-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BIbyDxmNjfwqN+qJZlKOvQ8Ytfey0oLCuIoCNnpGj66aJHLxEyjCt1T5/7nZIGAR 4iYoON0TKzgbWUDOX/xFGg== 0000894405-97-000010.txt : 19970514 0000894405-97-000010.hdr.sgml : 19970514 ACCESSION NUMBER: 0000894405-97-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARKANSAS BEST CORP /DE/ CENTRAL INDEX KEY: 0000894405 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 710673405 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19969 FILM NUMBER: 97601707 BUSINESS ADDRESS: STREET 1: 3801 OLD GREENWOOD RD CITY: FORT SMITH STATE: AR ZIP: 72903 BUSINESS PHONE: 5017856000 MAIL ADDRESS: STREET 1: P O BOX 48 CITY: FORT SMITH STATE: AR ZIP: 72902 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended March 31, 1997 ----------------- [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to ---------- ---------- Commission file number 0-19969 -------- ARKANSAS BEST CORPORATION - ----------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 6711 71-0673405 ------------------ ------------------ -------------------- (State or other (Primary Standard (I.R.S. Employer jurisdiction of Industrial Identification No.) incorporation or Classification Code No.) organization) 3801 Old Greenwood Road Fort Smith, Arkansas 72903 (501) 785-6000 ------------------------------------------------------------ (Address, including zip code, and telephone number, including area code, of the registrant's principal executive offices) Not Applicable -------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of The Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at April 15, 1997 ------------------------------- ------------------------------- Common Stock, $.01 par value 19,504,473 shares ARKANSAS BEST CORPORATION INDEX Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets -- March 31, 1997 and December 31, 1996 3 Consolidated Statements of Operations -- For the Three Months Ended March 31, 1997 and 1996 5 Consolidated Statements of Cash Flows -- For the Three Months Ended March 31, 1997 and 1996 7 Notes to Consolidated Financial Statements - March 31, 1997 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings 20 Item 2. Changes in Securities 20 Item 3. Defaults Upon Senior Securities 20 Item 4. Submission of Matters to a Vote of Security Holders 20 Item 5. Other Information 20 Item 6. Exhibits and Reports on Form 8-K 20 SIGNATURES 21 EXHIBITS Exhibit 11. Statement Re: Computation of Earnings Per Share 23 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ARKANSAS BEST CORPORATION CONSOLIDATED BALANCE SHEETS
March 31 December 31 1997 1996 (unaudited) (note) ($ thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 667 $ 1,806 Trade receivables, less allowances for doubtful accounts (1997 -- $6,393,000; 1996 -- $6,118,000) 185,793 186,065 Inventories -- Note C 32,616 33,831 Prepaid expenses 17,075 13,593 Federal and state income taxes 8,370 7,320 Deferred federal income taxes 16,028 16,490 -------- -------- TOTAL CURRENT ASSETS 260,549 259,105 PROPERTY, PLANT AND EQUIPMENT Land and structures 223,953 228,051 Revenue equipment 258,987 268,270 Manufacturing equipment 18,502 18,815 Service, office and other equipment 65,782 65,532 Leasehold improvements 8,287 9,273 -------- -------- 575,511 589,941 Less allowances for depreciation and amortization (227,567) (222,308) -------- -------- 347,944 367,633 OTHER ASSETS 56,991 57,160 NET ASSETS HELD FOR SALE 7,805 9,148 GOODWILL, less amortization (1997 -- $29,226,000; 1996 -- $28,006,000) 148,870 150,154 -------- -------- $822,159 $843,200 ======== ======== ARKANSAS BEST CORPORATION CONSOLIDATED BALANCE SHEETS March 31 December 31 1997 1996 (unaudited) (note) ($ thousands) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Bank drafts payable $ 330 $ 646 Trade accounts payable 77,006 79,140 Accrued expenses 190,489 182,011 Current portion of long-term debt 35,943 39,082 -------- -------- TOTAL CURRENT LIABILITIES 303,768 300,879 LONG-TERM DEBT, less current portion 304,728 326,950 OTHER LIABILITIES 21,599 21,416 DEFERRED FEDERAL INCOME TAXES 23,140 22,505 MINORITY INTEREST 32,885 34,020 SHAREHOLDERS' EQUITY Preferred stock, $.01 par value, authorized 10,000,000 shares; issued 1,495,000 shares 15 15 Common stock, $.01 par value, authorized 70,000,000 shares; issued and outstanding 1997 and 1996: 19,504,473 shares 195 195 Additional paid-in capital 192,328 192,328 Retained earnings (deficit) (56,499) (55,108) -------- -------- TOTAL SHAREHOLDERS' EQUITY 136,039 137,430 CONTINGENCIES -- Note F -------- -------- $822,159 $843,200 ======== ======== Note: The balance sheet at December 31, 1996 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to consolidated financial statements.
ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31 1997 1996 ---------------------- (unaudited) ($ thousands, except per share data) OPERATING REVENUES LTL motor carrier operations $ 296,535 $ 294,923 Intermodal operations 44,789 41,766 Truckload motor carrier operations 19,021 17,838 Logistics operations 12,134 13,230 Tire operations 32,094 31,613 Service and other 2,173 2,004 --------- --------- 406,746 401,374 OPERATING EXPENSES AND COSTS - Note E LTL motor carrier operations 285,085 303,465 Intermodal operations 45,223 40,679 Truckload motor carrier operations 18,490 16,412 Logistics operations 13,319 13,775 Tire operations 34,638 33,238 Service and other 2,226 2,336 --------- --------- 398,981 409,905 --------- --------- OPERATING INCOME (LOSS) 7,765 (8,531) --------- --------- OTHER INCOME (EXPENSE) Gain (loss) on sales of property and non-revenue equipment (686) 2,127 Interest (7,265) (7,801) Minority interest in subsidiary 1,025 641 Other, net (1,806) (1,273) --------- --------- (8,732) (6,306) --------- --------- LOSS BEFORE INCOME TAXES (967) (14,837) --------- --------- FEDERAL AND STATE INCOME TAXES (CREDIT) - Note D Current (780) (3,641) Deferred 130 (1,637) --------- --------- (650) (5,278) --------- --------- NET LOSS $ (317) $ (9,559) ========= ========= ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS -- (Continued) Three Months Ended March 31 1997 1996 ---------------------- (unaudited) ($ thousands, except per share data) LOSS PER COMMON SHARE: NET LOSS $ (0.07) $ (0.54) =========== ========== AVERAGE COMMON SHARES OUTSTANDING 19,504,473 19,516,539 =========== ========== CASH DIVIDENDS PAID PER COMMON SHARE $ - $ 0.01 =========== ========== See notes to consolidated financial statements.
ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31 1997 1996 --------------------------- (unaudited) ($ thousands) OPERATING ACTIVITIES Net loss $ (317) $ (9,559) Adjustments to reconcile net loss to net cash provided (used) by operating activities: Depreciation and amortization 12,761 15,514 Amortization of intangibles 1,220 1,154 Other amortization 1,146 674 Provision for losses on accounts receivable 1,114 1,094 Provision (credit) for deferred income taxes 130 (1,637) Gain on property, plant and equipment sales (153) (2,438) Minority interest in subsidiary (1,025) (891) Changes in operating assets and liabilities: Accounts receivable (1,922) 4,629 Inventories and prepaid expenses (2,267) (1,792) Other assets (307) (2,776) Accounts payable, bank drafts payable, taxes payable, accrued expenses and other liabilities 7,208 (8,507) -------- -------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 17,588 (4,535) INVESTING ACTIVITIES Purchases of property, plant and equipment, less capitalized leases (1,556) (8,974) Proceeds from asset sales 10,272 25,944 -------- -------- NET CASH PROVIDED BY INVESTING ACTIVITIES 8,716 16,970 ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS -- (Continued) Three Months Ended March 31 1997 1996 --------------------------- (unaudited) ($ thousands) FINANCING ACTIVITIES Deferred financing costs and expenses incurred in borrowing activities $ (898) $ (3,290) Borrowings under revolving credit facilities 77,875 27,050 Principal payments under term loan facilities (6,984) (3,529) Principal payments under revolving credit facilities (92,675) (47,900) Principal payments on other long-term debt and capital leases (3,576) (4,164) Dividends paid to minority shareholders of subsidiary (110) (132) Dividends paid (1,075) (1,270) Net increase in cash overdrafts - 4,276 --------- --------- NET CASH USED BY FINANCING ACTIVITIES (27,443) (28,959) --------- --------- NET DECREASE IN CASH AND CASH EQUIVALENTS (1,139) (16,524) Cash and cash equivalents at beginning of period 1,806 16,945 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 667 $ 421 ========= ========= See notes to consolidated financial statements.
ARKANSAS BEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) MARCH 31, 1997 NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS Arkansas Best Corporation (the "Company") is a diversified holding company engaged through its subsidiaries primarily in motor carrier, intermodal operations and truck tire retreading and sales. Principal subsidiaries are ABF Freight System, Inc., ("ABF"), Treadco, Inc. ("Treadco"), and Clipper Exxpress Company and related companies (the "Clipper Group"), Cardinal Freight Carriers, Inc. ("Cardinal"), G.I. Trucking Company ("G.I. Trucking"), CaroTrans International, Inc. ("CaroTrans"), The Complete Logistics Company ("Complete Logistics"), Integrated Distribution, Inc., and Carolina Breakdown Service, Inc. Approximately 80% of ABF's employees are covered under a collective bargaining agreement with the International Brotherhood of Teamsters which expires on March 31, 1998. NOTE B - FINANCIAL STATEMENT PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 1997, are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. For further information, refer to the Company's financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. Motor carrier revenue equipment gains and losses are reported as operating expenses and costs in 1997. The 1996 Statement of Operations has been reclassified to conform to the 1997 presentation. (See Note E.) NOTE C - INVENTORIES
March 31 December 31 1997 1996 --------------------------- ($ thousands) Finished goods $ 23,645 $ 24,029 Materials 5,666 6,267 Repair parts, supplies and other 3,305 3,535 -------- -------- $ 32,616 $ 33,831 ======== ========
NOTE D - FEDERAL AND STATE INCOME TAXES
March 31 December 31 1997 1996 --------------------------- ($ thousands) Income tax (credit) at regular rates $ (338) $ (5,193) Percent (35.0)% (35.0)% State taxes less federal benefits 122 (227) Percent 12.6% (1.5)% Amortization of goodwill 257 280 Percent 26.6% 1.9% Minority interest (349) (218) Percent (36.0)% (1.5)% Other items (342) 80 Percent (35.4)% 0.5% --------- --------- Income tax benefits $ (650) $(5,278) Percent (67.2)% (35.6)% ========= =========
NOTE E - OPERATING EXPENSES AND COSTS
Three Months Ended March 31 1997 1996 --------------------------- (unaudited) ($ thousands) LTL Motor Carrier Operations: Salaries and wages $197,979 $209,297 Supplies and expenses 29,753 31,549 Operating taxes and licenses 10,397 12,557 Insurance 6,610 6,526 Communications and utilities 6,713 7,835 Depreciation and amortization 9,118 12,056 Rents and purchased transportation 23,517 22,030 Other 1,839 1,902 Gain on sale of revenue equipment (841) (287) -------- -------- 285,085 303,465 Intermodal Operations: Cost of services 38,172 32,243 Selling, administrative and general 7,051 8,448 Gain on sale of revenue equipment - (12) -------- -------- 45,223 40,679 Truckload Motor Carrier Operations: Salaries and wages 6,920 6,098 Supplies and expenses 3,687 3,058 Operating taxes and licenses 1,755 1,773 Insurance 913 645 Communications and utilities 283 233 Depreciation and amortization 957 866 Rents and purchased transportation 3,766 3,638 Other 207 101 Loss on sale of revenue equipment 2 - -------- -------- 18,490 16,412 Logistics Operations: Cost of services 11,736 12,399 Selling, administrative and general 1,583 1,388 Gain on sale of revenue equipment - (12) -------- -------- 13,319 13,775 Tire Operations: Cost of sales 24,475 24,915 Selling, administrative and general 10,163 8,323 34,638 33,238 Service and Other: 2,226 2,336 -------- -------- $398,981 $409,905 ======== ========
NOTE F - LEGAL PROCEEDINGS AND ENVIRONMENTAL MATTERS AND OTHER EVENTS Various legal actions, the majority of which arise in the normal course of business, are pending. None of these legal actions are expected to have a material adverse effect on the Company's financial condition. The Company maintains liability insurance against risks arising out of the normal course of its business, subject to certain self-insured retention limits. The Company's subsidiaries store some fuel for its tractors and trucks in approximately 142 underground tanks located in 33 states. Maintenance of such tanks is regulated at the federal and, in some cases, state levels. The Company believes that it is in substantial compliance with all such regulations. The Company is not aware of any leaks from such tanks that could reasonably be expected to have a material adverse effect on the Company. Environmental regulations have been adopted by the United States Environmental Protection Agency ("EPA") that will require the Company to upgrade its underground tank systems by December 1998. The Company currently estimates that such upgrades, which are currently in process, will not have a material adverse effect on the Company. The Company has received notices from the EPA and others that it has been identified as a potentially responsible party ("PRP") under the Comprehensive Environmental Response Compensation and Liability Act or other federal or state environmental statutes at several hazardous waste sites. After investigating the Company's or its subsidiaries' involvement in waste disposal or waste generation at such sites, the Company has either agreed to de minimis settlements (aggregating approximately $200,000 over the last six years), or believes its obligations with respect to such sites would involve immaterial monetary liability, although there can be no assurances in this regard. As of March 31, 1997, the Company has accrued approximately $3.1 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. NOTE G - RECENT ACCOUNTING PRONOUNCEMENT In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings Per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for computing primary earnings per share, the dilutive effect of stock options will be excluded. The impact of Statement 128 on the calculation of primary earnings per share and fully diluted earnings per share for these quarters is not expected to be material. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Arkansas Best Corporation (the "Company") is a diversified holding company engaged through its subsidiaries primarily in less-than-truckload ("LTL") and truckload motor carrier operations, logistics and freight intermodal operations and truck tire retreading and new tire sales. Principal subsidiaries owned are ABF Freight System, Inc. ("ABF"), Treadco, Inc. ("Treadco"), and Clipper Exxpress Company ("Clipper"), Cardinal Freight Carriers, Inc. ("Cardinal"), G.I. Trucking Company ("G.I. Trucking"), CaroTrans International, Inc. ("CaroTrans"), The Complete Logistics Company ("Complete Logistics"), Integrated Distribution, Inc., and Carolina Breakdown Service, Inc. The Company in 1991 reduced its ownership in Treadco, through an initial public offering of Treadco common stock, to approximately 46%, while retaining control of Treadco by reason of its stock ownership, board representation and provision of management services. As a result, Treadco is consolidated with the Company for financial reporting purposes, with the ownership interests of the other stockholders reflected as minority interest. Segment Data The discussion and analysis of results of operations reflect information prepared on a business segment basis, which includes reclassification of certain expenses and costs between the Company and its subsidiaries and elimination of the effects of intercompany transactions. Operating profit on a business segment basis differs from operating income as reported in the Company's Consolidated Financial Statements. Other income and expenses (which include amortization expense), except for interest expense and minority interest, which appear below the operating income line in the Company's Statement of Operations, have been allocated to individual segments for the purpose of calculating operating profit on a segment basis. During 1996, the Company changed the name of its forwarding operations segment to the intermodal operations segment.
Three Months Ended March 31 1997 1996 ($ thousands) OPERATING REVENUES LTL motor carrier operations $296,535 $294,923 Intermodal operations 44,789 41,766 Truckload motor carrier operations 19,021 17,838 Logistics operations 12,134 13,230 Tire operations 32,094 31,613 Other 2,173 2,004 -------- -------- $406,746 $401,374 ======== ========
Three Months Ended March 31 1997 1996 ($ thousands) OPERATING PROFIT (LOSS) LTL motor carrier operations $ 9,926 $ (9,328) Intermodal operations (872) 681 Truckload motor carrier operations 529 1,425 Logistics operations (1,224) (526) Tire operations (2,685) (1,762) Other (401) 1,833 -------- -------- TOTAL OPERATING PROFIT (LOSS) 5,273 (7,677) MINORITY INTEREST (1,025) (641) INTEREST EXPENSE 7,265 7,801 -------- -------- LOSS BEFORE INCOME TAXES $ (967) $(14,837) ======== ========
The following table sets forth for the periods indicated a summary of the Company's operations as a percentage of revenues presented on a business segment basis. The basis of presentation for business segment data differs from the basis of presentation for data the Company provides to the U.S. Department of Transportation ("D.O.T.").
Three Months Ended March 31 1997 1996 ($ thousands) LTL MOTOR CARRIER OPERATIONS Salaries and wages 66.8 % 71.0 % Supplies and expenses 10.0 10.7 Operating taxes and licenses 3.5 4.3 Insurance 2.2 2.2 Communications and utilities 2.3 2.7 Depreciation and amortization 3.1 4.1 Rents and purchased transportation 7.9 7.5 Other 0.6 0.6 Gain on sale of revenue equipment (0.3) (0.1) Other non-operating (net) 0.6 0.2 ------ ------ 96.7 % 103.2 % ====== ====== INTERMODAL OPERATIONS Cost of services 85.2 % 77.2 % Selling, administrative and general 15.7 20.2 Gain on sale of revenue equipment - (0.1) Other non-operating (net) 1.0 1.1 ------ ------ 101.9 % 98.4 % ====== ====== Three Months Ended March 31 1997 1996 ($ thousands) TRUCKLOAD MOTOR CARRIER OPERATIONS Salaries and wages 36.4 % 34.2 % Supplies and expenses 19.4 17.1 Operating taxes and licenses 9.2 9.9 Insurance 4.8 3.6 Communications and utilities 1.5 1.3 Depreciation and amortization 5.0 4.9 Rents and purchased transportation 19.8 20.4 Other 1.1 0.6 ------ ------ 97.2 % 92.0 % ====== ====== LOGISTICS OPERATIONS Cost of services 96.7 % 93.7 % Selling, administrative and general 13.0 10.5 Gain on sale of revenue equipment - (0.1) Other non-operating (net) 0.4 (0.1) ------ ------ 110.1 % 104.0 % ====== ====== TIRE OPERATIONS Cost of sales 76.3 % 78.8 % Selling, administrative and general 31.7 26.3 Other non-operating (net) 0.4 0.4 ------ ------ 108.4 % 105.5 % ====== ======
Results of Operations Three Months Ended March 31, 1997 as Compared to the Three Months Ended March 31, 1996 Consolidated revenues of the Company for the three months ended March 31, 1997 were $407 million compared to $401 million for the three months ended March 31, 1996. The Company had an operating profit of $5.3 million for the three months ended March 31, 1997 compared to an operating loss of $7.7 million for the three months ended March 31, 1996. For the three months ended March 31, 1997, the Company had a net loss of $317,000 or a loss of $.07 per common share, compared to a net loss of $9.6 million, or a loss of $.54 per common share for the three months ended March 31, 1996. Earnings per common share for the three months ended March 31, 1997 and 1996 give consideration to preferred stock dividends of $1.1 million. Average common shares outstanding for both periods were 19.5 million. Outstanding shares for each period do not assume conversion of preferred stock to common shares, because conversion would be anti-dilutive for these periods. Less-Than-Truckload Motor Carrier Operations Segment. The Company's LTL motor carrier operations are conducted primarily through ABF and G.I. Trucking. Revenues from the LTL motor carrier operations segment for the three months ended March 31, 1997 were $297 million, with an operating profit of $9.9 million. For the three months ended March 31, 1997, ABF accounted for 92% of LTL segment revenues. ABF's revenue decreased 1.6% for the three months ended March 31, 1997 compared to the same period in 1996 due to lower tonnage levels offset in part by higher freight rates. ABF implemented an overall freight rate increase of 5.9% effective January 1, 1997. In the latter half of 1996, ABF began a program focusing on individual account profitability which resulted in the lower tonnage levels during the quarter. ABF's total tonnage per day decreased 7.2%, consisting of a 5.7% decrease in LTL tonnage and a 12.9% decrease in truckload. The LTL segment revenue increase for the three months ended March 31, 1997 was the result of G.I. Trucking's revenue increasing 37% over the three months ended March 31, 1996. G.I. Trucking has continued to replace revenues lost as a result of the ABF/Carolina Freight Carriers merger in September 1995. Revenues per day have increased at a compounded rate of 5.7% since December 1996, with number of shipments and tonnage also increasing over the same time period. G.I. Trucking's tonnage increased 39.8% for the three months ended March 31, 1997 from the same period in 1996. G.I.'s operating ratio was 101.3% for the first quarter of 1997 compared to 115.5% for the first quarter of 1996. During 1996, ABF discontinued 12 of the regional distribution terminal operations that it had acquired through the ABF/Carolina merger. These closings, which occurred during the first two quarters, returned ABF to its historical terminal system configuration. This reconfiguration allowed ABF to gradually reduce its direct labor costs, improve its weight per trailer and reduce its empty miles. ABF's operating ratio as reported to the D.O.T. was 95.7% in the first quarter of 1997 compared to 102.2% in the first quarter of 1996. The decrease in salaries and wages as a percent of revenue was the result of productivity improvements by both ABF and G.I. Trucking. ABF's salaries, wages and benefits increased 3.8% annually effective April 1, 1996, pursuant to a collective bargaining agreement with its Teamsters employees. Effective April 1, 1997, for the final year of the Teamsters' agreement, ABF's salaries, wages and benefits increased 3.9%. The decrease in depreciation and amortization as a percent of revenue is primarily the result of ABF's reconfiguration of its terminal system which allowed for improved asset utilization. Also, ABF increased its use of outside alternate modes of transportation as reflected in the increase in rents and purchase transportation as a percent of revenue. Operating taxes and licenses and depreciation and amortization also decreased primarily as a result of the disposal of revenue equipment as the Company balanced equipment needs to revenue levels throughout 1996. Intermodal Operations Segment. The Company's intermodal operations are conducted primarily through the Clipper Group and CaroTrans. Revenues from the intermodal operations segment for the three months ended March 31, 1997 increased 7.2% over the three months ended March 31, 1996, resulting from a 9.5% increase in revenues for the Clipper Group and a 2.0% increase in revenues for CaroTrans. Throughout 1996, Clipper experienced an increase in average weight per shipment, resulting in a decline in revenue per hundredweight without a proportionate reduction in cost per hundredweight, resulting in a decline in margins on higher revenues. Clipper is focusing on smaller shipment sizes to improve the margins, and effective January 1, 1997, Clipper implemented a 5.9% rate increase to help offset the reduction in revenue per hundredweight. CaroTrans expanded into some higher cost markets during 1996 and also experienced a shift in market mix to more full container-load freight. Also, ocean container costs increased. Both of these factors negatively impacted operating results. Cost reductions and profitability improvement initiatives enacted in late 1996 began to have an impact late in the first quarter of 1997. Truckload Motor Carrier Operations Segment. The Company's truckload motor carrier operations are conducted through Cardinal. For the three months ended March 31, 1997, Cardinal produced revenues of $19.0 million, a 6.7% increase over the $17.8 million in revenues for the first quarter of 1996. Salaries and wages as a percent of revenue increased primarily as a result of higher fringe benefit costs. Supplies and expenses as a percent of revenue increased as a result of higher fuel costs and higher maintenance expenses due to aging of revenue equipment. For the remainder of the year, fuel costs per mile are expected to be more in line with historical levels. Cardinal plans to take delivery of new replacement tractors beginning in the second quarter of 1997, which should reduce maintenance costs. The increase in insurance expense as a percent of revenue is due primarily to unfavorable loss experience during the first quarter of 1997. Logistics Operations Segment. The Company's logistics operations are conducted through Integrated Distribution, Inc. and Complete Logistics. Revenues for the logistics operations segment decreased by $1.1 million from the three months ended March 31, 1997 compared to March 31, 1996. The decline in revenues was primarily the result of the loss of customers caused by rate increases and the lack of new business. Tire Operations Segment. Treadco's revenues for the three months ended March 31, 1997 increased 1.5% to $32.1 million from $31.6 million for the three months ended March 31, 1996. For the first quarter of 1997, "same store" sales decreased 4.2% which was offset by a 7.6% increase in "new store" sales. "Same store" sales include both production locations and sales locations that have been in existence for the entire periods presented. Revenues from retreading for the three months ended March 31, 1997 decreased 10.0% to $12.6 million from $14.0 million for the same period in 1996. Revenues from new tire sales increased 9.4% to $16.4 million for the first quarter of 1997 from $15.0 million during the first quarter of 1996. Service revenues for the 1997 first quarter increased 17.6% to $3.1 million from $2.6 million for the first quarter of 1996. Treadco faces increased competition as Bandag, Inc. has granted additional franchises in some locations currently being served by Treadco. This has led to increased pricing pressures in the marketplace. As anticipated, Bandag continues to target Treadco's customers, which has caused the loss of a substantial amount of national account business, and in many cases, the business retained is at lower margins. During September 1996, Treadco completed the conversion of its production facilities that were under Bandag retread franchises to Oliver Rubber Company ("Oliver") licensed facilities. The conversion was completed in phases throughout the first three quarters of 1996, with approximately one-third of its production facilities converted each quarter. The decrease in cost of sales as a percent of revenue resulted primarily from lower tread rubber costs with Oliver. The increase in selling, administrative, and general expenses resulted from many factors, including higher insurance costs and bad debt expenses. Interest. Interest expense was $7.3 million for three months ended March 31, 1997 compared to $7.8 million for three months ended March 31, 1996 primarily due to a reduction of outstanding debt offset in part by a higher average interest rate. Income Taxes. The difference between the effective tax rate for 1997 and the federal statutory rate resulted primarily from state income taxes, amortization of goodwill, minority interest, and other nondeductible expenses (see Note D to the consolidated financial statements). Liquidity and Capital Resources The ratio of current assets to current liabilities was .86:1 at March 31, 1997 and December 31, 1996. Net cash provided by operating activities for the three months ended March 31, 1997 was $17.6 million compared to net cash used of $4.5 million for the three months ended March 31, 1996. The increase is due primarily to a reduction of the net loss and an increase in accounts payables offset in part by an increase in receivables. The Company is party to a $347 million credit agreement (the "Credit Agreement") with Societe Generale, Southwest Agency, as Managing and Administrative Agent and NationsBank of Texas, N.A., as Documentation Agent, and with 14 other participating banks. The Credit Agreement included a $72 million term loan and provides for up to $275 million of revolving credit loans (including letters of credit). At March 31, 1997, there were $172.5 million of Revolver Advances, $34.5 million of Term Advances and approximately $71.2 million of letters of credit outstanding. The Revolver Advances are payable on August 11, 1998. The Term Loan is payable in installments through August 1998. The Credit Agreement contains various covenants which limit, among other things, indebtedness, distributions, capital expenditures, asset sales, restricted payments, investments, loans and advances, as well as requiring the Company to meet certain financial tests. On January 31, 1997, the Company obtained an amendment to the Credit Agreement which included revised financial covenants with which the Company was in compliance. The Credit Agreement had previously been amended in February, 1996, including a revision of term and financial covenants. As a part of the February 1996 amendment, the Company obtained an additional credit agreement which provides for borrowings of up to $30 million. Borrowings under this agreement bear interest at either an adjusted prime rate plus 2% or a maximum rate as defined in the agreement, or the Eurodollar rate plus 3% or a maximum rate as defined in the agreement. In connection with the January 1997 amendment, the available borrowings were reduced to $15 million, and the Company was given the right to extend the maturity date of this agreement to September 30, 1997. As of March 31, 1997 and during the entire preceding year of 1996, there were no borrowings under this additional credit agreement. This agreement contains covenants that are substantially the same as the covenants contained in the primary Credit Agreement. At March 31, 1997, the Company had approximately $31 million of availability under the Credit Agreement as well as $15 million under the additional credit agreement. Treadco is a party to a revolving credit facility with Societe Generale (the "Treadco Credit Agreement"), providing for borrowings of up to the lesser of $20 million or the applicable borrowing base. Borrowings under the Treadco Credit Agreement are collateralized by accounts receivable and inventory. Borrowings under the agreement bear interest, at Treadco's option, at 1 1/4% above the LIBOR rate, or at the higher of the bank's prime rate or the "federal funds rate" plus 1/2%. At March 31, 1997, the average interest rate was 6.2%. At March 31, 1997, Treadco had $10 million outstanding under the Revolving Credit Agreement. The Treadco Credit Agreement is payable in September 1998 unless extended. Treadco pays a commitment fee of 3/8% on the unused amount under the Treadco Credit Agreement. The Treadco Credit Agreement contains various covenants which limit, among other things, dividends, disposition of receivables, indebtedness and investments, as well as requiring Treadco to meet certain financial tests. The Treadco Credit Agreement was amended in March 1997, restating certain financial test requirements. Management believes, based upon the Company's current levels of operations and anticipated growth, the Company's cash, capital resources, borrowings available under the Credit Agreement and cash flow from operations will be sufficient to finance current and future operations and meet all present and future debt service requirements. Seasonality The LTL and truckload motor carrier segment is affected by seasonal fluctuations, which affect tonnage to be transported. Freight shipments, operating costs and earnings are also affected adversely by inclement weather conditions. The third calendar quarter of each year usually has the highest tonnage levels while the first quarter has the lowest. Intermodal operations are similar to the LTL and truckload segments with revenues being weaker in the first quarter and stronger during the months of September and October. Treadco's operations are somewhat seasonal with the last six months of the calendar year generally having the highest levels of sales. 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. PART II. OTHER INFORMATION ARKANSAS BEST CORPORATION ITEM 1. LEGAL PROCEEDINGS. From time to time, the Company is named as a defendant in legal actions, the majority of which arise out of the normal course of its business. The Company is not a party to any pending legal proceeding which the Company's management believes to be material to the financial condition of the Company. The Company maintains liability insurance against risks in excess of retention levels arising out of the normal course of its business (see Note F to the Company's Unaudited Consolidated Financial Statements). ITEM 2. CHANGES IN SECURITIES. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. Exhibit 11 - Statement Re: Computation of Earnings Per Share. (b) Reports on Form 8-K. Form 8-K dated February 27, 1997 Item 5. On January 31, 1997, Arkansas Best Corporation's (the "Company's") existing $346,971,312 Amended and Restated Credit Agreement with Societe Generale, Southwest Agency as Managing Agent and Administrative Agent, NationsBank of Texas, N.A., as Documentation Agent, and certain other banks was amended. Also, on January 31, 1997, the Company's existing $30,000,000 Credit Agreement with Societe Generale, Southwest Agency as Agent, and certain other banks was amended. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ARKANSAS BEST CORPORATION (Registrant) Date: May 14, 1997 s/David E. Loeffler ------------------------------------ David E. Loeffler Vice President-Treasurer, Chief Financial Officer and Principal Accounting Officer EXHIBIT INDEX ARKANSAS BEST CORPORATION The following exhibits are filed with this report. Exhibit No. 11 Statement Re: Computation of Earnings per Share EX-11 2 EXHIBIT 11 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE ARKANSAS BEST CORPORATION
Three Months Ended March 31 1997 1996 ----------------------------- (unaudited) ($ thousands, except per share data) PRIMARY: Average shares outstanding 19,504,473 19,516,539 Net effect of dilutive stock options - Based on the treasury stock method using average market price - - ----------- ----------- Average common shares outstanding 19,504,473 19,516,539 =========== =========== Net loss $ (317) $ (9,559) Less: Preferred stock dividend 1,075 1,075 ----------- ----------- Net loss available for common $ (1,392) $ (10,634) =========== =========== Per common and common equivalent share: Net loss per common share $(0.07) $(0.54) =========== =========== Fully diluted earnings per common share are not presented, as such calculations would be anti-dilutive.
EX-27 3
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ARKANSAS BEST CORPORATION QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000894405 ARKANSAS BEST CORPORATION 1,000 3-MOS DEC-31-1997 MAR-31-1997 667 0 185,793 6,393 32,616 260,549 575,511 227,567 822,159 303,768 304,728 0 15 195 135,829 822,159 32,094 406,746 24,475 398,981 0 1,114 7,265 (967) (650) (317) 0 0 0 (317) (.07) (.07)
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