $62.6 million in 1997.

ABF's revenue increased due to an increase in LTL revenue per hundredweight for
1998 of 3.7% to $18.29 from $17.65 in 1997. ABF experienced a generally
favorable pricing environment during 1998, as it had in 1997. Total revenue
increased despite a decline in tonnage during 1998 of 1.4% compared to 1997.
Tonnage declines reflect some freight diversions caused by customer concerns
regarding labor contract negotiations in the first quarter of 1998. Tonnage
declines also reflect additional business handled during the UPS strike in the
third quarter of 1997. Per-day tonnage declines by quarter for 1998 compared to
1997, beginning with the first quarter, were 1.8%, 1.5%, 2.1% and .3%,
respectively.

The IBT voted in favor of a new labor contract on April 9, 1998. The contract
was effective April 1, 1998, and is for a five-year term. The contract provides
for an average annual wage and benefit increase of approximately 2.3%, including
a lump-sum payment of $750 for the first contract year for all active employees
who are IBT members. The lump-sum payment is being amortized over the first
twelve months of the contract period.

ABF's operating ratio improved to 94.2% in 1998 from 94.6% in 1997, as a result
of the revenue yield improvements previously described and as a result of
improvements in certain operating expense categories as follows:

Salaries and wages expense decreased .2% as a percent of revenue during 1998.
Salaries and wages increased due to a $750 lump-sum payment made to contractual
employees of ABF, which is being amortized monthly over the contract period.
This increase was offset by lower costs for labor and paid time off for
vacations and holidays, due in part to an increase in utilization of rail for
freight transportation. Rail usage increased to 17.3% of total miles in 1998
from 13.6% in 1997.

Decreases during 1998 in supplies and expenses (.4%) and operating taxes and
licenses (.3%) as a percent of revenue primarily reflect decreases in the cost
of fuel, due to a 21.1% decline in the average price per gallon of fuel from
1997. In addition, consumption of fuel was reduced due to better average tractor
miles per gallon. Fuel taxes declined due to favorable audit experience, as well
as lower consumption.

As described above, ABF's rail usage increased during 1998. Rents, which include
purchased transportation, increased .6% as a percent of revenue, primarily due
to increased rail usage. This increase was offset, in part, by declines in
operating lease expense reflecting ABF's reduction in leased road and city
tractors. Certain of the leased tractors were replaced with tractors acquired
under capital leases during 1998.

G.I. TRUCKING COMPANY
G.I. Trucking implemented a general rate increase of 5.5% on November 1, 1998.
The effective rate increase is expected to be approximately 3.0% due to the fact
that a portion of G.I. Trucking's customers have contract rates over various
periods. Total G.I. Trucking revenues increased 24.5% to $124.5 million from
$100.0 million in 1997. Revenue increases resulted from an increase of 1.7% in
G.I. Trucking's revenue per hundredweight to $10.63 and tonnage increases of
22.4% compared to the same period in 1997. G.I. Trucking expanded its operations
during 1998, opening new terminal locations in

<PAGE> 10

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued
- --------------------------------------------------------------------------------

Oklahoma City, OK; Tulsa, OK; Albuquerque, NM; El Paso, TX; and Kansas City, KS.
G.I. Trucking also added a southern California facility to relieve congestion at
their La Mirada, CA distribution center.

G.I.'s operating ratio improved to 98.7% in 1998 from 99.4% in 1997. Details of
the improvement in certain operating expenses follow:

Salaries and wages expense decreased 1.0% as a percent of revenue during 1998.
This decline reflects lower pension costs and, in part, the fact that a portion
of salaries and wages expense is generally fixed in nature and declines as a
percent of revenue with increases in revenue levels.

Supplies and expenses decreased 1.0% as a percent of revenue during 1998 due
primarily to declines in fuel prices from 1997. In addition, repair and
maintenance costs on revenue equipment were lower in 1998, reflecting new
equipment purchased during the year to replace older equipment which requires
more maintenance.

Insurance expense declined .6% as a percent of revenue during 1998. This
improvement was due primarily to a decrease in liability insurance rates and
favorable claims experience for workers' compensation claims.

G.I. Trucking has handled its increased level of business, in part, by utilizing
a higher level of purchased transportation relative to previous periods. As a
result, rents, which include purchased transportation, increased 2.4% as a
percent of revenue during 1998. While rents increased, total depreciation and
amortization decreased .6% as a percent of revenue during 1998, reflecting the
increase in purchased transportation. This overall decrease in depreciation as a
percent of revenue is net of additional depreciation related to 1998 capital
expenditures. During the year, G.I. Trucking purchased 114 new tractors and 253
new trailers.

CLIPPER DOMESTIC
Revenues from Clipper Domestic decreased 11.7% to $122.5 million in 1998 from
$138.8 million in 1997. Since the fourth quarter of 1997, Clipper Domestic has
been adversely affected by service problems with the U.S. rail system. During
the fourth quarter of 1998, Clipper Domestic experienced some improvements in
the on-time service levels of its rail suppliers. However, rail service remained
inconsistent and has not returned to acceptable levels across all lanes.
Primarily as a result of the rail service problems, intermodal shipments
declined 24.2% for the year ended December 31, 1998 compared to the same period
in 1997. Clipper Domestic also experienced a decline of 3.5% in the number of
LTL shipments during 1998. The decline in LTL shipments resulted from
management's decision to move away from heavier, less profitable shipments along
with some impact of rail service problems.

Clipper Domestic's operating ratio increased to 100.9% for 1998 from 97.4% for
1997.

Declines in the number of intermodal shipments caused Clipper Domestic to fall
below the volume levels necessary to receive volume rebates from the railroads
during 1998. Also, rail service problems caused Clipper Domestic to utilize more
expensive over-the-road transportation services. In addition, Clipper Domestic
experienced an increase in basic rail transportation costs when 1998 is compared
to 1997. These increases resulted in a 2.0% increase in cost of services as a
percent of revenue during 1998. Clipper Domestic's operating ratio also reflects
a 1.6% increase in selling, administrative and general costs as a percent of
revenue during 1998. Selling, administrative and general costs are primarily
fixed in nature and increase as a percentage of revenue with a decline in
revenue levels.

As described above, rail service improved somewhat in the last half of 1998, and
the Company plans to aggressively pursue business lost due to rail service
issues. However, truckload carriers, which benefited from rail service problems,
can be expected to compete aggressively to retain this business. Accordingly,
improvements in Clipper Domestic's results can only be expected to occur
gradually.

<PAGE> 11

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued
- --------------------------------------------------------------------------------

Management of the Company has reviewed the goodwill associated with Clipper
Domestic for impairment. Based on information available and management's
evaluation of the causes of 1998 operating results and future expectations of
operating results for Clipper Domestic, management concluded that it was not
appropriate to record an impairment loss for Clipper Domestic at December 31,
1998. Management will continually monitor Clipper Domestic's operating results
and the overall business environment in which Clipper Domestic operates.

CLIPPER INTERNATIONAL
Revenues decreased 12.7% to $44.0 million in 1998 from $50.5 million in 1997.
Declines in revenue resulted from a decrease in exports to Asia, management's
focus on account profitability, and adverse pricing trends, especially in South
America. Overall, shipment volume declines accounted for approximately one-half
the decrease in revenue with rate decreases accounting for the remaining
one-half.

Clipper International reported operating ratios of 108.0% for 1998 and 103.0%
for 1997. Costs of services increased 1.2% as a percent of revenue during 1998.
The increase is due in part to declines in revenues, without a corresponding
decline in the costs of U.S. inland handling and transportation. In addition,
ocean costs have declined less rapidly than revenue levels for Clipper
International. Selling, administrative and general costs increased 3.8% as a
percent of revenue during 1998. Selling, administrative and general costs are
primarily fixed in nature and increase as a percentage of revenue with a decline
in revenue levels.

Economic problems in Asia, South America and, to a lesser extent, in other
regions of the world have adversely impacted U.S. exports to these regions.
Exports are the primary source of Clipper International's revenues.

Imbalance in export-import freight has resulted in reduced costs for ocean
transportation of exports as shipping lines compete for the smaller volume of
traffic. Many of Clipper International's domestic customers demand a
pass-through of lower ocean transport rates, thus decreasing Clipper
International's revenue. In addition, lower export volumes have created
substantial price competition in Clipper International's business, as all
participants attempt to maintain freight volume and revenue.

TREADCO, INC.
Revenues increased 12.4% to $181.3 million in 1998 from $161.3 million in 1997.
For 1998, "same store" sales increased 10.9% and "new store" sales accounted for
1.5% of the total increase in revenues from 1997. "Same store" sales include
both production facilities and sales locations in existence for the entire years
of 1998 and 1997. "New store" sales resulted from one new sales location in 1998
and one new sales location in 1997. Revenues from retreading for 1998 were $70.8
million, an 8.4% increase from $65.3 million during 1997. In 1998, retreaded
truck tire units sold increased 8.1%. The average sales price for retreads
increased due primarily to a 3.0% price increase implemented on October 1, 1998.
Revenues from the sale of new tires for 1998 were $91.6 million, a 13.0%
increase from $81.0 million during 1997. New tire units sold increased 15.8%
from 1997. This increase was offset by a decrease in the average sales price per
tire of approximately 1.2% from 1997 due to the mix of new tires sold. Service
revenues for 1998 were $18.9 million, an increase of 26.5%, from $15.0 million
in 1997.

Treadco's operating ratio improved to 98.6% for 1998 from 101.6% for 1997. The
decrease in cost of services of 3.3%, as a percent of revenue, resulted
primarily from improved casing costs, inventory controls, and lower overhead
costs, reflecting greater capacity utilization. The increase in selling,
administrative and general costs of .3%, as a percent of revenue, resulted
primarily from the implementation of a gross profit-based compensation plan for
salesmen effective January 1, 1998.

<PAGE> 12

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued
- --------------------------------------------------------------------------------

Treadco's ability to return to profitability levels achieved prior to 1995 is
substantially dependent upon improved pricing and replacement of retread volume,
which declined beginning in 1996 primarily due to national account business
which was lost to competitors. Also, new business frequently has lower margins
than established accounts due to increased competition in Treadco's markets.

INTEREST

Interest expense was $18.4 million for 1998 compared to $24.0 million for 1997,
primarily due to lower interest rates and some reductions in average outstanding
debt. The average interest rate on the Company's Revolving Credit Agreement was
7.2% on January 1, 1998 and 6.4% on December 31, 1998.

INCOME TAXES

The difference between the effective tax rate for 1998 and the federal statutory
rate resulted from state income taxes, amortization of nondeductible goodwill,
minority interest, and other nondeductible expenses (see Note G to the
Consolidated Financial Statements).

At December 31, 1998, the Company had deferred tax assets of $21.8 million, net
of a valuation allowance of $1.1 million, and deferred tax liabilities of $42.7
million. The Company believes that the benefits of the deferred tax assets of
$21.8 million will be realized through the reduction of future taxable income.
Management has considered appropriate factors in assessing the probability of
realizing these deferred tax assets. These factors include deferred tax
liabilities of $42.7 million and the presence of significant taxable income in
1998. The valuation allowance has been provided for the benefit of net operating
loss carryovers in certain states with relatively short carryover periods and
other limitations.

Management intends to evaluate the realizability of deferred tax assets on a
quarterly basis by assessing the need for any additional valuation allowance.

1997 COMPARED TO 1996

Consolidated revenues from continuing operations of the Company for 1997 were
$1,643.7 million compared to $1,604.3 million for 1996, representing an increase
of 2.5%, primarily due to increases in revenues for ABF, G.I. Trucking and
Treadco, which were offset in part by declines in Cardinal revenues due to its
sale in July, 1997. The Company had operating income from continuing operations
of $62.9 million for 1997 compared to an operating loss of $(18.0) million for
1996. 1997 operating income improvements primarily reflect improvements at ABF.
However, operating income for all reportable segments, except Cardinal, improved
or equaled their 1996 performance. Income from continuing operations for 1997
was $21.0 million, or $0.84 per share (diluted), compared to losses from
continuing operations for 1996 of $(34.2) million, or a loss of $(1.98) per
share (basic and diluted). Improvements in income from continuing operations
reflect improved operating income as well as the after-tax gain on sale of
Cardinal of $2.0 million and lower interest costs resulting from reduced debt
levels.

ABF FREIGHT SYSTEM, INC.
ABF's revenue increased 2.9% to $1,154.3 million in 1997 from $1,122.9 in 1996,
due primarily to an overall rate increase of 5.5% that was implemented on
January 1, 1997. ABF's LTL revenue per hundredweight was $17.65 for 1997,
compared to $16.51 for 1996, representing an increase of 6.9%. This increase is
offset by a decline in total tonnage per day of 3.7% from 1996 to 1997,
resulting from ABF's emphasis on account profitability.

<PAGE> 13

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued
- --------------------------------------------------------------------------------

ABF's operating ratio was 94.6% in 1997 compared to 100.8% in 1996. During 1996,
ABF discontinued twelve of the regional distribution terminal operations
acquired in September 1995 in the 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
improve its direct labor costs, improve its weight per trailer and reduce its
empty miles, beginning in 1996 and continuing through 1997.

The decrease in salaries and wages of 3.7%, as a percentage of revenue, from
1996 to 1997 resulted primarily from productivity improvements. This decrease
was offset, in part, by the increase in salaries and wages for unionized
employees of approximately 3.9% annually effective April 1, 1997, pursuant to
ABF's collective bargaining agreement with the IBT employees.

Decreases during 1997 in supplies and expenses of .9% and operating taxes and
licenses of .6% as a percent of revenue primarily reflect decreases in fuel
costs and fuel taxes. Fuel costs, and the related taxes, were lower in 1997 than
in 1996 because of lower fuel prices, better fuel economy fleet-wide and 1.9%
fewer traveled miles.

The cost of insurance, which includes provisions for self-insurance of workers'
compensation, bodily injury and property damage claims, decreased .5% as a
percent of revenue in 1997 due to fewer and less severe claims, as well as
favorable experience in claim settlements compared to 1996.

A decrease in depreciation and amortization of .9% of revenue also resulted from
ABF's reconfiguration of its terminal system, which resulted in improved asset
utilization. ABF also increased its use of leased revenue equipment and outside
alternate modes of transportation as reflected in the .9% increase in rents, as
a percentage of revenue, which includes purchased transportation.

G.I. TRUCKING COMPANY
G.I. Trucking's revenues increased 27.5% to $100.0 million in 1997 from $78.4
million in 1996. G.I. Trucking continued to replace revenues lost as a result of
the ABF/Carolina Freight Carriers ("Carolina") merger in September 1995. G.I.
Trucking's revenue per hundredweight increased to $10.45 in 1997, a 3.5%
increase from 1996. G.I. Trucking's tonnage increased 23.2% from 1996 to 1997.

G.I. Trucking's operating ratio improved to 99.4% for 1997 as compared to 109.4%
for 1996. Details of the improvement follow:

Salaries and wages decreased 5.3% of revenue from 1996 to 1997 as a result of
productivity improvements as well as lower pension and health insurance costs.
In addition, a portion of salaries and wages expense is generally fixed in
nature and declines as a percent of revenue with increases in revenue levels.

Supplies and expenses declined 1.6% of revenue as a result of lower fuel costs,
lower repairs and maintenance costs and an effort to reduce fixed and variable
terminal operating costs.

Operating taxes and licenses declined .7% of revenue from 1996 to 1997 primarily
because of credits received by G.I. Trucking for weight and mileage taxes.

Communications and utilities decreased .5% as a percent of revenue from 1996 to
1997. Communications and utilities expense is generally fixed in nature and
declines as a percent of revenue with increases in revenue levels.

A decrease in depreciation and amortization of 2.0% of revenue resulted from a
portion of G.I. Trucking's revenue equipment becoming fully depreciated during
1997.

<PAGE> 14

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued
- --------------------------------------------------------------------------------

G.I. Trucking handled its increased level of business in 1997 in part by
utilizing a higher level of purchased transportation. As a result, rents and
purchased transportation increased .5% of revenue when compared to the same
periods in 1996.

CARDINAL FREIGHT CARRIERS, INC.
The Company's truckload motor carrier operations were conducted primarily
through Cardinal. Cardinal was sold on July 15, 1997. See Note D to the
Consolidated Financial Statements.

CLIPPER DOMESTIC
Revenues for Clipper Domestic increased 4% to $138.8 million in 1997 from $133.4
million in 1996. Through the first nine months of 1997, greater increases in
revenues for Clipper Domestic were reported. However, fourth quarter 1997
revenues decreased 9% when compared to the fourth quarter of 1996. Clipper
Domestic was adversely affected by the much-publicized problems with the U.S.
rail system. These problems resulted in lower revenue for Clipper Domestic
because of customer concerns regarding the reliability of rail service, which is
Clipper Domestic's principal method of transporting freight.

Throughout 1996, Clipper Domestic experienced an increase in its weight per
shipment. However, a decline in revenue per hundredweight without a
proportionate reduction in cost produced lower margins on higher revenue. In
1997, Clipper Domestic improved yields and decreased costs per shipment, when
compared to 1996, by focusing on smaller shipment sizes to improve margins.
Effective January 1, 1997, Clipper Domestic implemented a 5.9% rate increase. In
the fourth quarter of 1997, Clipper Domestic's costs were affected negatively by
diversion of some freight from rail to trucks, due to previously described rail
service issues. Clipper Domestic's operating ratio remained steady at 97.4% for
both 1997 and 1996.

CLIPPER INTERNATIONAL
Clipper International's revenue declined 6.5% to $50.5 million in 1997 from
$53.9 million in 1996. The decline in revenue for Clipper International was
expected due to actions taken in late 1996 and early 1997 to enhance
profitability. During 1996, Clipper International expanded into some higher cost
markets and experienced a shift in market mix to more full container-load
freight. Ocean container transportation costs also increased. Clipper
International recorded a charge of $400,000 in 1997 relating to the
consolidation of administrative offices and some sales locations with Clipper
Domestic. Each of these factors negatively impacted operating results in the
applicable periods. However, other productivity improvements offset these costs,
resulting in a lower operating ratio for 1997 of 103.0% compared to 104.3% for
1996.

TREADCO, INC.
Revenues for 1997 increased 11.9% to $161.3 million from $144.2 million for
1996. Both "same store" sales and "new store" sales increased approximately 6.0%
from 1996 to 1997. "Same store" sales include both production locations and
satellite sales locations that have been in existence for all of 1997 and 1996.
In 1997, "new store" sales resulted from one new sales location and one new
production facility. In 1996, "new store" sales resulted from five new sales
locations. Revenues from retreading for 1997 were $65.3 million, a 9.3% increase
from $59.8 million in 1996. In 1997, retread truck tire units sold increased
9.5%. The average sales price for retreads decreased in 1997 as Treadco faced
new competition at many locations, which resulted in pressure on selling prices.
Revenues from new tires for 1997 were $81.0 million, an 11.9% increase from
$72.4 million during 1996. New tire units sold increased 11.5%.

Cost of sales decreased 3.5% from 1996 to 1997. This decrease resulted primarily
from lower tread rubber and new tire costs of approximately 4.0%. Selling,
administrative and general expenses increased 1.6% from 1996 to 1997, resulting
primarily from a cost-of-living increase in salaries and wages expense of 1.0%.

<PAGE> 15

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued
- --------------------------------------------------------------------------------

INTEREST

Interest expense was $24.0 million for 1997 compared to $30.8 million for 1996,
primarily due to reductions of outstanding debt, although lower interest rates
also impacted interest costs. The average interest rate on the Company's
Revolving Credit Agreement was 8.2% on January 1, 1997 and 7.2% on December 31,
1997.

INCOME TAXES

The difference between the effective tax rate for 1997 and the federal statutory
rate resulted from state income taxes, amortization of goodwill, minority
interest, and other nondeductible expenses. In addition, income tax expense for
1997 exceeds the expected amount because of $3.5 million in taxes attributable
to a lower tax basis than accounting basis in Cardinal. The basis difference
resulted from goodwill of approximately $9.5 million allocated to Cardinal as a
result of purchase accounting for the 1995 WorldWay acquisition, which included
Cardinal (see Note G to the Consolidated Financial Statements).

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities for 1998 was $72.3 million compared to
$76.2 million in 1997. Cash provided by net income plus depreciation and
amortization for 1998 was $76.3 million compared to $68.4 million in 1997.
However, cash provided by operating activities for 1998 decreased because the
Company resumed income tax payments in 1998, whereas in 1997, income taxes paid
were nominal due to available net operating loss carryovers. In addition, cash
provided by operations and proceeds from asset sales of $16.4 million were used
to purchase revenue equipment and other assets in the amount of $60.9 million
during 1998. During 1997, cash provided by the sale of assets was $37.3 million.
In addition, the sale of Cardinal and Complete Logistics provided cash of $38.9
million, and asset purchases were $11.6 million.

The Company is party to a five-year, $250 million credit agreement (the "Credit
Agreement") with Societe Generale, Southwest Agency as Administrative Agent and
with Bank of America National Trust and Savings Association and Wells Fargo Bank
(Texas), N.A., as Co-Documentation Agents which became effective June 12, 1998
(see Note H to the Consolidated Financial Statements). The Credit Agreement
provides for up to $250 million of revolving credit loans (including letters of
credit).

At December 31, 1998, there were $119.6 million of Revolver Advances and
approximately $37.8 million of outstanding letters of credit. At December 31,
1998, the Company had approximately $92.6 million of borrowing availability
under the Credit Agreement. The Credit Agreement contains various covenants,
which limit, among other things, indebtedness, distributions, dispositions of
assets and capital expenditures, and require the Company to meet certain
quarterly financial ratio tests. As of December 31, 1998, the Company was in
compliance with the covenants.

In February 1998, the Company entered into an interest rate swap effective April
1, 1998, on a notional amount of $110 million. The purpose of the swap was to
limit the Company's exposure to increases in interest rates from current levels
on $110 million of bank borrowings over the seven-year term of the swap. The
interest rate under the swap is fixed at 5.845% plus the Credit Agreement
margin, which was .625% at December 31, 1998 (see Notes H and O to the
Consolidated Financial Statements).

Since January 1, 1998, ABF has entered into approximately $25.6 million in
capital lease obligations for the purchase of revenue equipment.

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

<PAGE> 16

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued
- --------------------------------------------------------------------------------

under the Treadco Credit Agreement are collateralized by accounts receivable and
inventories. Borrowings under the agreement bear interest at variable rates. At
December 31, 1998, Treadco had $1.25 million outstanding under the Revolving
Credit Agreement. The average interest rate during 1998 on the Treadco Credit
Agreement was 7.1%. The Treadco Credit Agreement contains various financial
covenants, which limit, among other things, dividends, disposition of
receivables, indebtedness and investments, and require Treadco to meet certain
financial tests. As of December 31, 1998, Treadco was in compliance with the
covenants.

The following table sets forth the Company's historical capital expenditures
(net of equipment trade-ins) for the periods indicated below:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
-------------------------------
($ thousands)
<S> <C> <C> <C>
CAPITAL EXPENDITURES
ABF Freight System, Inc. ..................................... $58,364 $ 6,761 $12,575
G.I. Trucking Company ........................................ 11,730 309 466
Cardinal Freight Carriers, Inc. .............................. -- 652 838
Clipper Domestic ............................................. 2,805 128 148
Clipper International ........................................ 79 58 213
Treadco, Inc. ................................................ 11,205 4,334 22,986
Other and eliminations ....................................... 2,263 1,893 4,373
------- ------- -------
Total Consolidated Capital Expenditures ................... $86,446 $14,135 $41,599
======= ======= =======
</TABLE>

The amounts presented in the table include equipment purchases financed with
capital leases of $25.6 million, $2.6 million, and $6.5 million in 1998, 1997
and 1996, respectively. In addition, in 1996, purchases of $7.4 million were
financed with notes payable.

In 1999 the Company forecasts total spending of approximately $63.6 million for
capital expenditures net of proceeds from equipment sales. Of the $63.6 million,
ABF is budgeted for approximately $45.8 million to be used primarily for revenue
equipment and facilities. Treadco is budgeted for $6.2 million of expenditures
to be used primarily for retreading and service equipment and facilities and
G.I. Trucking is budgeted for $7.4 million of expenditures to be used primarily
for revenue equipment.

Management believes, based upon the Company's current levels of operations, the
Company's cash, capital resources, borrowings available under the Credit
Agreement and cash flow from operations will be sufficient to finance current
and future operations and meet all present and future debt service requirements,
as well as fund the acquisition of 2,575,055 shares of Treadco not owned by ABC
at December 31, 1998 (see Note R to the Consolidated Financial Statements).

SEASONALITY

ABF and G.I. Trucking 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. Clipper Domestic's and Clipper International's
operations are similar to operations at ABF and G.I. Trucking 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 third quarter
of the calendar year generally having the highest levels of sales.

<PAGE> 17

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued
- --------------------------------------------------------------------------------

ENVIRONMENTAL MATTERS

The Company's subsidiaries store some fuel for their tractors and trucks in
approximately 91 underground tanks located in 26 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 were adopted by the United States Environmental Protection Agency
("EPA") that required the Company to upgrade its underground tank systems by
December 1998. The Company successfully completed the upgrades prior to the
deadline set by the EPA.

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 and the accuracy of assessments and estimates relating to
Year 2000 issues.

<PAGE> 18

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------------------

INTEREST RATE INSTRUMENTS

The Company has historically been subject to market risk on all or a part of its
borrowings under bank credit lines which have variable interest rates.

In February 1998, the Company entered into an interest rate swap effective April
1, 1998. The swap agreement is a contract to exchange floating interest rate
payments for fixed rate payments over the life of the instrument. The notional
amount is used to measure interest to be paid or received and does not represent
the exposure to credit loss. The purpose of the swap is to limit the Company's
exposure to increases in interest rates on the notional amount of bank
borrowings over the term of the swap. The fixed interest rate under the swap is
5.845% plus the Credit Agreement margin (currently .625%). This instrument is
not recorded on the balance sheet of the Company. Details regarding the swap, as
of December 31, 1998, are as follows:

<TABLE>
<CAPTION>
Notional Rate Rate Fair
Amount Maturity Paid Received Value(2)
-------- -------- ---- -------- --------
<S> <C> <C> <C> <C>
$110.0 million April 1, 2005 5.845% Plus Credit Agreement LIBOR rate(1) $(3.8) million
Margin (currently .625%) Plus Credit Agreement
Margin (currently .625%)

(1) LIBOR rate is determined two London Banking Days prior to the first day of
every month, and continues up to and including the maturity date.

(2) The fair value is an estimated amount the Company would have paid at
December 31, 1998, to terminate the agreement.
</TABLE>

FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments, for all financial instruments
except for the interest rate swap agreement disclosed above:

CASH AND CASH EQUIVALENTS. The carrying amount reported in the balance sheet for
cash and cash equivalents approximates its fair value.

LONG- AND SHORT-TERM DEBT. The carrying amounts of the Company's borrowings
under its Revolving Credit Agreements approximate their fair values, since the
interest rate under these agreements is variable. Also, the carrying amount of
long-term debt was estimated to approximate their fair values, with the
exception of the WorldWay Subordinated Debentures, Treadco equipment debt and
the corporate facility credit agreement (repaid in 1998) which are estimated
using current market rates.

The carrying amounts and fair value of the Company's financial instruments at
December 31 are as follows:

<TABLE>
<CAPTION>
1998
CARRYING FAIR
AMOUNT VALUE
---------------------
($ thousands)
<S> <C> <C>
Cash and cash equivalents ................................. $ 4,543 $ 4,543
Short-term debt ........................................... $ 1,233 $ 1,182
Long-term debt ............................................ $161,371 $157,337
</TABLE>

<PAGE> 19

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - continued
- --------------------------------------------------------------------------------

Borrowings under the Company's Credit Agreement in excess of $110.0 million are
subject to market risk. During 1998, outstanding debt obligations under the
Credit Agreement ranged from $104.7 million to $150.3 million. A 100-basis-point
change in interest rates on Credit Agreement borrowings above $110.0 million
would change annual interest cost by $100,000 per $10.0 million of borrowings.

The Company does not have a formal foreign currency risk management policy. The
Company's foreign operations are not significant to the Company's total revenues
or assets. Revenue from non-U.S. operations amounted to less than 3% of total
revenues for 1998. Accordingly, foreign currency exchange rate fluctuations have
never had a significant impact on the Company, and they are not expected to in
the foreseeable future. In addition, Clipper International generally requires
that foreign agents' remittances be denominated in U.S. dollars, thus limiting
risk to the Company of foreign currency fluctuations. In such cases, market risk
is transferred to the foreign agent which causes credit risk to the Company for
agents operating in regions subject to economic instability. The Company has not
recently suffered any significant credit losses due to agent relationships.

The Company has not historically entered into financial instruments for trading
purposes, nor has the Company historically engaged in hedging fuel prices. No
such instruments were outstanding during 1998 or 1997.

<PAGE> 20

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Shareholders and Board of Directors
Arkansas Best Corporation

We have audited the accompanying consolidated balance sheets of Arkansas Best
Corporation and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Arkansas Best Corporation and subsidiaries at December 31, 1998 and 1997, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.

ERNST & YOUNG LLP

Little Rock, Arkansas
January 22, 1999
<PAGE> 21
ARKANSAS BEST CORPORATION
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
--------- ---------
($ thousands)
<S> <C> <C>
ASSETS

CURRENT ASSETS
Cash and cash equivalents ........................... $ 4,543 $ 7,203
Trade receivables less allowances
(1998--$7,521,000; 1997--$7,603,000) ............... 172,476 175,693
Inventories ......................................... 33,150 30,685
Prepaid expenses .................................... 12,813 14,456
Deferred income taxes ............................... 1,251 5,584
Other ............................................... 5,467 3,275
--------- ---------
TOTAL CURRENT ASSETS ............................. 229,700 236,896

PROPERTY, PLANT AND EQUIPMENT
Land and structures ................................. 218,345 212,847
Revenue equipment ................................... 256,474 207,471
Manufacturing equipment ............................. 17,506 18,891
Service, office and other equipment ................. 74,803 64,598
Leasehold improvements .............................. 9,484 7,281
--------- ---------
576,612 511,088
Less allowances for depreciation and amortization ... (256,510) (225,733)
--------- ---------
320,102 285,355

OTHER ASSETS .......................................... 33,743 41,999

ASSETS HELD FOR SALE .................................. 2,084 3,342

GOODWILL, less amortization
(1998 -- $36,740,000; 1997 -- $31,867,000) .......... 124,975 130,747
--------- ---------
$ 710,604 $ 698,339
========= =========
</TABLE>

<PAGE> 22

ARKANSAS BEST CORPORATION
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
--------- ---------
($ thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Bank overdraft ..................................................... $ 18,516 $ 13,801
Bank drafts payable ................................................ 1,314 1,172
Trade accounts payable ............................................. 72,583 77,403
Accrued expenses ................................................... 146,161 157,622
Federal and state income taxes ..................................... 8,117 1,222
Current portion of long-term debt .................................. 17,504 16,484
--------- ---------
TOTAL CURRENT LIABILITIES ........................................ 264,195 267,704

LONG-TERM DEBT, less current portion ................................. 196,079 202,604

OTHER LIABILITIES .................................................... 20,706 21,921

DEFERRED INCOME TAXES ................................................ 22,197 24,448

MINORITY INTEREST .................................................... 33,512 32,600

SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, authorized 10,000,000 shares;
issued and outstanding 1,495,000 shares ........................... 15 15
Common stock, $.01 par value, authorized 70,000,000 shares;
issued and outstanding 1998: 19,610,213 shares;
1997: 19,596,213 shares ......................................... 196 196
Additional paid-in capital ......................................... 193,117 192,910
Retained earnings (deficit) ........................................ (19,413) (43,788)
Accumulated other comprehensive income (loss) ...................... -- (271)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY ....................................... 173,915 149,062

COMMITMENTS AND CONTINGENCIES ........................................

--------- ---------
$ 710,604 $ 698,339
========= =========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

<PAGE> 23

ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended December 31
1998 1997 1996
----------- ----------- -----------
($ thousands, except per share data)
<S> <C> <C> <C>
OPERATING REVENUES
Transportation operations ..................................... $ 1,472,471 $ 1,484,766 $ 1,462,722
Tire operations ............................................... 178,982 158,912 141,613
----------- ----------- -----------
1,651,453 1,643,678 1,604,335
----------- ----------- -----------

OPERATING EXPENSES AND COSTS
Transportation operations ..................................... 1,407,878 1,418,974 1,475,179
Tire operations ............................................... 177,165 161,796 147,164
----------- ----------- -----------
1,585,043 1,580,770 1,622,343
----------- ----------- -----------

OPERATING INCOME (LOSS) ......................................... 66,410 62,908 (18,008)

OTHER INCOME (EXPENSE)
Net gains (losses) on sale of property
and non-revenue equipment .................................... 1,691 (3,536) 1,856
Gain on sale of Cardinal Freight Carriers, Inc. ............... -- 8,985 --
Settlement of litigation ...................................... 9,124 -- --
Interest expense .............................................. (18,438) (23,978) (30,843)
Minority interest in subsidiary ............................... (3,257) 1,359 1,768
Other, net .................................................... (4,950) (5,380) (7,762)
----------- ----------- -----------
(15,830) (22,550) (34,981)
----------- ----------- -----------

INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES .............................. 50,580 40,358 (52,989)

FEDERAL AND STATE INCOME TAXES (CREDIT)
Current ....................................................... 19,943 3,079 (15,016)
Deferred ...................................................... 1,962 16,310 (3,766)
----------- ----------- -----------
21,905 19,389 (18,782)
----------- ----------- -----------

INCOME (LOSS) FROM CONTINUING OPERATIONS ........................ 28,675 20,969 (34,207)
----------- ----------- -----------

DISCONTINUED OPERATIONS:
Loss from discontinued operations (net of tax benefits of
$1,476 and $1,353 for the years ended December 31, 1997
and 1996, respectively) ...................................... -- (2,529) (2,396)
Loss on disposal of discontinued operations
(net of tax benefits of $605) ................................ -- (3,093) --
LOSS FROM DISCONTINUED OPERATIONS ............................... -- (5,622) (2,396)

NET INCOME (LOSS) ............................................... 28,675 15,347 (36,603)
Preferred stock dividends ..................................... 4,298 4,298 4,298
----------- ----------- -----------
NET INCOME (LOSS) FOR COMMON SHAREHOLDERS ....................... $ 24,377 $ 11,049 $ (40,901)
=========== =========== ===========

NET INCOME (LOSS) PER COMMON SHARE
BASIC:
Continuing operations ......................................... 1.24 0.85 (1.98)
Discontinued operations ....................................... -- (0.29) (0.12)
----------- ----------- -----------
NET INCOME (LOSS) PER SHARE ..................................... 1.24 0.56 (2.10)
----------- ----------- -----------

DILUTED:
Continuing operations ......................................... 1.21 0.84 (1.98)
Discontinued operations ....................................... -- (0.28) (0.12)
----------- ----------- -----------
NET INCOME (LOSS) PER SHARE ..................................... 1.21 0.56 (2.10)
----------- ----------- -----------
CASH DIVIDENDS PAID PER COMMON SHARE ............................ $ -- $ -- $ .01
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

<PAGE> 24

ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL RETAINED OTHER
PREFERRED COMMON PAID-IN EARNINGS COMPREHENSIVE
STOCK STOCK CAPITAL (DEFICIT) INCOME (LOSS)(1)
--------- --------- --------- --------- ---------
($ thousands)

<S> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1996 ......................... $ 15 $ 195 $ 192,436 $ (13,741) $ (1,041)

Net loss .......................................... -- -- -- (36,603) --
Adjustment to minimum pension liability ........... -- -- -- -- 770
Comprehensive loss ..............................
Retirement of common stock ........................ -- -- (108) -- --
Dividends paid .................................... -- -- -- (4,493) --
--------- --------- --------- --------- ---------

BALANCES AT DECEMBER 31, 1996 ....................... 15 195 192,328 (54,837) (271)

Net income ........................................ -- -- -- 15,347 --
Comprehensive income .............................
Issuance of common stock .......................... -- 1 582 -- --
Dividends paid .................................... -- -- -- (4,298) --
--------- --------- --------- --------- ---------

BALANCES AT DECEMBER 31, 1997 ....................... 15 196 192,910 (43,788) (271)

Net income ........................................ -- -- -- 28,675 --
Adjustment to minimum pension liability ........... (2) 271
Comprehensive income ...........................
Tax effect of stock options exercised ............. -- -- 118 -- --
Issuance of common stock .......................... -- -- 89 -- --
Dividends paid .................................... -- -- -- (4,298) --
--------- --------- --------- --------- ---------

BALANCES AT DECEMBER 31, 1998 ....................... $ 15 $ 196 $ 193,117 $ (19,413) $ --
========= ========= ========= ========= =========

TOTAL
EQUITY
---------
($ thousands)
<S> <C>
BALANCES AT JANUARY 1, 1996 ......................... $ 177,864

Net loss .......................................... (36,603)
Adjustment to minimum pension liability ........... 770
---------
Comprehensive loss .............................. (35,833)
---------
Retirement of common stock ........................ (108)
Dividends paid .................................... (4,493)
---------

BALANCES AT DECEMBER 31, 1996 ....................... 137,430

Net income ........................................ 15,347
---------
Comprehensive income ............................. 15,347
---------
Issuance of common stock .......................... 583
Dividends paid .................................... (4,298)
---------

BALANCES AT DECEMBER 31, 1997 ....................... 149,062

Net income ........................................ 28,675
Adjustment to minimum pension liability ........... 269
---------
Comprehensive income ............................ 28,944
=========
Tax effect of stock options exercised ............. 118
Issuance of common stock .......................... 89
Dividends paid .................................... (4,298)
---------

BALANCES AT DECEMBER 31, 1998 ....................... $ 173,915
=========
</TABLE>

The accompanying notes are an integral part of the consolidated
financial statements.

(1) Net of tax benefits of $.6 million at January 1, 1996, and $.1 million at
December 31, 1996 and 1997.

<PAGE> 25

ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
--------- --------- ---------
($ thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) ............................................. $ 28,675 $ 15,347 $ (36,603)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization .............................. 40,674 44,316 56,389
Amortization of intangibles ................................ 4,515 4,629 4,609
Other amortization ......................................... 2,420 4,139 3,740
Provision for losses on accounts receivable ................ 3,957 2,956 9,489
Provision (credit) for deferred income taxes ............... 1,962 16,310 (3,735)
Net gain on sales of assets and subsidiaries ............... (3,928) (4,560) (3,334)
Minority interest in Treadco ............................... 3,257 (1,359) (1,768)
Changes in operating assets and liabilities:
Receivables .............................................. (2,885) (7,646) 13,540
Inventories and prepaid expenses ......................... (1,793) 28 3,165
Other assets ............................................. 5,896 (8,826) 9,203
Accounts payable, bank drafts payable, taxes payable,
accrued expenses and other liabilities .................. (10,478) 10,865 (24,499)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES ....................... 72,272 76,199 30,196
--------- --------- ---------

INVESTING ACTIVITIES
Purchases of property, plant and equipment
excluding capital leases ..................................... (60,866) (11,645) (27,747)
Purchase of Treadco stock ..................................... (1,132) -- --
Proceeds from sales of subsidiaries ........................... -- 39,031 --
Proceeds from asset sales ..................................... 16,415 37,340 65,313
--------- --------- ---------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES ................ (45,583) 64,726 37,566
--------- --------- ---------

FINANCING ACTIVITIES
Deferred financing costs and expenses ......................... (731) (1,165) (3,512)
Borrowings under revolving credit facilities .................. 557,975 463,135 272,585
Payments under revolving credit facilities .................... (551,925) (545,635) (288,285)
Payments on long-term debt .................................... (22,175) (16,652) (24,704)
Payment under term loan facilities ............................ (13,000) (42,948) (34,052)
Dividends paid to minority shareholders of Treadco ............ -- (330) (440)
Dividends paid ................................................ (4,298) (4,298) (4,493)
Net increase in bank overdraft ................................ 4,715 13,801 --
Other ......................................................... 90 (2,057) 621
--------- --------- ---------
NET CASH USED BY FINANCING ACTIVITIES ........................... (29,349) (136,149) (82,280)
--------- --------- ---------

NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS .............................................. (2,660) 4,776 (14,518)
Cash and cash equivalents at beginning of year ................ 7,203 2,427 16,945
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR ........................ $ 4,543 $ 7,203 $ 2,427
========= ========= =========

</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

<PAGE> 26
ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------

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 transportation
operations, intermodal and ocean transportation operations, and truck tire
retreading and new tire sales (see Note N). Principal subsidiaries are ABF
Freight System, Inc. ("ABF"); Treadco, Inc. ("Treadco"); Clipper Exxpress
Company and related companies ("Clipper Domestic"); CaroTrans International,
Inc. ("Clipper International"); G.I. Trucking Company ("G.I Trucking"); FleetNet
America, Inc.; and, until July 15, 1997, Cardinal Freight Carriers, Inc.
("Cardinal").

Approximately 79% of ABF's employees are covered under a five-year collective
bargaining agreement which began on April 1, 1998, with the International
Brotherhood of Teamsters ("IBT").

The Company's consolidated financial statements reflect full consolidation of
the accounts of Treadco, with the ownership interests of the other stockholders
reflected as minority interest because the Company controls Treadco through
stock ownership, board representation and management services, provided under a
transition services agreement. During the third quarter of 1998, the Company
increased its percentage ownership of Treadco, Inc., approximately 3% to 49%, by
purchasing 177,500 shares for approximately $1.1 million (see Note R).

Summarized condensed financial information for Treadco is as follows:

TREADCO, INC.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
-------- --------
($ thousands)

<S> <C> <C>
Current assets ................................... $ 59,566 $ 55,644
Property, plant and equipment, net ............... 34,313 31,329
Other assets ..................................... 13,491 13,485
-------- --------

Total assets .................................. $107,370 $100,458
======== ========

Current liabilities .............................. $ 35,892 $ 28,372
Long-term debt and other ......................... 6,262 13,251
Stockholders' equity ............................. 65,216 58,835
-------- --------
Total liabilities and stockholders' equity .... $107,370 $100,458
======== ========
</TABLE>

YEAR ENDED DECEMBER 31
1998 1997 1996
--------- --------- ---------
($ thousands)

<S> <C> <C> <C>
Sales ....................................... $ 181,293 $ 161,276 $ 144,154
Operating expenses and costs ................ (178,801) (163,785) (149,337)
Interest expense ............................ (1,125) (1,256) (900)
Settlement of litigation (see Note L) ....... 9,124 -- --
Other income (expense) ...................... (18) (112) 731
Income tax (expense) credit ................. (4,092) 1,373 2,093
--------- --------- ---------
Net income (loss) ........................ $ 6,381 $ (2,504) $ (3,259)
========= ========= =========
</TABLE>

<PAGE> 27

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

NOTE B - ACCOUNTING POLICIES

CONSOLIDATION: The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany accounts and
transactions are eliminated in consolidation.

CASH AND CASH EQUIVALENTS: Short-term investments which have a maturity of
ninety days or less when purchased are considered cash equivalents.

CONCENTRATION OF CREDIT RISK: The Company's services are provided primarily to
customers throughout the United States and Canada, with additional customers in
foreign countries served by Clipper International. The Company performs ongoing
credit evaluations of its customers and generally does not require collateral.
Historically, credit losses have been within management's expectations.

INVENTORIES: Inventories, which consist primarily of new tires and retread tires
and supplies used in Treadco's business, are stated at the lower of cost
(first-in, first-out basis) or market.

PROPERTY, PLANT AND EQUIPMENT: Purchases of property, plant and equipment are
recorded at cost. For financial reporting purposes, such property is depreciated
principally by the straight-line method, using the following lives: structures
- -- 15 to 30 years; revenue equipment -- 3 to 7 years; manufacturing equipment --
5 to 12 years; other equipment -- 3 to 10 years; and leasehold improvements -- 4
to 10 years. For tax reporting purposes, accelerated depreciation or cost
recovery methods are used. Gains and losses on asset sales are reflected in the
year of disposal. Trade-in allowances in excess of the book value of revenue
equipment traded are accounted for by adjusting the cost of assets acquired.
Tires purchased with revenue equipment are capitalized as a part of the cost of
such equipment, with replacement tires being expensed when placed in service.

ASSETS HELD FOR SALE: Assets held for sale represent primarily non-operating
freight terminals and other properties, a portion of which were acquired as a
result of the WorldWay acquisition (see Note A), which are carried at the lower
of net book value or estimated net realizable value. The Company recorded
writedowns to net realizable value of $1.6 million in 1997 and $1.5 million in
1996 for Company properties reclassified to assets held for sale. No writedowns
were made in 1998. Writedowns are included in gains or losses on sales of
property.

Total assets held for sale at December 31, 1996 were $9.1 million. In 1997,
additional assets of $6.1 million were identified and reclassified to assets
held for sale. During 1997, assets carried at $10.3 million were sold, resulting
in a loss of $1.9 million.

Total assets held for sale at December 31, 1997 were $3.3 million. In 1998,
additional assets of $1.0 million were identified and reclassified to assets
held for sale. During 1998, assets carried at $2.3 million were sold, resulting
in a gain of $1.1 million.

GOODWILL: Excess cost over fair value of net assets acquired (goodwill) is
amortized on a straight-line basis over 15 to 40 years. The carrying value of
goodwill will be reviewed if the facts and circumstances suggest that it may be
impaired. If this review indicates that goodwill will not be recoverable, as
determined based on the undiscounted cash flows over the remaining amortization
period, the Company's carrying value of the goodwill will be reduced.

<PAGE> 28

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

INCOME TAXES: Deferred income taxes are accounted for under the liability
method. Deferred income taxes relate principally to asset and liability basis
differences arising from a 1988 purchase transaction and from the WorldWay
acquisition, as well as to the timing of the depreciation and cost recovery
deductions previously described and to temporary differences in the recognition
of certain revenues and expenses of carrier operations.

REVENUE RECOGNITION: Motor carrier revenue is recognized based on relative
transit time in each reporting period with expenses recognized as incurred.
Revenue for other segments is recognized generally at the point when goods or
services are provided to the customers.

EARNINGS (LOSS) PER SHARE: The calculation of earnings (loss) per share is based
on the weighted average number of common (basic earnings per share) or common
equivalent shares outstanding (diluted earnings per share) during the applicable
period. The dilutive effect of common stock equivalents is excluded from basic
earnings per share and included in the calculation of diluted earnings per
share. The calculation of basic earnings per share reduces income available to
common shareholders by preferred stock dividends paid or accrued during the
period.

COMPENSATION TO EMPLOYEES: Stock-based compensation to employees is accounted
for based on the intrinsic value method under Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25").

ACCOUNTING FOR SALES OF STOCK BY SUBSIDIARIES: It is the Company's policy to
recognize gains and losses on sales of subsidiary stock when incurred.

CLAIMS LIABILITIES: The Company is self-insured up to certain limits for
workers' compensation, cargo loss and damage, certain property damage and
liability claims. Provision has been made for the estimated liabilities for such
claims based on historical trends, claims frequency, severity and other factors.

ENVIRONMENTAL MATTERS: The Company expenses environmental expenditures related
to existing conditions resulting from past or current operations and from which
no current or future benefit is discernible. Expenditures which extend the life
of the related property or mitigate or prevent future environmental
contamination are capitalized. The Company determines its liability on a
site-by-site basis with actual testing at some sites, and records a liability at
the time when it is probable and can be reasonably estimated. The estimated
liability is not discounted or reduced for possible recoveries from insurance
carriers or other third parties (see Note L).

DERIVATIVE FINANCIAL INSTRUMENTS: The Company has, from time to time, entered
into interest-rate swap agreements and interest-rate cap agreements (see Notes H
and O) designed to modify the interest characteristic of outstanding debt or
limit exposure to increasing interest rates. The differential to be paid or
received as interest rates change is accrued and recognized as an adjustment of
interest expense related to the debt (the accrual accounting method). Any
related amount payable to or receivable from counterparties is included in
accrued liabilities or other receivables.

COMPREHENSIVE INCOME: The Company reports the classification components of other
comprehensive income by their nature in the financial statements and displays
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the consolidated financial
statements, as required by generally accepted accounting principles.
Comprehensive income

<PAGE> 29

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

refers to revenues, expenses, gains and losses that under generally accepted
accounting principles are included in comprehensive income but excluded from net
income.

SEGMENT INFORMATION: The Company uses the "management approach" for determining
appropriate segment information to disclose. The management approach is based on
the way management organizes the segments within the Company for making
operating decisions and assessing performance.

USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

RECLASSIFICATIONS: Certain reclassifications have been made to the prior year
financial statements to conform to the current year's presentation.

NOTE C - DISCONTINUED OPERATIONS

As of June 30, 1997, and prior periods since 1995, the Company was engaged in
providing logistics services, including warehousing and distribution, through
two wholly owned subsidiaries, The Complete Logistics Company ("CLC") and
Integrated Distribution, Inc. ("IDI"). On August 8, 1997, the Company sold CLC
for approximately $2.5 million in cash. The sale resulted in a pre-tax loss of
$1.3 million. In September 1997, the Company completed a formal plan to exit the
logistics segment by disposing of IDI. As of September 30, 1997, the Company
recorded a loss for the disposal of IDI of $2.2 million, net of tax benefits of
$100,000. On October 31, 1997, the Company closed the sale of IDI for proceeds
of approximately $600,000.

Results of operations of the logistics segment have been reported as
discontinued operations for the year ended December 31, 1997 and the statements
of operations for all prior periods have been restated to remove the revenue and
expenses of the logistics segment. Results of the logistics operations segment
included in discontinued operations are summarized as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
-------- ------------ ------------
($ thousands)

<S> <C> <C> <C>
Revenues ...................................................... $ -- $ 29,812 $ 54,849
Operating loss ................................................ -- (3,516) (2,835)
Pre-tax loss .................................................. -- (4,005) (3,749)
</TABLE>

NOTE D - 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 of approximately $9 million. The net
proceeds from the sale were used to pay down bank debt. Results of operations
for Cardinal included in the statements of operations are summarized as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
------------ ------------ ------------
($ thousands)

<S> <C> <C> <C>
Revenues .................................... $ -- $ 39,366 $ 74,623
Operating income ............................ -- 2,087 4,388
Pre-tax income .............................. -- 1,710 3,585
</TABLE>

<PAGE> 30

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

NOTE E - RECENT ACCOUNTING PRONOUNCEMENTS

In March 1998, the Accounting Standards Executive Committee of The American
Institute of CPA's ("AcSEC") issued Statement of Position ("SOP") 98-1,
Accounting for Costs of Computer Software Developed For or Obtained For Internal
Use. Under the SOP, qualifying computer software costs incurred during the
"application development stage" are required to be capitalized and amortized
over the software's estimated useful life. The SOP is effective for the Company
beginning January 1, 1999. The SOP will result in capitalization of costs
related to internal computer software development. All such costs are currently
expensed. The amount of costs capitalized within any period will be dependent on
the nature of software development activities and projects in that period.

In April 1998, the AcSEC issued Statement of Position 98-5, Reporting on the
Costs of Start-Up Activities. Under the SOP, certain costs associated with
start-up activities are required to be expensed as incurred. The SOP will be
effective for the Company on January 1, 1999. The Company has historically
expensed start-up costs. Accordingly, the Company does not anticipate the
adoption of this SOP to have a material impact on the Company's financial
statements.

NOTE F - INVENTORIES

<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
------- -------
($ thousands)
<S> <C> <C>
Finished goods .................................................. $25,523 $22,392
Materials ....................................................... 5,147 4,934
Repair parts, supplies and other ................................ 2,480 3,359
------- -------
$33,150 $30,685
======= =======
</TABLE>

<PAGE> 31

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

NOTE G - FEDERAL AND STATE INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows:

<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
-------- --------
($ thousands)
<S> <C> <C>
Deferred tax liabilities:
Depreciation and basis differences
for property, plant and equipment ............. $ 30,730 $ 32,208
Revenue recognition ............................ 4,312 3,360
Basis difference on asset and stock sale ....... 3,239 3,313
Prepaid expenses ............................... 2,885 5,173
Other .......................................... 1,578 3,351
-------- --------
Total deferred tax liabilities ................ 42,744 47,405

Deferred tax assets:
Accrued expenses ............................... 14,914 18,586
Postretirement benefits other than pensions .... 1,086 1,216
Net operating loss carryovers .................. 2,903 9,204
Alternative minimum tax credit carryovers ...... -- 1,825
Other .......................................... 4,043 310
-------- --------
Total deferred tax assets ..................... 22,946 31,141
Valuation allowance for deferred tax assets ... (1,148) (2,600)
-------- --------

Net deferred tax assets ....................... 21,798 28,541
-------- --------

Net deferred tax liabilities ..................... $ 20,946 $ 18,864
======== ========
</TABLE>

Significant components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
-------- -------- --------
($ thousands)
<S> <C> <C> <C>
Current (credit):
Federal .............................. $ 17,304 $ 1,913 $(15,016)
State ................................ 2,639 1,166 --
-------- -------- --------

Total current (credit) .............. 19,943 3,079 (15,016)
-------- -------- --------

Deferred (credit):
Federal .............................. 1,765 14,793 (1,149)
State ................................ 197 1,517 (2,617)
-------- -------- --------
Total deferred (credit) ............. 1,962 16,310 (3,766)
-------- -------- --------

Total income tax expense (credit) ...... $ 21,905 $ 19,389 $(18,782)
======== ======== ========
</TABLE>

<PAGE> 32

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

A reconciliation between the effective income tax rate, as computed on income
from continuing operations, and the statutory federal income tax rate is
presented in the following table:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
-------- -------- --------
($ thousands)
<S> <C> <C> <C>
Income tax (benefit) at the
statutory federal rate of 35% ................... $ 17,703 $ 14,125 $(18,546)
Federal income tax effects of:
State income taxes ............................. (986) (941) 913
Nondeductible goodwill ......................... 1,045 1,262 2,548
Other nondeductible expenses ................... 693 555 1,389
Minority interest .............................. 1,140 (476) (619)
Undistributed earnings or losses of Treadco .... 204 (80) (99)
Nondeductible goodwill included
in assets of Cardinal ......................... -- 3,078 --
Resolution of tax contingencies ................ -- -- (1,573)
Other .......................................... (730) (817) (178)
-------- -------- --------

Federal income taxes (benefit) ................... 19,069 16,706 (16,165)
State income taxes (benefit) ..................... 2,836 2,683 (2,617)
-------- -------- --------

$ 21,905 $ 19,389 $(18,782)
======== ======== ========
Effective tax rate ............................... 43.3% 48.0% (35.5)%
======== ======== ========
</TABLE>

Income taxes of $13.1 million were paid in 1998 and $2.4 million were paid in
1997. No income taxes were paid in 1996. Income tax refunds amounted to $4.4
million in 1998, $8.5 million in 1997 and $28.9 million in 1996.

As of December 31, 1998, the Company had state net operating loss carryovers of
approximately $56.1 million. State net operating loss carryovers expire
generally in five to fifteen years.

For financial reporting purposes, a valuation allowance of approximately $1.1
million has been established for certain state net operating loss carryovers for
which realization is uncertain. As a result of the current year utilization of
state net operating losses of the Company's various subsidiaries in which
realization of the benefits was previously uncertain, the Company decreased its
valuation allowance by $1.5 million in 1998.

NOTE H - LONG-TERM DEBT AND CREDIT AGREEMENTS

<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
-------- --------
($ thousands)

<S> <C> <C>
Revolving Credit and Term Loan Facility (1) ...... $119,600 $110,800
Subordinated Debentures (2) ...................... 37,994 42,657
Corporate Facility Credit Agreement (3) .......... -- 13,000
Treadco Credit Agreement (4) ..................... 1,250 4,000
Capitalized Lease Obligations (5) ................ 50,979 41,809
Other ............................................ 3,760 6,822
-------- --------
213,583 219,088
Less current portion ............................. 17,504 16,484
-------- --------
$196,079 $202,604
======== ========
</TABLE>

<PAGE> 33

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

(1) On June 12, 1998, the Company entered into a new senior five-year
Revolving Credit Agreement ("Credit Agreement") in the amount of $250
million, which includes a $75 million sublimit for the issuance of
letters of credit. The parties to the Credit Agreement are the Company,
Societe Generale, Southwest Agency, as Administrative Agent, and Bank
of America National Trust and Savings Association and Wells Fargo Bank
(Texas), N.A. as Co-Documentation Agents, as well as five other
participating banks. The Company's previous credit agreement was
terminated upon entering into the new Credit Agreement. The Credit
Agreement contains covenants limiting, among other things,
indebtedness, distributions, dispositions of assets, and capital
expenditures, and requires the Company to meet certain quarterly
financial ratio tests. As of December 31, 1998, the Company was in
compliance with all covenants. Interest rates under the agreement are
at variable rates as defined by the Credit Agreement. At December 31,
1998, the effective average interest rate on the Credit Agreement was
6.4%.

At December 31, 1998, there were $119.6 million of Revolver Advances
and approximately $37.8 million of outstanding letters of credit. At
December 31, 1997, there were $110.8 million of Revolver Advances and
approximately $19.8 million in outstanding letters of credit.
Outstanding revolving credit advances may not exceed a borrowing base
calculated using the Company's equipment and real estate, the Treadco
common stock owned by the Company, and eligible receivables. The
borrowing base was $300.2 million at December 31, 1998, which exceeded
the $250.0 million limit specified by the Credit Agreement. The amount
available under the Credit Agreement at December 31, 1998, was $92.6
million. The Company has pledged, as security for the 1998 Credit
Agreement, substantially all accounts receivable and revenue equipment
not already pledged under other debt obligations.

(2) The Subordinated Debentures were issued in April 1986 by WorldWay. The
debentures bear interest at 6.25% per annum, payable semi-annually, on
a par value of $39.9 million at December 31, 1998. The debentures are
payable April 15, 2011. The Company may redeem all outstanding
debentures at 100% of par at any time and is required to redeem,
through a mandatory sinking fund in each year through 2010, $2.5
million of the aggregate principal amount of the debentures issued. The
Company has met its sinking fund obligations through 2001 by making
market purchases and deposits of debentures with the Bond Trustee.
Bonds with a par value of $5.0 million were purchased in 1998 for
approximately $4.5 million. Bonds with a par value of $2.5 million were
purchased for approximately $2.0 million in 1997. The bond repurchases
resulted in gains of $.3 million in both 1998 and 1997 (included in
other income).

(3) The Company entered into a ten-year, $20 million corporate facility
credit agreement in 1994 to finance the construction of the Company's
corporate office building which was completed in February 1995. In
April 1998, the Company paid off the corporate facility credit
agreement.

(4) 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 Treadco
accounts receivable and inventories. Borrowings under the agreement
bear interest at a variable rate based on the terms of the Treadco
Credit Agreement. At December 31, 1998, Treadco had $1.25 million
outstanding under the Revolving Credit Agreement. The average interest
rate at December 31, 1998, was 7.1%. The Treadco Credit Agreement
contains various covenants, which limit, among other things, dividends,
disposition of receivables, indebtedness and investments, and require
Treadco to

<PAGE> 34

meet certain financial tests. As of December 31, 1998, Treadco was in
compliance with the covenants.

(5) Capitalized lease obligations include approximately $45.4 million
relative to leases of carrier revenue equipment with an aggregate net
book value of approximately $45.8 million at December 31, 1998. These
leases have a weighted average interest rate of approximately 6.9%.
Also included is approximately $5.6 million relative to leases of
computer and office equipment, various terminals financed by Industrial
Revenue Bond Issues, and Treadco delivery and service trucks, with a
weighted average interest rate of approximately 7.0%. The net book
value of the related assets was approximately $10.8 million at December
31, 1998.

Annual maturities on long-term debt, excluding capitalized lease obligations
(see Note K), in 1999 through 2003 aggregate approximately $1.2 million; $1.3
million; $4.8 million; $2.6 million; and $122.1 million, respectively.

Interest paid, net of interest capitalized, was $18.6 million in 1998, $24.6
million in 1997, and $32.2 million in 1996. Interest capitalized totaled $48,000
in 1998 and $.5 million in 1996. No interest was capitalized during 1997.

The Company is a party to an interest rate cap arrangement to reduce the impact
of increases in interest rates on its variable-rate long-term debt. The Company
will be reimbursed for the difference in interest rates if the LIBOR rate
exceeds a fixed rate of 9% applied to notional amounts, as defined in the
contract, ranging from $10.0 million as of December 31, 1998 to $2.5 million as
of October 1999. As of December 31, 1998, 1997 and 1996, the LIBOR rates were
5.1%, 5.8% and 5.5%, respectively; therefore no amounts were due to the Company
under this arrangement. In the event that amounts are due under this agreement
in the future, the payments to be received would be recognized as a reduction of
interest expense (the accrual accounting method). Fees totaling $.4 million were
paid in 1994 to enter into this arrangement. These fees are included in other
assets and are being amortized to interest expense over the life of the
contract.

In February 1998, the Company entered into an interest rate swap effective April
1, 1998, on a notional amount of $110 million. The purpose of the swap was to
limit the Company's exposure to increases in interest rates on $110 million of
bank borrowings over the seven-year term of the swap. The fixed interest rate
under the swap is 5.845% plus the Credit Agreement margin (currently .625%) (see
Note O).

NOTE I - ACCRUED EXPENSES

<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
---------- ----------
<S> <C> <C>
Accrued salaries, wages and incentive plans ....................... $ 19,494 $ 19,726
Accrued vacation pay .............................................. 31,627 31,241
Accrued interest .................................................. 2,413 2,568
Taxes other than income ........................................... 9,002 8,017
Loss, injury, damage and workers' compensation claims reserves .... 72,184 83,272
Pension costs ..................................................... -- 502
Other ............................................................. 11,441 12,296
---------- ----------
$ 146,161 $ 157,622
========== ==========
</TABLE>

<PAGE> 35

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

NOTE J - SHAREHOLDERS' EQUITY

PREFERRED STOCK. In February 1993, the Company completed a public offering of
1,495,000 shares of Preferred Stock at $50 per share. The Preferred Stock is
convertible at the option of the holder into Common Stock at the rate of 2.5397
shares of Common Stock for each share of Preferred Stock. Annual dividends are
$2.875 and are cumulative. The Preferred Stock is exchangeable, in whole or in
part, at the option of the Company on any dividend payment date beginning
February 15, 1995, for the Company's 5 3/4% Convertible Subordinated Debentures
due February 15, 2018, at a rate of $50 principal amount of debentures for each
share of Preferred Stock. The Preferred Stock is redeemable at any time, in
whole or in part, at the Company's option, initially at a redemption price of
$52.0125 per share and thereafter at redemption prices declining to $50 per
share on or after February 15, 2003, plus unpaid dividends to the redemption
date. Holders of Preferred Stock have no voting rights unless dividends are in
arrears six quarters or more, at which time they have the right to elect two
directors of the Company until all dividends have been paid. Dividends of $4.3
million were paid during 1998, 1997 and 1996.

STOCK OPTIONS. The Company has elected to follow APB 25 and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, Accounting for Stock-Based Compensation ("Statement 123"),
requires use of option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized.

The Company has a stock option plan which provides 2,000,000 shares of Common
Stock for the granting of options to directors and key employees of the Company.
All options granted are exercisable starting 12 months after the grant date,
with 20% of the shares covered thereby becoming exercisable at that time and
with an additional 20% of the option shares becoming exercisable on each
successive anniversary date, with full vesting occurring on the fifth
anniversary date. The options were granted for a term of 10 years.

Pro forma information regarding net income and earnings per share is required by
Statement 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant, using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1998, 1997 and 1996, respectively: risk-free interest rates of
4.8%, 6.7% and 5.8%; dividend yields of .01%, .01% and .01%; volatility factors
of the expected market price of the Company's Common Stock of .47, .45 and .41;
and a weighted-average expected life of the option of 9.5 years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of employee stock options.

<PAGE> 36

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows (in thousands except for earnings per share
information):

<TABLE>
<CAPTION>
DECEMBER 31
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net income (loss) - as reported ....................... $ 28,675 $ 15,347 $ (36,603)
========== ========== ==========
Net income (loss) - pro forma ......................... $ 27,809 $ 14,693 $ (37,379)
========== ========== ==========
Net income (loss) per share - as reported (basic) ..... $ 1.24 $ .56 $ (2.10)
========== ========== ==========
Net income (loss) per share - as reported (diluted) ... $ 1.21 $ .56 $ (2.10)
========== ========== ==========
Net income (loss) per share - pro forma (basic) ....... $ 1.20 $ .53 $ (2.14)
========== ========== ==========
Net income (loss) per share - pro forma (diluted) ..... $ 1.17 $ .52 $ (2.14)
========== ========== ==========
</TABLE>

A summary of the Company's stock option activity and related information for the
years ended December 31 follows:

<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------------------------------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding - beginning of year ........... 1,839,480 $ 8.01 1,790,200 $ 8.21 688,700 $ 11.05
Granted ................................... 37,500 10.57 312,000 5.44 1,101,500 6.44
Exercised ................................. (14,000) 6.38 (91,740) 6.38 -- --
Forfeited ................................. (23,480) 6.38 (170,980) 6.38 -- --
---------- ---------- ---------- ---------- ---------- ----------
Outstanding - end of year ................. 1,839,500 $ 8.11 1,839,480 $ 8.01 1,790,200 $ 8.21
========== ========== ========== ========== ========== ==========

Exercisable - end of year ................. 1,025,320 $ 9.28 781,776 $ 9.99 476,280 $ 10.92
========== ========== ========== ========== ========== ==========

Estimated weighted-average
fair value per share of options
granted to employees during the year .... $ 6.68 $ 3.65 $ 3.87
========== ========== ==========
</TABLE>

The following table summarizes information concerning currently outstanding and
exercisable options:

<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$4 - $6 288,000 8.2 $ 5.08 57,600 $ 5.08
$6 - $8 787,400 7.1 6.41 314,960 6.41
$8 - $10 92,500 6.0 9.14 61,200 9.32
$10 - $12 561,900 4.0 10.97 514,800 10.99
$12 - $14 109,700 5.6 12.64 76,760 12.65
--------- --------- --------- --------- --------- ---------
1,839,500 1,025,320
========= ========= ========= ========= ========= =========
</TABLE>

<PAGE> 37

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

SHAREHOLDERS' RIGHTS PLAN. Each issued and outstanding share of Common Stock has
associated with it one Common Stock right to purchase a share of Common Stock
from the Company at a price of $60.00. The rights are not exercisable, but could
become exercisable if certain events occur relating to the acquisition of 15% or
more of the outstanding Common Stock of the Company. Upon distribution, the
rights will entitle holders, other than an acquirer in a non-permitted
transaction, to receive Common Stock with a market value of two times the
exercise price of the right. The rights will expire in 2002 unless extended.

NOTE K - LEASES AND COMMITMENTS

Rental expense amounted to approximately $134.4 million in 1998, $122.5 million
in 1997 and $114.6 million in 1996. Those amounts included purchased
transportation and amounts for month-to-month rentals of revenue equipment.

The future minimum rental commitments, net of future minimum rentals to be
received under noncancellable subleases, as of December 31, 1998 for all
noncancellable operating leases are as follows:

<TABLE>
<CAPTION>
TERMINALS EQUIPMENT
AND RETREAD AND
PERIOD TOTAL PLANTS OTHER
- ------ ----- ------ -----
($ thousands)
<S> <C> <C> <C>
1999..................................... $18,638 $10,885 $ 7,753
2000..................................... 12,697 8,810 3,887
2001..................................... 8,917 7,400 1,517
2002..................................... 7,235 6,094 1,141
2003..................................... 4,344 4,117 227
Thereafter............................... 6,077 6,047 30
------- ------- -------
$57,908 $43,353 $14,555
======= ======= =======
</TABLE>

Certain of the leases are renewable for substantially the same rentals for
varying periods. Future minimum rentals to be received under noncancellable
subleases totaled approximately $4.0 million at December 31, 1998.

The future minimum payments under capitalized leases at December 31, 1998,
consisted of the following ($ thousands):

<TABLE>
<CAPTION>
<S> <C>
1999 ........................................ $ 19,213
2000 ........................................ 15,801
2001 ........................................ 17,858
2002 ........................................ 2,551
2003 ........................................ 235
Thereafter .................................. 1,668
----------
Total minimum lease payments ................ 57,326
Amounts representing interest ............... 6,347
----------
Present value of net minimum lease
included in long-term debt - Note H ....... $ 50,979
==========
</TABLE>

<PAGE> 38

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

Assets held under capitalized leases are included in property, plant and
equipment as follows:

<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
---------- ----------
($ thousands)

<S> <C> <C>
Revenue equipment ...................... $ 75,689 $ 64,446
Structures and other equipment ......... 13,952 17,162
---------- ----------
89,641 81,608
Less accumulated amortization .......... 33,030 31,362
---------- ----------
$ 56,611 $ 50,246
========== ==========
</TABLE>

The revenue equipment leases have remaining terms from one to seven years and
contain renewal or fixed price purchase options. The lease agreements require
the lessee to pay property taxes, maintenance and operating expenses. Lease
amortization is included in depreciation expense.

Capital lease obligations of $25.6 million, $2.6 million and $6.5 million were
incurred for the years ended December 31, 1998, 1997 and 1996, respectively.

NOTE L - 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 is expected to have a
material adverse effect on the Company's financial condition, cash flows or
results of operations. The Company maintains liability insurance against risks
arising out of the normal course of its business, subject to certain
self-insured retention limits.

As of December 31, 1998, the Company has accrued approximately $3.6 million to
provide for environmental-related liabilities. The Company's environmental
accrual is based on management's best

<PAGE> 39

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

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. Accruals for environmental liabilities are included in the balance
sheet as accrued expenses.

NOTE M - PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

The Company and its subsidiaries have noncontributory defined benefit pension
plans covering substantially all noncontractual employees. Benefits are based on
years of service and employee compensation. Contributions are made based upon at
least the minimum amounts required to be funded under provisions of the Employee
Retirement Income Security Act of 1974, with the maximum amounts not to exceed
the maximum amount deductible under the Internal Revenue Code. The plans' assets
are held in bank-administered trust funds and are primarily invested in equity
and government securities. Additionally, the Company participates in several
multiemployer plans, which provide defined benefits to the Company's union
employees. In the event of insolvency or reorganization, plan terminations or
withdrawal by the Company from the multiemployer plans, the Company may be
liable for a portion of the plan's unfunded vested benefits, the amount of
which, if any, has not been determined, but which would be material.

The Company also sponsors other postretirement benefit plans that provide
supplemental medical benefits, life insurance and accident and vision care to
full-time officers of the Company. The plans are noncontributory, with the
Company paying up to 80% of covered charges incurred by participants of the
plan.

<PAGE> 40

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

The following is a summary of the changes in benefit obligations and plan assets
for the defined benefit plans and other postretirement benefit plans:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
PENSION BENEFITS OTHER BENEFITS
1998 1997 1998 1997
--------- --------- --------- ---------
($ thousands)
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year .......... $ 155,638 $ 146,073 $ 6,534 $ 5,533
Service cost ..................................... 7,953 7,761 65 93
Interest cost .................................... 11,409 10,483 377 411
Amendments ....................................... (642) -- -- --
Actuarial (gain) loss and other .................. 16,037 1,117 (787) 1,040
Benefits and expenses paid ....................... (9,514) (9,796) (559) (542)
--------- --------- --------- ---------
Benefit obligation at end of year ................ 180,881 155,638 5,630 6,535
--------- --------- --------- ---------

CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year ... 175,003 158,492 -- --
Actual return on plan assets ..................... 32,354 23,853 -- --
Employer contribution ............................ 1,139 2,454 559 542
Benefits and expenses paid ....................... (9,514) (9,796) (559) (542)
--------- --------- --------- ---------
Fair value of plan assets at end of year ......... 198,982 175,003 -- --
--------- --------- --------- ---------

Funded status .................................... 18,101 19,365 (5,630) (6,535)
Unrecognized net actuarial (gain) loss ........... (1,056) 389 255 1,023
Unrecognized prior service cost .................. 1,067 1,181 819 951
Unrecognized net transition obligation (asset) ... (53) (57) 1,884 2,018
--------- --------- --------- ---------
Prepaid (accrued) benefit cost ................... $ 18,059 $ 20,878 $ (2,672) $ (2,543)
========= ========= ========= =========
</TABLE>

On December 31, 1998, the net pension asset is reflected in the accompanying
financial statements as a noncurrent asset of $18.1 million included in other
assets. On December 31, 1997, the net pension asset is reflected in the
accompanying financial statements as an accrued liability of $.5 million and a
noncurrent asset of $21.3 million included in other assets.

At December 31, 1998 and 1997, G.I. Trucking's Freight Handler's Retirement Plan
had pension benefit obligations of $29.0 million and $25.1 million,
respectively, and plan assets with a fair value of $27.5 million and $23.2
million, respectively.

At December 31, 1997, Treadco's defined benefit pension plan had pension benefit
obligations of $3.7 million and plan assets with a fair value of $3.6 million.

<PAGE> 41

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

Assumptions used in determining net periodic benefit cost for the defined
benefit plans and other postretirement benefit plans were:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
PENSION BENEFITS OTHER BENEFITS
1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------

WEIGHTED-AVERAGE ASSUMPTIONS
Discount rate ..................... 6.9% 7.0% 7.1% 6.9% 7.0% 7.5%
Expected return on plan assets .... 10.0% 9.4% - 10.0% 8.0% - 9.0% -- -- --
Rate of compensation increase ..... 3.0% - 4.0% 3.0% - 4.0% 3.0% -- -- --
</TABLE>

The weighted-average annual assumed rate of increase in the per capita cost of
covered benefits (in health care cost trend) is 9% for 1999 and 1998 and is
assumed to decrease gradually to 5% in 2002 and later.

A summary of the components of net periodic benefit cost for the defined benefit
plans and other postretirement plans follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
PENSION BENEFITS OTHER BENEFITS
1998 1997 1996 1998 1997 1996
-------- -------- -------- -------- -------- --------
($ thousands)
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost ................................ $ 7,953 $ 7,761 $ 8,025 $ 65 $ 93 $ 68
Interest cost ............................... 11,409 10,483 11,028 377 411 321
Expected return on plan assets .............. (16,842) (14,645) (17,324) -- -- --
Transition (asset) obligation recognition ... (4) (4) (4) 135 135 135
Amortization of prior service cost .......... 74 100 100 131 131 --
Recognized net actuarial loss (gain) ........ 1,369 918 4,669 (19) (70) (35)
-------- -------- -------- -------- -------- --------
Net periodic benefit cost ................... 3,959 4,613 6,494 689 700 489
Multiemployer plans ......................... 66,355 65,237 60,930 -- -- --
-------- -------- -------- -------- -------- --------
$ 70,314 $ 69,850 $ 67,424 $ 689 $ 700 $ 489
======== ======== ======== ======== ======== ========
</TABLE>

The health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one-percentage-point change in assumed
health care cost trend rates would have the following effects for the year ended
December 31, 1998:

<TABLE>
<CAPTION>
1% 1%
INCREASE DECREASE
--------------------
($ thousands)
<S> <C> <C>
Effect on total of service and interest cost components .... 63 (51)
Effect on postretirement benefit obligation ................ 742 (612)
</TABLE>

The Company has deferred compensation agreements with certain executives for
which liabilities aggregating $2.2 million and $2.0 million as of December 31,
1998 and 1997, respectively, have been recorded.

The Company also has a supplemental benefit plan for the purpose of
supplementing benefits under the Company's retirement plans. The plan will pay
sums in addition to amounts payable under the retirement plans to eligible
participants. Participation in the plan is limited to employees of the Company
who are participants in the Company's retirement plans and who are also either
participants in the Company's executive incentive plans or are designated as
participants in the plan by the Company's Board of Directors. As of December 31,
1998 and 1997, the Company has liabilities of $2.5 million and $2.6 million,

<PAGE> 42

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

respectively, for future costs under this plan reflected in the accompanying
consolidated financial statements in other liabilities.

An additional benefit plan provides certain death and retirement benefits for
certain officers and directors of WorldWay and its former subsidiaries. The
Company has liabilities of $6.0 million and $6.3 million at December 31, 1998
and 1997, respectively, for future costs under this plan reflected as other
liabilities in the accompanying consolidated financial statements. The Company
has insurance policies on the participants in amounts which are sufficient to
fund a substantial portion of the benefits under the plan.

The Company has various defined contribution plans which cover substantially all
of its employees. The plans permit participants to defer a portion of their
salary up to a maximum, ranging by plan from 8% to 15% as provided in Section
401(k) of the Internal Revenue Code. The Company matches the participant
contributions up to a specified limit ranging from 3% to 6% in 1998. The
matching contributions may be made in cash or Company stock. The plans also
allow for discretionary Company contributions determined annually. The Company's
expense for the defined contribution plans totaled $1.8 million for 1998, $1.3
million for 1997 and $1.4 million for 1996.

In addition, the Company's union employees and union retirees are provided
health care and other benefits through defined benefit multiemployer plans
administered and funded based on the applicable labor agreement. The Company's
obligation is determined based on the applicable labor agreement and does not
extend directly to employees or retirees. The cost of such benefits cannot be
readily separated between retirees and active employees. The aggregate
contribution to the multiemployer health and welfare benefit plans totaled
approximately $66.0 million, $67.0 million and $72.4 million for the years ended
December 31, 1998, 1997, and 1996, respectively.

In 1995, the Company adopted a performance award program available to the
officers of ABC. Units awarded will be initially valued at the closing price per
share of the Company's common stock on the date awarded. The vesting provisions
and the return on equity target will be set upon award. No awards have been
granted under this program. Treadco has a similar performance award plan which,
during 1995, 30,000 and 15,000 units were granted to Treadco's President and
Executive Vice President, respectively. During 1998, Treadco awarded 855 and 428
units to its President and Executive Vice President, respectively.

NOTE N - OPERATING SEGMENT DATA

The Company used the "management approach" to determine its reportable operating
segments as well as to determine the basis of reporting the operating segment
information. The management approach focuses on financial information that the
Company's decision-makers use to make decisions about operating matters.
Management uses operating revenues, operating expense categories, operating
ratios, operating income, and key operating statistics to evaluate performance
and allocate resources to the Company's operating segments.

During the periods being reported on, the Company operated in six defined
reportable operating segments: 1) ABF; 2) G.I. Trucking; 3) Cardinal (which was
sold in July 1997); 4) Clipper Domestic; 5) Clipper International; and 6)
Treadco. A discussion of the services from which each reportable segment derives
its revenues is as follows:

<PAGE> 43

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

ABF is headquartered in Fort Smith, Arkansas and is the fourth largest
less-than-truckload ("LTL") motor carrier in the United States based on 1998
revenues as reported to the U.S. Department of Transportation ("D.O.T."). ABF
provides direct service to over 98.7% of the cities in the United States having
a population of 25,000 or more. ABF concentrates on long-haul transportation of
general commodities freight, involving primarily LTL shipments.

G.I. Trucking is headquartered in La Mirada, California. G.I. Trucking is one of
the five largest western states-based non-union regional LTL motor carriers.
G.I. Trucking offers one- to three-day regional service through service centers
and agents in the Western and Southwestern regions. G.I. provides
transcontinental service through a partnership with three other regional
carriers through three major hub terminals located throughout the Midwest and
East Coast.

Cardinal, a truckload carrier serving primarily the Southeast and East, was sold
by the Company in July 1997.

Clipper Domestic is headquartered in Lemont, Illinois. Clipper Domestic offers
domestic intermodal freight services, utilizing a variety of transportation
modes including rail, over-the-road and air.

Clipper International is headquartered in Lemont, Illinois as well. Clipper
International provides international ocean freight services as a non-vessel
operating common carrier.

Treadco is headquartered in Fort Smith, Arkansas. Treadco is the nation's
largest independent tire retreader for the trucking industry and the fourth
largest commercial truck tire dealer. Treadco operates in locations across the
Southern, Southwestern, Midwestern and Western regions of the United States.

The Company's other business activities and operating segments that are not
reportable include FleetNet America, Inc., a third-party, vehicle maintenance
company; Arkansas Best Corporation, the parent holding company; and Transport
Realty, Inc., a real estate subsidiary of the Company, as well as other
subsidiaries.

The Company eliminates intercompany transactions in consolidation. However, the
information used by the Company's management with respect to its reportable
segments is before intersegment eliminations of revenues and expenses.
Intersegment revenues and expenses are not significant.

Further classifications of operations or revenues by geographic location beyond
the descriptions provided above is impractical, and is, therefore, not provided.
The Company's foreign operations are not significant.

<PAGE> 44

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

The following tables reflect reportable operating segment information for the
Company as well as a reconciliation of reportable segment information to the
Company's consolidated operating revenues, operating expenses and operating
income. The Company has restated its 1997 and 1996 reportable segment
presentation to conform to the current year's segment presentation.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
----------- ----------- -----------
($ thousands)
<S> <C> <C> <C>
OPERATING REVENUES

ABF Freight System, Inc. ....................... $ 1,175,213 $ 1,154,252 $ 1,121,867
G.I. Trucking Company .......................... 124,547 100,015 78,420
Cardinal Freight Carriers, Inc. ................ -- 39,366 74,623
Clipper Domestic ............................... 122,528 138,811 133,375
Clipper International .......................... 44,049 50,460 53,943
Treadco, Inc. .................................. 181,293 161,276 144,154
Other Revenues and eliminations ................ 3,823 (502) (2,047)
----------- ----------- -----------
Total consolidated operating revenues ........ $ 1,651,453 $ 1,643,678 $ 1,604,335
=========== =========== ===========

OPERATING EXPENSES AND COSTS

ABF FREIGHT SYSTEM, INC ..........................
Salaries and wages ............................. $ 781,730 $ 770,248 $ 789,860
Supplies and expenses .......................... 126,340 129,685 135,856
Operating taxes and licenses ................... 37,010 39,320 44,416
Insurance ...................................... 19,889 20,370 25,400
Communications and utilities ................... 14,258 14,457 16,640
Depreciation and amortization .................. 25,967 24,766 33,169
Rents and purchased transportation ............. 98,206 89,987 77,669
Other .......................................... 6,318 5,095 9,375
(Gain) on sale of revenue equipment ............ (2,114) (2,253) (1,462)
----------- ----------- -----------
1,107,604 1,091,675 1,130,923
----------- ----------- -----------

G.I. TRUCKING COMPANY
Salaries and wages ............................. 58,847 48,180 41,954
Supplies and expenses .......................... 10,643 9,480 8,743
Operating taxes and licenses ................... 2,574 2,007 2,143
Insurance ...................................... 3,970 3,842 2,989
Communications and utilities ................... 1,672 1,330 1,393
Depreciation and amortization .................. 3,157 3,131 4,031
Rents and purchased transportation ............. 39,094 28,955 22,351
Other .......................................... 3,025 2,509 2,204
(Gain) on sale of revenue equipment ............ (66) (25) (6)
----------- ----------- -----------
122,916 99,409 85,802
----------- ----------- -----------

CARDINAL FREIGHT CARRIERS, INC ................... -- 37,279 70,262
----------- ----------- -----------

Clipper Domestic
Cost of services ............................... 107,386 118,859 114,892
Selling, administrative and general ............ 16,280 16,318 14,987
(Gain) on sale of revenue equipment ............ (64) -- (21)
----------- ----------- -----------
123,602 135,177 129,858
----------- ----------- -----------
</TABLE>

<PAGE> 45

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
----------- ----------- -----------
($ thousands)
<S> <C> <C> <C>
OPERATING EXPENSES AND COSTS (continued)

CLIPPER INTERNATIONAL
Cost of services ......................................... $ 35,804 $ 40,399 $ 43,601
Selling, administrative and general ...................... 11,756 11,585 12,682
----------- ----------- -----------
47,560 51,984 56,283
----------- ----------- -----------

TREADCO, INC
Cost of services ......................................... 127,933 119,232 111,636
Selling, administrative and general ...................... 50,868 44,553 37,701
----------- ----------- -----------
178,801 163,785 149,337
----------- ----------- -----------

Other expenses and eliminations ............................ 4,560 1,461 (122)
----------- ----------- -----------

Total consolidated operating expenses and costs ........ $ 1,585,043 $ 1,580,770 $ 1,622,343
=========== =========== ===========

OPERATING INCOME (LOSS)
ABF Freight System, Inc. ................................. $ 67,609 $ 62,577 $ (9,056)
G.I. Trucking Company .................................... 1,631 606 (7,382)
Cardinal Freight Carriers, Inc. .......................... -- 2,087 4,361
Clipper Domestic ......................................... (1,074) 3,634 3,517
Clipper International .................................... (3,511) (1,524) (2,340)
Treadco, Inc. ............................................ 2,492 (2,509) (5,183)
Other and eliminations ................................... (737) (1,963) (1,925)
----------- ----------- -----------
Total consolidated operating income (loss) ............. $ 66,410 $ 62,908 $ (18,008)
=========== =========== ===========
</TABLE>

<PAGE> 46

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

The following tables provide asset, capital expenditure and depreciation and
amortization information by reportable operating segment:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
-------- -------- --------
($ thousands)
<S> <C> <C> <C>
IDENTIFIABLE ASSETS
ABF Freight System, Inc. ................................. $406,430 $381,049 $418,688
G.I. Trucking Company .................................... 39,859 28,240 31,381
Cardinal Freight Carriers, Inc. .......................... -- -- 28,444
Clipper Domestic ......................................... 47,407 61,350 56,273
Clipper International .................................... 6,360 10,038 6,750
Treadco, Inc. ............................................ 107,370 100,458 105,416
Other and eliminations ................................... 103,178 117,204 181,229
-------- -------- --------
Total consolidated assets .............................. $710,604 $698,339 $828,181
======== ======== ========

CAPITAL EXPENDITURES
ABF Freight System, Inc. ................................. $ 58,364 $ 6,761 $ 12,575
G.I. Trucking Company .................................... 11,730 309 466
Cardinal Freight Carriers, Inc. .......................... -- 652 838
Clipper Domestic ......................................... 2,805 128 148
Clipper International .................................... 79 58 213
Treadco, Inc. ............................................ 11,205 4,334 22,986
Other and eliminations ................................... 2,263 1,893 4,373
-------- -------- --------
Total consolidated capital expenditures ................ $ 86,446 $ 14,135 $ 41,599
======== ======== ========

DEPRECIATION AND AMORTIZATION EXPENSE
ABF Freight System, Inc. ................................. $ 27,214 $ 26,185 $ 34,903
G.I. Trucking Company .................................... 3,260 3,187 4,077
Cardinal Freight Carriers, Inc. .......................... -- 1,899 3,574
Clipper Domestic ......................................... 1,408 1,872 1,650
Clipper International .................................... 137 282 318
Treadco, Inc. ............................................ 6,902 6,334 5,113
Other .................................................... 8,688 13,325 15,103
-------- -------- --------
Total consolidated depreciation and amortization ....... $ 47,609 $ 53,084 $ 64,738
======== ======== ========
</TABLE>

<PAGE> 47

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

NOTE O - FINANCIAL INSTRUMENTS

Interest Rate Instruments

<TABLE>
<CAPTION>
Notional Rate Rate Fair
Amount Maturity Paid Received Value (2)
------- -------- ---- -------- ---------
<S> <C> <C> <C> <C>
$110.0 million April 1, 2005 5.845% Plus Credit Agreement LIBOR rate (1) $(3.8) million
Margin (currently .625%) Plus Credit Agreement
Margin (currently .625%)

(1) LIBOR rate is determined two London Banking Days prior to the first day
of every month, and continues up to and including the maturity date.

(2) The fair value is an estimated amount the Company would have paid at
December 31, 1998, to terminate the agreement.
</TABLE>

Fair Value of Financial Instruments

CASH AND CASH EQUIVALENTS. The carrying amount reported in the balance sheet for
cash and cash equivalents approximates its fair value.

LONG-AND SHORT-TERM DEBT. The carrying amounts of the Company's borrowings under
its Revolving Credit Agreements approximate their fair values, since the
interest rate under these agreements is variable. Also, the carrying amount of
long-term debt was estimated to approximate their fair values, with the
exception of the WorldWay Subordinated Debentures, Treadco equipment debt and
the corporate facility credit agreement (repaid in 1998) which are estimated
using current market rates.

The carrying amounts and fair value of the Company's financial instruments at
December 31 are as follows:

<TABLE>
<CAPTION>
1998 1997
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------------------------------------------
($ thousands)

<S> <C> <C> <C> <C>
Cash and cash equivalents .............. $ 4,543 $ 4,543 $ 7,203 $ 7,203
Short-term debt ........................ $ 1,233 $ 1,182 $ 3,431 $ 2,794
Long-term debt ......................... $161,371 $157,337 $173,847 $165,889
</TABLE>

<PAGE> 48

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

NOTE P - EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per
share:

<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
($ thousands, except per share data)
<S> <C> <C> <C>
NUMERATOR:
Numerator for basic earnings per share --
Net income (loss) ............................. $ 28,675 $ 15,347 $ (36,603)
Preferred stock dividends ..................... (4,298) (4,298) (4,298)
------------ ------------ ------------
Numerator for basic earnings per share --
net income (loss) available to
common shareholders ........................... 24,377 11,049 (40,901)

Effect of dilutive securities .................. 4,298 -- --
------------ ------------ ------------

Numerator for diluted earnings per share --
net income (loss) available to
common shareholders ........................... $ 28,675 $ 11,049 $ (40,901)
============ ============ ============

DENOMINATOR:
Denominator for basic earnings per
share -- weighted-average shares .............. 19,608,963 19,540,118 19,510,589

Effect of dilutive securities:
Employee stock options ........................ 287,107 260,849 --
Preferred stock ............................... 3,796,852 -- --
------------ ------------ ------------

Denominator for diluted earnings per
share -- adjusted weighted-average
shares and assumed conversions ................ 23,692,922 19,800,967 19,510,589

NET INCOME (LOSS) PER COMMON SHARE
BASIC:
Continuing operations .......................... $ 1.24 $ 0.85 $ (1.98)
Discontinued operations ........................ -- (0.29) (0.12)
------------ ------------ ------------
NET INCOME (LOSS) PER SHARE ...................... $ 1.24 $ 0.56 $ (2.10)
============ ============ ============

AVERAGE COMMON SHARES
OUTSTANDING (BASIC) ........................... 19,608,963 19,540,118 19,510,589
============ ============ ============

Diluted:
Continuing operations .......................... $ 1.21 $ 0.84 $ (1.98)
Discontinued operations ........................ -- (0.28) (0.12)
------------ ------------ ------------
NET INCOME (LOSS) PER SHARE ...................... $ 1.21 $ 0.56 $ (2.10)
------------ ------------ ------------

AVERAGE COMMON SHARES
OUTSTANDING (DILUTED): ......................... 23,692,922 19,800,967 19,510,589
------------ ------------ ------------

CASH DIVIDENDS PAID PER COMMON SHARE ............. $ -- $ -- $ .01
------------ ------------ ------------
</TABLE>

<PAGE> 49

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

NOTE Q - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The tables below present unaudited quarterly financial information for 1998 and
1997:

<TABLE>
<CAPTION>
1998
THREE MONTHS ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
------------ ------------ ------------ ------------
($ thousands, except per share data)

<S> <C> <C> <C> <C>
Operating revenues .......................... $ 387,907 $ 416,858 $ 431,525 $ 415,163
Operating expenses and costs ................ 376,671 398,182 412,070 398,120
------------ ------------ ------------ ------------

Operating income ............................ 11,236 18,676 19,455 17,043
Other income (expense) - net ................ (4,998) (6,238) (5,738) 1,144
Income taxes ................................ 2,620 5,037 5,624 8,624
------------ ------------ ------------ ------------

Net income .................................. $ 3,618 $ 7,401 $ 8,093 $ 9,563
============ ============ ============ ============

Earnings per common share, basic: (1) ....... $ .13 $ .32 $ .36 $ .43
------------ ------------ ------------ ------------
Average shares outstanding .................. 19,605,213 19,610,213 19,610,213 19,610,213
============ ============ ============ ============

Earnings per common share, diluted: (2) ..... $ .13 $ .31 $ .34 $ .41
------------ ------------ ------------ ------------
Average shares outstanding .................. 20,075,081 23,850,481 23,606,484 23,440,637
============ ============ ============ ============
</TABLE>

<TABLE>
<CAPTION>
1997
THREE MONTHS ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
------------ ------------ ------------ ------------
($ thousands, except per share data)

<S> <C> <C> <C> <C>
Operating revenues .................................... $ 394,613 $ 423,680 $ 425,289 $ 400,096
Operating expenses and costs .......................... 385,663 403,286 403,641 388,180
------------ ------------ ------------ ------------

Operating income ...................................... 8,950 20,394 21,648 11,916
Other expense - net ................................... (8,514) (9,188) (991) (3,857)
Income taxes (credit) ................................. (144) 4,930 11,399 3,204
------------ ------------ ------------ ------------

Income from continuing operations ..................... 580 6,276 9,258 4,855
Loss from discontinued operations ..................... (898) (1,268) (3,456) --
------------ ------------ ------------ ------------

Net income (loss) ..................................... $ (318) $ 5,008 $ 5,802 $ 4,855
============ ============ ============ ============

Earnings (loss) per common share, basic: (1)
Continuing operations ............................... $ (.03) $ .27 $ .42 $ .19
Discontinued operations ............................. (.04) (.07) (.18) --
------------ ------------ ------------ ------------

Net income per share .................................. $ (.07) $ .20 $ .24 $ .19
------------ ------------ ------------ ------------
Average shares outstanding ............................ 19,504,473 19,504,473 19,556,633 19,594,880
============ ============ ============ ============

Earnings (loss) per common share, diluted: (2)
Continuing operations ............................... $ (.03) $ .26 $ .39 $ .19
Discontinued operations ............................. (.04) (.06) (.15) --
------------ ------------ ------------ ------------

Net income per share .................................. $ (.07) $ .20 $ .24 $ .19
------------ ------------ ------------ ------------
Average shares outstanding ............................ 19,506,821 19,570,220 23,824,477 20,099,304
============ ============ ============ ============
</TABLE>

(1) Gives consideration to preferred stock dividends of $1.1 million per
quarter.
(2) In the first quarter of 1998 and in the first, second and fourth
quarters of 1997, consideration is given to preferred stock dividends
of $1.1 million per quarter. In the second, third and fourth quarters
of 1998 and in the third quarter of 1997, conversion of preferred
shares into common is assumed.

<PAGE> 50

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
- --------------------------------------------------------------------------------

NOTE R - SUBSEQUENT EVENTS

Treadco's Board will form a special committee of independent directors to
consider the Company's proposal. The proposal to acquire the remaining
outstanding shares of Treadco is subject to the approval of the Treadco Board's
special committee and the negotiation of a definitive agreement, which will
include customary conditions to closing.

<PAGE> 1
EXHIBIT 21

LIST OF SUBSIDIARY CORPORATIONS
ARKANSAS BEST CORPORATION

The Registrant owns and controls the following subsidiary corporations:

<TABLE>
<CAPTION>
JURISDICTION OF % OF VOTING
NAME INCORPORATION SECURITIES OWNED
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSIDIARIES OF ARKANSAS BEST CORPORATION:
ABF Freight System, Inc. Delaware 100
Treadco, Inc. Delaware 49.2
Transport Realty, Inc. Arkansas 100
Data-Tronics Corp. Arkansas 100
ABF Cartage, Inc. Delaware 100
Land-Marine Cargo, Inc. Puerto Rico 100
ABF Freight System Canada, Ltd. Canada 100
ABF Freight System de Mexico, Inc. Delaware 100
Agile Freight System, Inc. Delaware 100
Agricultural Express of America, Inc. Delaware 100
Clipper Exxpress Company Delaware 100
G.I. Trucking Company California 100
CaroTrans International, Inc. North Carolina 100
Motor Carrier Insurance, Ltd. Bermuda 100
FleetNet America, Inc. North Carolina 100
Best Service Corp. Arkansas 100

Subsidiary of ABF Freight System, Inc.:
ABF Freight System (B.C.), Ltd. British Columbia 100
</TABLE>

<PAGE> 1

EXHIBIT 23

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Arkansas Best Corporation of our report dated January 22, 1999, included in
the 1998 Annual Report to Shareholders of Arkansas Best Corporation.

Our audits also included the financial statement schedule of Arkansas Best
Corporation listed in Item 14(a). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.

We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-61793) pertaining to the Arkansas Best Corporation Stock
Option Plan, the Registration Statement (Form S-8 No. 333-69953) pertaining to
the Arkansas Best Corporation Voluntary Savings Plan, the Registration Statement
(Form S-8 No. 333-31475) pertaining to the Arkansas Best Corporation Stock
Option Plan, the Registration Statement (Form S-8 No. 33-66694) pertaining to
the Arkansas Best Corporation Disinterested Director Stockholder Plan and the
Registration Statement (Form S-8, No. 33-52877) pertaining to the Arkansas Best
Corporation Employees' Investment Plan, of our report dated January 22, 1999,
with respect to the consolidated financial statements incorporated herein by
reference, and our report included in the preceding paragraph with respect to
the financial statement schedule included in this Annual Report (Form 10-K) of
Arkansas Best Corporation.

Ernst & Young LLP

Little Rock, Arkansas
February 23, 1999

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ARKANSAS
BEST CORPORATION ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 4,543
<SECURITIES> 0
<RECEIVABLES> 172,476
<ALLOWANCES> 7,521
<INVENTORY> 33,150
<CURRENT-ASSETS> 229,700
<PP&E> 576,612
<DEPRECIATION> 256,510
<TOTAL-ASSETS> 710,604
<CURRENT-LIABILITIES> 264,195
<BONDS> 196,079
0
15
<COMMON> 196
<OTHER-SE> 173,704
<TOTAL-LIABILITY-AND-EQUITY> 710,604
<SALES> 178,982
<TOTAL-REVENUES> 1,651,453
<CGS> 127,933
<TOTAL-COSTS> 1,585,043
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,957
<INTEREST-EXPENSE> 18,438
<INCOME-PRETAX> 50,580
<INCOME-TAX> 21,905
<INCOME-CONTINUING> 28,675
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,675
<EPS-PRIMARY> 1.24
<EPS-DILUTED> 1.21

</TABLE>