-----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, DYNBTmCyfOA2xMslL1sjMtWRSgB/RlWIPexzM/rSw8iS6DN6dIAIou/JoRykXMBw 0x4N/G4pu/TSqDO7BQQuHA== 0000950134-97-005641.txt : 19970804 0000950134-97-005641.hdr.sgml : 19970804 ACCESSION NUMBER: 0000950134-97-005641 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970801 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: 97650463 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 FORM 10-Q PERIOD END JUNE 30, 1997 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended June 30, 1997 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ____________ to ____________ Commission file number 0-19969 ARKANSAS BEST CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 6711 71-0673405 - ------------------------------- ---------------------------- ---------------- (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code No.) Identification No.) 3801 Old Greenwood Road Fort Smith, Arkansas 72903 (501) 785-6000 - -------------------------------------------------------------------------------- (Address, including zip code, and telephone number, including area code, of the registrant's principal executive offices) Not Applicable - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of The Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at July 15, 1997 - ---------------------------- ---------------------------- Common Stock, $.01 par value 19,504,473 shares 2 ARKANSAS BEST CORPORATION INDEX
PAGE ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets -- June 30, 1997 and December 31, 1996 ................................................... 3 Consolidated Statements of Operations -- For the Three and Six Months Ended June 30, 1997 and 1996 .............................. 5 Condensed Consolidated Statements of Cash Flows -- For the Six Months Ended June 30, 1997 and 1996 ........................................ 7 Notes to Consolidated Financial Statements - June 30, 1997 ............................... 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .................................................... 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings ........................................................................ 20 Item 2. Changes in Securities .................................................................... 20 Item 3. Defaults Upon Senior Securities .......................................................... 20 Item 4. Submission of Matters to a Vote of Security Holders ...................................... 20 Item 5. Other Information ........................................................................ 20 Item 6. Exhibits and Reports on Form 8-K ......................................................... 20 SIGNATURES ..................................................................................... 21 EXHIBITS Exhibit 11. Statement Re: Computation of Earnings Per Share .......................................... 23
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ARKANSAS BEST CORPORATION CONSOLIDATED BALANCE SHEETS - --------------------------------------------------------------------------------
JUNE 30 DECEMBER 31 1997 1996 ------------ ------------ (UNAUDITED) (NOTE) ($ THOUSANDS) ASSETS CURRENT ASSETS Cash and cash equivalents .................................. $ -- $ 1,806 Trade receivables, less allowances for doubtful accounts (1997 -- $5,368,000; 1996 -- $6,118,000) ................ 192,705 186,065 Inventories -- Note C ...................................... 32,865 33,831 Prepaid expenses ........................................... 15,047 13,593 Federal and state income taxes refundable .................. 7,018 7,320 Deferred federal income taxes .............................. 15,641 16,490 Other ...................................................... 3,296 -- ------------ ------------ TOTAL CURRENT ASSETS ................................... 266,572 259,105 PROPERTY, PLANT AND EQUIPMENT Land and structures ........................................ 218,130 228,051 Revenue equipment .......................................... 248,576 268,270 Manufacturing equipment .................................... 18,693 18,815 Service, office and other equipment ........................ 67,548 65,532 Leasehold improvements ..................................... 8,028 9,273 ------------ ------------ 560,975 589,941 Less allowances for depreciation and amortization .......... (230,779) (222,308) ------------ ------------ 330,196 367,633 OTHER ASSETS .................................................... 50,231 57,160 NET ASSETS HELD FOR SALE ........................................ 5,233 9,148 GOODWILL, less amortization (1997 -- $30,474,000; 1996 -- $28,006,000) ................. 147,558 150,154 ------------ ------------ $ 799,790 $ 843,200 ============ ============
3 4 ARKANSAS BEST CORPORATION CONSOLIDATED BALANCE SHEETS - -------------------------------------------------------------------------------
JUNE 30 DECEMBER 31 1997 1996 ------------ ------------ (UNAUDITED) (NOTE) ($ THOUSANDS) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Bank overdraft .............................................. $ 3,082 $ -- Bank drafts payable ......................................... 334 646 Trade accounts payable ...................................... 81,870 79,140 Accrued expenses ............................................ 181,335 182,011 Current portion of long-term debt ........................... 26,158 39,082 ------------ ------------ TOTAL CURRENT LIABILITIES ............................... 292,779 300,879 LONG-TERM DEBT, less current portion ............................. 283,104 326,950 OTHER LIABILITIES ................................................ 22,774 21,416 DEFERRED FEDERAL INCOME TAXES .................................... 28,415 22,505 MINORITY INTEREST ................................................ 32,746 34,020 SHAREHOLDERS' EQUITY Preferred stock, $.01 par value, authorized 10,000,000 shares; issued 1,495,000 shares ... 15 15 Common stock, $.01 par value, authorized 70,000,000 shares; issued and outstanding 1997: 19,504,473 shares; 1996: 19,512,250 shares ........ 195 195 Additional paid-in capital .................................. 192,328 192,328 Retained earnings (deficit) ................................. (52,566) (55,108) ------------ ------------ TOTAL SHAREHOLDERS' EQUITY .............................. 139,972 137,430 CONTINGENCIES -- Note F ------------ ------------ $ 799,790 $ 843,200 ============ ============
Note: The balance sheet at December 31, 1996 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to consolidated financial statements. 4 5 ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS - -----------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 1997 1996 1997 1996 -------- -------- -------- -------- (UNAUDITED) ($ THOUSANDS, EXCEPT PER SHARE DATA) OPERATING REVENUES LTL motor carrier operations ....... $311,489 $298,886 $608,024 $593,809 Truckload motor carrier operations . 20,345 18,917 39,366 36,755 Intermodal operations .............. 48,629 45,001 93,418 86,767 Logistics operations ............... 12,089 14,245 24,223 27,475 Tire operations .................... 41,014 35,505 73,108 67,118 Service and other .................. 2,203 1,908 4,376 3,912 -------- -------- -------- -------- 435,769 414,462 842,515 815,836 -------- -------- -------- -------- OPERATING EXPENSES AND COSTS - Note E LTL motor carrier operations ....... 294,178 305,529 579,263 608,994 Truckload motor carrier operations . 18,814 17,465 37,304 33,877 Intermodal operations .............. 47,228 43,415 92,451 84,094 Logistics operations ............... 13,943 14,506 27,262 28,281 Tire operations .................... 40,801 36,827 75,439 70,065 Service and other .................. 2,266 2,440 4,492 4,776 -------- -------- -------- -------- 417,230 420,182 816,211 830,087 -------- -------- -------- -------- OPERATING INCOME (LOSS) ............... 18,539 (5,720) 26,304 (14,251) OTHER INCOME (EXPENSE) Gain (loss) on sales of property and non-revenue equipment ............ (1,130) 594 (1,816) 2,721 Interest ........................... (6,969) (7,603) (14,234) (15,404) Minority interest in subsidiary .... 29 486 1,054 1,127 Other .............................. (1,293) (1,919) (3,099) (3,192) -------- -------- -------- -------- (9,363) (8,442) (18,095) (14,748) -------- -------- -------- -------- INCOME (LOSS) BEFORE INCOME TAXES ................. 9,176 (14,162) 8,209 (28,999) FEDERAL AND STATE INCOME TAXES (CREDIT) Current ............................ 876 (1,201) 96 (4,842) Deferred ........................... 3,292 (4,175) 3,422 (5,812) -------- -------- -------- -------- 4,168 (5,376) 3,518 (10,654) -------- -------- -------- -------- NET INCOME (LOSS) ..................... $ 5,008 $ (8,786) $ 4,691 $(18,345) Preferred stock dividends ............. 1,075 1,074 2,149 2,149 -------- -------- -------- -------- NET INCOME (LOSS) APPLICABLE TO COMMON SHAREHOLDERS .............. $ 3,933 $ (9,860) $ 2,542 $(20,494) ======== ======== ======== ========
5 6 ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS -- (CONTINUED) - -------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 1997 1996 1997 1996 ----------- ----------- ----------- ----------- (UNAUDITED) ($ THOUSANDS, EXCEPT PER SHARE DATA) NET INCOME (LOSS) PER COMMON SHARE ........... $ 0.20 $ (0.51) $ 0.13 $ (1.05) =========== =========== =========== =========== AVERAGE COMMON SHARES OUTSTANDING ..... 19,570,220 19,512,367 19,538,521 19,514,453 =========== =========== =========== =========== CASH DIVIDENDS PAID PER COMMON SHARE ....... $ -- $ -- $ -- $ 0.01 =========== =========== =========== ===========
See notes to consolidated financial statements. 6 7 ARKANSAS BEST CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - -------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30 1997 1996 ---------- ---------- (UNAUDITED) ($ THOUSANDS) OPERATING ACTIVITIES Net cash provided by operating activities .......... $ 35,426 $ 1,236 INVESTING ACTIVITIES Purchase of property, plant and equipment, less capitalized leases .......................... (5,387) (15,455) Proceeds from asset sales .......................... 26,575 37,177 ---------- ---------- NET CASH PROVIDED BY INVESTING ACTIVITIES ............... 21,188 21,722 FINANCING ACTIVITIES Deferred financing costs and expenses .............. (898) (3,290) Borrowings under revolving credit facilities ....... 216,585 98,660 Payments under revolving credit facilities ......... (233,885) (119,660) Payments on long-term debt ......................... (8,887) (9,487) Payments under term loan facilities ................ (32,048) (6,496) Dividends paid ..................................... (2,149) (2,344) Other, net ......................................... 2,862 3,310 ---------- ---------- NET CASH USED BY FINANCING ACTIVITIES ................... (58,420) (39,307) ---------- ---------- NET DECREASE IN CASH AND CASH EQUIVALENTS ............... (1,806) (16,349) Cash and cash equivalents at beginning of period ... 1,806 16,945 ========== ========== CASH AND CASH EQUIVALENTS AT END OF PERIOD .............. $ -- $ 596 ========== ==========
7 8 ARKANSAS BEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 1997 - ------------------------------------------------------------------------------- NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS Arkansas Best Corporation (the "Company") is a diversified holding company engaged through its subsidiaries primarily in motor carrier operations, intermodal operations and truck tire retreading and sales. Principal subsidiaries are ABF Freight System, Inc., ("ABF"), Treadco, Inc. ("Treadco"), and Clipper Exxpress Company, CaroTrans International, Inc. ("CaroTrans"), and related companies ("Clipper Worldwide"), Cardinal Freight Carriers, Inc. ("Cardinal"), G.I. Trucking Company ("G.I. Trucking"), The Complete Logistics Company ("Complete Logistics"), Integrated Distribution, Inc., and FleetNet America, Inc. (formerly Carolina Breakdown Service, Inc.). Approximately 80% of ABF's employees are covered under a collective bargaining agreement with the International Brotherhood of Teamsters which expires on March 31, 1998. NOTE B - FINANCIAL STATEMENT PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months and six months ended June 30, 1997, are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. For further information, refer to the Company's financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. Motor carrier revenue equipment gains and losses are reported as operating expenses and costs in 1997. The 1996 Statement of Operations has been reclassified to conform to the 1997 presentation. (See Note E.) NOTE C - SALE OF CARDINAL FREIGHT CARRIERS, INC. On July 15, 1997, the Company sold Cardinal for approximately $38 million in cash. The sale resulted in a pre-tax gain, which will be reported in the third quarter of 1997, of approximately $8.5 million, subject to adjustments in the purchase price under the terms of the definitive agreement. The net proceeds from the sale of Cardinal were used to pay down bank debt. Results of operations for Cardinal are summarized as follows:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 1997 1996 1997 1996 -------- -------- -------- -------- Revenue ................. $ 20,345 $ 18,917 $ 39,366 $ 36,755 Operating income ........ 1,546 1,446 2,087 2,872 Net income .............. 836 739 1,027 1,481
8 9 ARKANSAS BEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued - ------------------------------------------------------------------------------- NOTE D - INVENTORIES
JUNE 30 DECEMBER 31 1997 1996 ------------ ------------ ($ THOUSANDS) Finished goods .............................. $ 23,321 $ 24,029 Materials ................................... 6,050 6,267 Repair parts, supplies and other ............ 3,494 3,535 ------------ ------------ $ 32,865 $ 33,831 ============ ============
NOTE E - OPERATING EXPENSES AND COSTS
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 1997 1996 1997 1996 -------- -------- -------- -------- (UNAUDITED) ($ THOUSANDS) LTL Motor Carrier Operations: Salaries and wages .................... $204,237 $209,000 $402,216 $418,297 Supplies and expenses ................. 30,403 33,673 60,156 65,222 Operating taxes and licenses .......... 10,589 12,545 20,986 25,102 Insurance ............................. 6,214 6,625 12,824 13,151 Communications and utilities .......... 6,977 7,406 13,690 15,241 Depreciation and amortization ......... 8,348 10,704 17,466 22,760 Rents and purchased transportation .... 26,217 21,918 49,734 43,948 Other ................................. 1,957 3,916 3,796 5,818 Gain on sale of revenue equipment ..... (764) (258) (1,605) (545) -------- -------- -------- -------- 294,178 305,529 579,263 608,994 Truckload Motor Carrier Operations: Salaries and wages .................... 7,390 6,890 14,310 12,988 Supplies and expenses ................. 3,570 3,175 7,257 6,233 Operating taxes and licenses .......... 1,788 1,797 3,543 3,570 Insurance ............................. 764 673 1,677 1,318 Communications and utilities .......... 306 234 589 467 Depreciation and amortization ......... 953 895 1,910 1,761 Rents and purchased transportation .... 3,975 3,713 7,741 7,351 Other ................................. 68 88 275 189 Loss on sale of revenue equipment ..... -- -- 2 -- -------- -------- -------- -------- 18,814 17,465 37,304 33,877 Intermodal Operations: Cost of services ...................... 40,300 38,396 78,472 70,639 Selling, administrative and general ... 6,928 5,019 13,979 13,467 Gain on sale of revenue equipment ..... -- -- -- (12) -------- -------- -------- -------- 47,228 43,415 92,451 84,094
9 10 ARKANSAS BEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued - -------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 1997 1996 1997 1996 -------- -------- -------- -------- (UNAUDITED) ($ THOUSANDS) NOTE E - OPERATING EXPENSES AND COSTS - continued Logistics Operations: Cost of services ....................... 12,305 12,932 24,041 25,331 Selling, administrative and general .... 1,575 1,579 3,158 2,967 Gain (loss)on sale of revenue equipment ... 63 (5) 63 (17) -------- -------- -------- -------- 13,943 14,506 27,262 28,281 Tire Operations: Cost of sales .......................... 30,051 31,483 54,526 56,398 Selling, administrative and general .... 10,750 5,344 20,913 13,667 -------- -------- -------- -------- 40,801 36,827 75,439 70,065 Service and other: ........................ 2,266 2,440 4,492 4,776 -------- -------- -------- -------- $417,230 $420,182 $816,211 $830,087 ======== ======== ======== ========
NOTE F - LEGAL PROCEEDINGS AND ENVIRONMENTAL MATTERS AND OTHER EVENTS Various legal actions, the majority of which arise in the normal course of business, are pending. None of these legal actions are expected to have a material adverse effect on the Company's financial condition. The Company maintains liability insurance against risks arising out of the normal course of its business, subject to certain self-insured retention limits. The Company's subsidiaries store some fuel for its tractors and trucks in approximately 138 underground tanks located in 33 states. Maintenance of such tanks is regulated at the federal and, in some cases, state levels. The Company believes that it is in substantial compliance with all such regulations. The Company is not aware of any leaks from such tanks that could reasonably be expected to have a material adverse effect on the Company. Environmental regulations have been adopted by the United States Environmental Protection Agency ("EPA") that will require the Company to upgrade its underground tank systems by December 1998. The Company currently estimates that such upgrades, which are currently in process, will not have a material adverse effect on the Company. The Company has received notices from the EPA and others that it has been identified as a potentially responsible party ("PRP") under the Comprehensive Environmental Response Compensation and Liability Act or other federal or state environmental statutes at several hazardous waste sites. After investigating the Company's or its subsidiaries' involvement in waste disposal or waste generation at such sites, the Company has either agreed to de minimis settlements (aggregating approximately $200,000 over the last six years), or believes its obligations with respect to such sites would involve immaterial monetary liability, although there can be no assurances in this regard. As of June 30, 1997, the Company has accrued approximately $2.8 million to provide for environmental-related liabilities. The Company's environmental accrual is based on management's best estimate of the actual liability. The Company's estimate is founded on management's experience in dealing with similar 10 11 ARKANSAS BEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued - ------------------------------------------------------------------------------- environmental matters and on actual testing performed at some sites. Management believes that the accrual is adequate to cover environmental liabilities based on the present environmental regulations. NOTE G - RECENT ACCOUNTING PRONOUNCEMENT In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings Per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for computing primary earnings per share, the dilutive effect of stock options will be excluded. The impact of Statement No. 128 on the calculation of primary earnings per share and fully diluted earnings per share for these quarters is not expected to be material. In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive Income. The Statement establishes standards for the reporting and display of comprehensive income and its components in a full set of general purpose financial statements. The Statement is effective for the Company in 1998. The Company does not anticipate that adoption of this Statement will have a material impact on the current presentation of its financial statements. In June 1997, the FASB issued Statement No. 131, Disclosures about Segments of an Enterprise and Related Information. The Statement changes the way public companies report segment information in annual financial statements and also requires those companies to report selected segment information in interim financial reports to shareholders. The proposal superseded FASB Statement No. 14 on segments. The Statement is effective for the Company in 1998. The Company is currently evaluating the impact that the Statement will have on its segment of business reporting. 11 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Arkansas Best Corporation (the "Company") is a diversified holding company engaged through its subsidiaries primarily in less-than-truckload ("LTL") and truckload motor carrier operations, freight intermodal operations, truck tire retreading and new tire sales and logistics operations. Principal subsidiaries owned are ABF Freight System, Inc. ("ABF"), Treadco, Inc. ("Treadco"), and Clipper Exxpress Company and affiliates ("Clipper Group") and including CaroTrans International, Inc. ("CaroTrans"), ("Clipper Worldwide"), and Cardinal Freight Carriers, Inc. ("Cardinal"), G.I. Trucking Company ("G.I. Trucking"), The Complete Logistics Company ("Complete Logistics"), Integrated Distribution, Inc., and FleetNet America, Inc., formerly Carolina Breakdown Service, Inc. The Company in 1991 reduced its ownership in Treadco, through an initial public offering of Treadco common stock, to approximately 46%, while retaining control of Treadco by reason of its stock ownership, board representation and provision of management services. As a result, Treadco is consolidated with the Company for financial reporting purposes, with the ownership interests of the other stockholders reflected as minority interest. OPERATING RESULTS The discussion and analysis of results of operations reflects information generally prepared on a business segment basis with motor carrier operations further separated between LTL and truckload, based on the primary business of the subsidiary. LTL subsidiaries also handle some truckload freight. Operating expenses include the reclassification of certain expenses and costs between the Company and its subsidiaries and elimination of the effects of intercompany transactions. Operating profit on a business segment basis differs from operating income as reported in the Company's Consolidated Financial Statements. Other income and expenses (which include amortization expense), except for interest expense and minority interest, have been allocated to individual segments for the purpose of calculating operating profit on a segment basis. During 1996, the Company changed the name of its forwarding operations segment to the intermodal operations segment.
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 1997 1996 1997 1996 -------- -------- -------- -------- ($ THOUSANDS) OPERATING REVENUES LTL motor carrier operations ......... $311,489 $298,886 $608,024 $593,809 Truckload motor carrier operations ... 20,345 18,917 39,366 36,755 Intermodal operations ................ 48,629 45,001 93,418 86,767 Logistics operations ................. 12,089 14,245 24,223 27,475 Tire operations ...................... 41,014 35,505 73,108 67,118 Other ................................ 2,203 1,908 4,376 3,912 -------- -------- -------- -------- $435,769 $414,462 $842,515 $815,836 ======== ======== ======== ========
12 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (Continued) - -------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 1997 1996 1997 1996 -------- -------- -------- -------- ($ THOUSANDS) OPERATING PROFIT (LOSS) LTL motor carrier operations ......... $ 15,550 $ (7,124) $ 25,476 $(16,452) Truckload motor carrier operations ... 1,531 1,451 2,060 2,876 Intermodal operations ................ 964 1,175 92 1,856 Logistics operations ................. (1,816) (245) (3,040) (771) Tire operations ...................... 140 (1,328) (2,545) (3,090) Other ................................ (253) (974) (654) 859 -------- -------- -------- -------- TOTAL OPERATING PROFIT (LOSS) ........... 16,116 (7,045) 21,389 (14,722) INTEREST EXPENSE ........................ (6,969) (7,603) (14,234) (15,404) MINORITY INTEREST ....................... 29 486 1,054 1,127 -------- -------- -------- -------- INCOME (LOSS) BEFORE INCOME TAXES ....... $ 9,176 $(14,162) $ 8,209 $(28,999) ======== ======== ======== ========
The following table sets forth for the periods indicated a summary of the Company's operations as a percentage of revenues with other income and expenses allocated on a business segment basis. The basis of presentation for business segment data differs from the basis of presentation for data the Company provides to the U.S. Department of Transportation ("D.O.T.").
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 1997 1996 1997 1996 ---- ---- ---- ---- LTL MOTOR CARRIER OPERATIONS Salaries and wages ...................... 65.6% 69.9% 66.2% 70.4% Supplies and expenses ................... 9.8 11.3 9.9 11.0 Operating taxes and licenses ............ 3.4 4.2 3.5 4.2 Insurance ............................... 2.0 2.2 2.1 2.2 Communications and utilities ............ 2.2 2.5 2.3 2.6 Depreciation and amortization ........... 2.7 3.6 2.9 3.8 Rents and purchased transportation ...... 8.4 7.3 8.2 7.4 Other ................................... 0.6 1.3 0.6 1.0 Gain on sale of revenue equipment ....... (0.2) (0.1) (0.3) (0.1) Other non-operating (net) ............... 0.5 0.2 0.4 0.3 ----- ----- ----- ----- 95.0% 102.4% 95.8% 102.8% TRUCKLOAD MOTOR CARRIER OPERATIONS Salaries and wages ...................... 36.3% 36.4% 36.4% 35.3% Supplies and expenses ................... 17.5 16.8 18.4 17.0 Operating taxes and licenses ............ 8.8 9.5 9.0 9.7 Insurance ............................... 3.8 3.6 4.3 3.6 Communications and utilities ............ 1.5 1.2 1.5 1.3 Depreciation and amortization ........... 4.7 4.7 4.9 4.8 Rents and purchased transportation ...... 19.5 19.6 19.7 20.0 Other ................................... 0.4 0.5 0.6 0.5 ----- ----- ----- ----- 92.5% 92.3% 94.8% 92.2% ===== ===== ===== =====
13 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (Continued) - -------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 1997 1996 1997 1996 ---- ---- ---- ---- INTERMODAL OPERATIONS Cost of services .......................... 82.9% 78.1% 84.0% 77.7% Selling, administrative and general ....... 14.2 18.4 15.0 19.3 Gain on sale of revenue equipment ......... -- (0.1) 0.0 (0.1) Other non-operating (net) ................. 0.9 1.0 0.9 1.0 ----- ----- ----- ----- 98.0% 97.4% 99.9% 97.9% LOGISTICS OPERATIONS Cost of services .......................... 101.8% 90.8% 99.2% 92.2% Selling, administrative and general ....... 13.0 11.1 13.0 10.8 (Gain) loss on sale of revenue equipment .. 0.5 0.0 0.3 (0.1) Other non-operating (net) ................. (0.3) (0.2) 0.1 (0.1) ----- ----- ----- ----- 115.0% 101.7% 112.6% 102.8% ===== ===== ===== ===== TIRE OPERATIONS Cost of sales ............................. 73.3% 78.0% 74.6% 78.4% Selling, administrative and general ....... 26.2 25.7 28.6 26.0 Other non-operating (net) ................. 0.2 0.0 0.3 0.2 ----- ----- ----- ----- 99.7% 103.7% 103.5% 104.6% ===== ===== ===== =====
RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1997 AS COMPARED TO THE THREE MONTHS ENDED JUNE 30, 1996 Consolidated revenues of the Company for the three months ended June 30, 1997 were $436 million compared to $414 million for the three months ended June 30, 1996. The Company had an operating profit (segment basis) of $16.1 million for the three months ended June 30, 1997 compared to an operating loss of $7.0 million for the three months ended June 30, 1996. For the three months ended June 30, 1997, the Company had net income of $5.0 million or $.20 per common share, compared to a net loss of $8.8 million, or a loss of $.51 per common share for the three months ended June 30, 1996. Earnings per common share for the three months ended June 30, 1997 and 1996 give consideration to preferred stock dividends of $1.1 million. Average common shares outstanding for the three months ended June 30, 1997 were 19.6 million compared to 19.5 million for the three months ended June 30, 1996. Outstanding shares for each period do not assume conversion of preferred stock to common shares, because conversion would be anti-dilutive for these periods. LESS-THAN-TRUCKLOAD MOTOR CARRIER OPERATIONS. The Company's LTL motor carrier operations are conducted by ABF and G.I. Trucking. Revenues from LTL motor carrier operations for the three months ended June 30, 1997 were $311 million, with an operating profit of $15.5 million compared to revenues of $299 million and an operating loss of $7.1 million for the three months ended June 30, 1996. 14 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (Continued) - ------------------------------------------------------------------------------- For the three months ended June 30, 1997, ABF accounted for 91% of LTL revenues. ABF's revenue increased 2.5% for the three months ended June 30, 1997 compared to the same period in 1996. ABF's revenue per hundred weight increased to $17.20 for the three months ended June 30, 1997, a 7.4% increase from the second quarter of 1996. This increase was offset by a decrease in tonnage resulting from ABF's emphasis on account profitability. ABF's 1997 second quarter tonnage per day decreased 5.0% from the 1996 second quarter. The LTL revenue increase for the three months ended June 30, 1997 can also be attributed to G.I. Trucking's revenue increasing 29.2% over the three months ended June 30, 1996. G.I. Trucking has continued to replace revenues lost as a result of the ABF/Carolina Freight Carriers merger in September 1995. G.I. Trucking's tonnage increased 25.4% for the three months ended June 30, 1997 from the same period in 1996. G.I.'s Trucking's operating ratio was 98.8% for the second quarter of 1997 compared to 107.1% for the second quarter of 1996. During 1996, ABF discontinued 12 of the regional distribution terminal operations that it had acquired through the ABF/Carolina merger. These closings, which occurred during the first two quarters of 1996, returned ABF to its historical terminal system configuration. This reconfiguration allowed ABF to gradually reduce its direct labor costs, improve its weight per trailer and reduce its empty miles. ABF's operating ratio as reported to the D.O.T. was 94.0% in the second quarter of 1997 compared to 101.9% in the second quarter of 1996. The decrease in salaries and wages as a percent of revenue was the result of productivity improvements by both ABF and G.I. Trucking. ABF's salaries, wages and benefits increased 3.8% annually effective April 1, 1996, pursuant to a collective bargaining agreement with its Teamsters employees. Effective April 1, 1997, for the final year of the Teamsters' agreement, ABF's salaries, wages and benefits increased 3.9%. The decrease in operating supplies and expenses as a percent of revenue was due in part to fewer miles travelled by company-owned revenue equipment which resulted in decreased maintenance and fuel expenses. In addition, the disposal of revenue equipment to balance equipment needs to revenue levels throughout 1996 also resulted in decreased operating supplies and expenses, decreased operating taxes and licenses and decreased depreciation and amortization. A decrease in depreciation and amortization also resulted from ABF's reconfiguration of its terminal system which allowed for improved asset utilization. Also, ABF increased its use of outside alternate modes of transportation as reflected in the increase in rents and purchased transportation as a percent of revenue. TRUCKLOAD MOTOR CARRIER OPERATIONS. The Company's truckload motor carrier operations are conducted through Cardinal. On July 15, 1997, the Company announced the completion of the sale of Cardinal. See Note C to the unaudited consolidated financial statements. For the three months ended June 30, 1997, Cardinal produced revenues of $20.3 million, a 7.5% increase over the $18.9 million in revenues for the second quarter of 1996. Operating profit for the 1997 15 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (Continued) - ------------------------------------------------------------------------------- second quarter totalled $1.53 million, compared to $1.45 million for the 1996 second quarter. Supplies and expenses as a percent of revenue increased as a result of higher maintenance expenses due to aging of revenue equipment. INTERMODAL OPERATIONS. The Company's intermodal operations are conducted primarily by Clipper Worldwide. Revenues from the intermodal operations for the three months ended June 30, 1997 totalled $48.6 million, an increase of 8.1% over the three months ended June 30, 1996, resulting from a 13.1% increase in revenues for the Clipper Group and a 3.6% decrease in revenues for CaroTrans. Throughout 1996, the Clipper Group experienced an increase in average weight per shipment, resulting in a decline in revenue per hundredweight without a proportionate reduction in cost per hundredweight, resulting in a decline in margins on higher revenues. The Clipper Group is focusing on smaller shipment sizes to improve the margins, and effective January 1, 1997, the Clipper Group implemented a 5.9% rate increase to help offset the reduction in revenue per hundredweight. CaroTrans expanded into some higher cost markets during 1996 and also experienced a shift in market mix to more full-container-load freight. Also, ocean container costs increased. These factors negatively impacted operating results. The decline in revenue was expected due to actions taken in late 1996 and early 1997 to enhance profitability. LOGISTICS OPERATIONS. The Company's logistics operations are conducted through Integrated Distribution, Inc. and Complete Logistics. Revenues for the logistics operations segment decreased by $2.1 million for the three months ended June 30, 1997 compared to June 30, 1996. The decline in revenues was primarily the result of the loss of customers caused by rate increases, the lack of new business and the closing of Complete Logistics' facility in Atlanta, Georgia. TIRE OPERATIONS. Treadco's revenues for the three months ended June 30, 1997 increased 15.5% to $41.0 million from $35.5 million for the three months ended June 30, 1996. For the second quarter of 1997, "same store" sales increased 6.5% and "new store" sales increased 7.4%. "Same store" sales include both production locations and sales locations that have been in existence for the entire periods presented. "New store" sales resulted from one new production facility and three new sales locations. Revenues from retreading for the three months ended June 30, 1997 increased 9.2% when compared to the same period in 1996. Revenues from new tire sales increased 16.0% for the second quarter 1997 when compared to the first quarter of 1997. Service revenues for the 1997 second quarter increased 25.9%. Treadco faces increased competition as Bandag, Inc. has granted additional franchises in some locations currently being served by Treadco. This has led to increased pricing pressures in the marketplace. As anticipated, Bandag continues to target Treadco's customers, which has caused the loss of a substantial amount of national account business, and in many cases, the business retained is at lower margins. During September 1996, Treadco completed the conversion of its production facilities that were under Bandag retread franchises to Oliver Rubber Company ("Oliver") licensed facilities. The conversion was 16 17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (Continued) - ------------------------------------------------------------------------------- completed in phases throughout the first three quarters of 1996, with approximately one-third of its production facilities converted each quarter. The decrease in cost of sales as a percent of revenue resulted primarily from lower tread rubber costs with Oliver. The increase in selling, administrative, and general expenses resulted from several factors, including salaries and wage expense increases for employees added for new locations, cost-of-living raises, and the lower selling price per retread tire. INTEREST. Interest expense was $7.0 million for three months ended June 30, 1997 compared to $7.6 million for three months ended June 30, 1996 primarily due to a reduction of outstanding debt. INCOME TAXES. The difference between the effective tax rate for 1997 and the federal statutory rate resulted primarily from state income taxes, amortization of goodwill, minority interest, and other nondeductible expenses. SIX MONTHS ENDED JUNE 30, 1997 AS COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1996 Consolidated revenues of the Company for the six months ended June 30, 1997 were $842 million compared to $816 million for the six months ended June 30, 1996. The Company had an operating profit of $21.4 million (segment basis) for the six months ended June 30, 1997 compared to an operating loss of $14.7 million for the six months ended June 30, 1996. For the six months ended June 30, 1997, the Company had net income of $4.7 million or $.13 per common share, compared to a net loss of $18.3 million, or a loss of $1.05 per common share for the six months ended June 30, 1996. Earnings per common share for the six months ended June 30, 1997 and 1996 give consideration to preferred stock dividends of $2.2 million. Average common shares outstanding for the six months ended June 30, 1997 and June 30, 1996 were 19.5 million. Outstanding shares for each period do not assume conversion of preferred stock to common shares, because conversion would be anti-dilutive for these periods. LESS-THAN-TRUCKLOAD MOTOR CARRIER OPERATIONS. The Company's LTL motor carrier operations are conducted by ABF and G.I. Trucking. Revenues from the LTL motor carrier operations segment for the six months ended June 30, 1997 were $608 million, with an operating profit of $25.4 million compared to $594 million of revenue and an operating loss of $16.4 million for the six months ended June 30, 1996. For the six months ended June 30, 1997, ABF accounted for 90% of LTL revenues. ABF's revenue increased .5% for the six months ended June 30, 1997 compared to the same period in 1996. ABF's revenue per hundredweight increased to $17.17 for the six months ended June 30, 1997, a 7.0% increase from the first six months of 1996. This increase was offset by a decrease in tonnage resulting from ABF's emphasis on account profitability. ABF's 1997 tonnage per day for the six months ended June 30, 1997 decreased 6.8% from the same period in 1996. 17 18 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (Continued) - ------------------------------------------------------------------------------- The LTL revenue increase for the six months ended June 30, 1997 can also be attributed to G.I. Trucking's revenue increasing 33.1% over the six months ended June 30, 1996. G.I. Trucking has continued to replace revenues lost as a result of the ABF/Carolina Freight Carriers merger in September 1995. G.I. Trucking's tonnage increased 31.8% for the six months ended June 30, 1997 from the same period in 1996. G.I. Trucking's operating ratio was 99.7% for the six months ended June 30, 1997 compared to 110.9% for the six months ended June 30, 1996. During 1996, ABF discontinued 12 of the regional distribution terminal operations that it had acquired through the ABF/Carolina merger. These closings, which occurred during the first two quarters of 1996, returned ABF to its historical terminal system configuration. This reconfiguration allowed ABF to gradually reduce its direct labor costs, improve its weight per trailer and reduce its empty miles. ABF's operating ratio as reported to the D.O.T. was 94.9% for the six months ended June 30, 1997 compared to 102.1% for the same period in 1996. The decrease in salaries and wages as a percent of revenue was the result of productivity improvements by both ABF and G.I. Trucking. ABF's salaries, wages and benefits increased 3.8% annually effective April 1, 1996, pursuant to a collective bargaining agreement with its Teamsters employees. Effective April 1, 1997, for the final year of the Teamsters' agreement, ABF's salaries, wages and benefits increased 3.9%. The decrease in operating supplies and expenses as a percent of revenue was due in part to fewer miles travelled by company-owned revenue equipment which resulted in decreased maintenance and fuel expenses. In addition, the disposal of revenue equipment to balance equipment needs to revenue levels throughout 1996 also resulted in decreased operating supplies and expenses, decreased operating taxes and licenses and decreased depreciation and amortization. A decrease in depreciation and amortization also resulted from ABF's reconfiguration of its terminal system which allowed for improved asset utilization. Also, ABF increased its use of outside alternate modes of transportation as reflected in the increase in rents and purchased transportation as a percent of revenue. TRUCKLOAD MOTOR CARRIER OPERATIONS. The Company's truckload motor carrier operations are conducted through Cardinal. On July 15, 1997 the Company announced the completion of the sale of Cardinal. See Note C of the unaudited consolidated financial statements. For the six months ended June 30, 1997, Cardinal produced revenues of $39.4 million, a 7.1% increase over the $36.8 million in revenues for the six months ended June 30, 1996. Supplies and expenses as a percent of revenue increased as a result of higher maintenance expenses due to aging of revenue equipment. Insurance expense as a percent of revenue has increased for the six months ended June 30, 1997 when compared to the same period in 1996, reflecting increased claims costs. INTERMODAL OPERATIONS. The Company's intermodal operations are conducted primarily through Clipper Worldwide. 18 19 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (Continued) - ------------------------------------------------------------------------------- Revenues from the intermodal operations segment for the six months ended June 30, 1997 increased 7.7% over the six months ended June 30, 1996, resulting from an 11.4% increase in revenues for the Clipper Group and a .9% decrease in revenues for CaroTrans. Throughout 1996, the Clipper Group experienced an increase in average weight per shipment, resulting in a decline in revenue per hundredweight without a proportionate reduction in cost per hundredweight, resulting in a decline in margins on higher revenues. The Clipper Group is focusing on smaller shipment sizes to improve the margins, and effective January 1, 1997, the Clipper Group implemented a 5.9% rate increase to help offset the reduction in revenue per hundredweight. CaroTrans expanded into some higher cost markets during 1996 and also experienced a shift in market mix to more full-container-load freight. Also, ocean container costs increased. These factors negatively impacted operating results. The decline in revenue was expected due to actions taken in late 1996 and early 1997 to enhance profitability. LOGISTICS OPERATIONS. The Company's logistics operations are conducted through Integrated Distribution, Inc. and Complete Logistics. Revenues for the logistics operations segment decreased by $3.3 million for the six months ended June 30, 1997 compared to June 30, 1996. The decline in revenues was primarily the result of the loss of customers caused by rate increases, the lack of new business and the closing of Complete Logistics' facility in Atlanta, Georgia. TIRE OPERATIONS. Treadco's revenues for the six months ended June 30, 1997 increased 8.92% to $73.1 million from $67.1 million for the six months ended June 30, 1996. For the first six months of 1997, "same store" sales increased 1.2% and "new store" sales increased 7.7%. "Same store" sales include both production locations and sales locations that have been in existence for the entire periods presented. Revenues from retreading for the six months ended June 30, 1997 increased 2.0% when compared to the same period in 1996. Revenues from new tire sales increased 13.0% for the six months ended June 30, 1997 when compared to the six months ended June 30, 1996. Service revenues for the first six months of 1997 increased 22.0%. Treadco faces increased competition as Bandag, Inc. has granted additional franchises in some locations currently being served by Treadco. This has led to increased pricing pressures in the marketplace. As anticipated, Bandag continues to target Treadco's customers, which has caused the loss of a substantial amount of national account business, and in many cases, the business retained is at lower margins. During September 1996, Treadco completed the conversion of its production facilities that were under Bandag retread franchises to Oliver Rubber Company ("Oliver") licensed facilities. The conversion was completed in phases throughout the first three quarters of 1996, with approximately one-third of its production facilities converted each quarter. The decrease in cost of sales as a percent of revenue resulted primarily from lower tread rubber costs with Oliver. The increase in selling, administrative, and general expenses resulted from several factors, including salaries and wage expense increases for employees added for new locations, cost-of-living raises, and the lower selling price per retread tire. 19 20 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (Continued) - ------------------------------------------------------------------------------- INTEREST. Interest expense was $14.2 million for six months ended June 30, 1997 compared to $15.4 million for six months ended June 30, 1996 primarily due to a reduction of outstanding debt. INCOME TAXES. The difference between the effective tax rate for 1997 and the federal statutory rate resulted primarily from state income taxes, amortization of goodwill, minority interest, and other nondeductible expenses. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities for the six months ended June 30, 1997 was $35.4 million compared to net cash provided of $1.2 million for the six months ended June 30, 1996. The increase is due primarily to net income and an increase in accounts payables offset in part by an increase in receivables. In addition to cash provided by operations, sale of excess property and equipment provided cash of $26.6 million for the six months ended June 30, 1997. The Company is party to a $347 million credit agreement (the "Credit Agreement") with Societe Generale, Southwest Agency, as Managing and Administrative Agent and NationsBank of Texas, N.A., as Documentation Agent, and with 14 other participating banks. The Credit Agreement originally included a $72 million term loan and provides for up to $275 million of revolving credit loans (including letters of credit). At June 30, 1997, there were $170.0 million of Revolver Advances, $9.9 million of Term Advances and approximately $68.9 million of letters of credit outstanding. Net proceeds from the Cardinal sale of approximately $35 million were used to pay the Term loan in full on July 15, 1997, with the remaining proceeds paid on the Revolver Advances. The Credit Agreement contains various covenants which limit, among other things, indebtedness, distributions, capital expenditures, asset sales, restricted payments, investments, loans and advances, as well as requiring the Company to meet certain financial tests. On January 31, 1997, the Company obtained a first amendment to the Credit Agreement which included revised financial covenants with which the Company was in compliance. The Credit Agreement had previously been amended in February 1996, including a revision of financial covenants. As a part of the February 1996 amendment, the Company obtained an additional credit agreement which provided for borrowings of up to $30 million. In connection with the January 1997 amendment, the available borrowings were reduced to $15 million. The additional credit agreement was terminated by the Company on June 30, 1997. At June 30, 1997, the Company had approximately $36.0 million of availability under the Credit Agreement. Concurrent with the closing of the sale of Cardinal on July 15, 1997, the Company and its banks agreed to a second amendment to the Credit Agreement, the primary effect of which was to extend the maturity from August 1998 to August 1999. Treadco is a party to a revolving credit facility with Societe Generale (the "Treadco Credit Agreement"), providing for borrowings up to $20 million. 20 21 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (Continued) - ------------------------------------------------------------------------------- The Treadco Credit Agreement contains various covenants which limit, among other things, dividends, disposition of receivables, indebtedness and investments, as well as requiring Treadco to meet certain financial tests. The Treadco Credit Agreement was amended in March 1997, restating certain financial requirements which the Company is in compliance with. Management believes, based upon the Company's current levels of operations and anticipated growth, the Company's cash, capital resources, borrowings available under the Credit Agreement and cash flow from operations will be sufficient to finance current and future operations and meet all scheduled debt service requirements. SEASONALITY Motor carrier operations are affected by seasonal fluctuations, which affect tonnage to be transported. Freight shipments, operating costs and earnings are also affected adversely by inclement weather conditions. The third calendar quarter of each year usually has the highest tonnage levels while the first quarter has the lowest. Intermodal operations are similar to motor carrier operations with revenues being weaker in the first quarter and stronger during the months of September and October. Treadco's operations are somewhat seasonal with the last six months of the calendar year generally having the highest levels of sales. FORWARD-LOOKING STATEMENTS The Management's Discussion and Analysis Section of this report contains forward-looking statements that are based on current expectations and are subject to a number of risks and uncertainties. Actual results could differ materially from current expectations due to a number of factors, including general economic conditions; competitive initiatives and pricing pressures; union relations; availability and cost of capital; shifts in market demand; weather conditions; the performance and needs of industries served by the Company's businesses; actual future costs of operating expenses such as fuel and related taxes; self-insurance claims and employee wages and benefits; actual costs of continuing investments in technology; and the timing and amount of capital expenditures. 21 22 PART II. OTHER INFORMATION ARKANSAS BEST CORPORATION ITEM 1. LEGAL PROCEEDINGS. From time to time, the Company is named as a defendant in legal actions, the majority of which arise out of the normal course of its business. The Company is not a party to any pending legal proceeding which the Company's management believes to be material to the financial condition of the Company. The Company maintains liability insurance against risks in excess of retention levels arising out of the normal course of its business (see Note F to the Company's Unaudited Consolidated Financial Statements). ITEM 2. CHANGES IN SECURITIES. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Company's Annual Meeting of Shareholders was held on May 9, 1997. The first proposal considered at the Annual Meeting was to elect two persons to serve as directors of the Company. The results on this proposal are as follows: Directors Votes For Votes Withheld Arthur J. Fritz 15,179,877 1,426,180 John H. Morris 15,181,294 1,424,763 The second proposal was to ratify the appointment of Ernst & Young LLP as independent auditors for fiscal year 1997. This proposal received 16,465,563 votes for adoption, 85,682 votes against adoption, 54,812 abstentions and -0- broker non-votes. The third proposal was to approve an amendment to the Arkansas Best Corporation 1992 Stock Option Plan. This proposal received 9,533,597 votes for adoption, 3,789,219 against adoption, 171,661 withheld and 3,111,580 broker non-votes. 22 23 ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) EXHIBITS. Exhibit 11 - Statement Re: Computation of Earnings Per Share. Exhibit 27 - Financial Data Schedule (b) REPORTS ON FORM 8-K. Form 8-K dated August 1, 1997 Item 5. On July 15, 1997, Arkansas Best Corporation's (the "Company's") existing $346,971,312 Amended and Restated Credit Agreement with Societe Generale, Southwest Agency as Managing Agent and Administrative Agent, NationsBank of Texas, N.A., as Documentation Agent, and certain other banks was amended. 23 24 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ARKANSAS BEST CORPORATION (Registrant) Date: August 1, 1997 /s/ David E. Loeffler ---------------------------------- David E. Loeffler Vice President-Treasurer, Chief Financial Officer and Principal Accounting Officer 24 25 EXHIBIT INDEX ARKANSAS BEST CORPORATION The following exhibits are filed with this report.
EXHIBIT NO. - ------- 11 Statement Re: Computation of Earnings per Share 27 Financial Data Schedule
EX-11 2 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE ARKANSAS BEST CORPORATION
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 1997 1996 1997 1996 ------------ ------------ ------------ ------------ ($ THOUSANDS, EXCEPT PER SHARE DATA) PRIMARY: Average shares outstanding ............... 19,504,473 19,512,367 19,504,473 19,514,453 Net effect of dilutive stock options - Based on the treasury stock method using average market price ........... 65,747 -- 34,048 -- ------------ ------------ ------------ ------------ Average common shares outstanding ........ 19,570,220 19,512,367 19,538,521 19,514,453 ============ ============ ============ ============ Net income (loss) ........................ $ 5,008 $ (8,786) $ 4,691 $ (18,345) Less: Preferred stock dividends .......... 1,075 1,074 2,149 2,149 ------------ ------------ ------------ ------------ Net income (loss) applicable to common shareholders ................. $ 3,933 $ (9,860) $ 2,542 $ (20,494) ============ ============ ============ ============ Per common and common equivalent share: Net income (loss) per common share ..... $ .20 $ (0.51) $ .13 $ (0.51) ============ ============ ============ ============
Fully diluted earnings per common share are not presented, as such calculations would be anti-dilutive. EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ARKANSAS BEST CORPORATION QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000894405 ARKANSAS BEST CORPORATION 1,000 6-MOS DEC-31-1997 JUN-30-1997 0 0 192,705 5,368 32,865 266,572 560,975 230,779 799,790 292,779 283,104 0 15 195 139,762 799,790 73,108 842,515 54,526 816,211 0 2,036 14,234 8,209 3,518 4,691 0 0 0 4,691 .13 .13
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