-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, NTvXUyb/GjQSZVrQcKtd7hXQH62DkiQORRaK+BtDypb2Hz3LLLMGd+PevLyI3nsQ YdrGMUXWA/R5pGd4cpCxBw== 0000894405-94-000009.txt : 19940811 0000894405-94-000009.hdr.sgml : 19940811 ACCESSION NUMBER: 0000894405-94-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARKANSAS BEST CORP /DE/ CENTRAL INDEX KEY: 0000894405 STANDARD INDUSTRIAL CLASSIFICATION: 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: 94542423 BUSINESS ADDRESS: STREET 1: 1000 SOUTH 21 ST CITY: FORT SMITH STATE: AR ZIP: 72901 BUSINESS PHONE: 5017856000 MAIL ADDRESS: STREET 1: P O BOX 48 CITY: FORT SMITH STATE: AR ZIP: 72902 10-Q 1 ARKANSAS BEST FORM 10-Q JUNE 30, 1994 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, 1994 ---------------- [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to ------------- ------------- Commission file number 0-19969 -------- ARKANSAS BEST CORPORATION - - ----------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 6711 71-0673405 - - ------------------------- ------------------------- ---------------------- (State or other (Primary Standard (I.R.S. Employer jurisdiction of Industrial Classification Identification No.) incorporation or Code No.) organization) 1000 South 21st Street Fort Smith, Arkansas 72901 (501) 785-6000 - - ----------------------------------------------------------------------------- (Address, including zip code, and telephone number, including area code, of the registrant's principal executive offices) Not Applicable - - ----------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of The Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at July 29, 1994 --------------------------------- -------------------------------- Common Stock, $.01 par value 19,200,077 shares ARKANSAS BEST CORPORATION INDEX Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets -- June 30, 1994 and December 31, 1993 3 Consolidated Statements of Operations -- For the Three and Six Months Ended June 30, 1994 and 1993 5 Consolidated Statements of Cash Flows -- For the Six Months Ended June 30, 1994 and 1993 7 Notes to Consolidated Financial Statements -- June 30, 1994 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings 21 Item 2. Changes in Securities 21 Item 3. Defaults Upon Senior Securities 21 Item 4. Submission of Matters to a Vote of Security Holders 21 Item 5. Other Information 21 Item 6. Exhibits and Reports on Form 8-K 22 SIGNATURES 23 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ARKANSAS BEST CORPORATION CONSOLIDATED BALANCE SHEETS
June 30 December 31 1994 1993 (unaudited) (note) ($ thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 17,610 $ 6,962 Trade receivables, less allowances for doubtful accounts (1994 -- $2,551,000; 1993 -- $2,220,000) 109,821 104,598 Inventories -- Note C 28,318 29,086 Prepaid expenses 9,487 9,916 --------- --------- TOTAL CURRENT ASSETS 165,236 150,562 PROPERTY, PLANT AND EQUIPMENT Land and structures 108,939 108,422 Revenue equipment 180,376 169,573 Manufacturing equipment 6,179 5,997 Service, office and other equipment 35,927 33,913 Leasehold improvements 8,592 8,096 Construction in progress 5,461 - --------- --------- 345,474 326,001 Less allowances for depreciation and amortization (152,398) (147,799) --------- --------- 193,076 178,202 OTHER ASSETS 12,111 12,839 GOODWILL, less amortization (1994 -- $17,825,000; 1993 -- $16,267,000) 104,593 106,130 --------- --------- $ 475,016 $ 447,733 ========= =========
ARKANSAS BEST CORPORATION CONSOLIDATED BALANCE SHEETS
June 30 December 31 1994 1993 (unaudited) (note) ($ thousands) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Bank drafts payable $ 6,449 $ 7,661 Trade accounts payable 42,361 36,143 Accrued expenses 83,600 71,278 Federal and state income taxes 6,205 6,398 Deferred federal income taxes 3,503 3,503 Current portion of long-term debt 12,438 15,239 --------- --------- TOTAL CURRENT LIABILITIES 154,556 140,222 LONG-TERM DEBT, less current portion 57,024 43,731 OTHER LIABILITIES 4,173 3,933 DEFERRED FEDERAL INCOME TAXES 24,798 26,158 MINORITY INTEREST 32,842 31,699 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 1994: 19,200,077 shares; 1993: 19,185,325 shares 192 192 Additional paid-in capital 206,661 206,457 Stock payable to employee benefit plans - 205 Predecessor basis adjustment (15,371) (15,371) Retained earnings 10,126 10,492 --------- --------- TOTAL SHAREHOLDERS' EQUITY 201,623 201,990 CONTINGENCIES -- Note F --------- --------- $ 475,016 $ 447,733 ========= ========= Note: The balance sheet at December 31, 1993 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to consolidated financial statements.
ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended June 30 June 30 1994 1993 1994 1993 (unaudited) ($ thousands, except per share data) OPERATING REVENUES Carrier operations $ 173,805 $ 217,212 $ 408,131 $ 424,265 Tire operations 35,609 26,178 65,014 47,145 Service and other 1,346 1,232 2,596 2,422 --------- --------- --------- --------- 210,760 244,622 475,741 473,832 OPERATING EXPENSES AND COSTS -Note E Carrier operations 178,011 208,962 401,274 409,596 Tire operations 32,696 23,932 60,277 43,338 Service and other 1,624 1,349 3,143 2,724 --------- --------- --------- --------- 212,331 234,243 464,694 455,658 --------- --------- --------- --------- OPERATING INCOME (LOSS) (1,571) 10,379 11,047 18,174 OTHER INCOME Gain on asset sales 850 1,127 1,168 1,379 Other 380 129 528 243 --------- --------- --------- --------- 1,230 1,256 1,696 1,622 OTHER EXPENSES Interest 1,785 1,718 3,129 4,051 Other 1,011 906 2,025 1,804 Minority interest in subsidiary 917 701 1,407 1,170 --------- --------- --------- --------- 3,713 3,325 6,561 7,025 --------- --------- --------- --------- INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM (4,054) 8,310 6,182 12,771 FEDERAL AND STATE INCOME TAXES (CREDIT) - Note D Current (468) 4,409 5,375 8,236 Deferred (178) (530) (1,360) (2,058) --------- --------- --------- --------- (646) 3,879 4,015 6,178 --------- --------- --------- --------- ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Continued) Three Months Ended Six Months Ended June 30 June 30 1994 1993 1994 1993 (unaudited) ($ thousands, except per share data) INCOME (LOSS) BEFORE EXTRAORDINARY ITEM $ (3,408) $ 4,431 $ 2,167 $ 6,593 EXTRAORDINARY ITEM: Loss on extinguishments of debt - (162) - (329) --------- --------- --------- --------- NET INCOME (LOSS) $ (3,408) $ 4,269 $ 2,167 $ 6,264 ========= ========= ========= ========= EARNINGS (LOSS) PER COMMON SHARE: INCOME (LOSS) BEFORE EXTRAORDINARY ITEM $ (0.23) $ 0.18 $ - $ 0.25 EXTRAORDINARY ITEM: Loss on extinguishments of debt - (0.01) - (0.01) --------- --------- --------- --------- NET INCOME (LOSS) $ (0.23) $ 0.17 $ - $ 0.24 ========= ========= ========= ========= CASH DIVIDENDS PAID PER COMMON SHARE $ 0.01 $ 0.01 $ 0.02 $ 0.02 ========= ========= ========= ========= AVERAGE COMMON SHARES OUTSTANDING 19,200,077 19,127,064 19,304,649 19,160,830 ========== ========== ========== ========== See notes to consolidated financial statements.
ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30 1994 1993 (unaudited) ($ thousands) OPERATING ACTIVITIES Net income $ 2,167 $ 6,264 Adjustments to reconcile net income to net cash provided (used) by operating activities: Loss on extinguishments of debt - 329 Depreciation and amortization 13,113 14,777 Amortization of intangibles 1,558 1,520 Amortization of other expenses 226 123 Contribution of common stock to employee benefit plans - 210 Provision for losses on accounts receivable 1,902 1,210 Provision for deferred income taxes (1,360) (2,058) Gain on asset sales (1,168) (1,379) Gain on issuance of subsidiary stock (45) (22) Minority interest in subsidiary 1,407 1,170 Changes in operating assets and liabilities: Accounts receivable (7,125) (6,360) Inventories and prepaid expenses 1,197 (2,297) Other assets 647 972 Accounts payable, bank drafts payable, taxes payable, accrued expenses and other liabilities 17,374 6,223 --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 29,893 20,682 INVESTING ACTIVITIES Purchases of property, plant and equipment, less capitalized leases (27,040) (7,829) Proceeds from asset sales 5,421 7,026 --------- --------- NET CASH USED BY INVESTING ACTIVITIES (21,619) (803) ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Six Months Ended June 30 1994 1993 (unaudited) ($ thousands) FINANCING ACTIVITIES Deferred financing costs and expenses incurred in borrowing activities $ (144) $ (47) Net proceeds from the issuance of preferred stock - 71,893 Proceeds from term loan facility 20,000 - Proceeds from commercial paper agreement 1,000 - Borrowings under revolving credit facilities 27,000 15,000 Principal payments under term loan facility - (50,000) Payments under revolving credit facilities (31,000) (30,000) Principal payments on other long-term debt (11,730) (15,862) Payments to retire 14% senior subordinated notes - (2,175) Dividends paid to minority shareholders of subsidiary (219) (215) Dividends paid (2,533) (382) --------- --------- NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 2,374 (11,788) --------- --------- NET INCREASE IN CASH AND CASH EQUIVALENTS 10,648 8,091 Cash and cash equivalents at beginning of period 6,962 5,644 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 17,610 $ 13,735 ========= ========= See notes to consolidated financial statements.
ARKANSAS BEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1994 NOTE A -- ORGANIZATION Arkansas Best Corporation (the "Company") is a diversified holding company engaged through its subsidiaries primarily in motor carrier operations and truck tire retreading and sales. Principal subsidiaries owned are ABF Freight System, Inc., ("ABF"), Treadco, Inc. ("TREADCO"), and ABC Treadco, Inc. ("ABC Treadco"). In February 1993, the Company completed its public offering of 1,495,000 shares of $2.875 Series A Cumulative Convertible Exchangeable Preferred Stock at $50 per share. NOTE B -- FINANCIAL STATEMENT PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 1994, are not necessarily indicative of the results that may be expected for the year ending December 31, 1994. For further information, refer to the Company's financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1993. NOTE C -- INVENTORIES
June 30 December 31 1994 1993 ($ thousands) Finished goods $ 20,554 $ 20,240 Materials 5,786 6,784 Repair parts, supplies and other 1,978 2,062 -------- -------- $ 28,318 $ 29,086 ======== ========
NOTE D -- FEDERAL AND STATE INCOME TAXES
Three Months Ended Six Months Ended June 30 June 30 1994 1993 1994 1993 ($ thousands) Income tax at regular rates $(1,419) $ 2,825 $ 2,164 $ 4,342 Percent (35.0)% 34.0% 35.0% 34.0% State taxes less federal benefits (54) 482 542 863 Percent (1.3)% 5.8% 8.8% 6.8% Amortization of goodwill 266 251 531 502 Percent 6.6% 3.0% 8.6% 3.9% Minority interest 312 238 479 397 Percent 7.7% 2.9% 7.8% 3.1% Other items 249 83 299 74 Percent 6.1% 1.0% 4.7% 0.6% ------- ------- ------- ------- Income tax expense $ (646) $ 3,879 $ 4,015 $ 6,178 Percent (15.9)% 46.7% 64.9% 48.4% ======= ======= ======= =======
NOTE E -- OPERATING EXPENSES AND COSTS
Three Months Ended Six Months Ended June 30 June 30 1994 1993 1994 1993 (unaudited) ($ thousands) Carrier Operations: Salaries and wages $122,451 $146,664 $277,893 $287,784 Supplies and expenses 17,691 24,963 42,193 48,349 Operating taxes and licenses 7,720 8,435 16,958 16,551 Insurance 3,598 4,186 7,966 8,217 Communications and utilities 5,212 6,111 10,938 12,110 Depreciation and amortization 5,660 6,572 11,549 13,623 Rents 14,579 11,375 31,341 21,182 Other 1,100 656 2,436 1,780 -------- -------- -------- -------- 178,011 208,962 401,274 409,596 -------- -------- -------- -------- Tire Operations: Cost of sales 26,145 18,911 47,693 33,853 Selling, administrative and general 6,551 5,021 12,584 9,485 -------- -------- -------- -------- 32,696 23,932 60,277 43,338 -------- -------- -------- -------- Service and Other 1,624 1,349 3,143 2,724 -------- -------- -------- -------- $212,331 $234,243 $464,694 $455,658 ======== ======== ======== ========
NOTE F -- LEGAL PROCEEDINGS AND ENVIRONMENTAL MATTERS Various legal actions, the majority of which arise in the normal course of business, are pending. None of these other legal actions is expected to have a material adverse effect on the Company's financial condition. The Company maintains liability insurance against risks arising out of the normal course of its business. ABF stores some fuel for its tractors and trucks in 102 underground tanks located in 27 states. Maintenance of such tanks is regulated at the federal and, in some cases, state levels. ABF believes that it is in substantial compliance with all such regulations. ABF is not aware of any leaks from such tanks that could reasonably be expected to have a material adverse effect on the Company. Environmental regulations have been adopted by the United States Environmental Protection Agency ("EPA") that will require ABF to upgrade its underground tank systems by December 1998. ABF currently estimates that such upgrades, which are currently in process, will not have a material adverse effect on the Company. The Company has received notices from the EPA and others that it has been identified as a potentially responsible party under the Comprehensive Environmental Response Compensation and Liability Act or other federal or state environmental statutes at several hazardous waste sites. After investigating the Company's or its subsidiaries' involvement in waste disposal or waste generation at such sites, the Company has either agreed to de minimis settlements (aggregating approximately $223,000 since 1989), or believes its obligations with respect to such sites would involve immaterial monetary liability, although there can be no assurances in this regard. NOTE G -- TEAMSTERS LABOR STRIKE ABF's labor agreement with the International Brotherhood of Teamsters ("IBT") expired on March 31, 1994. On April 6, 1994, when the terms of a new agreement had not been agreed to between the industry's bargaining group, Trucking Management, Inc. ("TMI"), and the IBT, the Teamsters employees of ABF and 20 other carriers went on strike. On April 29, 1994, TMI and the IBT reached a tentative agreement on a new four-year contract. ABF Teamsters employees began returning to work at 12:01 a.m. on April 30, 1994. The contract has since been voted on and ratified by the IBT membership. NOTE H -- LONG-TERM DEBT The Company entered into a $20 million term credit agreement, dated as of April 25, 1994, with Nationsbank of Texas, N.A., as agent, and Societe Generale Southwest Agency. The proceeds from the agreement will be used in financing the construction of the Company's corporate office which is expected to be completed by January 1995. Amounts advanced and unpaid shall bear interest of 8.07% per annum. The Company shall repay the outstanding principal amount in 40 equal installments, each in the amount of $500,000, due and payable on the fifteenth day of each January, April, July, and October hereafter commencing on July 15, 1994. At June 30, 1994, there was $20 million outstanding. On March 2, 1994, ABF, Renaissance Asset Funding Corp. ("Renaissance") and Societe Generale entered into a receivables purchase agreement. The agreement allows ABF to sell to Renaissance an interest in up to $55 million in a pool of receivables. At June 30, 1994, ABF had no receivables financed through this facility. ABF expects to use this facility from time to time throughout the year for various corporate needs, including working capital. On July 1, 1994, the Company amended its Credit Agreement with Societe Generale, as Agent, and NationsBank of Texas as Co-Agent. Among other things, the amendment extended the maturity date of the revolving credit facility to June 30, 1997 and changed one of the Company's interest rate options from LIBOR plus 1 1/2% to LIBOR plus 3/4%. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Arkansas Best Corporation (the "Company") is primarily engaged, through its motor carrier subsidiaries, in less-than-truckload ("LTL") shipments of general commodities. The Company is also engaged through its approximately 46%-owned consolidated subsidiary, Treadco, Inc. ("TREADCO"), in truck tire retreading and new tire sales. 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 agreement to provide 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 in subsidiary, which appears below the operating income line in the Company's Statement of Operations, have been allocated to individual segments for the purpose of calculating operating profit on a segment basis.
Three Months Ended Six Months Ended June 30 June 30 1994 1993 1994 1993 ($ thousands) OPERATING REVENUES Carrier operations $173,805 $217,212 $408,131 $424,265 Tire operations 35,609 26,178 65,014 47,145 Other 1,346 1,232 2,596 2,422 -------- -------- -------- -------- $210,760 $244,622 $475,741 $473,832 ======== ======== ======== ======== OPERATING EXPENSES AND COSTS CARRIER OPERATIONS Salaries and wages $122,451 $146,664 $277,893 $287,784 Supplies and expenses 17,691 24,963 42,193 48,349 Operating taxes and licenses 7,720 8,435 16,958 16,551 Insurance 3,598 4,186 7,966 8,217 Communications and utilities 5,212 6,111 10,938 12,110 Depreciation and amortization 5,660 6,572 11,549 13,623 Rents 14,579 11,375 31,341 21,182 Other 1,100 656 2,436 1,780 Other non-operating (net) 4 (413) 183 (41) -------- -------- -------- -------- 178,015 208,549 401,457 409,555 TIRE OPERATIONS Cost of sales 26,145 18,911 47,693 33,853 Selling, administrative and general 6,551 5,021 12,584 9,485 Other non-operating (net) 57 (26) 254 3 -------- -------- -------- -------- 32,753 23,906 60,531 43,341 SERVICE AND OTHER 1,344 1,438 3,035 2,944 -------- -------- -------- -------- $212,112 $233,893 $465,023 $455,840 ======== ======== ======== ======== OPERATING PROFIT (LOSS) Carrier operations $ (4,210) $ 8,663 $ 6,674 $ 14,710 Tire operations 2,856 2,272 4,483 3,804 Other 2 (206) (439) (522) -------- -------- -------- -------- TOTAL OPERATING PROFIT (LOSS) (1,352) 10,729 10,718 17,992 MINORITY INTEREST 917 701 1,407 1,170 INTEREST EXPENSE 1,785 1,718 3,129 4,051 -------- -------- -------- -------- INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM $ (4,054) $ 8,310 $ 6,182 $ 12,771 ======== ======== ======== ========
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 ICC.
Three Months Ended Six Months Ended June 30 June 30 1994 1993 1994 1993 CARRIER OPERATIONS Salaries and wages 70.5% 67.5% 68.1% 67.8% Supplies and expenses 10.2 11.5 10.3 11.4 Operating taxes and licenses 4.4 3.9 4.2 3.9 Insurance 2.1 1.9 2.0 1.9 Communications and utilities 3.0 2.8 2.7 2.9 Depreciation and amortization 3.3 3.0 2.8 3.2 Rents 8.4 5.2 7.7 5.0 Other 0.6 0.3 0.6 0.4 Other non-operating (net) (0.1) (0.1) 0.0 0.0 ----- ---- ---- ---- Total Carrier Operations 102.4% 96.0% 98.4% 96.5% ===== ==== ==== ==== TIRE OPERATIONS Cost of sales 73.4% 72.2% 73.4% 71.8% Selling, administrative and general 18.4 19.2 19.4 20.1 Other non-operating (net) 0.2 (0.1) 0.3 0.0 ---- ---- ---- ---- Total Tire Operations 92.0% 91.3% 93.1% 91.9% ==== ==== ==== ====
Results of Operations Three Months Ended June 30, 1994 As Compared With Three Months Ended June 30, 1993 After losing an estimated $.68 per common share for the month of April 1994, the Company reported a $.23 loss per common share for the three months ended June 30, 1994. The April loss was due to the labor strike by the Teamsters union employees of ABF Freight System, Inc. ("ABF"), the Company's largest subsidiary. Consolidated revenues of the Company for the three months ended June 30, 1994 were $210.8 million compared to $244.6 million for the three months ended June 30, 1993. The Company had a operating loss of $1.4 million for the three months ended June 30, 1994 compared to operating profit of $10.7 million for the three months ended June 30, 1993. The net loss for the three months ended June 30, 1994 was $3.4 million, or $.23 per common share, compared to net income of $4.3 million, or $.17 per common share for the three months ended June 30, 1993. The net loss of $3.4 million, or $.23 per common share, also compares to income before extraordinary item of $4.4 million, or $.18 per common share for the three months ended June 30, 1993. During the three months ended June 30, 1993, the Company recorded an extraordinary loss of $162,000 (net of income tax benefit of $99,000), or $.01 per common share for the net loss on extinguishment of debt. Earnings per common share for the three months ended June 30, 1994 and 1993 give consideration to preferred stock dividends of $1.1 million. Average common shares outstanding for the three months ended June 30, 1994 were 19.2 million shares compared to 19.1 million shares for the three months ended June 30, 1993. Motor Carrier Operations Segment. ABF's labor agreement with the International Brotherhood of Teamsters ("IBT") expired on March 31, 1994. On April 6, 1994, when the terms of a new agreement had not been agreed to between the industry's bargaining group, Trucking Management, Inc. ("TMI"), and the IBT, the Teamsters employees of ABF and 20 other carriers went on strike. On April 29, 1994, TMI and the IBT reached a tentative agreement on a new four-year contract. ABF Teamsters employees began returning to work at 12:01 a.m. on April 30, 1994. The contract has since been voted on and ratified by the IBT membership. During the strike, the non-union employees of the Company were given an across-the-board pay reduction instead of having lay-offs. The 40% reduction in pay for the non-union employees during the strike amounted to approximately $3.3 million. Revenue and income comparisons for the three months have been negatively affected by the strike. Although ABF lost accounts to non-union carriers as a result of the strike, post-strike business has substantially returned to pre-strike levels. ABF's revenues for May and June of 1994 increased 12.8% over May and June of 1993. The Company attributes the return to pre-strike levels primarily to a firm economy and the Company's efforts to maintain employee morale and customer service during the strike. The ICC operating ratio for May and June of 1994 was 90.4% compared to 96.3% for the same two months of 1993. Operating results for May and June of 1994 are not necessarily indicative of the results that may be expected for the remainder of the year. Under the new labor contract which was effective retroactive to April 6, 1994, salaries, wages and benefits for full-time employees will increase 2.7% annually during the first year of the contract. The increase will be offset in part by the option to use casual workers on the dock after 40 hours of work is provided to all regular employees, a freeze on some casual workers' pay for the life of the contract and a reduction in new hire step rates. The new contract allows ABF to use intermodal or rail service for up to 28% of the line-haul operations. An increased use of rail will result in higher rent expense and may reduce over-the-road and labor costs. During the previous three years, ABF has financed its road tractor replacement program with operating leases instead of capital leases, which decreased both interest and depreciation expense and increased rent expense. In 1994, ABF purchased, with borrowings under its Credit Agreement, road tractors under its replacement program, which will increase depreciation and interest expense and decrease rent expense. Tire Operations Segment Treadco's revenues for the three months ended June 30, 1994 increased 36.0% to $35.6 million from $26.2 million for the three months ended June 30, 1993. For the three months ended June 30, 1994, "same store" sales increased 13.9% and "new store" sales accounted for 21.1% of the total increase from the three months ended June 30, 1993. "Same store" sales include both production locations and satellite sales locations that have been in existence for the entire three-month periods of 1994 and 1993. Same store sales increased primarily as a result of a higher demand for both new replacement and retreaded truck tires during the period. New store sales resulted primarily from the August 1993 acquisition of Trans- World Tire Corporation ("Trans-World") in Florida. Revenues from retreading for the three months ended June 30, 1994 increased 32.1% to $19.4 million from $14.7 million for the three months ended June 30, 1993. Revenues from new tire sales increased 41.0% to $16.2 million for the three months ended June 30, 1994 from $11.5 million for the three months ended June 30, 1993. Tire operations segment operating expenses as a percent of revenues were 92.0% for the three months ended June 30, 1994 compared to 91.3% for the three months ended June 30, 1993. Cost of sales for the tire operations segment as a percent of revenues increased to 73.4% for the three months ended June 30, 1994 from 72.2% for the three months ended June 30, 1993 resulting primarily from integrating the August 1993 acquisition of five Florida facilities into TREADCO. Although the integration is progressing as planned, the costs of sales as a percent of revenues are higher at the Florida locations. Selling, administrative and general expenses for the tire operations segment decreased to 18.4% for the three months ended June 30, 1994 from 19.2% for the three months ended June 30, 1993. The decrease resulted primarily from the increase in sales and the fact that a portion of selling, administrative and general expenses are fixed costs. Interest. Interest expense was $1.8 million for the three months ended June 30, 1994 compared to $1.7 million during the three months ended June 30, 1993. An increase in long-term debt outstanding offset in part by lower average interest rates under the Company's borrowing arrangements and the utilization of operating leases resulted in the increase in interest expense. The increase in long-term debt consisted primarily of drawing funds on a term loan under the existing Credit Agreement and maintaining a higher average balance outstanding under the revolving credit facilities. The additional funds were used to meet operational needs resulting from the labor strike. Income Taxes. The difference between the effective tax rate for the three months ended June 30, 1994 and the federal statutory rate resulted primarily from state income taxes, amortization of goodwill, minority interest, undistributed earnings of Treadco and other nondeductible expenses (see Note D to the consolidated financial statements). Six Months Ended June 30, 1994 As Compared With Six Months Ended June 30, 1993 The Company overcame a loss of an estimated $.68 per common share for the month of April 1994 to break even for the six months ended June 30, 1994. Consolidated revenues of the Company for the six months ended June 30, 1994 were $475.7 million compared to $473.8 million for the six months ended June 30, 1993. The Company had operating profit of $10.7 million for the six months ended June 30, 1994 compared to operating profit of $18.0 million for the six months ended June 30, 1993. Net income for the six months ended June 30, 1994 was $2.2 million, or $.00 per common share (after giving consideration to preferred stock dividends of $2.1 million), compared to net income of $6.3 million, or $.24 per common share for the six months ended June 30, 1993. The net income of $2.2 million, or $.00 per common share, also compares to income before extraordinary item of $6.6 million, or $.25 per common share for the six months ended June 30, 1993. During the six months ended June 30, 1993, the Company recorded an extraordinary loss of $329,000 (net of income tax benefit of $201,000), or $.01 per common share for the net loss on extinguishment of debt. Earnings per common share for the six months ended June 30, 1994 and June 30, 1993 give consideration to preferred stock dividends of $2.1 million and $1.8 million, respectively. Average common shares outstanding for the six months ended June 30, 1994 were 19.3 million shares compared to 19.2 million shares for the six months ended June 30, 1993. Motor Carrier Operations Segment. Revenue and income comparisons for the six months have been negatively affected by the strike. Under the new labor contract which was effective retroactive to April 6, 1994, salaries, wages and benefits for full-time employees will increase 2.7% annually during the first year of the contract. The increase will be offset in part by the option to use casual workers on the dock after 40 hours of work is provided to all regular employees, a freeze on some casual workers' pay for the life of the contract and a reduction in new hire step rates. The new contract allows ABF to use intermodal or rail service for up to 28% of the line-haul operations. An increased use of rail will result in higher rent expense and may reduce over-the-road and labor costs. During the previous three years, ABF has financed its road tractor replacement program with operating leases instead of capital leases, which decreased both interest and depreciation expense and increased rent expense. In 1994, ABF purchased, with borrowings under its Credit Agreement, road tractors under its replacement program, which will increase depreciation and interest expense and decrease rent expense. Tire Operations Segment Treadco's revenues for the six months ended June 30, 1994 increased 37.9% to $65.0 million from $47.1 million for the six months ended June 30, 1993. For the six months ended June 30, 1994, "same store" sales increased 13.4% and "new store" sales accounted for 23.9% of the total increase from the six months ended June 30, 1993. "Same store" sales include both production locations and satellite sales locations that have been in existence for the entire six-month periods of 1994 and 1993. Same store sales increased primarily as a result of a higher demand for both new replacement and retreaded truck tires during the period. New store sales resulted primarily from the August 1993 acquisition of Trans-World. Revenues from retreading for the six months ended June 30, 1994 increased 34.0% to $36.0 million from $26.9 million for the six months ended June 30, 1993. Revenues from new tire sales increased 43.1% to $29.0 million for the six months ended June 30, 1994 from $20.2 million for the six months ended June 30, 1993. Tire operations segment operating expenses as a percent of revenues were 93.1% for the six months ended June 30, 1994 compared to 91.9% for the six months ended June 30, 1993. Cost of sales for the tire operations segment as a percent of revenues increased to 73.4% for the six months ended June 30, 1994 from 71.8% for the six months ended June 30, 1993 resulting primarily from integrating the August 1993 acquisition of five Florida facilities into TREADCO. Although the integration is progressing as planned, the costs of sales as a percent of revenues are higher at the Florida locations. Selling, administrative and general expenses for the tire operations segment decreased to 19.4% for the six months ended June 30, 1994 from 20.1% for the six months ended June 30, 1993. The decrease resulted primarily from the increase in sales and the fact that a portion of selling, administrative and general expenses are fixed costs. Interest. Interest expense was $3.1 million for the six months ended June 30, 1994 compared to $4.1 million during the six months ended June 30, 1993. A decrease in long-term debt outstanding, lower average interest rates under the Company's borrowing arrangements and the utilization of operating leases resulted in the decrease in interest expense. The decrease in long- term debt consisted primarily of retiring $50 million in principal of a term loan under its existing Credit Agreement and financing a portion of its revenue equipment with operating leases. Income Taxes. The difference between the effective tax rate for the six months ended June 30, 1994 and the federal statutory rate resulted primarily from state income taxes, amortization of goodwill, minority interest, undistributed earnings of Treadco and other nondeductible expenses (see Note D to the consolidated financial statements). Liquidity and Capital Resources The ratio of current assets to current liabilities was 1.07:1 at June 30, 1994 and December 31, 1993. Net cash provided by operating activities for the six months ended June 30, 1994 was $29.9 million compared to $20.7 million for the six months ended June 30, 1993. The increase is due primarily to an increase in accounts payable and accrued expenses offset in part by a reduction in net income. The Company and certain banks are parties to a Credit Agreement with Societe Generale, as Agent and NationsBank of Texas a Co-Agent (the "Credit Agreement") which provides funds available under a three-year Revolving Credit Facility of $100 million, including $40 million for letters of credit. There are no borrowings outstanding under the Revolving Credit Facility and approximately $36.3 million of letters of credit outstanding at June 30, 1994. The Revolving Credit Facility is payable on June 30, 1997. Outstanding revolving credit advances may not exceed a borrowing base calculated using the Company's revenue equipment, real property and the Treadco common stock owned by the Company. At June 30, 1994, the borrowing base was $103.7 million. The Company has paid and will continue to pay certain customary fees for such commitments and loans. Amounts advanced under the revolving credit facility bear interest, at the Company's option, at a rate per annum of either: (i) the greater of (a) the agent bank's prime rate and (b) the Federal Funds Rate plus 1/2%; or (ii) LIBOR plus 3/4%. The Credit Agreement contains various covenants which limit, among other things, dividends, indebtedness, capital expenditures, loans and investments, as well as requiring the Company to meet certain financial tests. As of June 30, 1994, these covenants have been met. If there is an event of default which is not remedied or waived within 10 days, the Credit Agreement will become secured to the extent of amounts then outstanding of all of the Company's revenue equipment, real property and common stock included in the borrowing base (subject to certain exceptions). The Company entered into a $20 million term credit agreement, dated as of April 25, 1994, with Nationsbank of Texas, N.A., as agent, and Societe Generale Southwest Agency. The proceeds from the agreement will be used in financing the construction of the Company's corporate office which is expected to be completed by January 1995. Amounts advanced and unpaid shall bear interest of 8.07% per annum. The Company shall repay the outstanding principal amount in 40 equal installments, each in the amount of $500,000, due and payable on the fifteenth day of each January, April, July, and October hereafter commencing on July 15, 1994. At June 30, 1994, there was $20 million outstanding. On March 2, 1994, ABF, Renaissance Asset Funding Corp. ("Renaissance") and Societe Generale entered into a receivables purchase agreement. The agreement allows ABF to sell to Renaissance an interest in up to $55 million in a pool of receivables. At June 30, 1994, ABF had no receivables financed through this facility. ABF expects to use this facility from time to time throughout the year for various corporate needs, including working capital. Management believes, based upon the Company's current levels of operations and anticipated growth, the Company's cash, capital resources, borrowings available under the Credit Agreement and cash flow from operations will be sufficient to finance current and future operations and meet all present and future debt service requirements. Seasonality The motor carrier segment is affected by seasonal fluctuations, which affect tonnage to be transported. Freight shipments, operating costs and earnings are also affected adversely by inclement weather conditions. The third calendar quarter of each year usually has the highest tonnage levels while the first quarter has the lowest. TREADCO's operations are somewhat seasonal with the last six months of the calendar year generally having the highest levels of sales. PART II. OTHER INFORMATION ARKANSAS BEST CORPORATION ITEM 1. LEGAL PROCEEDINGS. From time to time, the Company is named as a defendant in legal actions, the majority of which arise out of the normal course of its business. The Company is not a party to any pending legal proceeding which the Company's management believes to be material to the financial condition of the Company. The Company maintains liability insurance against risks arising out of the normal course of its business (see Note F to the Company's Unaudited Consolidated Financial Statements). ITEM 2. CHANGES IN SECURITIES. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Company's Annual Meeting of Stockholders was held on May 10, 1994. The first proposal considered at the Annual Meeting was to elect two persons to serve as directors of the Company. The results of the vote on this proposal are as follows: Directors Votes For Votes Withheld Arthur J. Fritz, Jr. 16,070,582 29,139 John H. Morris 16,070,682 29,039 The second proposal was to amend the Company's 1992 Stock Option Plan. This proposal received 15,099,450 votes for adoption, 523,292 votes against adoption, 194,668 abstentions and 282,311 broker non-votes. The third proposal was to ratify the appointment of Ernst & Young as independent auditors for fiscal year 1994. This proposal received 16,085,131 votes for adoption, 4,142 votes against adoption, 10,448 abstentions and -0- broker non-votes. ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. Exhibit 11 - Statement Re: Computation of Earnings Per Share. (b) Reports on Form 8-K. None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ARKANSAS BEST CORPORATION (Registrant) Date: August 8, 1994 s/Donald L. Neal ----------------- ------------------------------------ Donald L. Neal - Senior Vice President - Chief Financial Officer, and Principal Accounting Officer EX-11 2 EARNINGS PER COMMON SHARE EXHIBIT 11 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE ARKANSAS BEST CORPORATION
Three Months Ended Six Months Ended June 30 June 30 1994 1993 1994 1993 ($ thousands, except per share data) PRIMARY: Average shares outstanding 19,200,077 19,125,633 19,197,936 19,092,053 Net effect of dilutive stock options -- Based on the treasury stock method using average market price - 1,431 106,713 68,777 ---------- ---------- ---------- ---------- Average common shares outstanding 19,200,077 19,127,064 19,304,649 19,160,830 ========== ========== ========== ========== Income before extra- ordinary item $ (3,408) $ 4,431 $ 2,167 $ 6,593 Less: Preferred stock dividend 1,075 1,075 2,149 1,755 ---------- ---------- ---------- ---------- (4,483) 3,356 18 4,838 Extraordinary item: Loss on extinguishment of debt - (162) - (329) ---------- ---------- ---------- ---------- Net income (loss) available for common $ (4,483) $ 3,194 $ 18 $ 4,509 ========== ========== ========== ========== Per common and common equivalent share: Income (loss) before extraordinary item $ (0.23) $ 0.18 $ - $ 0.25 Extraordinary item: Loss on extinguish- ment of debt - (0.01) - (0.01) ---------- ---------- ---------- ---------- Net income (loss) per common share $ (0.23) $ 0.17 $ - $ 0.24 ========== ========== ========== ========== Fully-diluted earnings per share are not presented, as such calculations would be anti-dilutive.
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