-----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, TlN4hmXjQpT1LRP+OMGU1qOvnc9bxpM5hLRuZSyvLYsH/Xr0Uw4Duin/n3LMCmnJ 3FjhoVeEI/9Hu3/CHyMOJA== 0000894405-96-000008.txt : 19960515 0000894405-96-000008.hdr.sgml : 19960515 ACCESSION NUMBER: 0000894405-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 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: 96562556 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, 1996 --------------------- [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to ------------- ------------- Commission file number 0-19969 -------- ARKANSAS BEST CORPORATION - ----------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 6711 71-0673405 - ------------------------- ------------------------- ---------------------- (State or other (Primary Standard (I.R.S. Employer jurisdiction of Industrial Classification Identification No.) incorporation or Code No.) organization) 3801 Old Greenwood Road Fort Smith, Arkansas 72903 (501) 785-6000 - ----------------------------------------------------------------------------- (Address, including zip code, and telephone number, including area code, of the registrant's principal executive offices) Not Applicable - ----------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of The Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at May 1, 1996 --------------------------------- -------------------------------- Common Stock, $.01 par value 19,512,250 shares ARKANSAS BEST CORPORATION INDEX Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets -- March 31, 1996 and December 31, 1995 3 Consolidated Statements of Operations -- For the Three Months Ended March 31, 1996 and 1995 5 Consolidated Statements of Cash Flows -- For the Three Months Ended March 31, 1996 and 1995 7 Notes to Consolidated Financial Statements -- March 31, 1996 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 15 PART II. OTHER INFORMATION Item 1. Legal Proceedings 25 Item 2. Changes in Securities 25 Item 3. Defaults Upon Senior Securities 25 Item 4. Submission of Matters to a Vote of Security Holders 25 Item 5. Other Information 25 Item 6. Exhibits and Reports on Form 8-K 25 SIGNATURES 26 EXHIBITS 27 Exhibit 11. Statement Re: Computation of Earnings Per Share PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ARKANSAS BEST CORPORATION CONSOLIDATED BALANCE SHEETS
March 31, December 31 1996 1995 (unaudited) (note) ($ thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 421 $ 16,945 Trade receivables, less allowances for doubtful accounts (1996 -- $17,752,000; 1995 -- $19,403,000) 199,473 205,196 Inventories -- Note D 35,440 36,850 Prepaid expenses 17,129 13,927 Federal and state income taxes 9,707 17,489 Deferred federal income taxes 32,080 32,080 --------- --------- TOTAL CURRENT ASSETS 294,250 322,487 PROPERTY, PLANT AND EQUIPMENT Land and structures 234,330 228,706 Revenue equipment 283,340 285,045 Manufacturing equipment 8,676 8,289 Service, office and other equipment 64,848 65,474 Leasehold improvements 8,935 10,631 Construction in progress 33 44 Non-operating property 15,641 15,869 --------- --------- 615,803 614,058 Less allowances for depreciation and amortization (203,219) (190,906) --------- --------- 412,584 423,152 OTHER ASSETS 59,185 54,783 NET ASSETS HELD FOR SALE 23,994 39,937 GOODWILL, less amortization (1996 -- $25,181,000; 1995 -- $24,027,000) 144,060 145,478 --------- --------- $ 934,073 $ 985,837 ========= ========= ARKANSAS BEST CORPORATION CONSOLIDATED BALANCE SHEETS March 31, December 31 1996 1995 (unaudited) (note) ($ thousands) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Bank overdraft $ 4,276 $ - Bank drafts payable 5,954 12,999 Trade accounts payable 65,401 74,998 Accrued expenses 185,714 188,708 Current portion of long-term debt 25,533 26,634 --------- --------- TOTAL CURRENT LIABILITIES 286,878 303,339 LONG-TERM DEBT, less current portion 374,031 399,144 OTHER LIABILITIES 22,011 18,665 DEFERRED FEDERAL INCOME TAXES 46,903 48,560 MINORITY INTEREST 37,242 38,265 SHAREHOLDERS' EQUITY Preferred stock, $.01 par value, authorized 10,000,000 shares; issued 1,495,000 shares 15 15 Common stock, $.01 par value, authorized 70,000,000 shares; issued and outstanding 1996: 19,515,758 shares; 1995: 19,519,061 195 195 Additional paid-in capital 207,780 207,807 Predecessor basis adjustment (15,371) (15,371) Retained earnings (deficit) (25,611) (14,782) --------- --------- TOTAL SHAREHOLDERS' EQUITY 167,008 177,864 CONTINGENCIES -- Note G --------- --------- $ 934,073 $ 985,837 ========= ========= Note: The balance sheet at December 31, 1995 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to consolidated financial statements.
ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31 1996 1995 (unaudited) ($ thousands, except per share data) OPERATING REVENUES LTL operations $ 294,923 $ 244,477 Forwarding operations 41,766 28,768 Truckload operations 17,838 0 Logistics operations 13,230 3,945 Tire operations 31,613 33,214 Service and other 2,004 803 ----------- --------- 401,374 311,207 ----------- --------- OPERATING EXPENSES AND COSTS -Note F LTL operations 303,752 233,123 Forwarding operations 40,691 28,143 Truckload operations 16,412 0 Logistics operations 13,787 4,332 Tire operations 33,238 31,497 Service and other 2,336 758 ----------- --------- 410,216 297,853 ----------- --------- OPERATING INCOME (LOSS) (8,842) 13,354 OTHER INCOME (EXPENSE) Gain on asset sales 2,438 313 Interest (7,801) (2,128) Minority interest in subsidiary 641 (489) Other, net (1,273) (1,292) ----------- --------- (5,995) (3,596) ----------- --------- INCOME (LOSS) BEFORE INCOME TAXES (14,837) 9,758 FEDERAL AND STATE INCOME TAXES (CREDIT) -Note D Current (3,641) 7,500 Deferred (1,637) (2,884) ----------- --------- (5,278) 4,616 ----------- --------- NET INCOME (LOSS) $ (9,559) $ 5,142 =========== ========= ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Continued) Three Months Ended March 31 1996 1995 (unaudited) ($ thousands, except per share data) EARNINGS PER COMMON SHARE: NET INCOME $ (0.54) $ $0.21 ============ ========== AVERAGE COMMON SHARES OUTSTANDING: 19,516,539 19,566,404 ============ ========== CASH DIVIDENDS PAID PER COMMON SHARE $ 0.01 $ 0.01 ============ ========== See notes to consolidated financial statements.
ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31 1996 1995 (unaudited) ($ thousands) OPERATING ACTIVITIES Net income (loss) $ (9,559) $ 5,142 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 15,514 7,792 Amortization of intangibles 1,154 1,176 Other amortization 674 161 Provision for losses on accounts receivable 1,094 597 Provision for deferred income taxes (1,637) (2,884) Gain on asset sales (2,438) (313) Gain on issuance of subsidiary stock - (20) Minority interest in subsidiary (891) 489 Changes in operating assets and liabilities: Accounts receivable 4,629 7,429 Inventories and prepaid expenses (1,792) (1,138) Other assets (2,776) 1,260 Accounts payable, bank drafts payable, taxes payable, accrued expenses and other liabilities (8,507) 6,151 --------- --------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (4,535) 25,842 INVESTING ACTIVITIES Purchases of property, plant and equipment, less capitalized leases (8,974) (10,565) Proceeds from asset sales 25,944 2,112 --------- --------- NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 16,970 (8,453) ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Three Months Ended March 31 1996 1995 ($ thousands) FINANCING ACTIVITIES Deferred financing costs and expenses incurred in borrowing activities $ (3,290) $ - Borrowings under revolving credit facilities 7,100 5,000 Principal payments under term loan facilities (3,529) (500) Payments under revolving credit facilities (27,950) (6,000) Principal payments on other long-term debt (4,164) (3,182) Dividends paid to minority shareholders of subsidiary (132) (110) Dividends paid (1,270) (1,270) Net increase (decrease) in cash overdrafts 4,276 (5,989) --------- --------- NET CASH USED BY FINANCING ACTIVITIES (28,959) (12,051) --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (16,524) 5,338 Cash and cash equivalents at beginning of period 16,945 3,458 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 421 $ 8,796 ========= ========= See notes to consolidated financial statements.
ARKANSAS BEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) March 31, 1996 NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS Arkansas Best Corporation (the "Company") is a diversified holding company engaged through its subsidiaries primarily in motor carrier and freight forwarding operations and truck tire retreading and sales. Principal subsidiaries are ABF Freight System, Inc., ("ABF"), Treadco, Inc. ("Treadco"), and Clipper Exxpress Company and related companies (the "Clipper Group") and, effective August 12, 1995, WorldWay Corporation ("WorldWay") (see Note C). The principal subsidiaries of WorldWay included Carolina Freight Carriers Corp., which was merged into ABF on September 25, 1995, Cardinal Freight Carriers, Inc. ("Cardinal"), G.I. Trucking Company ("G.I. Trucking"), CaroTrans International, Inc. ("CaroTrans"), The Complete Logistics Company ("Complete Logistics") and Innovative Logistics Incorporated ("Innovative Logistics"). 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, 1996, are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. For further information, refer to the Company's financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. NOTE C - ACQUISITION On July 14, 1995, ABC Acquisition Corporation (the "Purchaser"), a wholly owned subsidiary of the Company, commenced a tender offer (the "Offer") to purchase all outstanding shares of common stock of WorldWay Corporation ("WorldWay"), at a purchase price of $11 per share (the "Acquisition").For financial statement purposes, the Worldway Acquisition has been accounted for under the purchase method effective August 12, 1995. NOTE D - INVENTORIES
March 31 December 31 1996 1995 ($ thousands) Finished goods $ 25,267 $ 25,579 Materials 6,734 7,621 Repair parts, supplies and other 3,439 3,650 --------- --------- $ 35,440 $ 36,850 ======== ========
NOTE E - FEDERAL AND STATE INCOME TAXES
Three Months Ended March 31 1996 1995 ($ thousands) Income tax at regular rates $ (5,193) $ 3,415 Percent (35.0)% 35.0% State taxes less federal benefits (227) 685 Percent (1.5)% 7.0% Amortization of goodwill 280 266 Percent 1.9% 2.7% Minority interest (218) 166 Percent (1.5)% 1.7% Other items 80 84 Percent 0.5% 0.9% -------- -------- Income tax expense $ (5,278) $ 4,616 Percent (35.6)% 47.3% ======== ========
NOTE F - OPERATING EXPENSES AND COSTS
Three Months Ended March 31 1996 1995 (unaudited) ($ thousands) LTL Operations: Salaries and wages $ 209,297 $ 165,175 Supplies and expenses 31,549 26,372 Operating taxes and licenses 12,557 10,335 Insurance 6,526 4,485 Communications and utilities 7,835 5,802 Depreciation and amortization 12,056 6,393 Rents and purchased transportation 22,030 13,615 Other 1,902 946 -------- -------- 303,752 233,123 Forwarding Operations: Cost of services 32,243 24,488 Selling, administrative and general 8,448 3,655 -------- -------- 40,691 28,143 Truckload Operations: Salaries and wages 6,098 - Supplies and expenses 3,058 - Operating taxes and licenses 1,773 - Insurance 645 - Communications and utilities 233 - Depreciation and amortization 866 - Rents and purchased transportation 3,638 - Other 101 - -------- -------- 16,412 - Logistics Operations: Cost of services 12,399 3,861 Selling, administrative and general 1,388 471 -------- -------- 13,787 4,332 Tire Operations: Cost of sales 24,915 24,781 Selling, administrative and general 8,323 6,716 -------- -------- 33,238 31,497 Service and Other: 2,336 758 --------- --------- $ 410,216 $ 297,853 ========= =========
NOTE G - LEGAL PROCEEDINGS AND ENVIRONMENTAL MATTERS AND OTHER EVENTS In August 1990, a lawsuit was filed in the United States District Court for the Southern District of New York, by Riverside Holdings, Inc., Riverside Furniture Corporation ("Riverside") and MR Realty Associates, L.P. ("Plaintiffs") against the Company and a subsidiary. Plaintiffs have asserted state law, Employee Retirement Income Security Act of 1974 and securities claims against the Company in connection with the Company's sale of Riverside in April 1989. Plaintiffs sought approximately $4 million in actual damages and $10 million in punitive damages. On April 15, 1996, the Court partially granted the Company's motion for Summary Judgment by dismissing Riverside's claims for punitive damages, ERISA violations and common law breach of contract and fraud claims. The Court did not dismiss Riverside's claim of violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 of that Act. The Company is vigorously contesting the lawsuit. After consultation with legal counsel, the Company has concluded that resolution of the foregoing lawsuit is not expected to have a material adverse effect on the Company's financial condition. In November, 1995 Daily Transport Canada, Inc. ("Daily"), a Toronto-based LTL carrier, and related companies served a Request for Arbitration against ABF, as successor to Carolina Freight Carriers Corporation ("CFCC"), for its lost profits claimed to be in the amount of $15,000,000 resulting from the alleged breach of a contract between CFCC and Daily. Daily claims that ABF breached an agreement for Daily to handle, through the year 2003, all CFCC freight movements in Ontario and Quebec, Canada. ABF has filed a federal court action in North Carolina seeking to stay arbitration of the alleged agreement on the grounds that the agreement is not valid and contesting Daily's calculation of damages. ABF is vigorously defending the arbitration. Based on information currently available, the Company does not believe that the outcome of this matter will have a material adverse effect on the Company's financial condition or results of operations. Various other legal actions, the majority of which arise in the normal course of business, are pending. None of these other legal actions is expected to have a material adverse effect on the Company's financial condition. The Company maintains liability insurance against risks arising out of the normal course of its business, subject to certain self-insured retention limits. The Company's subsidiaries store some fuel for its tractors and trucks in approximately 176 underground tanks located in 34 states. Maintenance of such tanks is regulated at the federal and, in some cases, state levels. The Company believes that it is in substantial compliance with all such regulations. The Company is not aware of any leaks from such tanks that could reasonably be expected to have a material adverse effect on the Company. Environmental regulations have been adopted by the United States Environmental Protection Agency ("EPA") that will require the Company to upgrade its underground tank systems by December 1998. The Company currently estimates that such upgrades, which are currently in process, will not have a material adverse effect on the Company. The Company has received notices from the EPA and others that it has been identified as a potentially responsible party ("PRP") under the Comprehensive Environmental Response Compensation and Liability Act or other federal or state environmental statutes at several hazardous waste sites. After investigating the Company's or its subsidiaries' involvement in waste disposal or waste generation at such sites, the Company has either agreed to de minimis settlements (aggregating approximately $250,000 over the last five years), or believes its obligations with respect to such sites would involve immaterial monetary liability, although there can be no assurances in this regard. As of March 31, 1996, the Company has accrued approximately $1.9 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. In August 1995, Bandag Incorporated ("Bandag"), Treadco's tread rubber supplier and franchiser of the retreading process used by substantially all of Treadco's locations, announced that certain franchise agreements would not be renewed upon expiration in 1996. Bandag subsequently advised Treadco that unless Treadco uses the Bandag process exclusively, Bandag will not renew any of Treadco's franchise agreements when they expire. In October 1995, Treadco announced it had reached an agreement for Oliver Rubber Company ("Oliver") to be a supplier of equipment and related materials for Treadco's truck tire precure retreading business. The agreement provides that Oliver will supply Treadco with retreading equipment and related materials for any Treadco facilities which cease being a Bandag franchised location. Treadco has converted eight of its production facilities that were under Bandag retread franchises to Oliver licensed facilities. Treadco plans to complete the conversion of its remaining franchises to the Oliver process by the end of the third quarter. Under the franchise agreements, Bandag has the right to purchase retread equipment supplied to Treadco by Bandag at its fair market value at locations that cease being a Bandag franchise, and Bandag has exercised this option at the locations where franchises were terminated. Treadco is installing equipment provided by Oliver immediately upon the removal of the equipment supplied by Bandag. Management of Treadco does not believe that the carrying value of the Bandag-supplied equipment at March 31, 1996 exceeds the fair market value of the equipment. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Arkansas Best Corporation (the "Company") is a diversified holding company engaged through its subsidiaries primarily in less-than-truckload ("LTL") and truckload motor carrier operations, logistics and freight forwarding operations and truck tire retreading and new tire sales. Principal subsidiaries owned are ABF Freight System, Inc. ("ABF"), Treadco, Inc. ("Treadco"), and Clipper Exxpress Company ("Clipper"). Effective August 12, 1995, pursuant to its acquisition of WorldWay Corporation ("WorldWay"), the Company acquired Cardinal Freight Carriers, Inc. ("Cardinal"), G.I. Trucking Company ("G.I. Trucking"), CaroTrans International, Inc. ("CaroTrans"), The Complete Logistics Company ("Complete Logistics") and Innovative Logistics Incorporated ("ILI"). (See discussion below.) The Company in 1991 reduced its ownership in Treadco, through an initial public offering of Treadco common stock, to approximately 46%, while retaining control of Treadco by reason of its stock ownership, board representation and provision of management services. As a result, Treadco is consolidated with the Company for financial reporting purposes, with the ownership interests of the other stockholders reflected as minority interest. Segment Data The following tables reflect information prepared on a business segment basis, which includes reclassification of certain expenses and costs between the Company and its subsidiaries and elimination of the effects of intercompany transactions. Operating profit on a business segment basis differs from operating income as reported in the Company's Consolidated Financial Statements. Other income and other expenses (which include amortization expense), except for interest expense and minority interest, which appear below the operating income line in the Company's Statement of Operations, have been allocated to individual segments for the purpose of calculating operating profit on a segment basis. The segment information for prior periods has been restated to reflect the Company's current reported business segments. In the current and future periods, information that was previously reported in the service and other business segment will be reported in the logistics operations segment.
Three Months Ended March 31 1996 1995 ($ thousands) OPERATING REVENUES LTL operations $ 294,923 $ 244,477 Forwarding operations 41,766 28,768 Truckload operations 17,838 - Logistics operations 13,230 3,945 Tire operations 31,613 33,214 Service and other 2,004 803 --------- -------- $ 401,374 $ 311,207 ========= ========= OPERATING EXPENSES AND COSTS LTL OPERATIONS Salaries and wages $ 209,297 $ 165,175 Supplies and expenses 31,549 26,372 Operating taxes and licenses 12,557 10,335 Insurance 6,526 4,485 Communications and utilities 7,835 5,802 Depreciation and amortization 12,056 6,393 Rents and purchased transportation 22,030 13,615 Other 1,902 946 Other non-operating (net) 499 319 --------- -------- 304,251 233,442 FORWARDING OPERATIONS Cost of services 32,243 24,488 Selling, administrative & general 8,448 3,655 Other non-operating (net) 394 426 --------- -------- 41,085 28,569 TRUCKLOAD OPERATIONS Salaries and wages 6,098 - Supplies and expenses 3,058 - Operating taxes and licenses 1,773 - Insurance 645 - Communications and utilities 233 - Depreciation and amortization 866 - Rents and purchased transportation 3,638 - Other 101 - Other non-operating (net) 1 - --------- -------- 16,413 - (Continued) Three Months Ended March 31 1996 1995 ($ thousands) LOGISTICS OPERATIONS Cost of services 12,399 3,861 Selling, administrative & general 1,388 471 Other non-operating (net) (31) (9) --------- --------- 13,756 4,323 TIRE OPERATIONS Cost of sales 24,915 24,781 Selling, administrative and general 8,323 6,716 Other non-operating (net) 137 125 --------- --------- 33,375 31,622 SERVICE AND OTHER 171 876 --------- --------- $ 409,051 $ 298,832 ========= ========= OPERATING PROFIT (LOSS) LTL operations $ (9,328) $ 11,035 Forwarding operations 681 199 Truckload operations 1,425 - Logistics operations (526) (378) Tire operations (1,762) 1,592 Service and other 1,833 (73) --------- -------- TOTAL OPERATING PROFIT (LOSS) (7,677) 12,375 MINORITY INTEREST (641) 489 INTEREST EXPENSE 7,801 2,128 --------- -------- INCOME (LOSS) BEFORE INCOME TAXES $ (14,837) $ 9,758 ========= =========
The following table sets forth for the periods indicated a summary of the Company's operations as a percentage of revenues presented on a business segment basis as shown in the table on the preceding page. The basis of presentation for business segment data differs from the basis of presentation for data the Company provides to the U.S. Department of Transportation.
Three Months Ended March 31 1996 1995 ($ thousands) LTL OPERATIONS Salaries and wages 71.0% 67.6% Supplies and expenses 10.7% 10.8% Operating taxes and licenses 4.3% 4.2% Insurance 2.2% 1.8% Communications and utilities 2.7% 2.4% Depreciation and amortization 4.1% 2.6% Rents and purchased transportation 7.5% 5.6% Other 0.6% 0.4% Other non-operating (net) 0.1% 0.1% --------- --------- Total LTL Operations 103.2% 95.5% ========= ========= FORWARDING OPERATIONS Cost of services 77.2% 85.1% Selling, administrative and general 20.2% 12.7% Other non-operating (net) 1.0% 1.5% --------- --------- Total Forwarding Operations 98.4% 99.3% ========= ========= TRUCKLOAD OPERATIONS Salaries and wages 34.2% - Supplies and expenses 17.1% - Operating taxes and licenses 9.9% - Insurance 3.6% - Communications and utilities 1.3% - Depreciation and amortization 4.9% - Rents and purchased transportation 20.4% - Other 0.6% - Other non-operating (net) - - --------- --------- Total Truckload Operations 92.0% - ========= ========= (Continued) Three Months Ended March 31 1996 1995 ($ thousands) LOGISTICS OPERATIONS Cost of sales 93.7% 97.9% Selling, administrative and general 10.5% 11.9% Other non-operating (net) (0.2)% (0.2)% --------- --------- Total Logistics Operations 104.0% 109.6% ========= ========= TIRE OPERATIONS Cost of sales 78.8% 74.6% Selling, administrative and general 26.3% 20.2% Other non-operating (net) 0.5% 0.4% --------- --------- Total Tire Operations 105.6% 95.2% ========= =========
Results of Operations Three Months Ended March 31, 1996 as Compared to the Three Months Ended March 31, 1995 Consolidated revenues of the Company for the three months ended March 31, 1996 were $401 million compared to $311 million for the three months ended March 31, 1995. The Company had an operating loss of $7.7 million for the three months ended March 31, 1996 compared to an operating profit of $12.4 million for the three months ended March 31, 1995. For the three months ended March 31, 1996, the Company had a net loss of $9.6 million, or a loss of $.54 per common share, compared to net income of $5.1 million, or $.21 per common share for the three months ended March 31, 1995. Revenues for the first quarter of 1996 increased due to the Acquisition of WorldWay. Earnings per common share for the three months ended March 31, 1996 and 1995 give consideration to preferred stock dividends of $1.1 million. Average common shares outstanding for the three months ended March 31, 1996 were 19.5 million shares compared to 19.6 million shares for the three months ended March 31, 1995. Outstanding shares for each period do not assume conversion of preferred stock to common shares, because conversion would be anti- dilutive for these periods. Less-Than-Truckload Motor Carrier Operations Segment. The Company's LTL motor carrier operations are conducted primarily through ABF and effective August 12, 1995 through G.I. Trucking. Revenues from the LTL motor carrier operations segment for the three months ended March 31, 1996 were $295 million, with an operating loss of $9.3 million. Earnings at ABF continue to be negatively affected by a slow economy. So far, ABF has been more successful in retaining its January 1, 1996 freight rate increase of 5.8% than it has in previous years which is part of the reason revenue increased 13.7% on a tonnage increase of 6.9%. Following the Acquisition of WorldWay, the operations of Carolina Freight Carriers ("Carolina Freight") and Red Arrow Freight Lines ("Red Arrow") were merged into ABF on September 24, 1995. Effective with the merger, ABF inherited Carolina Freight's regional distribution terminal operations, which reconfigured the way freight flowed through ABF's terminal system. This reconfiguration created many operating inefficiencies in ABF's system. Labor dollars as a percent of revenue increased, empty miles increased and weight per trailer decreased, which all had an adverse impact on expenses. Operating results for the quarter and a slight operating profit for the month of March indicate that ABF's previously disclosed cost reduction measures are having the desired effect. During the quarter, ABF discontinued seven of the inherited regional distribution terminal operations, and five more will be discontinued by mid-May. These closings will realign ABF to its normal terminal system configuration. Salaries, wages and benefits increased 3.3% annually effective April 1, 1995, pursuant to ABF's collective bargaining agreement with its Teamsters' employees and will increase 3.8% annually effective April 1, 1996. Forwarding Operations Segment. The Company's forwarding operations are conducted primarily through Clipper and effective August 12, 1995, CaroTrans. Comparisons for the three months ended March 31, 1996 were affected by the Acquisition of WorldWay in August 1995. Therefore, comparisons of the results of operations for the forwarding operations segment are not meaningful and are not presented. For the three months ended March 31, 1996, the forwarding operations segment had revenues of $41.8 million with an operating profit of $681,000. Forwarding operations continued to be affected during the three months ended March 31, 1996 by soft economic conditions. Truckload Motor Carrier Operations Segment. Effective August 12, 1995, with the Acquisition of WorldWay, the Company began reporting a new business segment, truckload motor carrier operations. The Company's truckload motor carrier operations are conducted through Cardinal. For the three months ended March 31, 1996, Cardinal had revenues of $17.8 million with an operating profit of $1.4 million. Cardinal's operations continued to be affected during the three months ended March 31, 1996 by soft economic conditions. Logistics Operations Segment. Effective August 12, 1995, with the Acquisition of WorldWay, the Company began reporting a new business segment, logistics operations. The Company's logistics operations are conducted through Integrated Distribution, Inc. and effective August 12, 1995, through Complete Logistics and ILI. For the three months ended March 31, 1996, the logistics operations segment had operating revenues of $13.2 million with an operating loss of $526,000. Tire Operations Segment. Treadco's revenues for the three months ended March 31, 1996 decreased 4.8% to $31.6 million from $33.2 million for the three months ended March 31, 1995. For the first quarter of 1996, "same store" sales decreased 9.6% which was offset in part by a 4.5% 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. Economic conditions continued to weaken demand for both new replacement and retreaded truck tires during the quarter. Treadco has seen increased competition as Bandag Incorporated ("Bandag") has granted additional franchises in some locations currently being served by Treadco. The new competition has led to increased pricing pressures in the marketplace. As anticipated, Bandag continues to target Treadco's accounts which has caused difficulty in retaining the national account business and in some cases the business retained is at lower profit margins. Revenues from retreading for three months ended March 31, 1996 decreased 6.4% to $16.6 million from $17.7 million for three months ended March 31, 1995. Revenues from new tire sales decreased 3.0% to $15.0 million for three months ended March 31, 1996 from $15.5 million for three months ended March 31, 1995. Tire operations segment operating expenses as a percent of revenues were 105.6% for three months ended March 31, 1996 compared to 95.2% for three months ended March 31, 1995. Cost of sales for the tire operations segment as a percent of revenues increased to 78.8% for three months ended March 31, 1996 from 74.6% for three months ended March 31, 1995. The increase resulted primarily from expenses incurred during the conversion and because margins are less on new tires. Selling, administrative and general expenses for the tire operations segment increased to 26.3% for three months ended March 31, 1996 from 20.2% for three months ended March 31, 1995. The increase resulted primarily from higher insurance costs, expenses associated with employee medical benefits and legal costs. Also, the coverage of fixed costs at six new locations hasn't reached levels comparable to Treadco's other locations. Treadco has converted eight of its production facilities that were under Bandag retread franchises to Oliver Rubber Company ("Oliver") licensed facilities. The converted locations are Little Rock, West Memphis, Pine Bluff, Springdale and Fort Smith (AR), Phoenix (AZ), Springfield (MO) and San Antonio (TX). Treadco plans to complete the conversion of its remaining Bandag franchises to the Oliver process by the end of the third quarter. The conversion has resulted in up to two lost production days during each conversion, some short-term operational inefficiencies and time lost as production employees have familiarized themselves with the new equipment. Also, management has been required to spend time with the conversion at the expense of the normal daily operations. Service and Other Segment. Operating income for the other operations segment includes gains of $2.1 million on the sale of real estate. The gains principally are recognized on the sale of excess terminal properties which resulted from the ABF/Carolina Freight merger. Interest. Interest expense was $7.8 million for three months ended March 31, 1996 compared to $2.1 million for three months ended March 31, 1995 primarily due to a higher level of outstanding debt. The increase in long-term debt consisted primarily of debt incurred or assumed in the acquisition of WorldWay and debt incurred for working capital requirements. Income Taxes. The difference between the effective tax rate for 1995 and the federal statutory rate resulted primarily from state income taxes, amortization of goodwill, minority interest, and other nondeductible expenses (see Note E to the consolidated financial statements). Liquidity and Capital Resources The ratio of current assets to current liabilities was 1.031 at March 31, 1996 compared to 1.06:1 at December 31, 1995. Net cash used by operating activities for the three months ended March 31, 1996 was $4.5 million compared to net cash provided of $25.8 million for the three months ended March 31, 1995. The decrease is due primarily to the net loss from operations and reductions in accounts payable and accrued expenses. The Company is in the process of selling excess real estate which resulted from the merger of Carolina Freight and Red Arrow into ABF. So far in 1996, the Company has received net proceeds from the sale of real estate of $19 million and has $13-14 million in pending sales which are projected to close before the end of the second quarter of 1996. On August 10, 1995 the Company entered into a $350 million credit agreement (the "Credit Agreement") with Societe Generale, Southwest Agency as Managing and Administrative Agent and NationsBank of Texas, N.A., as Documentation Agent, and with 15 other participating banks. The Credit Agreement includes a $75 million term loan and provides for up to $275 million of revolving credit loans (including letters of credit). Term Loan and Revolving Credit advances bear interest at one of the following rates, at the Company's option: (a) Prime Rate advance or (b) Eurodollar Rate advance. A Prime Rate advance bears an interest rate equal to the lesser of (i) the Adjusted Prime Rate plus the Applicable Margin and (ii) the maximum nonusurious interest rate under applicable law. The Adjusted Prime Rate is equal to the greater of the prime rate offered by Societe Generale or the Federal Funds Rate plus 1/2%. The Applicable Margin is determined as a function of the ratio of the Company's consolidated indebtedness to its consolidated earnings before interest, taxes, depreciation and amortization. Eurodollar Rate advances shall bear an interest rate per annum equal to the lesser of (i) the Eurodollar Rate offered by Societe Generale plus the Applicable Margin and (ii) the maximum nonusurious interest rate under applicable law. The Company has paid and will continue to pay certain customary fees for such commitments and advances. At March 29, 1996, the average interest rate on the Credit Agreement was 7.9%. The Company pays a commitment fee at a rate per annum equal to the Applicable Margin on the unused amount of the Company's revolving credit commitment. There were $185 million of Revolver Advances, $72 million of Term Advances and approximately $65 million of letters of credit outstanding at March 31, 1996. Outstanding revolving credit advances may not exceed a borrowing base calculated using the Company's revenue equipment, real property and other equipment, the Treadco common stock owned by the Company and the Company's eligible receivables. The Term Advances are payable in varying installments commencing in November 1996. The Credit Agreement contains various covenants which limit, among other things, indebtedness, distributions, asset sales, restricted payments, investments, loans and advances, as well as requiring the Company to meet certain financial tests. As of March 31, 1996, these covenants have been met. On February 21, 1996, the Company obtained an amendment to the Credit Agreement which revised the agreement so that the Company was in compliance with all covenants. Under the amended Credit Agreement, the Company has pledged substantially all revenue equipment and real property not already pledged under other debt obligations or capital leases. The amendment also revised the maturity schedule of the term loan agreement to revise the loans to be paid off in graduated principal installments through August 1998. The amendment also requires that net proceeds received from certain asset sales be applied against the term loan balance. Also, on February 21, 1996, the Company obtained an additional credit agreement which provides for borrowings of up to $30 million. This agreement bears interest at either an adjusted prime rate plus 2% or a maximum rate as defined in the agreement in the case of prime rate advances, or the Eurodollar rate plus 3% or a maximum rate as defined in the agreement in the care of Eurodollar rate advances. The maturity date of this agreement is March 31, 1997. This agreement contains covenants that are substantially the same as the covenants contained in the primary credit agreement. The Company assumed the Subordinated Debentures of WorldWay which were issued in April 1986. The debentures bear interest at 6.25% per annum, payable semi- annually, on a par value of $50,000,000. The debentures are payable April 15, 2011. The Company may redeem the debentures at a price of 101.25% declining to 100% at April 15, 1996. The Company is required to redeem through a mandatory sinking fund commencing before April 15, in each of the years from 1997 to 2010, an amount in cash sufficient to redeem $2,500,000 annually of the aggregate principal amount of the debentures issued. Treadco is a party to a revolving credit facility with Societe Generale (the "Treadco Credit Agreement") providing for borrowings of up to the lesser of $20 million or the applicable borrowing base. Borrowings under the Treadco Credit Agreement are collateralized by accounts receivable and inventory. Borrowings under the agreement bear interest, at Treadco's option, at 3/4% above the bank's LIBOR rate, or at the higher of the bank's prime rate or the "federal funds rate" plus 1/2%. At March 31, 1996, the weighted average interest rate was 6.1%. At March 31, 1996, Treadco had $7 million outstanding under the Treadco Credit Agreement. The Treadco Credit Agreement is payable in September 1998. Treadco pays a commitment fee of 3/8% on the unused amount under the Treadco Credit Agreement. The Treadco Credit Agreement contains various covenants which limit, among other things, dividends, disposition of receivables, indebtedness and investments, as well as requiring Treadco to meet certain financial tests which have been met. Management believes, based upon the Company's current levels of operations and anticipated growth, the Company's cash, capital resources, borrowings available under the Credit Agreement and the Treadco Credit Agreement and cash flow from operations will be sufficient to finance current and future operations and meet all present and future debt service requirements. Seasonality The LTL and truckload motor carrier segment is affected by seasonal fluctuations, which affect tonnage to be transported. Freight shipments, operating costs and earnings are also affected adversely by inclement weather conditions. The third calendar quarter of each year usually has the highest tonnage levels while the first quarter has the lowest. Forwarding operations are similar to the LTL and truckload segments with revenues being weaker in the first quarter and stronger during the months of September and October. Treadco's operations are somewhat seasonal with the last six months of the calendar year generally having the highest levels of sales. 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 G to the Company's Unaudited Consolidated Financial Statements). ITEM 2. CHANGES IN SECURITIES. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. Exhibit 11 - Statement Re: Computation of Earnings Per Share. (b) Reports on Form 8-K. Form 8-K dated February 28, 1996 Item 5. Other Events. -- $346,971,321 Amended and Restated Credit Agreement dated February 21, 1996 and $30,000,000 Credit Agreement dated February 21, 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ARKANSAS BEST CORPORATION (Registrant) Date: May 13, 1996 /s/Donald L. Neal ----------------- ------------------------------------ Donald L. Neal - Senior Vice President - Chief Financial Officer, and Principal Accounting Officer EXHIBIT INDEX ARKANSAS BEST CORPORATION The following exhibits are filed with this report. Exhibit No. 11 Statement Re: Computation of Earnings per Share EX-11 2 EXHIBIT 11 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE ARKANSAS BEST CORPORATION
Three Months Ended March 31 1996 1995 ($ thousands, except per share data) PRIMARY: Average shares outstanding 19,516,539 19,513,708 Net effect of dilutive stock options - Based on the treasury stock method using average market price - 52,696 ---------- ---------- Average common shares outstanding 19,516,539 19,566,404 ========== ========== Net income (loss) $ (9,559) $ 5,142 Less: Preferred stock dividend 1,075 1,075 ---------- ---------- Net income (loss) available for common $ (10,634) $ 4,067 ========== ========== Per common and common equivalent share: Net income (loss) per common share $ (0.54) $ 0.21 ========== ==========
EX-27 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM THE ARKANSAS BEST CORPORATION QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000894405 ARKANSAS BEST CORPORATION 1,000 3-MOS DEC-31-1996 MAR-31-1996 421 0 199,473 17,752 35,440 294,250 615,803 203,219 934,073 286,878 377,031 0 15 195 166,798 934,073 31,613 401,374 24,915 410,216 0 1,094 7,801 (14,837) (5,278) (9,559) 0 0 0 (9,559) (.54) (.54)
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