0000894405-95-000008.txt : 19950810 0000894405-95-000008.hdr.sgml : 19950810 ACCESSION NUMBER: 0000894405-95-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950809 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: 95559962 BUSINESS ADDRESS: STREET 1: 1000 SOUTH 21 ST CITY: FORT SMITH STATE: AR ZIP: 72901 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 June 30, 1995 ---------------- [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to ------------- ------------- Commission file number 0-19969 -------- ARKANSAS BEST CORPORATION ----------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 6711 71-0673405 ------------------------- ------------------------- ---------------------- (State or other (Primary Standard (I.R.S. Employer jurisdiction of Industrial Classification Identification No.) incorporation or Code No.) organization) 1000 South 21st Street Fort Smith, Arkansas 72901 (501) 785-6000 ----------------------------------------------------------------------------- (Address, including zip code, and telephone number, including area code, of the registrant's principal executive offices) Not Applicable ----------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of The Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at August 1, 1995 --------------------------------- -------------------------------- Common Stock, $.01 par value 19,529,408 shares ARKANSAS BEST CORPORATION INDEX Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets -- June 30, 1995 and December 31, 1994 3 Consolidated Statements of Operations -- For the Three and Six Months Ended June 30, 1995 and 1994 5 Consolidated Statements of Cash Flows -- For the Six Months Ended June 30, 1995 and 1994 7 Notes to Consolidated Financial Statements -- June 30, 1995 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings 22 Item 2. Changes in Securities 22 Item 3. Defaults Upon Senior Securities 22 Item 4. Submission of Matters to a Vote of Security Holders 22 Item 5. Other Information 22 Item 6. Exhibits and Reports on Form 8-K 22 SIGNATURES 24 EXHIBITS 25 Exhibit 11. Statement Re: Computation of Earnings Per Share - PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ARKANSAS BEST CORPORATION CONSOLIDATED BALANCE SHEETS
June 30 December 31 1995 1994 (unaudited) (note) ($ thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 5,414 $ 3,458 Trade receivables, less allowances for doubtful accounts (1995 -- $2,810,000; 1994 -- $2,825,000) 132,496 136,144 Inventories -- Note C 37,150 32,463 Prepaid expenses 11,316 13,734 --------- --------- TOTAL CURRENT ASSETS 186,376 185,799 PROPERTY, PLANT AND EQUIPMENT Land and structures 130,417 110,424 Revenue equipment 215,753 200,250 Manufacturing equipment 8,231 7,467 Service, office and other equipment 47,368 40,516 Leasehold improvements 9,070 9,421 Construction in progress 188 13,939 --------- --------- 411,027 382,017 Less allowances for depreciation and amortization (174,726) (166,436) --------- --------- 236,301 215,581 OTHER ASSETS 14,657 15,705 GOODWILL, less amortization (1995 -- $22,161,000; 1994 -- $19,794,000) 149,677 151,960 --------- --------- $ 587,011 $ 569,045 ========= =========
ARKANSAS BEST CORPORATION CONSOLIDATED BALANCE SHEETS
June 30 December 31 1995 1994 (unaudited) (note) ($ thousands) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Bank overdraft $ - $ 5,989 Bank drafts payable 10,586 10,779 Trade accounts payable 51,197 49,368 Accrued expenses 89,888 82,157 Federal and state income taxes 3,004 5,786 Deferred federal income taxes 4,159 4,159 Current portion of long-term debt 59,463 65,161 --------- --------- TOTAL CURRENT LIABILITIES 218,297 223,399 LONG-TERM DEBT, less current portion 79,741 59,295 OTHER LIABILITIES 6,342 5,915 DEFERRED FEDERAL INCOME TAXES 25,919 28,842 MINORITY INTEREST 35,822 34,989 SHAREHOLDERS' EQUITY Preferred stock, $.01 par value, authorized 10,000,000 shares; issued 1,495,000 shares 15 15 Common stock, $.01 par value, authorized 70,000,000 shares; issued and outstanding 19,513,708 shares 195 195 Additional paid-in capital 207,636 207,636 Predecessor basis adjustment (15,371) (15,371) Retained earnings 28,415 24,130 --------- --------- TOTAL SHAREHOLDERS' EQUITY 220,890 216,605 COMMITMENTS AND CONTINGENCIES -- Notes F and G --------- --------- $ 587,011 $ 569,045 ========= ========= Note: The balance sheet at December 31, 1994 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 Six Months Ended June 30 June 30 1995 1994 1995 1994 (unaudited) ($ thousands, except per share data) OPERATING REVENUES Carrier operations $ 240,042 $ 173,805 $ 484,519 $ 408,131 Forwarding operations 29,658 - 58,426 - Tire operations 37,414 35,609 70,628 65,014 Service and other 4,980 1,346 9,728 2,596 --------- --------- --------- --------- 312,094 210,760 623,301 475,741 OPERATING EXPENSES AND COSTS -Note E Carrier operations 235,109 178,011 468,232 401,274 Forwarding operations 28,827 - 56,970 - Tire operations 35,519 32,696 67,016 60,277 Service and other 5,435 1,624 10,525 3,143 --------- --------- --------- --------- 304,890 212,331 602,743 464,694 --------- --------- --------- --------- OPERATING INCOME (LOSS) 7,204 (1,571) 20,558 11,047 OTHER INCOME Gain on asset sales 1,512 850 1,825 1,168 Other 119 380 276 528 --------- --------- --------- --------- 1,631 1,230 2,101 1,696 OTHER EXPENSES Interest 2,521 1,785 4,649 3,129 Other 1,444 1,011 2,893 2,025 Minority interest in subsidiary 585 917 1,074 1,407 --------- --------- --------- --------- 4,550 3,713 8,616 6,561 --------- --------- --------- --------- INCOME (LOSS) BEFORE INCOME TAXES 4,285 (4,054) 14,043 6,182 FEDERAL AND STATE INCOME TAXES (CREDIT) - Note D Current 2,642 (468) 10,142 5,375 Deferred (40) (178) (2,924) (1,360) --------- --------- --------- --------- 2,602 (646) 7,218 4,015 --------- --------- --------- --------- NET INCOME (LOSS) $ 1,683 $ (3,408) $ 6,825 $ 2,167 ========= ========= ========= ========= ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Continued) Three Months Ended Six Months Ended June 30 June 30 1995 1994 1995 1994 (unaudited) ($ thousands, except per share data) NET INCOME (LOSS) PER COMMON SHARE $ 0.03 $ (0.23) $ 0.24 $ - ========= ========= ========= ========= AVERAGE COMMON SHARES OUTSTANDING 19,515,132 19,200,077 19,540,768 19,304,649 ========== ========== ========== ========== CASH DIVIDENDS PAID PER COMMON SHARE $ 0.01 $ 0.01 $ 0.02 $ 0.02 ========= ========= ========= ========= See notes to consolidated financial statements.
ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30 1995 1994 (unaudited) ($ thousands) OPERATING ACTIVITIES Net income $ 6,825 $ 2,167 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 16,189 13,113 Amortization of intangibles 2,367 1,558 Other amortization 308 226 Provision for losses on accounts receivable 1,486 1,902 Provision for deferred income taxes (2,924) (1,360) Gain on asset sales (1,825) (1,168) Gain on issuance of subsidiary stock (20) (45) Minority interest in subsidiary 1,074 1,407 Changes in operating assets and liabilities: Accounts receivable 2,162 (7,125) Inventories and prepaid expenses (2,269) 1,197 Other assets 738 647 Accounts payable, bank drafts payable, taxes payable, accrued expenses and other liabilities 6,711 17,374 --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 30,822 29,893 INVESTING ACTIVITIES Purchases of property, plant and equipment, less capitalized leases (25,459) (27,040) Proceeds from asset sales 8,660 5,421 Adjustment to the acquisition of the Clipper Group (84) - --------- --------- NET CASH USED BY INVESTING ACTIVITIES (16,883) (21,619) ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Six Months Ended June 30 1995 1994 (unaudited) ($ thousands) FINANCING ACTIVITIES Deferred financing costs and expenses incurred in borrowing activities $ - $ (144) Proceeds from commercial paper agreement - 1,000 Proceeds from term loan facility - 20,000 Borrowings under revolving credit facilities 17,000 27,000 Principal payments under term loan facilities (1,000) - Payments under revolving credit facilities (6,000) (31,000) Principal payments on other long-term debt (13,235) (11,730) Dividends paid to minority shareholders of subsidiary (220) (219) Dividends paid (2,539) (2,533) Net decrease in cash overdrafts (5,989) - --------- --------- NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (11,983) 2,374 --------- --------- NET INCREASE IN CASH AND CASH EQUIVALENTS 1,956 10,648 Cash and cash equivalents at beginning of period 3,458 6,962 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,414 $ 17,610 ========= ========= See notes to consolidated financial statements.
ARKANSAS BEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) June 30, 1995 NOTE A -- ORGANIZATION Arkansas Best Corporation (the "Company") is a diversified holding company engaged through its subsidiaries primarily in motor carrier and freight forwarding operations and truck tire retreading and sales. Principal subsidiaries owned are ABF Freight System, Inc., ("ABF"), Treadco, Inc. ("TREADCO"), ABC Treadco, Inc. ("ABC Treadco"), and, effective September 30, 1994, Clipper Exxpress Company ("Clipper"). See Note G. NOTE B -- FINANCIAL STATEMENT PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 1995, are not necessarily indicative of the results that may be expected for the year ending December 31, 1995. For further information, refer to the Company's financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1994. NOTE C -- INVENTORIES
June 30 December 31 1995 1994 ($ thousands) Finished goods $ 28,118 $ 22,764 Materials 6,757 7,487 Repair parts, supplies and other 2,275 2,212 -------- -------- $ 37,150 $ 32,463 ======== ========
NOTE D -- FEDERAL AND STATE INCOME TAXES
Three Months Ended Six Months Ended June 30 June 30 1995 1994 1995 1994 ($ thousands) Income tax at regular rates $ 1,500 $ (1,419) $ 4,915 $ 2,164 Percent 35.0% (35.0)% 35.0% 35.0% State taxes less federal benefits 446 (54) 1,130 542 Percent 10.4% (1.3)% 8.1% 8.8% Amortization of nondeductible goodwill 266 266 532 531 Percent 6.2% 6.6% 3.8% 8.6% Minority interest 205 312 376 479 Percent 4.8% 7.7% 2.7% 7.8% Other items 185 249 265 299 Percent 4.3% 6.1% 1.8% 4.7% ------- ------- ------- ------- Income tax expense $ 2,602 $ (646) $ 7,218 $ 4,015 Percent 60.7% (15.9)% 51.4% 64.9% ======= ======= ======= =======
NOTE E -- OPERATING EXPENSES AND COSTS
Three Months Ended Six Months Ended June 30 June 30 1995 1994 1995 1994 ($ thousands) Carrier Operations: Salaries and wages $166,751 $122,451 $331,926 $277,893 Supplies and expenses 25,892 17,691 52,264 42,193 Operating taxes and licenses 9,691 7,720 20,026 16,958 Insurance 5,596 3,598 10,081 7,966 Communications and utilities 5,798 5,212 11,600 10,938 Depreciation and amortization 6,810 5,660 13,203 11,549 Rents and purchased transportation 13,496 14,579 27,111 31,341 Other 1,075 1,100 2,021 2,436 -------- -------- -------- -------- 235,109 178,011 468,232 401,274 -------- -------- -------- -------- Forwarding Operations: Cost of services 25,099 - 49,587 - Selling, administrative and general 3,728 - 7,383 - -------- -------- -------- -------- 28,827 - 56,970 - -------- -------- -------- -------- NOTE E -- OPERATING EXPENSES AND COSTS (Cont'd) Three Months Ended Six Months Ended June 30 June 30 1995 1994 1995 1994 ($ thousands) Tire Operations: Cost of sales $ 27,765 $ 26,145 $ 52,546 $ 47,693 Selling, administrative and general 7,754 6,551 14,470 12,584 -------- -------- -------- -------- 35,519 32,696 67,016 60,277 -------- -------- -------- -------- Service and Other 5,435 1,624 10,525 3,143 -------- -------- -------- -------- $304,890 $212,331 $602,743 $464,694 ======== ======== ======== ========
NOTE F -- LEGAL PROCEEDINGS AND ENVIRONMENTAL MATTERS Various legal actions, the majority of which arise in the normal course of business, are pending. None of these other legal actions is expected to have a material adverse effect on the Company's financial condition. The Company maintains liability insurance against risks arising out of the normal course of its business, subject to certain self-insured retention limits. ABF stores some fuel for its tractors and trucks in 93 underground tanks located in 27 states. Maintenance of such tanks is regulated at the federal and, in some cases, state levels. ABF believes that it is in substantial compliance with all such regulations. ABF is not aware of any leaks from such tanks that could reasonably be expected to have a material adverse effect on the Company. Environmental regulations have been adopted by the United States Environmental Protection Agency ("EPA") that will require ABF to upgrade its underground tank systems by December 1998. ABF currently estimates that such upgrades, which are currently in process, will not have a material adverse effect on the Company. The Company has received notices from the EPA and others that it has been identified as a potentially responsible party under the Comprehensive Environmental Response Compensation and Liability Act or other federal or state environmental statutes at several hazardous waste sites. After investigating the Company's or its subsidiaries' involvement in waste disposal or waste generation at such sites, the Company has either agreed to de minimis settlements (aggregating approximately $223,000 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. NOTE G -- WORLDWAY CORPORATION MERGER AGREEMENT On July 10, 1995, the Company announced the signing of a definitive agreement providing for the merger of a subsidiary of the Company with WorldWay Corporation ("WorldWay"), pursuant to which WorldWay will become a wholly owned subsidiary of the Company. On July 14, 1995, the Company commenced a cash tender offer for all outstanding shares of WorldWay at $11.00 per share net. WorldWay currently has approximately 6,561,672 common shares outstanding and approximately $70 million of debt. The Company anticipates entering into a new financing agreement to finance the tender offer and refinance some existing debt. The Company has received a commitment letter for such financing. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The Company is engaged, through its motor carrier subsidiaries, in LTL shipments of general commodities. The Company is also engaged through its 46%-owned subsidiary, Treadco, Inc., in truck tire retreading and new truck tire sales and, through its freight forwarding subsidiaries, in intermodal marketing and freight logistics services. The Company owns approximately 46% of Treadco, whose shares are traded on the Nasdaq Stock Exchange. Treadco is consolidated with the Company for financial reporting purposes as a result of its control of Treadco by reason of its stock ownership, board representation and provision of management services. The ownership interests of the other stockholders are reflected as minority interest. On September 30, 1994, the Company purchased all the outstanding stock of Clipper Exxpress Company ("Clipper") and two affiliated companies collectively (the "Clipper Group"). Beginning October 1, 1994, the operations of the Clipper Group are presented in the forwarding operations segment. On October 12, 1994, the Company issued 310,191 shares of common stock for all the outstanding stock of Traveller Enterprises and subsidiaries and Commercial Warehouse Company, collectively (the "Traveller Group"). Segment Data The following tables reflect information prepared on a business segment basis, which includes reclassification of certain expenses and costs between the Company and its subsidiaries and elimination of the effects of intercompany transactions. Operating profit on a business segment basis differs from operating income as reported in the Company's Consolidated Financial Statements. Other income and other expenses (which include amortization expense), except for interest expense and minority interest, which appear below the operating income line in the Company's Statement of Operations, have been allocated to individual segments for the purpose of calculating operating profit on a segment basis.
Three Months Ended Six Months Ended June 30 June 30 1995 1994 1995 1994 ($ thousands) OPERATING REVENUES Carrier operations $240,042 $173,805 $484,519 $408,131 Forwarding operations 29,658 - 58,426 - Tire operations 37,414 35,609 70,628 65,014 Other 4,980 1,346 9,728 2,596 -------- -------- -------- -------- $312,094 $210,760 $623,301 $475,741 ======== ======== ======== ======== OPERATING EXPENSE AND COSTS CARRIER OPERATIONS Salaries and wages $166,751 $122,451 $331,926 $277,893 Supplies and expenses 25,892 17,691 52,264 42,193 Operating taxes and licenses 9,691 7,720 20,026 16,958 Insurance 5,596 3,598 10,081 7,966 Communications and utilities 5,798 5,212 11,600 10,938 Depreciation and amortization 6,810 5,660 13,203 11,549 Rents and purchased transportation 13,496 14,579 27,111 31,341 Other 1,075 1,100 2,021 2,436 Other non-operating (net) (679) 4 (360) 183 -------- -------- -------- -------- Total carrier operations 234,430 178,015 467,872 401,457 FORWARDING OPERATIONS Cost of services 25,099 - 49,587 - Selling, administrative and general 3,728 - 7,383 - Other non-operating (net) 434 - 860 - -------- -------- -------- -------- Total forwarding operations 29,261 - 57,830 - TIRE OPERATIONS Cost of sales 27,765 26,145 52,546 47,693 Selling, administrative and general 7,754 6,551 14,470 12,584 Other non-operating (net) (5) 57 120 254 -------- -------- -------- -------- Total tire operations 35,514 32,753 67,136 60,531 SERVICE AND OTHER 5,498 1,344 10,697 3,035 -------- -------- -------- -------- $304,703 $212,112 $603,535 $465,023 ======== ======== ======== ======== Three Months Ended Six Months Ended June 30 June 30 1995 1994 1995 1994 ($ thousands) OPERATING PROFIT (LOSS) Carrier operations $ 5,612 $ (4,210) $ 16,647 $ 6,674 Forwarding operations 397 - 596 - Tire operations 1,900 2,856 3,492 4,483 Other (518) 2 (969) (439) -------- -------- -------- -------- TOTAL OPERATING PROFIT 7,391 (1,352) 19,766 10,718 MINORITY INTEREST 585 917 1,074 1,407 INTEREST EXPENSE 2,521 1,785 4,649 3,129 -------- -------- -------- -------- INCOME (LOSS) BEFORE INCOME TAXES $ 4,285 $ (4,054) $ 14,043 $ 6,182 ======== ======== ======== ========
The following table sets forth for the periods indicated a summary of the Company's operations as a percentage of revenues presented on a business segment basis as shown in the preceding table. The basis of presentation for business segment data differs from the basis of presentation for data the Company provides to the Interstate Commerce Commission.
Three Months Ended Six Months Ended June 30 June 30 1995 1994 1995 1994 CARRIER OPERATIONS Salaries and wages 69.5% 70.5% 68.5% 68.1% Supplies and expenses 10.8 10.2 10.8 10.3 Operating taxes and licenses 4.0 4.4 4.1 4.2 Insurance 2.3 2.1 2.1 2.0 Communications and utilities 2.4 3.0 2.4 2.7 Depreciation and amortization 2.8 3.3 2.7 2.8 Rents and purchased transportation 5.6 8.4 5.6 7.7 Other 0.4 0.6 0.4 0.6 Other non-operating (net) (0.1) (0.1) (0.0) 0.0 ---- ----- ---- ---- Total Carrier Operations 97.7% 102.4% 96.6% 98.4% ==== ===== ==== ==== FORWARDING OPERATIONS Cost of services 84.6% - 84.9% - Selling, administrative and general 12.6 - 12.6 - Other non-operating (net) 1.5 - 1.5 - ----- ----- ---- ---- Total Forwarding Operations 98.7% - 99.0% - ==== ===== ==== ==== Three Months Ended Six Months Ended June 30 June 30 1995 1994 1995 1994 TIRE OPERATIONS Cost of sales 74.2% 73.4% 74.4% 73.4% Selling, administrative and general 20.7 18.4 20.5 19.4 Other non-operating (net) 0.0 0.2 0.2 0.3 ---- ---- ---- ---- Total Tire Operations 94.9 92.0% 95.1% 93.1% ==== ==== ==== ====
Results of Operations Three Months Ended June 30, 1995 as Compared with Three Months Ended June 30, 1994 Consolidated revenues of the Company for the three months ended June 30, 1995 were $312.1 million compared to $210.8 million for the three months ended June 30, 1994. Operating profit for the Company was $7.4 million for the three months ended June 30, 1995 compared to an operating loss of $(1.4) million for the three months ended June 30, 1994. Net income for the three months ended June 30, 1995 was $1.7 million, or $.03 per common share, compared to a net loss of $(3.4) million, or $(.23) per common share for the corresponding three months of 1994. Consolidated revenues and income for the three months ended June 30, 1994 were adversely affected by the 24-day labor strike by the Teamsters' union employees of ABF Freight System, Inc. ("ABF") in April 1994. Earnings per common share for the three months ended June 30, 1995 and 1994 give consideration to preferred stock dividends of $1.1 million. Average common shares outstanding for the three months ended June 30, 1995 were 19.5 million shares compared to 19.2 million shares for the three months ended June 30, 1994. Outstanding shares for the three months ended June 30, 1995 and 1994 do not assume conversion of preferred stock to common shares, because conversion would be anti-dilutive for these periods. Motor Carrier Operations Segment. ABF's labor agreement with the International Brotherhood of Teamsters ("IBT") expired on March 31, 1994. On April 6, 1994, when the terms of a new agreement had not been agreed to between the industry's bargaining group, Trucking Management, Inc. ("TMI"), and the IBT, the ABF Teamsters' employees and 20 other carriers went on strike. On April 29, 1994, TMI and the IBT reached a tentative agreement on a new four-year contract. ABF Teamsters employees began returning to work at 12:01 a.m. on April 30, 1994. During the strike, the non-union employees of the Company were given an across-the-board 40% pay reduction instead of lay- offs. Comparisons for the three months have been affected significantly by the 1994 strike. Revenues from the carrier operations segment for the three months ended June 30, 1995 were $240.0 million, with operating profit of $5.6 million. Earnings at ABF continue to be negatively affected by a slowing economy and increased pricing pressure which have resulted in tonnage levels below Company expectations. Salaries, wages and benefits increased 3.3% annually effective April 1, 1995, pursuant to ABF's collective bargaining agreement with its Teamsters' employees. Forwarding Operations Segment. Effective September 30,1994, with the purchase of the Clipper Group, the Company began reporting a new business segment, forwarding operations. The Company's consolidated financial statements for the three months ended June 30, 1995 include only current year financial information for the forwarding operations segment and therefore, comparisons of results of operations are not presented. Tire Operations Segment. Treadco's revenues for the three months ended June 30, 1995 increased 5.1% to $37.4 million from $35.6 million for the three months ended June 30, 1994. For the three months ended June 30, 1995, "same store" sales increased 3.6% and "new store" sales accounted for 2.3% of the increase from the three months ended June 30, 1994. Same store sales include both production locations and satellite sales locations that have been in existence for the entire three month periods ended June 30, 1995 and 1994. Although a softer economy during the quarter slowed demand for both new replacement and retreaded truck tires, same store sales were higher primarily as a result of an increase in market share in the areas served. Revenues from retreading for the three months ended June 30, 1995 increased 1.5% to $19.7 million from $19.4 million for the three months ended June 30, 1994. Revenues from new tire sales increased 9.3% to $17.7 million for the three months ended June 30, 1995 from $16.2 million for the three months ended June 30, 1994. Of Treadco's 26 Bandag franchise agreements, seven expire in June 1996, one in August 1996, eight in the summer of 1997 and the remaining ten in the summer of 1998. In the event the first group of franchises are not renewed, Treadco believes that while short-term operating inefficiencies might occur, it would be able to meet its production needs. However, if the franchises are not renewed, Treadco believes there could be a disruption in its relationship with some customers because of Bandag's national marketing presence. Treadco's margins continue to be squeezed primarily as a result of Bandag's three tread rubber price increases which total 9.6% since the first quarter of 1994. So far Treadco has been unsuccessful in fully passing along these increased costs. Also, during the same period, Treadco has seen increased competition as Bandag has granted additional franchises in some locations currently served by Treadco. Although Treadco believes Bandag is displeased with Treadco's recent efforts to explore alternative retreading processes, Treadco believes it is in compliance with the terms of each franchise agreement. Tire operations segment operating expenses as a percent of revenues were 94.9% for the three months ended June 30, 1995 compared to 92.0% for the three months ended June 30, 1994. Cost of sales for the tire operations segment as a percent of revenues increased to 74.2% for the three months ended June 30, 1995 from 73.4% for the three months ended June 30, 1994 resulting primarily from the increased cost of materials from Bandag Inc. (see discussion above). Selling, administrative and general expenses for the tire operations segment increased to 20.7% for the three months ended June 30, 1995 from 18.4% for the three months ended June 30, 1994. The increase resulted primarily from an increase in bad debt expense and increased costs associated with employee medical benefits. Interest. Interest expense was $2.5 million for the three months ended June 30, 1995 compared to $1.8 million for the three months ended June 30, 1994 primarily due to a higher level of debt outstanding. The increase in long-term debt consisted primarily of debt incurred in the acquisition of the Clipper Group on September 30, 1994. Income Taxes. The difference between the effective tax rate for the three months ended June 30, 1995 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). Six Months Ended June 30, 1995 as Compared with Six Months Ended June 30, 1994 Consolidated revenues of the Company for the six months ended June 30, 1995 were $623.3 million compared to $475.7 million for the six months ended June 30, 1994. Operating profit for the Company was $19.8 million for the six months ended June 30, 1995 compared to operating profit of $10.7 million for the six months ended June 30, 1994. Net income for the six months ended June 30, 1995 was $6.8 million, or $.24 per common share, compared to net income of $2.2 million, or $.00 per common share for the corresponding six months of 1994. Consolidated revenues and income for the six months ended June 30, 1994 were adversely affected by the 24-day labor strike by the Teamsters' union employees of ABF Freight System, Inc. ("ABF") in April 1994. Earnings per common share for the six months ended June 30, 1995 and 1994 give consideration to preferred stock dividends of $2.1 million. Average common shares outstanding for the six months ended June 30, 1995 were 19.5 million shares compared to 19.3 million shares for the six months ended June 30, 1994. Outstanding shares for the six months ended June 30, 1995 and 1994 do not assume conversion of preferred stock to common shares, because conversion would be anti-dilutive for these periods. Motor Carrier Operations Segment. Comparisons for the six months were affected by the ABF Teamsters' employees strike in April 1994 (see discussion above). Revenues from the carrier operations segment for the six months ended June 30, 1995 were $484.5 million, with operating profit of $16.6 million. Earnings at ABF continue to be negatively affected by a slowing economy and increased pricing pressure which have resulted in tonnage levels below Company expectations. Salaries, wages and benefits increased 3.3% annually effective April 1, 1995, pursuant to ABF's collective bargaining agreement with its Teamsters' employees. Forwarding Operations Segment. Effective September 30,1994, with the purchase of the Clipper Group, the Company began reporting a new business segment, forwarding operations. The Company's consolidated financial statements for the six months ended June 30, 1995 include only current year financial information for the forwarding operations segment and therefore, comparisons of results of operations are not presented. Tire Operations Segment. Treadco's revenues for the six months ended June 30, 1995 increased 8.6% to $70.6 million from $65.0 million for the six months ended June 30, 1994. For the six months ended June 30, 1995, "same store" sales increased 7.8% and "new store" sales accounted for 1.3% of the increase from the six months ended June 30, 1994. Same store sales include both production locations and satellite sales locations that have been in existence for the entire six month periods ended June 30, 1995 and 1994. Although a softer economy during the quarter slowed demand for both new replacement and retreaded truck tires, same store sales were higher primarily as a result of an increase in market share in the areas served. Revenues from retreading for the six months ended June 30, 1995 increased 4.0% to $37.4 million from $36.0 million for the six months ended June 30, 1994. Revenues from new tire sales increased 14.4% to $33.2 million for the six months ended June 30, 1995 from $29.0 million for the six months ended June 30, 1994. Tire operations segment operating expenses as a percent of revenues were 95.1% for the six months ended June 30, 1995 compared to 93.1% for the six months ended June 30, 1994. Cost of sales for the tire operations segment as a percent of revenues increased to 74.4% for the six months ended June 30, 1995 from 73.4% for the six months ended June 30, 1994. Bandag Inc., Treadco's tread rubber supplier, has implemented three price increases, totaling 9.6%, since the first quarter of 1994, which Treadco has been unsuccessful, so far, in fully passing along to our customers (see discussion above). Selling, administrative and general expenses for the tire operations segment increased to 20.5% for the six months ended June 30, 1995 from 19.4% for the six months ended June 30, 1994. The increase resulted primarily from an increase in bad debt expense and increased costs associated with employee medical benefits. Interest. Interest expense was $4.6 million for the six months ended June 30, 1995 compared to $3.1 million for the six months ended June 30, 1994 primarily due to a higher level of outstanding debt. The increase in long- term debt consisted primarily of debt incurred in the acquisition of the Clipper Group and a term loan used to finance construction of the Company's corporate office building which was completed in 1995. Income Taxes. The difference between the effective tax rate for the six months ended June 30, 1995 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 Company and certain banks are parties to a Credit Agreement with Societe Generale, as Agent and NationsBank of Texas as Co-Agent (the "Credit Agreement") which provides funds available under a three-year Revolving Credit Facility of $150 million, including $40 million for letters of credit. There was $5 million outstanding under the Revolving Credit Facility and approximately $32.3 million of letters of credit outstanding at June 30, 1995. The Revolving Credit Facility is payable on June 30, 1998. Outstanding revolving credit advances may not exceed a borrowing base calculated using the Company's revenue equipment, real property, the Treadco common stock owned by the Company, eligible receivables and other eligible assets. At June 30, 1995, the borrowing base was $126.9 million. The Company has paid and will continue to pay certain customary fees for such commitments and loans. Amounts advanced under the revolving credit facility bear interest, at the Company's option, at a rate per annum of either:(i) the greater of (a) the agent bank's prime rate and (b) the Federal Funds Rate plus 1/2%; or (ii) LIBOR plus 3/4%. The Credit Agreement contains various covenants which limit, among other things, dividends, indebtedness, capital expenditures, loans and investments, as well as requiring the Company to meet certain financial tests. As of June 30, 1995, these covenants have been met. If there is an event of default which is not remedied or waived within 10 days, the Credit Agreement will become secured to the extent of amounts then outstanding of all of the Company's receivables (excluding receivables sold under the receivables purchase agreement), revenue equipment, real property and common stock included in the borrowing base (subject to certain exceptions). The Company has outstanding 1,495,000 shares of Preferred Stock which is convertible at the option of the holder into Common Stock at the rate of 2.5397 shares of Common Stock for each share of Preferred Stock. Annual dividends are $2.875 and are cumulative. The Preferred Stock is redeemable at the Company's option on or after February 15, 1996 at $52.0125 per share plus accumulated unpaid dividends, and is exchangeable at the option of the Company for the Company's 5 3/4% Convertible Subordinated Debentures due February 15, 2018 at a rate of $50 principal amount of debentures for each share of Preferred Stock. The holders of the Preferred Stock have no voting rights unless dividends are in arrears six quarters or more, at which time the holders have the right to elect two directors of the Company until all dividends have been paid. On March 2, 1994, ABF, Renaissance Asset Funding Corp. ("Renaissance") and Societe Generale entered into a receivables purchase agreement. The agreement allows ABF to sell to Renaissance an interest in up to $55 million in a pool of receivables. At June 30, 1995, ABF had $40 million of receivables financed through this facility. Effective July 31, 1995 this agreement was terminated and refinanced with borrowings under the 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 $12 million or the applicable borrowing base. At June 30, 1995, the borrowing base was $29.8 million. Borrowings under the Treadco Credit Agreement are collateralized by accounts receivable and inventory. Borrowings under the agreement bear interest, at Treadco's option, at 1% above the bank's LIBOR rate, or at the higher of the bank's prime rate or the "federal funds rate" plus 1/2%. At June 30, 1995, the interest rate was 9%. At June 30, 1995, Treadco had $9 million outstanding under the Treadco Credit Agreement. Treadco pays a commitment fee of 3/8% on the unused amount under the Treadco Credit Agreement. The Treadco Credit Agreement contains various covenants which limit, among other things, dividends, disposition of receivables, indebtedness and investments, as well as requiring Treadco to meet certain financial tests which have been met. Under the Treadco Credit Agreement, Treadco's assets are subject to pledge and, therefore, are available for use only by that subsidiary. On September 30, 1994, the Company paid an initial payment of $54 million to the Clipper Group shareholders from cash on hand and funds provided under its existing lines of credit. In May 1995, the Company paid the final $6 million payment to the Clipper Group shareholders. On October 12, 1994, the Company issued 310,191 shares of common stock for all of the outstanding stock of the Traveller Group. The final number of shares that will be issued in conjunction with this transaction are subject to certain closing audit adjustments. On July 10, 1995, the Company announced the signing of a definitive agreement providing for the merger of a subsidiary of the Company with WorldWay Corporation ("WorldWay"), pursuant to which WorldWay will become a wholly owned subsidiary of the Company. On July 14, 1995 the Company commenced a cash tender offer for all outstanding shares of WorldWay at $11.00 per share net. The offer is scheduled to expire at 12:00 Midnight, New York City time, on Thursday, August 10, 1995, unless extended. WorldWay currently has approximately 6,561,672 common shares outstanding and approximately $70 million of debt. The Company plans to obtain funds for the acquisition pursuant to a financing for which it has received a commitment letter dated July 7, 1995 from Societe Generale, Southwest Agency and NationsBank of Texas, N.A. Management believes, based upon the Company's current levels of operations and anticipated growth, the Company's cash, capital resources, borrowings available under the Credit Agreement and cash flow from operations will be sufficient to finance current and future operations and meet all present and future debt service requirements. Seasonality The motor carrier segment is affected by seasonal fluctuations, which affect tonnage to be transported. Freight shipments, operating costs and earnings are also affected adversely by inclement weather conditions. The third calendar quarter of each year usually has the highest tonnage levels while the first quarter has the lowest. Forwarding operations are similar to the motor carrier segment with revenues being weaker in the first quarter and stronger during the months of September and October. Treadco's operations are somewhat seasonal with the last six months of the calendar year generally having the highest levels of sales. 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 arising out of the normal course of its business (see Note F to the Company's Unaudited Consolidated Financial Statements). ITEM 2. CHANGES IN SECURITIES. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Company's Annual Meeting of Shareholders was held on May 9, 1995. The first proposal considered at the Annual Meeting was to elect two persons to serve as directors of the Company. The results of the vote on this proposal are as follows: Directors Votes For Votes Withheld Frank Edelstein 17,068,002 47,593 Robert A. Young III 17,073,511 42,084 The second proposal was to approve an amendment to the Arkansas Best Corporation 1992 Stock Option Plan. This proposal received 14,226,884 votes for adoption, 1,676,840 votes against adoption, 67,314 abstentions and 1,144,557 broker non-votes. The third proposal was to ratify the appointment of Ernst & Young LLP as independent auditors for fiscal year 1995. This proposal received 16,903,666 votes for adoption, 191,440 votes against adoption, 20,489 abstentions and -0- broker non-votes. ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. Exhibit 11 - Statement Re: Computation of Earnings Per Share. (b) Reports on Form 8-K. None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ARKANSAS BEST CORPORATION (Registrant) Date: August 9, 1995 s/Donald L. Neal ----------------- ------------------------------------ Donald L. Neal - Senior Vice President - Chief Financial Officer, and Principal Accounting Officer LIST OF EXHIBITS ARKANSAS BEST CORPORATION The following exhibits are filed with this report. Exhibit No. Page 11 Statement Re: Computation of Earnings per Share - 27 Financial Data Schedule - EX-11 2 EXHIBIT 11 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE ARKANSAS BEST CORPORATION
Three Months Ended Six Months Ended June 30 June 30 1995 1994 1995 1994 ($ thousands, except per share data) Primary: Average shares outstanding 19,513,708 19,200,077 19,513,708 19,197,936 Net effect of dilutive stock options -- Based on the treasury stock method using average market price 1,424 0 27,060 106,713 ---------- ---------- ---------- ---------- Average common shares outstanding 19,515,132 19,200,077 19,540,768 19,304,649 ========== ========== ========== ========== Net income $ 1,683 $ (3,408) $ 6,825 $ 2,167 Less: Preferred stock dividend 1,075 1,075 2,149 2,149 ---------- ---------- ---------- ---------- Net income (loss) available for common $ 608 $ (4,483) $ 4,676 $ 18 ========== ========== ========== ========== Per common and common equivalent share: Net income (loss) per common share $ 0.03 $ (0.23) $ 0.24 $ 0.00 ========== ========== ========== ========== Fully diluted earnings per common share are not presented, as such calculations would be anti-dilutive.
EX-27 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ARKANSAS BEST CORPORATION FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000894405 ARKANSAS BEST CORPORATION 1,000 6-MOS DEC-31-1995 JUN-30-1995 5,414 0 135,306 2,810 37,150 186,376 411,027 174,726 587,011 218,297 79,741 195 0 15 220,680 587,011 70,628 623,301 67,016 602,743 0 1,486 4,649 14,043 7,218 6,825 0 0 0 6,825 .24 .24