-----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, nG7G2UfkWFZxc1vZeI/m75/NG9lnUxhz3+2yGoe75uE3fTPrmpC801w8MRZT9ahp uJrSZBJ77SZ81wQdjugiJg== 0000894405-94-000017.txt : 19941116 0000894405-94-000017.hdr.sgml : 19941116 ACCESSION NUMBER: 0000894405-94-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: NASD 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: 94559031 BUSINESS ADDRESS: STREET 1: 1000 SOUTH 21 ST CITY: FORT SMITH STATE: AR ZIP: 72901 BUSINESS PHONE: 5017856000 MAIL ADDRESS: STREET 1: P O BOX 48 CITY: FORT SMITH STATE: AR ZIP: 72902 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended September 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 October 31, 1994 --------------------------------- -------------------------------- Common Stock, $.01 par value 19,203,517 shares ARKANSAS BEST CORPORATION INDEX Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets -- September 30, 1994 and December 31, 1993 3 Consolidated Statements of Operations -- For the Three and Nine Months Ended September 30, 1994 and 1993 5 Consolidated Statements of Cash Flows -- For the Nine Months Ended September 30, 1994 and 1993 7 Notes to Consolidated Financial Statements -- September 30, 1994 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 PART II. OTHER INFORMATION Item 1. Legal Proceedings 23 Item 2. Changes in Securities 23 Item 3. Defaults Upon Senior Securities 23 Item 4. Submission of Matters to a Vote of Security Holders 23 Item 5. Other Information 23 Item 6. Exhibits and Reports on Form 8-K 23 SIGNATURES 25 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ARKANSAS BEST CORPORATION CONSOLIDATED BALANCE SHEETS
September 30 December 31 1994 1993 (unaudited) (note) ($ thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 20,528 $ 6,962 Trade receivables, less allowances for doubtful accounts (1994 -- $2,635,000; 1993 -- $2,220,000) 138,741 104,598 Inventories -- Note C 29,179 29,086 Prepaid expenses 10,955 9,916 --------- --------- TOTAL CURRENT ASSETS 199,403 150,562 PROPERTY, PLANT AND EQUIPMENT Land and structures 109,477 108,422 Revenue equipment 196,721 169,573 Manufacturing equipment 6,874 5,997 Service, office and other equipment 37,426 33,913 Leasehold improvements 8,852 8,096 Construction in progress 8,751 - --------- --------- 368,101 326,001 Less allowances for depreciation and amortization (157,327) (147,799) --------- --------- 210,774 178,202 OTHER ASSETS 14,619 12,839 GOODWILL, less amortization (1994 -- $18,604,000; 1993 -- $16,267,000) -- Note H 153,108 106,130 --------- --------- $ 577,904 $ 447,733 ========= =========
ARKANSAS BEST CORPORATION CONSOLIDATED BALANCE SHEETS
September 30 December 31 1994 1993 (unaudited) (note) ($ thousands) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Bank drafts payable $ 10,491 $ 7,661 Trade accounts payable 50,680 36,143 Accrued expenses 86,082 71,278 Federal and state income taxes 10,707 6,398 Deferred federal income taxes 3,503 3,503 Current portion of long-term debt -- Note H 79,238 15,239 --------- --------- TOTAL CURRENT LIABILITIES 240,701 140,222 LONG-TERM DEBT, less current portion 61,978 43,731 OTHER LIABILITIES 5,615 3,933 DEFERRED FEDERAL INCOME TAXES 26,205 26,158 MINORITY INTEREST 33,811 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: 19,203,517 shares; 1993: 19,185,325 shares 192 192 Additional paid-in capital 206,698 206,457 Stock payable to employee benefit plans - 205 Predecessor basis adjustment (15,371) (15,371) Retained earnings 18,060 10,492 --------- --------- TOTAL SHAREHOLDERS' EQUITY 209,594 201,990 CONTINGENCIES -- Note F --------- --------- $ 577,904 $ 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 Nine Months Ended September 30 September 30 1994 1993 1994 1993 (unaudited) ($ thousands, except per share data) OPERATING REVENUES Carrier operations $ 254,019 $ 233,222 $ 662,150 $ 657,487 Tire operations 39,149 32,663 104,163 79,808 Service and other 1,083 1,221 3,679 3,643 --------- --------- --------- --------- 294,251 267,106 769,992 740,938 OPERATING EXPENSES AND COSTS -Note E Carrier operations 237,509 216,760 638,783 626,356 Tire operations 35,740 29,608 96,017 72,946 Service and other 1,504 1,350 4,647 4,074 --------- --------- --------- --------- 274,753 247,718 739,447 703,376 --------- --------- --------- --------- OPERATING INCOME 19,498 19,388 30,545 37,562 OTHER INCOME Gain on asset sales 787 959 1,955 2,338 Other 191 135 719 378 --------- --------- --------- --------- 978 1,094 2,674 2,716 OTHER EXPENSES Interest 1,592 1,732 4,721 5,783 Other 1,074 933 3,099 2,737 Minority interest in subsidiary 1,079 933 2,486 2,103 --------- --------- --------- --------- 3,745 3,598 10,306 10,623 --------- --------- --------- --------- INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM 16,731 16,884 22,913 29,655 FEDERAL AND STATE INCOME TAXES (CREDIT) - Note D Current 6,123 6,431 11,498 14,667 Deferred 1,407 1,699 47 (359) --------- --------- --------- --------- 7,530 8,130 11,545 14,308 --------- --------- --------- --------- ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Continued) Three Months Ended Nine Months Ended September 30 September 30 1994 1993 1994 1993 (unaudited) ($ thousands, except per share data) INCOME BEFORE EXTRAORDINARY ITEM $ 9,201 $ 8,754 $ 11,368 $ 15,347 EXTRAORDINARY ITEM: Loss on extinguishments of debt - - - (329) --------- --------- --------- --------- NET INCOME $ 9,201 $ 8,754 $ 11,368 $ 15,018 ========= ========= ========= ========= EARNINGS PER COMMON SHARE: PRIMARY: INCOME BEFORE EXTRAORDINARY ITEM $ 0.42 $ 0.40 $ 0.42 $ 0.65 EXTRAORDINARY ITEM: Loss on extinguishments of debt - - - (0.01) --------- --------- --------- --------- NET INCOME $ 0.42 $ 0.40 $ 0.42 $ 0.64 ========= ========= ========= ========= FULLY DILUTED: INCOME BEFORE EXTRAORDINARY ITEM $ 0.40 $ 0.38 $ 0.42 $ 0.65 EXTRAORDINARY ITEM Loss on extinguishments of debt - - - (0.01) --------- --------- --------- --------- NET INCOME $ 0.40 $ 0.38 $ 0.42 $ 0.64 ========= ========= ========= ========= AVERAGE COMMON SHARES OUTSTANDING: Primary 19,306 19,164 19,305 19,162 ========= ========= ========= ========= Fully Diluted 23,138 22,972 19,305 19,162 ========= ========= ========= ========= CASH DIVIDENDS PAID PER COMMON SHARE $ 0.01 $ 0.01 $ 0.03 $ 0.03 ========= ========= ========= ========= See notes to consolidated financial statements.
ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30 1994 1993 (unaudited) ($ thousands) OPERATING ACTIVITIES Net income $ 11,368 $ 15,018 Adjustments to reconcile net income to net cash provided (used) by operating activities: Loss on extinguishments of debt - 329 Depreciation and amortization 20,332 21,590 Amortization of intangibles 2,337 2,288 Amortization of other expenses 341 203 Contribution of common stock to employee benefit plans - 394 Provision for losses on accounts receivable 2,636 1,625 Provision for deferred income taxes 47 (359) Gain on asset sales (1,955) (2,338) Write-off of intrastate operating rights 42 - Gain on issuance of subsidiary stock (45) (37) Minority interest in subsidiary 2,486 2,103 Changes in operating assets and liabilities: Accounts receivable (20,762) (19,890) Inventories and prepaid expenses (601) (2,849) Other assets (562) 1,382 Accounts payable, bank drafts payable, taxes payable, accrued expenses and other liabilities 25,554 6,332 --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 41,218 25,791 INVESTING ACTIVITIES Purchases of property, plant and equipment, less capitalized leases (38,899) (9,487) Proceeds from asset sales 7,578 10,216 Acquisition of the Clipper Group (net of cash acquired) (49,514) - Acquisition of Trans-World Tire Corp. - (2,500) --------- --------- NET CASH USED BY INVESTING ACTIVITIES (80,835) (1,771) ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Nine Months Ended September 30 1994 1993 (unaudited) ($ thousands) FINANCING ACTIVITIES Deferred financing costs and expenses incurred in borrowing activities $ (147) $ (47) Net proceeds from the issuance of preferred stock - 71,893 Proceeds from issuance of common stock 37 - Proceeds from term loan facility 20,000 - Proceeds from commercial paper agreement 56,000 - Borrowings under revolving credit facilities 30,000 32,000 Principal payments under term loan facility - (50,000) Payments under revolving credit facilities (34,000) (47,000) Principal payments on other long-term debt (14,578) (21,476) Payments to retire 14% senior subordinated notes - (2,175) Dividends paid to minority shareholders of subsidiary (329) (323) Dividends paid (3,800) (573) --------- --------- NET CASH USED BY FINANCING ACTIVITIES 53,183 (17,701) --------- --------- NET INCREASE IN CASH AND CASH EQUIVALENTS 13,566 6,319 Cash and cash equivalents at beginning of period 6,962 5,644 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 20,528 $ 11,963 ========= ========= See notes to consolidated financial statements.
ARKANSAS BEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 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"), Clipper Exxpress Company ("Clipper") which was acquired on September 30, 1994 (see Note H), and ABC Treadco, Inc. ("ABC Treadco"). 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 nine months ended September 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
September 30 December 31 1994 1993 ($ thousands) Finished goods $ 21,166 $ 20,240 Materials 6,234 6,784 Repair parts, supplies and other 1,779 2,062 -------- -------- $ 29,179 $ 29,086 ======== ========
NOTE D -- FEDERAL AND STATE INCOME TAXES
Three Months Ended Nine Months Ended September 30 September 30 1994 1993 1994 1993 ($ thousands) Income tax at regular rates $ 5,856 $ 5,909 $ 8,020 $10,379 Percent 35.0% 35.0% 35.0% 35.0% State taxes less federal benefits 555 702 1,097 1,331 Percent 3.3% 4.2% 4.8% 4.5% Amortization of goodwill 246 251 777 754 Percent 1.5% 1.5% 3.4% 2.5% Minority interest 367 317 846 715 Percent 2.2% 1.9% 3.7% 2.4% Adjustment of deferred taxes for rate increase - 677 - 677 Percent - 4.0% - 2.3% Retroactive effective of tax rate increase on 1993 taxes - 151 - - Percent - 0.9% - - Other items 506 123 805 452 Percent 3.0% 0.7% 3.5% 1.5% ------- ------- ------- ------- Income tax expense $ 7,530 $ 8,130 $11,545 $14,308 Percent 45.0% 48.2% 50.4% 48.2% ======= ======= ======= =======
NOTE E -- OPERATING EXPENSES AND COSTS
Three Months Ended Nine Months Ended September 30 September 30 1994 1993 1994 1993 (unaudited) ($ thousands) Carrier Operations: Salaries and wages $166,829 $152,640 $444,722 $440,424 Supplies and expenses 25,888 23,909 68,081 72,258 Operating taxes and licenses 9,059 8,827 26,017 25,378 Insurance 5,233 4,435 13,199 12,652 Communications and utilities 5,679 5,747 16,617 17,857 Depreciation and amortization 6,364 6,156 17,913 19,779 Rents 17,554 13,851 48,895 35,033 Other 903 1,195 3,339 2,975 -------- -------- -------- -------- 237,509 216,760 638,783 626,356 Tire Operations: Cost of sales 28,816 23,799 76,509 57,652 Selling, administrative and general 6,924 5,809 19,508 15,294 -------- -------- -------- -------- 35,740 29,608 96,017 72,946 Service and Other 1,504 1,350 4,647 4,074 -------- -------- -------- -------- $274,753 $247,718 $739,447 $703,376 ======== ======== ======== ========
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 generally maintains liability insurance against risks arising out of the normal course of its business. ABF stores some fuel for its tractors and trucks in 100 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 -- 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 September 30, 1994, there was $19.5 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 September 30, 1994, ABF had $55 million financed through this facility. The Company used funds provided by the facility to finance the acquisition of Clipper Exxpress Company and two affiliated companies. (See Note H.) 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 September 30, 1997 and changed one of the Company's interest rate options from LIBOR plus 1 1/2% to LIBOR plus 3/4%. NOTE H -- ACQUISITIONS On September 30, 1994 Arkansas Best Corporation consummated the purchase of all outstanding stock of Clipper Exxpress Company ("Clipper"), Agricultural Express of America, Inc. ("AXXA") and Agile Freight System, Inc. ("Agile") (collectively the "Clipper Group") pursuant to a stock purchase agreement entered into on August 18, 1994. The Company's total purchase price is $60 million in cash, subject to certain closing audit adjustments. The Company paid an initial payment of $54 million to the Clipper Group shareholders from cash on hand and funds provided under its receivables purchase agreement. The final payment which is due on May 15, 1995 will be funded from cash on hand and/or funds available under its existing credit facilities. On October 12, 1994, the Company announced that its wholly owned subsidiary, Integrated Distribution Systems, Inc., had entered into agreements to acquire all the stock of Traveller Enterprises ("Traveller") and Commercial Warehouse Company ("CWC") (collectively the "Traveller Group"). Integrated Distribution Systems, Inc. exchanged 310,191 shares of the Company's Common Stock, $.01 par value, for the stock of Traveller and CWC. The Traveller Group has combined annual revenues of approximately $17.5 million. Pro forma information (as if the Clipper Group and Traveller Group acquisitions were completed at the beginning of the respective periods) for the nine months ended September 30, 1994 and 1993 is as follows:
Nine Months Ended September 30 1994 1993 ($ thousands) Operating revenues $ 880,625 $ 845,030 Operating expenses 841,999 803,999 --------- --------- 38,626 41,031 Interest expense, net 7,451 8,288 Minority interest in subsidiary 2,486 2,103 Other income, net 1,508 1,188 Provision for income taxes 13,205 14,229 --------- --------- Income before extraordinary item $ 13,976 $ 15,223 ========= ========= Earnings per common share before extraordinary item $ 0.55 $ 0.64 ========= ========= Average common shares outstanding 19,615 19,472 ========= =========
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. On September 30, 1994, the Company consummated the purchase of all outstanding stock of Clipper Exxpress Company ("Clipper"), Agricultural Express of America, Inc. ("AXXA") and Agile Freight System, Inc. ("Agile") (collectively the "Clipper Group") pursuant to a stock purchase agreement entered into on August 18, 1994. The Company's total purchase price is $60 million in cash, subject to certain closing audit adjustments. The Company paid an initial payment of $54 million to the Clipper Group shareholders from cash on hand and funds provided under its receivables purchase agreement. The final payment which is due on May 15, 1995 will be funded from cash on hand and/or funds available under its existing credit facilities. On October 12, 1994, the Company announced that its wholly owned subsidiary, Integrated Distribution Systems, Inc., had entered into agreements to acquire all the stock of Traveller Enterprises ("Traveller") and Commercial Warehouse Company ("CWC") (collectively the "Traveller Group"). Integrated Distribution Systems, Inc. exchanged 310,191 shares of the Company's Common Stock, $.01 par value, for the stock of Traveller and CWC. The Traveller Group has combined annual revenues of approximately $17.5 million. Segment Data The following tables reflect information prepared on a business segment basis, which includes reclassification of certain expenses and costs between the Company and its subsidiaries and elimination of the effects of intercompany transactions. Operating profit on a business segment basis differs from operating income as reported in the Company's Consolidated Financial Statements. Other income and other expenses (which include amortization expense), except for interest expense and minority interest in subsidiary, which appears below the operating income line in the Company's Statement of Operations, have been allocated to individual segments for the purpose of calculating operating profit on a segment basis.
Three Months Ended Nine Months Ended September 30 September 30 1994 1993 1994 1993 ($ thousands) OPERATING REVENUES Carrier operations $254,019 $233,222 $662,150 $657,487 Tire operations 39,149 32,663 104,163 79,808 Other 1,083 1,221 3,679 3,643 -------- -------- -------- -------- $294,251 $267,106 $769,992 $740,938 ======== ======== ======== ======== OPERATING EXPENSES AND COSTS CARRIER OPERATIONS Salaries and wages $166,829 $152,640 $444,722 $440,424 Supplies and expenses 25,888 23,909 68,081 72,258 Operating taxes and licenses 9,059 8,827 26,017 25,378 Insurance 5,233 4,435 13,199 12,652 Communications and utilities 5,679 5,747 16,617 17,857 Depreciation and amortization 6,364 6,156 17,913 19,779 Rents 17,554 13,851 48,895 35,033 Other 903 1,195 3,339 2,975 Other non-operating (net) 81 (293) 264 (334) -------- -------- -------- -------- 237,590 216,467 639,047 626,022 TIRE OPERATIONS Cost of sales 28,816 23,799 76,509 57,652 Selling, administrative and general 6,924 5,809 19,508 15,294 Other non-operating (net) 80 14 334 17 -------- -------- -------- -------- 35,820 29,622 96,351 72,963 SERVICE AND OTHER 1,439 1,468 4,474 4,412 -------- -------- -------- -------- $274,849 $247,557 $739,872 $703,397 ======== ======== ======== ======== OPERATING PROFIT (LOSS) Carrier operations $ 16,429 $ 16,755 $ 23,103 $ 31,465 Tire operations 3,329 3,041 7,812 6,845 Other (356) (247) (795) (769) -------- -------- -------- -------- TOTAL OPERATING PROFIT 19,402 19,549 30,120 37,541 MINORITY INTEREST 1,079 933 2,486 2,103 INTEREST EXPENSE 1,592 1,732 4,721 5,783 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM $ 16,731 $ 16,884 $ 22,913 $ 29,655 ======== ======== ======== ========
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 Nine Months Ended September 30 September 30 1994 1993 1994 1993 CARRIER OPERATIONS Salaries and wages 65.7% 65.4% 67.2% 67.0% Supplies and expenses 10.2 10.3 10.3 11.0 Operating taxes and licenses 3.6 3.8 3.9 3.9 Insurance 2.1 1.9 2.0 1.9 Communications and utilities 2.2 2.5 2.5 2.7 Depreciation and amortization 2.5 2.6 2.7 3.0 Rents 6.9 5.9 7.4 5.3 Other 0.3 0.5 0.5 0.5 Other non-operating (net) 0.0 (0.1) 0.0 (0.1) ----- ---- ---- ---- Total Carrier Operations 93.5% 92.8% 96.5% 95.2% ===== ==== ==== ==== TIRE OPERATIONS Cost of sales 73.6% 72.9% 73.5% 72.2% Selling, administrative and general 17.7 17.8 18.7 19.2 Other non-operating (net) 0.2 0.0 0.3 0.0 ----- ----- ----- ----- Total Tire Operations 91.5% 90.7% 92.5% 91.4% ===== ===== ===== =====
Results of Operations Three Months Ended September 30, 1994 As Compared With Three Months Ended September 30, 1993 Consolidated revenues of the Company for the three months ended September 30, 1994 were $294.3 million compared to $267.1 million for the three months ended September 30, 1993. The Company had operating profit of $19.4 million for the three months ended September 30, 1994 compared to operating profit of $19.5 million for the three months ended September 30, 1993. Net income for the three months ended September 30, 1994 was $9.2 million, or $.40 per common share, compared to net income of $8.8 million, or $.38 per common share for the three months ended September 30, 1993. Net income for the three months ended September 30, 1993 was reduced by $828,000, or $.04 per common share (assuming full dilution), to reflect the retroactive increase in the corporate federal tax rate under the Revenue Reconciliation Act of 1993. Earnings per common share for the three months ended September 30, 1994 and 1993 give consideration to preferred stock dividends of $1.1 million. Average common shares outstanding for the three months ended September 30, 1994 were 23.1 million shares compared to 23.0 million shares for the three months ended September 30, 1993. Per share earnings reflect full dilution and assume conversion of preferred shares to common. Motor Carrier Operations Segment. Revenues from the motor carrier operations segment increased 8.9% to $254.0 million for the three months ended September 30, 1994 from $233.2 million for the three months ended September 30, 1993. The increase resulted primarily from a 7.4% increase in total tonnage and a 1.7% increase in revenue per hundredweight. The increase in total tonnage consisted of an 8.3% increase in less-than-truckload ("LTL") tonnage and a 4.6% increase in truckload tonnage compared to the three months ended September 30, 1993. The increase is due primarily to a favorable economy, a stable pricing environment and consistent performance by ABF in responding to customer needs. Motor carrier segment operating expenses as a percent of revenues increased to 93.5% for the three months ended September 30, 1994 from 92.8% for the three months ended September 30, 1993. Salaries and wages expense as a percent of revenues increased to 65.7% for the three months ended September 30, 1994 compared to 65.4% for the three months ended September 30, 1993, resulting primarily from contractual wage increases which went into effect in April 1994 under the new collective bargaining agreement. Insurance expense as a percent of revenues increased to 2.1% for the three months ended September 30, 1994 from 1.9% for the three months ended September 30, 1993, resulting primarily from an increase to the loss and damage claims reserve. Communications and utilities expenses as a percent of revenues decreased to 2.2% for the three months ended September 30, 1994 from 2.5% for the three months ended September 30, 1993. The decrease resulted primarily from the increase in sales and the fact that a portion of communications and utilities expenses are relatively fixed costs. Rent expense as a percent of revenues increased to 6.9% for the three months ended September 30, 1994 from 5.9% for the three months ended September 30, 1993. The increase in rent expense resulted primarily from the utilization of alternate modes of outside transportation during periods of peak activity and the use of operating leases. 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 utilizing borrowings under its Credit Agreement, purchased 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 September 30, 1994 increased 19.9% to $39.1 million from $32.7 million for the three months ended September 30, 1993. For the three months ended September 30, 1994, "same store" sales increased 7.0% and "new store" sales accounted for 13.0% of the total increase from the three months ended September 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 and an increase in market share in the areas served. "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 September 30, 1994 increased 17.2% to $20.7 million from $17.6 million for the three months ended September 30, 1993. Revenues from new tire sales increased 22.9% to $18.4 million for the three months ended September 30, 1994 from $15.1 million for the three months ended September 30, 1993. Tire operations segment operating expenses as a percent of revenues were 91.5% for the three months ended September 30, 1994 compared to 90.7% for the three months ended September 30, 1993. Cost of sales for the tire operations segment as a percent of revenues increased to 73.6% for the three months ended September 30, 1994 from 72.9% for the three months ended September 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. Effective October 1, 1994, Bandag Incorporated ("Bandag") announced a 4% price increase. Bandag provides the Company with its raw materials for the retreading process. Management believes it will be difficult to recoup the price increase during the fourth quarter. The Company's new tire manufacturers are implementing a price increase effective November 1, 1994 of 2%. Management believes it will be easier to pass on the new tire price increase to TREADCO's customers, because of the shortage in availability of new tires. Selling, administrative and general expenses for the tire operations segment decreased to 17.7% for the three months ended September 30, 1994 from 17.8% for the three months ended September 30, 1993. Interest. Interest expense was $1.6 million for the three months ended September 30, 1994 compared to $1.7 million during the three months ended September 30, 1993. Lower average interest rates under the Company's borrowing arrangements and the utilization of operating leases mainly offset by an increase in the average long-term debt outstanding resulted in the decrease in interest expense. The increase in average long-term debt outstanding consisted primarily of drawing funds on a term loan under the existing Credit Agreement. Income Taxes. The difference between the effective tax rate for the three months ended September 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). Nine Months Ended September 30, 1994 As Compared With Nine Months Ended September 30, 1993 Consolidated revenues of the Company for the nine months ended September 30, 1994 were $770.0 million compared to $740.9 million for the nine months ended September 30, 1993. The Company had operating profit of $30.1 million for the nine months ended September 30, 1994 compared to operating profit of $37.5 million for the nine months ended September 30, 1993. Net income for the nine months ended September 30, 1994 was $11.4 million, or $.42 per common share (after giving consideration to preferred stock dividends of $2.1 million), compared to net income of $15.0 million, or $.64 per common share for the nine months ended September 30, 1993. The net income of $11.4 million, or $.42 per common share, also compares to income before extraordinary item of $15.3 million, or $.65 per common share for the nine months ended September 30, 1993. During the nine months ended September 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 nine months ended September 30, 1994 and September 30, 1993 give consideration to preferred stock dividends of $3.2 million and $2.8 million, respectively. Net income for the three months ended September 30, 1993 was reduced by $828,000, or $.04 per common share (assuming full dilution), to reflect the retroactive increase in the corporate federal tax rate under the Revenue Reconciliation Act of 1993. Average common shares outstanding for the nine months ended September 30, 1994 were 19.3 million shares compared to 19.2 million shares for the nine months ended September 30, 1993. Outstanding shares for the nine months do not assume conversion of preferred stock to common shares, because conversion would be anti-dilutive for these periods. Consolidated revenues and income for the nine months ended September 30, 1994 were adversely affected by the 24-day labor strike by the Teamsters' union employees of ABF in April. As a result of the strike, the Company incurred a $.68 loss per common share during the month of April. 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 nine 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 utilizing borrowings under its Credit Agreement, purchased 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 nine months ended September 30, 1994 increased 30.5% to $104.2 million from $79.8 million for the nine months ended September 30, 1993. For the nine months ended September 30, 1994, "same store" sales increased 10.6% and "new store" sales accounted for 19.6% of the total increase from the nine months ended September 30, 1993. "Same store" sales include both production locations and satellite sales locations that have been in existence for the entire nine- 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 and an increase in market share in the areas served. "New store" sales resulted primarily from the August 1993 acquisition of Trans- World. Revenues from retreading for the nine months ended September 30, 1994 increased 27.4% to $56.7 million from $44.5 million for the nine months ended September 30, 1993. Revenues from new tire sales increased 34.5% to $47.5 million for the nine months ended September 30, 1994 from $35.3 million for the nine months ended September 30, 1993. Tire operations segment operating expenses as a percent of revenues were 92.5% for the nine months ended September 30, 1994 compared to 91.4% for the nine months ended September 30, 1993. Cost of sales for the tire operations segment as a percent of revenues increased to 73.5% for the nine months ended September 30, 1994 from 72.2% for the nine months ended September 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. Suppliers have announced a price increase on raw materials and new tires in the fourth quarter of 1994 (see discussion in the comparisons of three months results of operations). Selling, administrative and general expenses for the tire operations segment decreased to 18.7% for the nine months ended September 30, 1994 from 19.2% for the nine months ended September 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 $4.7 million for the nine months ended September 30, 1994 compared to $5.8 million during the nine months ended September 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 nine months ended September 30, 1994 and the federal statutory rate resulted primarily from state income taxes, amortization of goodwill, minority interest, and other nondeductible expenses (see Note D to the consolidated financial statements). Liquidity and Capital Resources The ratio of current assets to current liabilities was .83:1 at September 30, 1994 compared to 1.07:1 at December 31, 1993. The decrease in the current ratio resulted primarily from the acquisition of the Clipper Group. Net cash provided by operating activities for the nine months ended September 30, 1994 was $41.2 million compared to $25.8 million for the nine months ended September 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 $38.2 million of letters of credit outstanding at September 30, 1994. The Revolving Credit Facility is payable on September 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 September 30, 1994, the borrowing base was $108.5 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 covenants. As of September 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 September 30, 1994, there was $19.5 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 September 30, 1994, ABF had $55 million of receivables financed through this facility. ABF financed $52.5 million of receivables to provide funds to the Company for the acquisition of the Clipper Group. On September 30, 1994, the Company paid an initial payment of $54 million to the Clipper Group shareholders from cash on hand and funds provided under its existing lines of credit. The final $6 million payment (subject to certain closing audit and other contractual adjustments) which is due May 15, 1995 will be funded from cash and/or funds provided under its existing lines of credit. Management believes, based upon the Company's current levels of operations and anticipated growth, the Company's cash, capital resources, borrowings available under its existing credit facilities 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 nine 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 generally 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. None ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. Exhibit 11 - Statement Re: Computation of Earnings Per Share. (b) Reports on Form 8-K. Form 8-K dated August 18, 1994 Item 5. Other Events -- Announcement of agreement to purchase all the stock of Clipper Exxpress Company and two affiliated transportation companies. Form 8-K dated September 30, 1994 Item 2. Acquisition or Disposition of Assets -- Acquisition of Clipper Exxpress Company, Agricultural Express of America, Inc. and Agile Freight System, Inc. Item 7. Financial Statements and Exhibits -- Financial statements of Clipper Exxpress, Agricultural Express of America, Inc. and Agile Freight System, Inc. and pro forma financial information to be filed under cover of Form 8-K/A as soon as practible. Stock Purchase Agreement dated August 18, 1994 by and among Arkansas Best Corporation and the Shareholders of Clipper Exxpress Company, Agile Freight System, Inc. and Agricultural Express of America, Inc. Form 8-K/A No. 1 dated September 30, 1994 Item 7. Financial Statements and Exhibits -- Audited financial statements of Clipper Exxpress Company, Agricultural Express of America, Inc. and Agile Freight System, Inc. for the years ended December 31, 1993 and 1992. Unaudited financial statements of Clipper Exxpress Company, Agricultural Express of America, Inc. and Agile Freight System, Inc. for the six months ended June 30, 1994 and 1993. Pro forma condensed consolidated statements of income for the year ended December 31, 1993 and the six months ended June 30, 1994 and the pro forma condensed consolidated balance sheet as of June 30, 1994. 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: November 11, 1994 s/Donald L. Neal ----------------- ------------------------------------ Donald L. Neal - Senior Vice President - Chief Financial Officer, and Principal Accounting Officer EX-11 2 EXHIBIT 11 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE ARKANSAS BEST CORPORATION
Three Months Ended Nine Months Ended September 30 September 30 1994 1993 1994 1993 (Thousands, except per share data) PRIMARY: Average shares outstanding 19,201 19,164 19,199 19,116 Net effect of dilutive stock options -- Based on the treasury stock method using average market price 105 - 106 46 ---------- ---------- ---------- ---------- Average common shares outstanding 19,306 19,164 19,305 19,162 ========== ========== ========== ========== Income before extra- ordinary item $ 9,201 $ 8,754 $ 11,368 $ 15,347 Less: Preferred stock dividend 1,075 1,075 3,224 2,830 ---------- ---------- ---------- ---------- 8,126 7,679 8,144 12,517 Extraordinary item: Loss on extinguishment of debt - - - (329) ---------- ---------- ---------- ---------- Net income (loss) available for common $ 8,126 $ 7,679 $ 8,144 $ 12,188 ========== ========== ========== ========== Per common and common equivalent share: Income (loss) before extraordinary item $ 0.42 $ 0.40 $ 0.42 $ 0.65 Extraordinary item: Loss on extinguish- ment of debt - - - (0.01) ---------- ---------- ---------- ---------- Net income (loss) per common share $ 0.42 $ 0.40 $ 0.42 $ 0.64 ========== ========== ========== ========== Three Months Ended Nine Months Ended September 30 September 30 1994 1993 1994 1993 (Thousands, except per share data) FULLY-DILUTED: Average shares outstanding 19,201 19,164 19,199 19,116 Net effect of dilutive stock options -- Based on the treasury stock method using ending market price 140 18 106 46 Assumed conversion of preferred stock 3,797 3,797 - - ---------- ---------- ---------- ---------- Average common shares outstanding 23,138 22,972 19,305 19,162 ========== ========== ========== ========== Income before extra- ordinary item $ 9,201 $ 8,754 $ 11,368 $ 15,347 Less: Preferred stock dividend - - 3,224 2,830 ---------- ---------- ---------- ---------- 9,201 8,754 8,144 12,517 Extraordinary item: Loss on extinguishment of debt - - - (329) ---------- ---------- ---------- ---------- Net income (loss) available for common $ 9,201 $ 8,754 $ 8,144 $ 12,188 ========== ========== ========== ========== Per common and common equivalent share: Income (loss) before extraordinary item $ 0.40 $ 0.38 $ 0.42 $ 0.65 Extraordinary item: Loss on extinguish- ment of debt - - - (0.01) ---------- ---------- ---------- ---------- Net income (loss) per common share $ 0.40 $ 0.38 $ 0.42 $ 0.64 ========== ========== ========== ==========
EX-27 3
5 The schedule contains summary financial information extracted from the Arkansas Best Corporation Form 10-Q for the Quarter ended September 30, 1994 and is qualified in its entirety by reference to such financial statements. 0000894405 ARKANSAS BEST CORPORATION 1,000 9-MOS DEC-31-1994 SEP-30-1994 20,528 0 141,376 (2,635) 29,179 199,403 368,101 (157,327) 577,904 240,701 61,978 192 0 15 209,387 577,904 104,163 769,992 76,509 739,447 0 2,636 4,721 22,913 11,545 11,368 0 0 0 11,368 .42 .42
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