-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UD8krTfstjo3elCuzbgr+WY+iF5j/Tw4tSWqOA48gqvZ668g5sEL9uqKYcI2EnM6 9aTnOyK/F2gpNlp44z0HCQ== 0000950123-09-030436.txt : 20090805 0000950123-09-030436.hdr.sgml : 20090805 20090805172832 ACCESSION NUMBER: 0000950123-09-030436 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20090630 FILED AS OF DATE: 20090805 DATE AS OF CHANGE: 20090805 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARKANSAS BEST CORP /DE/ CENTRAL INDEX KEY: 0000894405 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 710673405 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19969 FILM NUMBER: 09989240 BUSINESS ADDRESS: STREET 1: 3801 OLD GREENWOOD RD CITY: FORT SMITH STATE: AR ZIP: 72903 BUSINESS PHONE: 5017856000 MAIL ADDRESS: STREET 1: P O BOX 48 CITY: FORT SMITH STATE: AR ZIP: 72902 10-Q 1 c88837e10vq.htm FORM 10-Q Form 10-Q
Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
     
þ   Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarter Ended June 30, 2009
     
o   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   71-0673405
     
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer Identification No.)
3801 Old Greenwood Road
Fort Smith, Arkansas 72903
(479) 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 registrant (1) has 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
             
Large accelerated filer þ   Accelerated filer o   Non-accelerated filer o   Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ 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 31, 2009
     
Common Stock, $.01 par value   25,287,940 shares
 
 

 

 


 

ARKANSAS BEST CORPORATION
INDEX
         
    Page  
 
       
       
 
       
       
 
       
    3  
 
       
    5  
 
       
    6  
 
       
    7  
 
       
    8  
 
       
    20  
 
       
    35  
 
       
    36  
 
       
       
 
       
    37  
 
       
    37  
 
       
    37  
 
       
    37  
 
       
    38  
 
       
    38  
 
       
    39  
 
       
    40  
 
       
 Exhibit 31.1 - Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 Exhibit 31.2 - Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 Exhibit 32 - Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 


Table of Contents

PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ARKANSAS BEST CORPORATION
CONSOLIDATED BALANCE SHEETS
                 
    June 30     December 31  
    2009     2008  
    (Unaudited)        
    ($ thousands, except share data)  
 
               
ASSETS
               
 
               
CURRENT ASSETS
               
Cash and cash equivalents
  $ 62,318     $ 100,880  
Short-term investment securities
    129,049       117,855  
Accounts receivable, less allowances (2009 — $3,676; 2008 — $3,513)
    120,226       111,452  
Other accounts receivable, less allowances (2009 — $978; 2008 — $1,001)
    6,006       6,611  
Prepaid expenses
    9,907       10,670  
Deferred income taxes
    36,967       36,079  
Prepaid and refundable income taxes
    24,214       17,661  
Other
    6,610       6,982  
 
           
TOTAL CURRENT ASSETS
    395,297       408,190  
 
               
PROPERTY, PLANT AND EQUIPMENT
               
Land and structures
    239,849       235,861  
Revenue equipment
    504,357       514,503  
Service, office and other equipment
    154,412       150,524  
Leasehold improvements
    21,625       21,697  
 
           
 
    920,243       922,585  
Less allowances for depreciation and amortization
    486,484       473,010  
 
           
 
    433,759       449,575  
 
               
OTHER ASSETS
    52,843       50,636  
 
               
GOODWILL
    66,530       63,897  
 
           
 
               
 
  $ 948,429     $ 972,298  
 
           
See notes to consolidated financial statements.

 

3


Table of Contents

ARKANSAS BEST CORPORATION
CONSOLIDATED BALANCE SHEETS — continued
                 
    June 30     December 31  
    2009     2008  
    (Unaudited)        
    ($ thousands, except share data)  
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
 
               
CURRENT LIABILITIES
               
Bank overdraft and drafts payable
  $ 11,953     $ 15,189  
Accounts payable
    63,991       51,646  
Income taxes payable
    164       758  
Accrued expenses
    155,183       147,540  
Current portion of long-term debt
    139       159  
 
           
TOTAL CURRENT LIABILITIES
    231,430       215,292  
 
               
LONG-TERM DEBT, less current portion
    1,657       1,457  
 
               
PENSION AND POSTRETIREMENT LIABILITIES
    77,966       89,472  
 
               
OTHER LIABILITIES
    18,773       17,314  
 
               
DEFERRED INCOME TAXES
    28,338       24,017  
 
               
STOCKHOLDERS’ EQUITY
               
Common stock, $.01 par value, authorized 70,000,000 shares; issued 2009: 26,722,086 shares; 2008: 26,702,222 shares
    267       267  
Additional paid-in capital
    271,454       268,396  
Retained earnings
    430,020       471,360  
Treasury stock, at cost, 1,677,932 shares
    (57,770 )     (57,770 )
Accumulated other comprehensive loss
    (53,706 )     (57,507 )
 
           
TOTAL STOCKHOLDERS’ EQUITY
    590,265       624,746  
 
           
 
               
 
  $ 948,429     $ 972,298  
 
           
See notes to consolidated financial statements.

 

4


Table of Contents

ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
                                 
    Three Months Ended     Six Months Ended  
    June 30     June 30  
    2009     2008     2009     2008  
    (Unaudited)  
    ($ thousands, except share and per share data)  
 
                               
OPERATING REVENUES
  $ 362,635     $ 498,514     $ 702,312     $ 946,025  
 
                               
OPERATING EXPENSES AND COSTS
    389,932       472,832       758,211       907,191  
 
                       
 
                               
OPERATING INCOME (LOSS)
    (27,297 )     25,682       (55,899 )     38,834  
 
                               
OTHER INCOME (EXPENSE)
                               
Interest and dividend income
    803       1,448       1,733       3,267  
Interest expense and other related financing costs
    (344 )     (336 )     (685 )     (675 )
Other, net
    1,313       18       232       (493 )
 
                       
 
    1,772       1,130       1,280       2,099  
 
                       
 
                               
INCOME (LOSS) BEFORE INCOME TAXES
    (25,525 )     26,812       (54,619 )     40,933  
 
                               
FEDERAL AND STATE INCOME TAXES
                               
Current (benefit) provision
    (2,805 )     15,040       (22,213 )     20,241  
Deferred (benefit) provision
    (7,277 )     (4,383 )     1,194       (4,007 )
 
                       
 
    (10,082 )     10,657       (21,019 )     16,234  
 
                       
 
                               
NET INCOME (LOSS)
  $ (15,443 )   $ 16,155     $ (33,600 )   $ 24,699  
 
                       
 
                               
EARNINGS (LOSS) PER SHARE
                               
Basic
  $ (0.62 )   $ 0.63     $ (1.35 )   $ 0.97  
Diluted
    (0.62 )     0.63       (1.35 )     0.96  
 
                       
 
                               
AVERAGE COMMON SHARES OUTSTANDING
                               
Basic
    25,043,815       24,968,217       25,042,874       24,923,105  
Diluted
    25,043,815       25,146,822       25,042,874       25,070,722  
 
                       
 
                               
CASH DIVIDENDS DECLARED AND PAID PER COMMON SHARE
  $ 0.15     $ 0.15     $ 0.30     $ 0.30  
 
                       
See notes to consolidated financial statements.

 

5


Table of Contents

ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
                                                                 
                                                    Accumulated        
                    Additional                             Other        
    Common Stock     Paid-In     Retained     Treasury Stock     Comprehensive     Total  
    Shares     Amount     Capital     Earnings     Shares     Amount     Loss     Equity  
    (Unaudited)  
    ($ and shares, thousands)  
 
                                                               
Balances at January 1, 2009
    26,702     $ 267     $ 268,396     $ 471,360       1,678     $ (57,770 )   $ (57,507 )   $ 624,746  
Net loss
                            (33,600 )                             (33,600 )
Change in foreign currency translation, net of tax of $33
                                                    51       51  
Amortization of unrecognized net periodic benefit costs, net of tax of $2,175:
                                                               
Net actuarial loss
                                                    3,223       3,223  
Prior service costs
                                                    152       152  
Net transition obligation
                                                    41       41  
Pension settlement expense, net of tax of $61
                                                    97       97  
Unrecognized net actuarial gain, net of tax of $83
                                                    128       128  
Increase in fair value of available for sale security
                                                    109       109  
 
                                                             
Total comprehensive loss (1)
                                                            (29,799 )
 
                                                             
Issuance of common stock under share-based compensation plans
    20             153                                       153  
Tax effect of share-based compensation plans and other
                    (268 )                                     (268 )
Share-based compensation expense
                    3,173                                       3,173  
Dividends paid on common stock
                            (7,740 )                             (7,740 )
 
                                               
Balances at June 30, 2009
    26,722     $ 267     $ 271,454     $ 430,020       1,678     $ (57,770 )   $ (53,706 )   $ 590,265  
 
                                               
     
(1)  
Total comprehensive loss for the three months ended June 30, 2009 was $13.3 million. Total comprehensive income for the three and six months ended June 30, 2008 was $16.9 million and $26.8 million, respectively.
See notes to consolidated financial statements.

 

6


Table of Contents

ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
                 
    Six Months Ended  
    June 30  
    2009     2008  
    (Unaudited)  
    ($ thousands)  
OPERATING ACTIVITIES
               
Net income (loss)
  $ (33,600 )   $ 24,699  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
               
Depreciation and amortization
    37,916       38,462  
Other amortization
    147       147  
Pension settlement expense
    158       1,093  
Share-based compensation expense
    3,173       3,006  
Provision for losses on accounts receivable
    1,911       656  
Deferred income tax (benefit) provision
    1,194       (4,007 )
Gain on sales of assets
    (961 )     (2,323 )
Excess tax benefits from share-based compensation
          (657 )
Changes in operating assets and liabilities:
               
Receivables
    (7,620 )     (14,726 )
Prepaid expenses
    926       1,236  
Other assets
    534       4,947  
Accounts payable, taxes payable, accrued expenses and other liabilities(1)
    (1,661 )     6,412  
 
           
NET CASH PROVIDED BY OPERATING ACTIVITIES
    2,117       58,945  
 
           
 
               
INVESTING ACTIVITIES
               
Purchases of property, plant and equipment, net of capital leases(1)
    (12,730 )     (16,067 )
Proceeds from asset sales
    2,922       12,758  
Purchases of short-term investment securities
    (75,288 )     (19,225 )
Proceeds from sales of short-term investment securities
    64,095       78,604  
Business acquisition, net of cash acquired
    (4,873 )      
Capitalization of internally developed software and other
    (2,621 )     (2,547 )
 
           
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES
    (28,495 )     53,523  
 
           
 
               
FINANCING ACTIVITIES
               
Payments on long-term debt
    (1,360 )     (143 )
Net change in bank overdraft
    (3,236 )     3,892  
Payment of common stock dividends
    (7,740 )     (7,649 )
Excess tax benefits from share-based compensation
          657  
Proceeds from the exercise of stock options and other
    152       2,870  
 
           
NET CASH USED BY FINANCING ACTIVITIES
    (12,184 )     (373 )
 
           
 
               
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    (38,562 )     112,095  
Cash and cash equivalents at beginning of period
    100,880       93,805  
 
           
CASH AND CASH EQUIVALENTS AT END OF PERIOD
  $ 62,318     $ 205,900  
 
           
     
(1)  
Does not include $5.4 million and $7.9 million of equipment which was received but not yet paid for at June 30, 2009 and 2008, respectively.
See notes to consolidated financial statements.

 

7


Table of Contents

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE A — ORGANIZATION AND DESCRIPTION OF THE BUSINESS
Arkansas Best Corporation (the “Company”) is a holding company engaged, through its subsidiaries, primarily in motor carrier freight transportation. The Company’s principal operations are conducted through ABF Freight System, Inc. and other subsidiaries of the Company that are engaged in motor carrier freight transportation (collectively “ABF”).
Approximately 75% of ABF’s employees are covered under a five-year collective bargaining agreement with the International Brotherhood of Teamsters (“IBT”). The agreement with the IBT, which became effective April 1, 2008, provides for compounded annual contractual wage and benefit increases of approximately 4%, subject to wage rate cost-of-living adjustments.
NOTE B — FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and applicable rules and regulations of the Securities and Exchange Commission (the “Commission”) pertaining to interim financial information. Accordingly, these interim financial statements do not include all information or footnote disclosures required by accounting principles generally accepted in the United States for complete financial statements and, therefore, should be read in conjunction with the audited financial statements and accompanying notes included in the Company’s 2008 Annual Report on Form 10-K and other current filings with the Commission. In the opinion of management, all adjustments (which are of a normal and recurring nature) considered necessary for a fair presentation have been included. ABF is impacted by seasonal fluctuations which affect tonnage and shipment levels and consequently revenues and operating results. The second and third calendar quarters of each year usually have the highest tonnage levels while the first quarter generally has the lowest, although other factors, including the state of the U.S. and global economies, may influence quarterly tonnage levels. Operating results for the interim periods presented may not necessarily be indicative of the results for the fiscal year.
Effective June 30, 2009, the Company adopted the provisions of Statement of Financial Accounting Standards No. 165, Subsequent Events (“FAS 165”) which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. Management performed an evaluation of events through August 5, 2009, the date of filing this Quarterly Report on Form 10-Q, and believes that there are no material subsequent events requiring additional disclosure or recognition in this Form 10-Q.
Preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosed amounts of contingent liabilities and the reported amounts of revenues and expenses. If the underlying estimates and assumptions upon which the financial statements are based change in future periods, actual amounts may differ from those included in the accompanying consolidated financial statements.
The effective tax benefit rate for the six months ended June 30, 2009 was 38.5% as compared to the effective tax provision rate of 39.7% for the same period of 2008. The difference between the Company’s effective tax rate and the federal statutory rate primarily results from the effect of state income taxes, nondeductible expenses and alternative fuel tax credits. The federal tax benefit recorded in 2009 will be realized by refund of taxes paid in prior years through loss carrybacks allowed by the U.S. Internal Revenue Code.

 

8


Table of Contents

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — continued
NOTE C — SHORT-TERM INVESTMENTS
Short-term investments consist of FDIC-insured certificates of deposit, which are recorded at cost plus accrued interest, totaling $129.0 million and $117.9 million at June 30, 2009 and December 31, 2008, respectively.
NOTE D — FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Financial Instruments
The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments, except for capitalized leases.
Cash and Cash Equivalents: Cash and cash equivalents are reported in the consolidated balance sheets at fair value.
Short-Term Investments: Certificates of deposit are reported in the consolidated balance sheets at cost plus accrued interest, which approximates fair value.
Long-Term Investments: Long-term investments consist of an available for sale auction rate security for which the underlying security matures in 2025. The security is reported at fair value in other long-term assets in the consolidated balance sheets.
Debt: At June 30, 2009 and December 31, 2008, the Company had no borrowings under its revolving Credit Agreement. Debt reported in the consolidated balance sheets primarily consists of capital lease obligations.
The carrying amounts and fair value of the Company’s financial instruments are as follows:
                                 
    June 30     December 31  
    2009     2008  
    Carrying     Fair     Carrying     Fair  
    Amount     Value     Amount     Value  
    ($ thousands)  
 
                               
Cash and cash equivalents:
                               
Cash
  $ 7,251     $ 7,251     $ 5,275     $ 5,275  
Money market funds
    55,067       55,067       95,605       95,605  
 
                       
Total cash and cash equivalents
  $ 62,318     $ 62,318     $ 100,880     $ 100,880  
 
                       
 
                               
Short-term investments (certificates of deposit)
  $ 129,049     $ 129,049     $ 117,855     $ 117,855  
 
                               
Long-term investments (available for sale security)
  $ 707     $ 707     $ 608     $ 608  
Interest Rate Instruments: The Company has historically been subject to market risk on all or a part of its borrowings under bank credit lines which have variable interest rates. During the six months ended June 30, 2009 and the year ended December 31, 2008, the Company incurred no borrowings and had no outstanding debt obligations other than letters of credit under the Credit Agreement.

 

9


Table of Contents

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — continued
Financial Assets Measured at Fair Value
Fair value is generally determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. In the absence of active markets for the identical assets or liabilities, such measurements generally involve developing assumptions based on observable market data. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These inputs form a three-level valuation hierarchy as follows:
   
Level 1 — Quoted prices for identical assets and liabilities in active markets.
   
Level 2 — Quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
   
Level 3 — Unobservable inputs that are significant to the valuation model.
Assets Measured at Fair Value on a Recurring Basis
The following table presents, for each of the fair value hierarchy levels, the Company’s assets that are measured at fair value on a recurring basis at June 30, 2009:
                                 
            Fair Value Measurements Using  
    Total     Level 1     Level 2     Level 3  
            ($ thousands)  
Money market funds(1)
  $ 55,067     $ 55,067     $     $  
Available for sale security(2)
    707             707        
Equity, bond and money market mutual funds held in trust related to a nonqualified deferred compensation plan(3)
    6,860       6,860              
 
                       
 
  $ 62,634     $ 61,927     $ 707     $  
 
                       
     
(1)  
Included in cash and cash equivalents in the consolidated balance sheet. Quoted market prices were used to determine fair values.
 
(2)  
Consists of an insured, investment-grade auction rate debt security which is included in other long-term assets in the consolidated balance sheet. The security is valued using the income approach with inputs derived from observable market data. An unrealized gain of $0.1 million related to the security is included in accumulated other comprehensive loss as of June 30, 2009.
 
(3)  
Represents assets associated with the deferral of compensation, the Company’s match on deferred compensation and investment earnings related to the Company’s Voluntary Savings Plan. These securities, which are considered general assets of the Company until distributed to the participant, are included in other long-term assets in the consolidated balance sheet. A corresponding liability is included in other long-term liabilities in the consolidated balance sheet. Quoted market prices were used to determine fair values of the investments, which consist of U.S. and international equity mutual funds, government and corporate bond mutual funds and money market funds, held in a trust with a third-party brokerage firm.

 

10


Table of Contents

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — continued
Assets Measured at Fair Value on a Nonrecurring Basis
The Company also has assets that under certain conditions are subject to measurement at fair value on a nonrecurring basis. The following table presents assets that are measured at fair value on a nonrecurring basis for the six months ended June 30, 2009:
                                 
            Fair Value Measurements Using  
    Total     Level 1     Level 2     Level 3  
            ($ thousands)  
 
                               
Assets held for sale(1)
  $ 2,433     $     $ 2,433     $  
     
(1)  
Assets held for sale are included in other noncurrent assets in the consolidated balance sheet at the lower of their carrying amount or fair value less cost to sell. Assets held for sale primarily represent ABF’s older revenue equipment. Quoted prices for similar assets in active markets were used to determine fair values. During the six months ended June 30, 2009, assets held for sale with a carrying amount of $1.0 million were written down to their fair value of $0.6 million, resulting in an operating loss of $0.4 million. In certain cases, carrying amounts of assets held for sale may be lower than current fair values.
NOTE E — CREDIT AGREEMENT
The Company has a revolving credit agreement (the “Credit Agreement”) dated May 4, 2007, with a syndicate of financial institutions. The Credit Agreement, which has a maturity date of May 4, 2012, provides for up to $325.0 million of revolving credit loans (including a $150.0 million sublimit for letters of credit). The Credit Agreement contains various customary covenants which limit, among other things, indebtedness and dispositions of assets and which require the Company to maintain compliance with certain quarterly financial ratios. As of June 30, 2009, the Company was in compliance with the covenants. As of June 30, 2009 and December 31, 2008, there were outstanding letters of credit issued of $51.5 million and $50.9 million, respectively, under the Credit Agreement and there were no outstanding revolver advances. The Company’s borrowing ability under the Credit Agreement is restricted by performance covenants, specifically the leverage ratio that limits total outstanding indebtedness to 3.0 times the Company’s trailing twelve months earnings before interest, taxes, depreciation and amortization, as defined in the Credit Agreement. Due to this limitation, total unused borrowing capacity was approximately $125 million as of June 30, 2009.
The Credit Agreement allows the Company to request extensions of the maturity date for a period not to exceed two years, subject to approval of a majority of the participating financial institutions. The Credit Agreement also allows the Company to request an increase in the amount of revolving credit loans of up to $200.0 million to an aggregate amount of $525.0 million, to the extent commitments are received from participating lenders. The Credit Agreement requires the payment of a utilization fee if the borrowings under the Credit Agreement exceed 50% of the facility amount. Interest rates under the agreement are at variable rates as defined by the Credit Agreement. The Credit Agreement contains a pricing grid, based on the Company’s senior debt ratings, that determines its interest rate, facility fees, utilization fees and letter of credit fees. The Company’s senior unsecured debt rating of BBB+ and outlook by Standard & Poor’s Ratings Services are on watch with negative implications and its senior unsecured debt rating of Baa2 and outlook by Moody’s Investors Service, Inc. are under review for possible downgrade.

 

11


Table of Contents

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — continued
NOTE F — PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
Nonunion Defined Benefit Pension, Supplemental Benefit Pension and Postretirement Health Plans
The following is a summary of the components of net periodic benefit cost:
                                                 
    Three Months Ended June 30  
    Nonunion Defined     Supplemental     Postretirement  
    Benefit Pension Plan     Benefit Pension Plan     Health Plan  
    2009     2008     2009     2008     2009     2008  
    ($ thousands)  
 
                                               
Service cost
  $ 2,270     $ 2,295     $ 147     $ 149     $ 43     $ 43  
Interest cost
    3,090       2,933       261       255       277       292  
Expected return on plan assets
    (2,358 )     (3,430 )                        
Transition (asset) obligation recognition
                      (17 )     33       34  
Amortization of prior service cost (credit)
    (224 )     (224 )     349       390              
Pension settlement expense
                158                    
Recognized net actuarial loss and other
    2,360       818       138       203       142       164  
 
                                   
Net periodic benefit cost
  $ 5,138     $ 2,392     $ 1,053     $ 980     $ 495     $ 533  
 
                                   
                                                 
    Six Months Ended June 30  
    Nonunion Defined     Supplemental     Postretirement  
    Benefit Pension Plan     Benefit Pension Plan     Health Plan  
    2009     2008     2009     2008     2009     2008  
    ($ thousands)  
 
                                               
Service cost
  $ 4,541     $ 4,590     $ 300     $ 305     $ 85     $ 86  
Interest cost
    6,180       5,866       537       543       555       584  
Expected return on plan assets
    (4,717 )     (6,860 )                        
Transition (asset) obligation recognition
                      (28 )     67       68  
Amortization of prior service cost (credit)
    (448 )     (448 )     698       780              
Pension settlement expense
                158       1,093              
Recognized net actuarial loss and other
    4,720       1,636       270       436       284       328  
 
                                   
Net periodic benefit cost
  $ 10,276     $ 4,784     $ 1,963     $ 3,129     $ 991     $ 1,066  
 
                                   
The Company’s full-year 2009 nonunion defined benefit pension plan expense is estimated to be $20.6 million compared to $9.6 million for the year ended December 31, 2008. In March 2009, the Company made voluntary tax-deductible contributions totaling $15.5 million to its nonunion defined benefit pension plan. The Company may make additional contributions to the nonunion pension plan in 2009 of up to $10.0 million, which would not exceed the maximum tax-deductible contribution. The Company’s nonunion defined benefit pension plan covers substantially all noncontractual employees hired before January 1, 2006. All eligible noncontractual employees hired subsequent to December 31, 2005 participate in a defined contribution plan.
The Company has an unfunded supplemental benefit pension plan for the purpose of providing additional retirement benefits to certain executive officers of the Company. The Company is required to record pension settlement expense when cash payouts exceed annual service and interest costs of the related plan.

 

12


Table of Contents

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — continued
The following is a summary of the obligations settled and pension settlement expense related to the supplemental benefit pension plan:
                                 
    Three Months Ended     Six Months Ended  
    June 30     June 30  
    2009     2008     2009     2008  
    ($ thousands, except per share data)  
 
                               
Obligations settled
  $ 795     $     $ 795     $ 3,795  
Pension settlement expense, pre-tax
  $ 158     $     $ 158     $ 1,093  
Pension settlement expense per share, net of taxes
  $     $     $     $ 0.03  
During the last six months of 2009, the Company anticipates settling obligations of $2.2 million and recording pension settlement expense of approximately $0.4 million on a pre-tax basis, or $0.01 per diluted share, net of taxes. The final settlement expense is dependent upon the pension actuarial valuation, which is based on the applicable discount rate determined at the settlement date. During the last six months of 2008, the Company recorded pension settlement expense of $0.4 million on a pre-tax basis, or 0.01 per diluted share, net of taxes.
Multiemployer Plans
Under the provisions of the Taft-Hartley Act, retirement and health care benefits for ABF’s contractual employees are provided by a number of multiemployer plans. ABF contributes to these plans monthly based generally on the time worked by its contractual employees, as specified in ABF’s five-year collective bargaining agreement that became effective on April 1, 2008 and other supporting supplemental agreements. ABF recognizes as expense the contractually required contribution for the period and recognizes as a liability any contributions due and unpaid.
ABF currently contributes to 26 multiemployer pension plans, which vary in size and in funding status. In the event of the termination of a multiemployer pension plan or if ABF were to withdraw from a multiemployer pension plan, ABF would have material liabilities for its share of the unfunded vested liabilities of each such plan. ABF has not received notification of any plan termination, and ABF does not currently intend to withdraw from these plans. Therefore, the Company believes the occurrence of events that would require recognition of liabilities for its share of unfunded vested benefits is remote.
There have been no significant changes in information available to the Company related to multiemployer plans as disclosed in the Company’s 2008 Annual Report on Form 10-K.
NOTE G — STOCKHOLDERS’ EQUITY
Dividends on Common Stock
On July 23, 2009, the Company’s Board of Directors declared a dividend of $0.15 per share payable to stockholders of record as of August 7, 2009.

 

13


Table of Contents

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — continued
The following table is a summary of dividends declared during the applicable quarter:
                                 
    2009     2008  
    Per Share     Amount     Per Share     Amount  
    ($ thousands, except per share data)  
 
                               
First quarter
  $ 0.15     $ 3,847     $ 0.15     $ 3,803  
Second quarter
  $ 0.15     $ 3,893     $ 0.15     $ 3,846  
Third quarter (2009 amount estimated)
  $ 0.15     $ 3,891     $ 0.15     $ 3,848  
Stock Awards
As of June 30, 2009, the Company had outstanding stock options granted under the 1992 Stock Option Plan, the 2000 Non-Qualified Stock Option Plan and the 2002 Stock Option Plan and outstanding restricted stock and restricted stock units granted under the 2005 Ownership Incentive Plan (“the 2005 Plan”). The 1992 Stock Option Plan expired on December 31, 2001. The 2005 Plan supersedes the Company’s 2000 Non-Qualified Stock Option Plan and 2002 Stock Option Plan with respect to future awards and provides for the granting of 1.5 million shares, which may be awarded as incentive and nonqualified stock options, SARs, restricted stock or restricted stock units. Any outstanding stock options under the 1992, 2000 or 2002 stock option plans which are forfeited or otherwise unexercised will be included in the shares available for grant under the 2005 Plan. As of June 30, 2009, the Company had not elected to treat any exercised options as Employer Stock Appreciation Rights (“SARs”) and no employee SARs had been granted. No stock options have been granted since 2004.
Restricted Stock
A summary of the Company’s restricted stock program, which consists of restricted stock and restricted stock units awarded under the 2005 Plan, is presented below:
                 
            Weighted-Average  
            Grant Date  
    Shares/Units     Fair Value  
 
               
Outstanding — January 1, 2009
    627,522     $ 38.03  
Granted
    306,730       22.55  
Vested
    (18,146 )     36.05  
Forfeited
    (17,405 )     38.57  
 
           
Outstanding — June 30, 2009
    898,701     $ 32.76  
 
           

 

14


Table of Contents

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — continued
Stock Options
A summary of the Company’s stock option program is presented below:
                                 
                    Weighted-        
                    Average        
            Weighted-     Remaining     Intrinsic  
    Shares     Average     Contractual     Value(1)  
    Under Option     Exercise Price     Term (Years)     ($ thousands)  
 
Outstanding — January 1, 2009
    576,364     $ 26.02                  
Granted
                           
Exercised
    (9,000 )     17.00                  
Forfeited
    (13,325 )     28.00                  
 
                           
Outstanding — June 30, 2009
    554,039     $ 26.12       3.1     $ 814  
 
                       
 
                               
Options outstanding at June 30, 2009 which are vested or expected to vest
    554,039     $ 26.12       3.1     $ 814  
 
                       
 
Exercisable — June 30, 2009
    554,039     $ 26.12       3.1     $ 814  
 
                       
     
(1)  
The intrinsic value for each option represents the excess, if any, of the market value of the Company’s Common Stock on June 30, 2009 over the exercise price of the option.
Accumulated Other Comprehensive Loss
Components of accumulated other comprehensive loss are as follows:
                 
    June 30     December 31  
    2009     2008  
    ($ thousands)  
 
               
Pre-tax amounts:
               
Foreign currency translation
  $ (938 )   $ (1,022 )
Unrecognized net periodic benefit costs
    (87,137 )     (93,097 )
Increase in fair value of available for sale security
    109        
 
           
Total
  $ (87,966 )   $ (94,119 )
 
           
 
               
After-tax amounts:
               
Foreign currency translation
  $ (574 )   $ (625 )
Unrecognized net periodic benefit costs
    (53,241 )     (56,882 )
Increase in fair value of available for sale security
    109        
 
           
Total
  $ (53,706 )   $ (57,507 )
 
           

 

15


Table of Contents

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — continued
NOTE H — EARNINGS PER SHARE
Effective January 1, 2009, the Company adopted FASB Staff Position No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF 03-6-1”). FSP EITF 03-6-1 established that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are participating securities. The Company’s unvested restricted stock and restricted stock units are paid nonforfeitable dividends or dividend equivalents at the same rate and at the same time as the dividends paid on outstanding shares of Common Stock and are therefore considered participating securities. In accordance with FSP EITF 03-6-1, the Company’s calculation of earnings per share allocates dividends paid and a portion of unallocated net income, but not losses, to unvested restricted stock and restricted stock units. The adoption of FSP EITF 03-6-1, which also requires retrospective adjustment of earnings per share for prior-periods, decreased basic earnings per share by $0.02 for the three and six months ended June 30, 2008 and decreased diluted earnings per share by $0.01 and $0.02 for the three and six months ended June 30, 2008, respectively.
The following table sets forth the computation of basic and diluted earnings per share:
                                 
    Three Months Ended     Six Months Ended  
    June 30     June 30  
    2009     2008     2009     2008  
    ($ thousands, except share and per share data)  
Basic earnings per share
                               
Numerator:
                               
Net income (loss)
  $ (15,443 )   $ 16,155     $ (33,600 )   $ 24,699  
Effect of unvested restricted stock awards
    (127 )     (379 )     (209 )     (512 )
 
                       
Adjusted net income (loss)
  $ (15,570 )   $ 15,776     $ (33,809 )   $ 24,187  
 
                       
 
                               
Denominator:
                               
Weighted-average shares
    25,043,815       24,968,217       25,042,874       24,923,105  
 
                       
 
                               
Net income (loss) per share
  $ (0.62 )   $ 0.63     $ (1.35 )   $ 0.97  
 
                       
 
                               
Diluted earnings per share
                               
Numerator:
                               
Net income (loss)
  $ (15,443 )   $ 16,155     $ (33,600 )   $ 24,699  
Effect of unvested restricted stock awards
    (127 )     (379 )     (209 )     (512 )
 
                       
Adjusted net income (loss)
  $ (15,570 )   $ 15,776     $ (33,809 )   $ 24,187  
 
                       
 
                               
Denominator:
                               
Weighted-average shares
    25,043,815       24,968,217       25,042,874       24,923,105  
Effect of dilutive securities
          178,605             147,617  
 
                       
Adjusted weighted-average shares and assumed conversions
    25,043,815       25,146,822       25,042,874       25,070,722  
 
                       
 
                               
Net income (loss) per share
  $ (0.62 )   $ 0.63     $ (1.35 )   $ 0.96  
 
                       
For the three and six months ended June 30, 2009, outstanding stock awards of 738,996 and 983,601, respectively, and for the three and six months ended June 30, 2008, outstanding stock awards of 173,420 and 229,116, respectively, were not included in the per diluted share calculations because their inclusion would have the effect of decreasing the loss per share in the 2009 periods presented and increasing the earnings per share in the 2008 periods presented.

 

16


Table of Contents

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — continued
NOTE I — OPERATING SEGMENT DATA
The Company uses the “management approach” to determine its reportable operating segments, as well as to determine the basis of reporting the operating segment information. The management approach focuses on financial information that the Company’s management uses to make decisions about operating matters. Management uses operating revenues, operating expense categories, operating ratios, operating income and key operating statistics to evaluate performance and allocate resources to the Company’s operations. ABF, which provides transportation of general commodities, represents the Company’s only reportable operating segment.
The Company eliminates intercompany transactions in consolidation. However, the information used by the Company’s management with respect to its reportable segment is before intersegment eliminations of revenues and expenses. Intersegment revenues and expenses are not significant. Further classifications of operations or revenues by geographic location are impractical and are, therefore, not provided. The Company’s foreign operations are not significant.

 

17


Table of Contents

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — continued
The following tables reflect reportable operating segment information for the Company, as well as a reconciliation of reportable segment information to the Company’s consolidated financial statements:
                                 
    Three Months Ended     Six Months Ended  
    June 30     June 30  
    2009     2008     2009     2008  
    ($ thousands)  
 
                               
OPERATING REVENUES
                               
ABF
  $ 343,805     $ 479,522     $ 666,918     $ 907,269  
Other revenues and eliminations
    18,830       18,992       35,394       38,756  
 
                       
 
  $ 362,635     $ 498,514     $ 702,312     $ 946,025  
 
                       
 
                               
OPERATING EXPENSES AND COSTS
                               
ABF
                               
Salaries, wages and benefits
  $ 245,226     $ 273,792     $ 478,723     $ 531,515  
Fuel, supplies and expenses
    52,733       97,030       103,261       178,888  
Operating taxes and licenses
    10,553       11,959       21,067       23,898  
Insurance
    6,417       5,415       9,920       10,247  
Communications and utilities
    3,563       3,682       7,534       7,692  
Depreciation and amortization
    17,861       18,461       36,471       37,017  
Rents and purchased transportation
    32,357       42,448       60,243       78,469  
Gain on sale of property and equipment
    (244 )     (451 )     (961 )     (2,326 )
Other
    2,161       1,655       4,325       3,458  
 
                       
Total ABF operating expenses and costs
    370,627       453,991       720,583       868,858  
 
                       
 
                               
Other expenses and eliminations
    19,305       18,841       37,628       38,333  
 
                       
 
  $ 389,932     $ 472,832     $ 758,211     $ 907,191  
 
                       
 
                               
OPERATING INCOME (LOSS)
                               
ABF
  $ (26,822 )   $ 25,531     $ (53,665 )   $ 38,411  
Other income (loss) and eliminations
    (475 )     151       (2,234 )     423  
 
                       
 
  $ (27,297 )   $ 25,682     $ (55,899 )   $ 38,834  
 
                       
 
                               
OTHER INCOME (EXPENSE)
                               
Interest and dividend income
  $ 803     $ 1,448     $ 1,733     $ 3,267  
Interest expense and other related financing costs
    (344 )     (336 )     (685 )     (675 )
Other, net
    1,313       18       232       (493 )
 
                       
 
  $ 1,772       1,130     $ 1,280       2,099  
 
                       
 
                               
INCOME (LOSS) BEFORE INCOME TAXES
  $ (25,525 )   $ 26,812     $ (54,619 )   $ 40,933  
 
                       
NOTE J — LEGAL PROCEEDINGS AND ENVIRONMENTAL MATTERS
The Company is involved in various legal actions arising in the ordinary course of business. The Company maintains liability insurance against certain risks arising out of the normal course of its business, subject to certain self-insured retention limits. The Company routinely establishes and reviews the adequacy of reserves for estimated legal and environmental exposures. While management believes that amounts accrued in the accompanying consolidated financial statements are adequate, estimates of these liabilities may change as circumstances develop. Considering amounts recorded, these matters are not expected to have a material adverse effect on the Company’s financial condition, cash flows or results of operations.

 

18


Table of Contents

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — continued
The Company’s subsidiaries store fuel for use in tractors and trucks in 71 underground tanks located in 23 states. Maintenance of such tanks is regulated at the federal and, in some cases, state levels. The Company believes that it is in substantial compliance with all such regulations. The Company’s underground storage tanks are required to have leak detection systems. The Company is not aware of any leaks from such tanks that could reasonably be expected to have a material adverse effect on the Company.
The Company has received notices from the Environmental Protection Agency 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 $53,000 over the last ten years, primarily at six sites) or believes its obligations, other than those specifically accrued for with respect to such sites, would involve immaterial monetary liability, although there can be no assurances in this regard.
At June 30, 2009 and December 31, 2008, the Company’s reserve for estimated environmental clean-up costs of properties currently or previously operated by the Company totaled $1.1 million, which is included in accrued expenses in the accompanying consolidated balance sheets. Amounts accrued reflect management’s best estimate of the future undiscounted exposure related to identified properties based on current environmental regulations. The Company’s estimate is based on management’s experience with similar environmental matters and on testing performed at certain sites.

 

19


Table of Contents

ITEM 2.  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Arkansas Best Corporation (the “Company”) is a holding company engaged, through its subsidiaries, primarily in motor carrier freight transportation. The Company’s principal operations are conducted through ABF Freight System, Inc. and other subsidiaries of the Company that are engaged in motor carrier freight transportation (collectively “ABF”).
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations describes the principal factors affecting critical accounting policies, liquidity and capital resources, and results of operations of the Company. This discussion should be read in conjunction with the accompanying quarterly unaudited condensed consolidated financial statements and the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. The Company’s 2008 Annual Report on Form 10-K includes additional information about significant accounting policies, practices and the transactions that underlie the Company’s financial results, as well as a detailed discussion of the most significant risks and uncertainties to which its financial and operating results are subject. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Critical Accounting Policies and Recent Accounting and Disclosure Requirements Impacting the Company
The Company’s accounting policies that are “critical,” or the most important, to understand the Company’s financial condition and results of operations and that require management of the Company to make the most difficult judgments are described in the Company’s 2008 Annual Report on Form 10-K. There have been no material changes in these critical accounting policies during the six months ended June 30, 2009.
In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“FAS 157”). This statement defines fair value, establishes a framework for measuring fair value and expands the disclosures on fair value measurements. In February 2008, the FASB issued FASB Staff Position FAS 157-2, Effective Date of FASB Statement No. 157 (“FSP 157-2”), which provided a one-year deferral of the effective date of FAS 157 for nonfinancial assets and liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually. In accordance with FSP 157-2, the Company adopted the provisions of FAS 157 with respect to its assets and liabilities that are measured at fair value within the financial statements on a recurring basis effective January 1, 2008 and adopted the provisions of FAS 157 with respect to its nonfinancial assets and liabilities that are measured at fair value within the financial statements on a nonrecurring basis as of January 1, 2009. The adoption of FAS 157 did not have a material effect on the Company’s consolidated financial statements (see Note D to the accompanying consolidated financial statements).
Effective January 1, 2009, the Company adopted FASB Staff Position No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF 03-6-1”). FSP EITF 03-6-1 established that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are participating securities. The Company’s unvested restricted stock and restricted stock units are paid nonforfeitable dividends or dividend equivalents at the same rate and at the same time as the dividends paid on outstanding shares of Common Stock and are therefore considered participating securities. In accordance with FSP EITF 03-6-1, the Company’s calculation of earnings per share allocates dividends paid and a portion of unallocated net income, but not losses, to unvested restricted stock and restricted stock units. The adoption of FSP EITF 03-6-1, which also requires retrospective adjustment of earnings per share for prior-periods, decreased basic earnings per share by $0.02 for the three and six months ended June 30, 2008 and decreased diluted earnings per share by $0.01 and $0.02 for the three and six months ended June 30, 2008, respectively (see Note H to the accompanying consolidated financial statements).

 

20


Table of Contents

ITEM 2.  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — continued
The FASB issued three staff positions related to fair value accounting and disclosure which were effective for the Company as of June 30, 2009 and are reflected in the disclosures in Note D to the accompanying consolidated financial statements. FASB Staff Position FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, requires disclosures about fair value of financial instruments for interim reporting periods. FASB Staff Position FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments, requires the Company to disclose the contractual maturities of debt securities in interim financial statements and addresses the recognition and measurement of an impairment loss when an entity does not intend or will not be required to sell an impaired security. FASB Staff Position FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, requires disclosure of the valuation techniques used to measure fair value of financial instruments and provides additional guidance for estimating fair value when the level of market activity for assets and liabilities covered by FAS 157 has significantly declined.
Effective June 30, 2009, the Company adopted the provisions of Statement of Financial Accounting Standards No. 165, Subsequent Events (“FAS 165”) which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. Management performed an evaluation of events through August 5, 2009, the date of filing this Quarterly Report on Form 10-Q, and believes that there are no material subsequent events requiring additional disclosure or recognition in this Form 10-Q.
Liquidity and Capital Resources
The Company’s primary sources of liquidity are cash and short-term investments on-hand, cash generated by operations and borrowing capacity under its revolving credit agreement.
Cash Flow and Short-Term Investments: Components of cash and cash equivalents and short-term investments are as follows:
                 
    June 30     December 31  
    2009     2008  
    ($ thousands)  
 
               
Cash and cash equivalents, primarily money market funds
  $ 62,318     $ 100,880  
Short-term investments (FDIC-insured certificates of deposit)
    129,049       117,855  
 
           
Total
  $ 191,367     $ 218,735  
 
           
During the six months ended June 30, 2009, cash, cash equivalents and short-term investments declined $27.4 million, primarily reflecting purchases of revenue equipment (tractors and trailers used primarily in ABF’s operations) and other property and equipment totaling $9.8 million net of asset sales, payment of dividends on Common Stock of $7.7 million and the acquisition of a privately-owned logistics company for net cash consideration of $6.2 million including repayment of debt assumed in the acquisition.
During the six months ended June 30, 2008, cash provided from operations of $58.9 million and proceeds from asset sales of $12.8 million were used to purchase revenue equipment and other property and equipment totaling $16.1 million and pay dividends on Common Stock of $7.7 million. The decrease in operating cash flow during the six months ended June 30, 2009 as compared to the same period of 2008 primarily reflects the effect of the weaker freight tonnage environment on ABF’s operating results.

 

21


Table of Contents

ITEM 2.  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — continued
Credit Agreement: The Company has a revolving credit agreement (the “Credit Agreement”) with a syndicate of financial institutions. The Credit Agreement, which has a maturity date of May 4, 2012, provides for up to $325.0 million of revolving credit loans (including a $150.0 million sublimit for letters of credit). The Credit Agreement contains various customary covenants which limit, among other things, indebtedness and dispositions of assets and which require the Company to maintain compliance with certain quarterly financial ratios. As of June 30, 2009, the Company was in compliance with the covenants. As of June 30, 2009 and December 31, 2008, there were outstanding letters of credit issued of $51.5 million and $50.9 million, respectively, under the Credit Agreement and there were no outstanding revolver advances. The Company’s borrowing ability under the Credit Agreement is restricted by performance covenants, specifically the leverage ratio that limits total outstanding indebtedness to 3.0 times the Company’s trailing twelve months earnings before interest, taxes, depreciation and amortization, as defined in the Credit Agreement. Due to this limitation, total unused borrowing capacity was approximately $125 million as of June 30, 2009.
The Credit Agreement allows the Company to request extensions of the maturity date for a period not to exceed two years, subject to approval of a majority of the participating financial institutions. The Credit Agreement also allows the Company to request an increase in the amount of revolving credit loans of up to $200.0 million to an aggregate amount of $525.0 million, to the extent commitments are received from participating lenders. The Credit Agreement requires the payment of a utilization fee if the borrowings under the Credit Agreement exceed 50% of the facility amount. Interest rates under the agreement are at variable rates as defined by the Credit Agreement. The Credit Agreement contains a pricing grid, based on the Company’s senior debt ratings, that determines its interest rate, facility fees, utilization fees and letter of credit fees. The Company’s senior unsecured debt rating of BBB+ and outlook by Standard & Poor’s Ratings Services are on watch with negative implications and its senior unsecured debt rating of Baa2 and outlook by Moody’s Investors Service, Inc. are under review for possible downgrade.
As further discussed in the Executive Overview of Management’s Discussion and Analysis of Financial Condition and Results of Operations, ABF’s operating results have been adversely impacted by the economic recession. As a result, the Company has reported consolidated net losses in each of the last three quarterly periods beginning with fourth quarter 2008. These operating losses have led to a declining fixed charge coverage ratio which was 4.7 to 1 for the reporting period ended June 30, 2009 compared to the 2.0 to 1 minimum ratio required by the Credit Agreement. While ABF has implemented cost reduction initiatives, unless operating results improve from second quarter 2009 levels, the Company may not meet the required fixed charge coverage ratio during the remaining 2009 reporting periods. If this financial covenant is not met, the letters of credit currently issued under the Credit Agreement would have to be replaced with cash deposits, performance bonds or other acceptable forms of securities. Although there can be no assurances, management believes that the Company could obtain an amendment to the Credit Agreement or other satisfactory financing arrangements as needed; however, due to recent liquidity disruptions and continued uncertainty in the credit markets, the terms of any new financing arrangements may be less favorable and result in higher costs than the current Credit Agreement.

 

22


Table of Contents

ITEM 2.  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — continued
Contractual Obligations: The following table provides the aggregate annual contractual obligations of the Company including capital and operating lease obligations, purchase obligations and near-term estimated benefit plan distributions as of June 30, 2009. The Company’s 2008 Annual Report on Form 10-K includes additional information and description of these obligations.
                                         
    Payments Due by Period  
    ($ thousands)  
            Less Than     1-3     3-5     More Than  
Contractual Obligations   Total     1 Year     Years     Years     5 Years  
 
                                       
Capital lease obligations, including interest
  $ 2,383     $ 233     $ 511     $ 435     $ 1,204  
Operating lease obligations(1)
    44,684       11,291       16,993       8,377       8,023  
Purchase obligations(2)
    27,709       27,709                    
Voluntary savings plan distributions(3)
    2,144       2,144                    
Postretirement health expenditures(4)
    825       825                    
Deferred salary distributions(5)
    1,144       1,144                    
Supplemental pension distributions(6)
    2,175       2,175                    
 
                             
Total
  $ 81,064     $ 45,521     $ 17,504     $ 8,812     $ 9,227  
 
                             
     
(1)  
While the Company owns the majority of its larger terminals and distribution centers, certain facilities and equipment are leased. As of June 30, 2009, the Company had future minimum rental commitments, net of noncancelable subleases, totaling $44.3 million for terminal facilities and $0.4 million for other equipment. The future minimum rental commitments are presented exclusive of executory costs such as insurance, maintenance and taxes. In addition, the Company has provided lease guarantees through March 2012 totaling $0.7 million related to Clipper, a former subsidiary of the Company.
 
(2)  
Purchase obligations relating to revenue equipment, other equipment and property are cancelable if certain conditions are met. These commitments are included in the Company’s 2009 annual net capital expenditure plan, which is estimated to be approximately $45.0 million to $50.0 million.
 
(3)  
Represents elective distributions anticipated within the next twelve months under the Voluntary Savings Plan, a nonqualified deferred compensation plan. Future distributions are subject to change for retirement, death or disability of current employees. As a result, estimates of distributions beyond one year cannot be made with a reasonable level of accuracy and are not presented.
 
(4)  
Represents distributions projected over the next twelve months related to postretirement health benefits. Future distributions are subject to change based upon increases and other changes in premiums and medical costs and continuation of the plan for current participants. As a result, estimates of distributions beyond one year are not presented.
 
(5)  
Represents deferred salary agreement distributions projected over the next twelve months. Future distributions are subject to change based upon assumptions for projected salaries and retirements, deaths, disability or early retirement of current employees. As a result, estimates of distributions beyond one year cannot be made with a reasonable level of accuracy and are not presented.
 
(6)  
Represents distributions within the next twelve months under the unfunded supplemental pension benefit plan. The amounts and dates of distributions in future periods are dependent upon actual retirement dates of eligible officers and other events and factors, including assumptions involved in distribution calculations such as the discount rate, years of service and future salary changes. As a result, estimates of distributions beyond one year cannot be made with a reasonable level of accuracy and are not presented.

 

23


Table of Contents

ITEM 2.  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — continued
The Company made voluntary tax-deductible contributions totaling $15.5 million to its nonunion pension plan in March 2009. Based upon current information, the Company is evaluating making additional contributions in 2009 of up to $10.0 million, which would not exceed the maximum tax-deductible contribution (see Note F to the accompanying consolidated financial statements).
ABF contributes to multiemployer health, welfare and pension plans based generally on the time worked by its contractual employees, as specified in the collective bargaining agreement and other supporting supplemental agreements (see Note F to the accompanying consolidated financial statements).
Other Liquidity Information: Management believes cash generated by operations, cash and cash equivalents, short-term investments and amounts available under the Credit Agreement, including any future amendments thereof, will be sufficient for the foreseeable future to finance the Company’s lease commitments; letter of credit commitments; quarterly dividends; stock repurchases; nonunion benefit plan contributions; unfunded supplemental pension benefits; capital expenditures; health, welfare and pension contributions under collective bargaining agreements; and other expenditures. At this point in time, the Company’s liquidity has not been significantly impacted by the current credit environment.
Financial Instruments: The Company has not historically entered into financial instruments for trading purposes, nor has the Company historically engaged in a program for hedging fuel prices. No such instruments were outstanding as of June 30, 2009 or 2008.
Off-Balance-Sheet Arrangements: The Company’s off-balance-sheet arrangements include future minimum rental commitments, net of noncancelable subleases, of $44.7 million under operating lease agreements. The Company has no investments, loans or any other known contractual arrangements with affiliated special-purpose entities, variable interest entities or financial partnerships.

 

24


Table of Contents

ITEM 2.  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — continued
Results of Operations
Executive Overview
Arkansas Best Corporation (“the Company”) is a holding company engaged, through its subsidiaries, primarily in motor carrier freight transportation. The Company’s principal operations are conducted through ABF, which represented 95% of the Company’s consolidated revenues for the six months ended June 30, 2009.
On an ongoing basis, ABF’s ability to operate profitably and generate cash is impacted by tonnage (gross weight hauled), which influences operating leverage as tonnage levels vary; the pricing environment; customer account mix; and the ability to manage costs effectively, primarily in the area of salaries, wages and benefits (“labor”).
For the three and six months ended June 30, 2009, respectively, the Company reported consolidated net losses of $15.4 million and $33.6 million after taxes, primarily reflecting the operating results of ABF. During the three and six months ended June 30, 2009, ABF’s revenues decreased 27.7% and 25.6%, respectively, on a per-day basis compared to the same periods in 2008. This revenue decline primarily reflects decreases in tonnage levels and changes in revenue per hundredweight, including fuel surcharges. ABF’s second quarter 2009 operating ratio increased to 107.8% from 94.7% in the second quarter of 2008. During the six months ended June 30, 2009, ABF’s operating ratio increased to 108.0% from 95.8% during the same period of 2008. The ABF operating results are more fully discussed in the ABF section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.
ABF’s operations are affected by general economic conditions, as well as a number of other competitive factors that are more fully described in the General Development of Business and Risk Factors sections of the Company’s 2008 Annual Report on Form 10-K. The prolonged unfavorable economic environment has impacted the business activities of ABF’s customers which has had a corresponding adverse effect on ABF’s tonnage levels and limited ABF’s ability to secure adequate pricing for its services. ABF’s second quarter 2009 operating results were impacted by a 17.0% year-over-year decline in tonnage per day, which was preceded by year-over-year declines in tonnage per day of 5.1% in third quarter 2008, 11.5% in fourth quarter 2008 and 15.7% in first quarter 2009. ABF’s management believes that these tonnage trends are representative of the weakened domestic and global economies due, in part, to turmoil in the financial markets and the related effects on industrial production and the residential and commercial construction and retail sectors. For the month of July 2009, average daily total tonnage for ABF declined approximately 13% compared to the same period last year. There can be no assurances that ABF will not experience further declines in tonnage levels due to a number of factors including, but not limited to, continued weakness in general economic activity.
As a result of the extended period of an adverse economic environment and the historically severe tonnage declines that have continued from the fourth quarter of 2008, ABF has implemented cost reduction programs. ABF is generally effective in managing its costs to business levels. However, incremental reductions in labor and other operating costs become increasingly challenging and less effective as ABF maintains service levels and continues its focus on serving the regional markets. A larger proportion of ABF’s operating costs are fixed in nature when maintaining customer service levels. ABF’s ability to effectively manage labor costs, which amounted to 71.8% of ABF’s revenues for the six months ended June 30, 2009, has a direct impact on its operating performance. Labor costs, including retirement and health care benefits for ABF’s contractual employees that are provided by a number of multiemployer plans (see Note F to the accompanying consolidated financial statements), are impacted by ABF’s contractual obligations under its labor agreement primarily with the International Brotherhood of Teamsters (“IBT”). The current five-year collective bargaining agreement, which became effective April 1, 2008, provides for compounded annual contractual wage and benefit increases of approximately 4%, subject to wage rate cost-of-living adjustments, as further discussed in the ABF section of Management’s Discussion and Analysis of Financial Condition and Results of Operations. ABF’s operating results will continue to be adversely impacted if tonnage remains at the current levels.

 

25


Table of Contents

ITEM 2.  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — continued
The industry pricing environment is another key to ABF’s operating performance. The pricing environment, which generally becomes more competitive during periods of lower tonnage levels, influences ABF’s ability to obtain compensatory margins and price increases on customer accounts. ABF’s pricing is typically measured by billed revenue per hundredweight, which is a reasonable, although approximate, measure of price change. This measure is affected by freight profile factors such as average shipment size, average length of haul, freight density and customer and geographic mix. ABF focuses on individual account profitability rather than billed revenue per hundredweight when considering customer account or market evaluations due to the difficulty in quantifying, with sufficient accuracy, the impact of changes in freight profile characteristics, which is necessary to estimate true price changes. However, total company profitability for ABF is considered together with measures of billed revenue per hundredweight. Total billed revenue per hundredweight decreased 13.1% and 11.3%, respectively, during the three and six months ended June 30, 2009 versus the same periods of 2008, primarily due to lower fuel surcharges resulting from lower fuel-related costs. The fuel surcharge constituted a higher proportion of the total freight rate during the majority of 2008, as further discussed below. Management believes that higher fuel surcharges, along with the competitive environment, prevented ABF from securing adequate increases in base LTL rates during periods of higher fuel surcharge levels in 2008. Obtaining base rate increases involves a lengthy process to address the pricing and resulting profitability of individual customer accounts. Prolonged periods with insufficient base LTL rate improvements result in higher operating ratios as elements of unit cost, including contractual wage and benefit rates, continue to increase. ABF also experienced freight profile changes during the six months ended June 30, 2009 that impacted the reported billed revenue per hundredweight, as further discussed in the ABF section of Management’s Discussion and Analysis of Financial Condition and Results of Operations. Excluding freight profile changes and the changes in fuel surcharges, pricing on ABF’s traditional less-than-truckload (“LTL”) business declined slightly in the second quarter of 2009. During the three and six months ended June 30, 2009, the pricing environment was very competitive and management expects the pricing environment to remain competitive throughout the remainder of 2009.
ABF operates in a highly competitive industry with both union and nonunion motor carriers. The Company’s nonunion competitors have a lower fringe benefit cost structure for their freight-handling and driving personnel than union carriers. In addition, wage concessions granted to certain union competitors allow for a lower wage and benefit cost structure than that of ABF. Competitors with lower labor cost structures could reduce freight rates to gain market share which may further limit ABF’s ability to maintain or increase base freight rates and therefore adversely impact the Company’s competitiveness in the industry. ABF has recently engaged in discussions with the IBT to attempt to address this issue.

 

26


Table of Contents

ITEM 2.  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — continued
The transportation industry is dependent upon the availability of adequate fuel supplies. The Company has not experienced a lack of available fuel but could be adversely impacted if a fuel shortage were to develop. ABF charges a fuel surcharge based on changes in diesel fuel prices compared to a national index. The ABF fuel surcharge rate in effect is available on the ABF Web site at abf.com. (The information contained on the ABF Web site is not a part of this Quarterly Report on Form 10-Q nor shall it be deemed incorporated by reference into this Quarterly Report on Form 10-Q.) Although revenues from fuel surcharges generally more than offset increases in direct diesel fuel costs, other operating costs have been, and may continue to be, impacted by fluctuating fuel prices. The total impact of energy prices on other nonfuel-related expenses is difficult to ascertain. ABF cannot predict, with reasonable certainty, future fuel price fluctuations, the impact of energy prices on other cost elements, recoverability of fuel costs through fuel surcharges, and the effect of fuel surcharges on ABF’s overall rate structure or the total price that ABF will receive from its customers. During periods of changing diesel fuel prices, the fuel surcharge and associated direct diesel fuel costs also vary by different degrees. Depending upon the rates of these changes and the impact on costs in other fuel- and energy-related areas, operating margins could be impacted. Whether fuel prices fluctuate or remain constant, ABF’s operating income may be adversely affected if competitive pressures limit its ability to recover fuel surcharges. Throughout the first six months of 2009, the fuel surcharge mechanism had strong market acceptance among ABF customers. While the fuel surcharge is one of several components in ABF’s overall rate structure, the actual rate paid by customers is governed by market forces based on value provided to the customer. ABF experienced significantly higher fuel prices in the first ten months of 2008 compared to the same period in 2007. Beginning in the middle of July 2008, fuel prices declined steadily through mid-March 2009 and then increased slightly during the second quarter from the March 2009 low. As of the end of July 2009, the fuel surcharge rate was approximately 22 revenue percentage points below the peak reached in July 2008. While fuel prices and the related fuel surcharge levels have declined in 2009 compared to 2008, ABF has not been able to increase other elements of margin primarily due to the competitive environment which has been influenced by lower levels of available tonnage.
The Company ended the second quarter of 2009 with $191.4 million of cash, cash equivalents and short-term investments, $590.3 million in stockholders’ equity and no borrowings under its revolving Credit Agreement. Because of the Company’s financial position at June 30, 2009, the Company should continue to be in a position to pursue various initiatives.

 

27


Table of Contents

ITEM 2.  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — continued
                 
    Three Months Ended June 30  
Consolidated Results   2009     2008  
    ($ thousands, except workdays and per share data)  
 
               
WORKDAYS
    63.5       64.0  
 
               
OPERATING REVENUES
               
ABF
  $ 343,805     $ 479,522  
Other revenues and eliminations
    18,830       18,992  
 
           
 
  $ 362,635     $ 498,514  
 
           
 
               
OPERATING INCOME (LOSS)
               
ABF
  $ (26,822 )   $ 25,531  
Other and eliminations
    (475 )     151  
 
           
 
  $ (27,297 )   $ 25,682  
 
           
 
               
DILUTED EARNINGS (LOSS) PER SHARE
  $ (0.62 )   $ 0.63  
 
           
                 
    Six Months Ended June 30  
    2009     2008  
    ($ thousands, except workdays and per share data)  
 
               
WORKDAYS
    126.0       127.5  
 
               
OPERATING REVENUES
               
ABF
  $ 666,918     $ 907,269  
Other revenues and eliminations
    35,394       38,756  
 
           
 
  $ 702,312     $ 946,025  
 
           
 
               
OPERATING INCOME (LOSS)
               
ABF
  $ (53,665 )   $ 38,411  
Other and eliminations
    (2,234 )     423  
 
           
 
  $ (55,899 )   $ 38,834  
 
           
 
               
DILUTED EARNINGS (LOSS) PER SHARE
  $ (1.35 )   $ 0.96  
 
           
Consolidated revenues for the three and six months ended June 30, 2009 decreased 26.7% and 24.9%, respectively, on a per-day basis compared to the prior year periods. Consolidated operating losses for the three and six months ended June 30, 2009 represent declines from the same periods of 2008 of $53.0 million and $94.7 million, respectively. The change in consolidated operating results and per share amounts primarily reflect the operations of ABF, as discussed in the ABF section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Consolidated operating results were impacted by nonunion healthcare and pension, workers’ compensation and third-party casualty insurance claims which on a pre-tax basis totaled $26.1 million and $42.4 million or $0.63 and $1.03 per share in the three and six months ended June 30, 2009, respectively, compared to $21.0 million and $36.8 million on a pre-tax basis or $0.51 and $0.89 per share in the same prior year periods. The increase in nonunion healthcare costs reflects unfavorable claims experience, and the higher workers’ compensation and third-party casualty insurance expense was primarily related to increased severity of claims incurred during the second quarter 2009. For the three and six months ended June 30, 2009, nonunion pension expense increased from the comparable prior year periods due to higher amortization of actuarial losses associated with the effect of market declines on the value of nonunion pension plan assets in 2008 and lower expected returns on pension assets in 2009. For the six months ended June 30, 2009, “other” operating loss includes the costs incurred for an advisory firm, which totaled $2.7 million (pre-tax), or $0.07 per share, related to the development of a formal strategic plan and identification of potential acquisition opportunities.

 

28


Table of Contents

ITEM 2.  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — continued
ABF Freight System, Inc.
The following table sets forth a summary of operating expenses and operating income (loss) as a percentage of revenue for ABF, the Company’s only reportable operating segment:
                                 
    Three Months Ended     Six Months Ended  
    June 30     June 30  
    2009     2008     2009     2008  
 
                               
ABF OPERATING EXPENSES AND COSTS
                               
 
                               
Salaries, wages and benefits
    71.3 %     57.1 %     71.8 %     58.6 %
Fuel, supplies and expenses
    15.3       20.2       15.5       19.7  
Operating taxes and licenses
    3.1       2.5       3.2       2.6  
Insurance
    1.9       1.1       1.5       1.1  
Communications and utilities
    1.0       0.8       1.1       0.8  
Depreciation and amortization
    5.2       3.8       5.5       4.1  
Rents and purchased transportation
    9.4       8.9       9.0       8.6  
Gain on sale of property and equipment
    (0.1 )     (0.1 )     (0.1 )     (0.3 )
Other
    0.7       0.4       0.5       0.6  
 
                       
 
    107.8 %     94.7 %     108.0 %     95.8 %
 
                       
 
                               
ABF OPERATING INCOME (LOSS)
    (7.8 )%     5.3 %     (8.0 )%     4.2 %
The following tables provide a comparison of key operating statistics for ABF:
                         
    Three Months Ended June 30  
    2009     2008     % Change  
 
                       
Workdays
    63.5       64.0          
 
                       
Billed revenue* per hundredweight, including fuel surcharges
  $ 23.81     $ 27.40       (13.1 )
 
                       
Pounds
    1,451,669,827       1,761,730,259       (17.6 )
 
                       
Pounds per day
    22,860,942       27,527,035       (17.0 )
 
                       
Shipments per DSY hour
    0.496       0.488       1.6  
 
                       
Pounds per DSY hour
    646.11       655.20       (1.4 )
 
                       
Pounds per shipment
    1,303       1,343       (3.0 )
 
                       
Pounds per mile
    19.29       19.47       (0.9 )
     
*  
Billed revenue does not include revenue deferral required for financial statement purposes under the Company’s revenue recognition policy.

 

29


Table of Contents

ITEM 2.  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — continued
                         
    Six Months Ended June 30  
    2009     2008     % Change  
 
                       
Workdays
    126.0       127.5          
 
                       
Billed revenue* per hundredweight, including fuel surcharges
  $ 23.83     $ 26.88       (11.3 )
 
                       
Pounds
    2,809,064,375       3,397,991,332       (17.3 )
 
                       
Pounds per day
    22,294,162       26,650,912       (16.3 )
 
                       
Shipments per DSY hour
    0.491       0.488       0.6  
 
                       
Pounds per DSY hour
    633.32       638.35       (0.8 )
 
                       
Pounds per shipment
    1,289       1,307       (1.4 )
 
                       
Pounds per mile
    19.19       19.36       (0.9 )
     
*  
Billed revenue does not include revenue deferral required for financial statement purposes under the Company’s revenue recognition policy.
ABF’s revenue for the three and six months ended June 30, 2009 was $343.8 million and $666.9 million, respectively, compared to $479.5 million and $907.3 million reported for the same periods in 2008. ABF’s revenue per day decreased 27.7% and 25.6% for the three and six months ended June 30, 2009, respectively, compared to the same periods in 2008. The revenue decrease primarily reflects 17.0% and 16.3% declines in tonnage per day and 13.1% and 11.3% decreases in billed revenue per hundredweight for the three and six months ended June 30, 2009, respectively, as compared to the same periods in 2008. The decrease in billed revenue per hundredweight was largely attributable to lower fuel surcharges. ABF charges a fuel surcharge based on changes in diesel fuel prices compared to a national index. The ABF fuel surcharge rate in effect is available at abf.com. (The information contained on the ABF Web site is not a part of this Quarterly Report on Form 10-Q nor shall it be deemed incorporated by reference into the Quarterly Report on Form 10-Q.)
Effective January 5, 2009 and February 4, 2008, ABF implemented general rate increases to cover known and expected cost increases. Nominally, the increases were 5.79% and 5.45%, respectively, although the amounts vary by lane and shipment characteristics. The 2009 general rate increase, which was in line with increases announced by other LTL carriers, was implemented four weeks earlier than the 2008 increase. The general rate increase affected approximately 45% of ABF’s business for the six months ended June 30, 2009, while rate increases on the remaining business are subject to individually negotiated pricing arrangements that are effective at various times throughout the year. ABF’s ability to retain the general rate increases, which it has not been able to do in the second quarter of 2009 due to the recessionary environment, is impacted by competitive factors and customer account mix changes.
ABF’s 13.1% and 11.3% decrease in billed revenue per hundredweight for the three and six months ended June 30, 2009 compared to the same periods in 2008 was impacted not only by lower fuel surcharges and the general rate increase, but also by changes in profile such as length of haul, pounds per shipment, freight density and customer and geographic mix. Total weight per shipment for the three and six months ended June 30, 2009 decreased 3.0% and 1.4%, respectively, compared to the same periods in 2008. A lower weight per shipment has the effect of increasing the nominal revenue per hundredweight without a commensurate impact on effective pricing or shipment profitability. For the three and six months ended June 30, 2009, billed revenue per hundredweight compared to the same periods in 2008 reflects a very competitive pricing environment.

 

30


Table of Contents

ITEM 2.  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — continued
As fuel prices increased substantially throughout the first half of 2008, the associated higher fuel surcharges constituted a larger proportion of the total freight rate and influenced ABF’s ability to obtain increases in base freight rates. Fuel prices and the associated fuel surcharge have significantly declined since the middle of July 2008. ABF’s average fuel surcharge in effect during the second quarter of 2009 was 20.5 revenue percentage points below the comparable prior year quarter. ABF’s ability to improve its operating ratio during periods of declining fuel surcharge levels is dependent on securing price increases to cover contractual wage rates and other increases in cost elements. However, obtaining overall base rate increases involves a lengthy process to address the pricing and resulting profitability of individual customer accounts. In addition, the pricing environment is more competitive during periods of lower tonnage levels. Excluding freight profile changes and the increase in fuel surcharges, pricing on ABF’s traditional LTL business during the second quarter of 2009 declined slightly compared to the prior year period.
ABF generated operating losses of $26.8 million and $53.7 million for the three and six months ended June 30, 2009 versus operating income of $25.5 million and $38.4 million during the same periods in 2008. ABF’s second quarter 2009 operating ratio increased to 107.8% from 94.7% in the second quarter of 2008. For the six months ended June 30, 2009, ABF’s operating ratio increased to 108.0% from 95.8% in the first six months of 2008. The increase in ABF’s operating ratio was primarily influenced by the decline in freight tonnage levels previously discussed, the effects of base LTL rates not covering increases in elements of cost, including contractual wage rates, and maintaining an operating structure that provides competitive customer service. Changes in operating expenses, which had an impact on ABF’s operating ratio, are discussed in the following paragraphs.
Salaries, wages and benefits expense for the three and six months ended June 30, 2009 increased 14.2% and 13.2% of revenues compared to the same periods in 2008. Portions of salaries, wages and benefits are fixed in nature and increase, as a percent of revenue, with decreases in revenue levels including fuel surcharges. ABF is generally effective in managing its costs to business levels. However, during periods of declining tonnage levels which ABF has experienced in recent quarters, incremental reductions in labor and other operating costs become increasingly challenging and less effective as ABF maintains service levels and continues its focus on serving the regional markets. Shipments per dock, street and yard (“DSY”) hour and total pounds per mile are measures ABF uses to assess the effectiveness of labor costs. Shipments per DSY hour is used to measure effectiveness in ABF’s local operations, although total pounds per DSY hour is also a relevant measure when the average shipment size is changing. Total pounds per mile is used by ABF to measure the effectiveness of its linehaul operations, although this metric is influenced by other factors including freight density, loading efficiency, average length of haul and the degree to which rail service is used. ABF’s average length of haul has been declining in recent quarters, due in part to the enhanced regional service offering. As a result, total pounds per mile has become a less effective measure of the productivity of ABF’s operations and labor costs. The challenges of adjusting the cost structure throughout the ABF system are evidenced by the 1.4% and 0.8% decreases in pounds per DSY hour for the three and six months ended June 30, 2009, respectively, and the 0.9% decrease in pounds per mile for the three and six months ended June 30, 2009 as compared to same periods of 2008. These lower productivity measures were also impacted by profile changes including the year-over-year reduction in pounds per shipment for the periods presented.

 

31


Table of Contents

ITEM 2.  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — continued
The increase in salaries, wages and benefits as a percent of revenues for the three and six months ended June 30, 2009 compared to the same periods in 2008 was impacted by contractual increases under the IBT National Freight Industry Standards Agreement. The annual contractual wage increases effective on April 1, 2009 and 2008 were 1.8% and 2.2%, respectively. On August 1, 2008, health, welfare and pension benefit costs under the agreement increased 8.1%. On August 1, 2009, health, welfare and pension benefit costs under the agreement will increase 7.5%. The increase in salaries, wages and benefits as a percent of revenues was also influenced by an increase in ABF’s nonunion pension expense in 2009 compared to 2008, which impacted the operating ratio comparison by approximately one percentage point for the three and six months ended June 30, 2009. The increase in nonunion pension costs is primarily attributable to higher amortization of actuarial losses associated with the effect of market declines on the value of nonunion pension plan assets in 2008 and lower expected returns on pension assets in 2009. The Company’s full-year 2009 nonunion pension cost, which is predominantly related to ABF, is estimated to be approximately $11.0 million more than the amount recognized in 2008 (see Note F to the accompanying consolidated financial statements). Second quarter 2009 salaries, wages and benefits costs were also influenced by higher workers’ compensation expense due to an increase in the severity of claims, which impacted ABF’s operating ratio by 0.9% compared to the prior year period. On a year-to-date basis through June 30, 2009, workers’ compensation costs as a percent of revenue were 0.3% above the same prior year period but in line with ABF’s ten-year historical average. Salaries, wages and benefits as a percent of revenues for the three and six months ended June 30, 2009 was further impacted by unfavorable claims experience under the Company’s self-insured healthcare program, which increased the operating ratio by 0.6% compared to the same prior year periods.
Fuel, supplies and expenses decreased 4.9% and 4.2% of revenues for the three and six months ended June 30, 2009, respectively, compared to the same periods in 2008. This decrease primarily reflects significantly lower fuel costs as the average price per gallon of fuel decreased 55.1% and 52.3%, respectively, during the three and six months ended June 30, 2009, compared to the same periods in 2008.
Insurance costs increased 0.8% and 0.4% of revenues for the three and six months ended June 30, 2009, respectively, compared to the same prior year periods, primarily due to the increase in severity of third-party casualty claims.
Depreciation and amortization increased 1.4% of revenues for the three and six months ended June 30, 2009 compared to the same periods in 2008. Depreciation and amortization charges are generally fixed in nature when maintaining customer service levels and increase as a percentage of revenue with decreases in revenue levels including fuel surcharges. The increase as a percent of revenue also reflects the higher unit costs of revenue equipment being depreciated in the first six months of 2009 compared to the average costs in the same period of 2008.
Operating taxes and licenses, communication and utilities, and rents and purchased transportation all decreased in amount during the three and six month periods ended June 30, 2009 compared to the same periods in 2008 primarily due to lower business levels. As a percent of revenue, these costs were higher during 2009 compared to 2008 as a portion of these items are fixed in nature and increase as a percent of revenue with decreases in revenue levels including fuel surcharges.
Consolidated Balance Sheet
Accounts Payable: Accounts payable increased $12.3 million from December 31, 2008 to June 30, 2009, primarily due to the seasonal increase in revenue levels in June 2009 compared to December 2008 and accruals for revenue equipment received but not yet paid for of $5.4 million as of June 30, 2009.
Pension and Postretirement Liabilities: Pension and postretirement liabilities decreased $11.5 million from December 31, 2008 to June 30, 2009, primarily due to contributions made to the nonunion defined benefit pension plan, partially offset by pension and postretirement expense accruals.

 

32


Table of Contents

ITEM 2.  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — continued
Income Taxes
The difference between the Company’s effective tax rate and the federal statutory rate primarily results from the effect of state income taxes, nondeductible expenses and alternative fuel tax credits. The federal tax benefit recorded in 2009 will be realized by refund of taxes paid in prior years through loss carrybacks allowed by the U.S. Internal Revenue Code.
Seasonality
ABF is impacted by seasonal fluctuations, which affect tonnage and shipment levels. Freight shipments, operating costs and earnings are also affected adversely by inclement weather conditions. The second and third calendar quarters of each year usually have the highest tonnage levels while the first quarter generally has the lowest, although other factors, including the state of the economy, may influence quarterly freight tonnage levels.
Effects of Inflation
Generally, inflationary increases in labor and fuel costs, which are discussed above, have been offset through price increases and fuel surcharges. In periods of increasing fuel prices, the effect of higher associated fuel surcharges on the overall price to the customer influences ABF’s ability to obtain increases in base freight rates. In periods with declining fuel surcharge levels, the timing and extent of base price increases on ABF’s revenues may not correspond with contractual increases in wage rates and other inflationary increases in cost elements and as a result could impact the Company’s operating results. During the second quarter 2009, ABF’s base LTL pricing was believed to be slightly negative while wage rates increased on April 1, 2009 under the collective bargaining agreement with its union employees. ABF’s revenue equipment (tractors and trailers used primarily in ABF’s operations) will likely be replaced during the normal replacement cycles at higher costs which could result in higher depreciation charges on a per-unit basis. ABF considers these costs in setting its pricing policies, although ABF’s overall freight rate structure is governed by market forces based on value provided to the customer. As discussed above, the pricing environment has been very competitive during the economic recession and has limited ABF’s ability to offset inflationary and contractual cost increases.
Current Economic Conditions
Given the current economic environment and the uncertainties regarding the potential impact on ABF’s business, there can be no assurance that the Company’s estimates and assumptions regarding the duration of the ongoing economic downturn, or the period of recovery, made for the purposes of impairment tests related to ABF’s operating assets and goodwill, will prove to be accurate predictions of the future. If the Company’s assumptions regarding forecasted cash flow and revenue and operating income growth rates are not achieved, it is possible that a goodwill impairment test may be triggered and may result in a material non-cash adjustment to the Company’s consolidated financial statements.

 

33


Table of Contents

ITEM 2.  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — continued
Forward-Looking Statements
Statements contained in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this report that are not based on historical facts are “forward-looking statements.” Terms such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “plan,” “predict,” “prospects,” “scheduled,” “should,” “would,” and similar expressions and the negatives of such terms are intended to identify forward-looking statements. Such statements are by their nature subject to uncertainties and risk, including, but not limited to, current adverse economic conditions; the impact of any limitations on our customers’ access to adequate financial resources; availability and cost of capital; shifts in market demand; weather conditions; the performance and needs of industries served by Arkansas Best Corporation’s subsidiaries; future costs of operating expenses such as fuel and related taxes; self-insurance claims and insurance premium costs; relationships with employees, including unions; union and non-union employee wages and benefits, including changes in required contributions to multiemployer pension plans; governmental regulations and policies; costs of continuing investments in technology; the timing and amount of capital expenditures; the cost, integration and performance of any future acquisitions; competitive initiatives, pricing pressures and the effect of volatility in fuel prices and the associated changes in fuel surcharges on securing increases in base freight rates; and other financial, operational and legal risks and uncertainties detailed from time to time in Arkansas Best Corporation’s Securities and Exchange Commission public filings.

 

34


Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
Since December 31, 2008, there have been no significant changes in the Company’s market risks as reported in the Company’s 2008 Annual Report on Form 10-K.

 

35


Table of Contents

ITEM 4. CONTROLS AND PROCEDURES
Controls and Procedures
As of the end of the period covered by this report, an evaluation was performed with the participation of the Company’s management, including the CEO and CFO, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2009. There have been no changes in the Company’s internal controls over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

 

36


Table of Contents

PART II.
OTHER INFORMATION
ARKANSAS BEST CORPORATION
ITEM 1. LEGAL PROCEEDINGS.
For information related to the Company’s legal proceedings, see Note J, Legal Proceedings and Environmental Matters under Part I, Item 1, of this quarterly report on Form 10-Q. The Company disclosed in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, the final dismissal, effective on March 16, 2009, of a class action lawsuit whereby Farm Water Technological Services, Inc., d/b/a Water Tech, and C.B.J.T., d/b/a Agricultural Supply, on behalf of themselves and other plaintiffs, alleged that the Company and eleven other companies engaged in the less-than-truckload transportation business violated U.S. antitrust laws regarding fuel surcharges.
ITEM 1A. RISK FACTORS.
The Company’s risk factors are fully described in the Company’s 2008 Annual Report on Form 10-K. No material changes to the Company’s risk factors have occurred since the Company filed its 2008 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
(a) Recent sales of unregistered securities.
None.
(b) Use of proceeds from registered securities.
None.
(c) Purchases of equity securities by the issuer and affiliated purchasers.
The Company has a program to repurchase $75.0 million of its Common Stock in the open market or in privately negotiated transactions. The repurchases may be made either from the Company’s cash reserves or from other available sources. The program has no expiration date but may be terminated at any time at the Board of Directors’ discretion. As of June 30, 2009, the Company has purchased 1,618,150 shares for an aggregate cost of $56.8 million, leaving $18.2 million available for repurchase under the program. The Company made no repurchases during the six months ended June 30, 2009.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.

 

37


Table of Contents

PART II. — continued
OTHER INFORMATION
ARKANSAS BEST CORPORATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company’s Annual Meeting of Shareholders was held on April 21, 2009.
The first proposal considered at the Annual Meeting was to elect Fred A. Allardyce and John H. Morris to serve as Directors of the Company. The results of this proposal were as follows:
                 
Directors   Votes For     Votes Withheld  
Fred A. Allardyce
    23,472,785       447,658  
John H. Morris
    23,354,365       566,078  
The second proposal was to ratify the appointment of Ernst & Young LLP as independent registered public accounting firm for the fiscal year 2009. This proposal received 23,753,256 votes for adoption, 161,622 against adoption, 5,565 abstentions and no broker nonvotes.
The third proposal was to approve amendments to the Company’s Restated Certificate of Incorporation to declassify the Company’s Board of Directors. This proposal received 23,761,028 votes for adoption, 149,174 against adoption, 10,241 abstentions and no broker nonvotes.
ITEM 5. OTHER INFORMATION.
None.

 

38


Table of Contents

PART II. — continued
OTHER INFORMATION
ARKANSAS BEST CORPORATION
ITEM 6. EXHIBITS.
The following exhibits are filed or furnished with this report or are incorporated by reference to previously filed material:
         
Exhibit
No.
       
 
  3.1    
Restated Certificate of Incorporation of the Company (previously filed as Exhibit 3.1 to the Company’s Registration Statement on Form S-1 under the Securities Act of 1933 filed with the Securities and Exchange Commission (the “Commission”) on March 17, 1992, Commission File No. 33-46483, and incorporated herein by reference).
       
 
  3.2    
Certificate of Designations of $2.875 Series A Cumulative Convertible Exchangeable Preferred Stock of the Company (previously filed as Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on May 5, 2009, Commission File No. 000-19969, and incorporated herein by reference).
       
 
  3.3    
Certificate of Amendment to the Restated Certificate of Incorporation of the Company (previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Commission on April 24, 2009, Commission File No. 0-19969, and incorporated herein by reference).
       
 
  3.4    
Second Amended and Restated Bylaws of the Company dated as of April 21, 2009 (previously filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed with the Commission on April 24, 2009, Commission File No. 0-19969, and incorporated herein by reference).
       
 
  4.1    
First Amended and Restated Rights Agreement, dated as of May 1, 2001 between Arkansas Best Corporation and Computershare Investor Services, LLC, as Rights Agent (including exhibits thereto) (previously filed as Exhibit 4.1 to the Form 8-A/A Amendment No. 2 filed with the Commission on May 16, 2001, Commission File No. 000-19969, and incorporated herein by reference).
       
 
  4.2    
Amendment to First Amended and Restated Rights Agreement, dated as of April 4, 2003 between Arkansas Best Corporation and LaSalle Bank, National Association, as Rights Agent (previously filed as Exhibit 4.2 to the Form 8-A/A Amendment No. 3 filed with the Commission on April 4, 2003, Commission File No. 000-19969, and incorporated herein by reference).
       
 
  4.3    
Second Amendment to First Amended and Restated Rights Agreement, dated as of May 18, 2007 between Arkansas Best Corporation and LaSalle Bank, National Association, as Rights Agent (previously filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K, filed with the Commission on May 18, 2007, Commission File No. 000-19969, and incorporated herein by reference).
       
 
  31.1 *  
Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
       
 
  31.2 *  
Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
       
 
  32 **  
Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
     
*  
Filed herewith.
 
**  
Furnished herewith.

 

39


Table of Contents

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 5, 2009  /s/ Judy R. McReynolds    
  Judy R. McReynolds   
  Senior Vice President — Chief Financial Officer,
Treasurer and Principal Accounting Officer 
 

 

40


Table of Contents

         
EXHIBIT INDEX
         
Exhibit No.   Description
       
 
  3.1    
Restated Certificate of Incorporation of the Company (previously filed as Exhibit 3.1 to the Company’s Registration Statement on Form S-1 under the Securities Act of 1933 filed with the Securities and Exchange Commission (the “Commission”) on March 17, 1992, Commission File No. 33-46483, and incorporated herein by reference).
       
 
  3.2    
Certificate of Designations of $2.875 Series A Cumulative Convertible Exchangeable Preferred Stock of the Company (previously filed as Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on May 5, 2009, Commission File No. 000-19969, and incorporated herein by reference).
       
 
  3.3    
Certificate of Amendment to the Restated Certificate of Incorporation of the Company (previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Commission on April 24, 2009, Commission File No. 0-19969, and incorporated herein by reference).
       
 
  3.4    
Second Amended and Restated Bylaws of the Company dated as of April 21, 2009 (previously filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed with the Commission on April 24, 2009, Commission File No. 0-19969, and incorporated herein by reference).
       
 
  4.1    
First Amended and Restated Rights Agreement, dated as of May 1, 2001 between Arkansas Best Corporation and Computershare Investor Services, LLC, as Rights Agent (including exhibits thereto) (previously filed as Exhibit 4.1 to the Form 8-A/A Amendment No. 2 filed with the Commission on May 16, 2001, Commission File No. 000-19969, and incorporated herein by reference).
       
 
  4.2    
Amendment to First Amended and Restated Rights Agreement, dated as of April 4, 2003 between Arkansas Best Corporation and LaSalle Bank, National Association, as Rights Agent (previously filed as Exhibit 4.2 to the Form 8-A/A Amendment No. 3 filed with the Commission on April 4, 2003, Commission File No. 000-19969, and incorporated herein by reference).
       
 
  4.3    
Second Amendment to First Amended and Restated Rights Agreement, dated as of May 18, 2007 between Arkansas Best Corporation and LaSalle Bank, National Association, as Rights Agent (previously filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K, filed with the Commission on May 18, 2007, Commission File No. 000-19969, and incorporated herein by reference).
       
 
  31.1 *  
Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
       
 
  31.2 *  
Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
       
 
  32 **  
Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
     
*  
Filed herewith.
 
**  
Furnished herewith.

 

41

EX-31.1 2 c88837exv31w1.htm EXHIBIT 31.1 - CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 to Section 302 of the Sarbanes-Oxley Act of 2002
EXHIBIT 31.1
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Robert A. Davidson, certify that:
1.  
I have reviewed this Quarterly Report on Form 10-Q of Arkansas Best Corporation;
2.  
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.  
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.  
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.  
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
         
Date: August 5, 2009  /s/ Robert A. Davidson    
  Robert A. Davidson   
  President — Chief Executive Officer and
Principal Executive Officer 
 

 

 

EX-31.2 3 c88837exv31w2.htm EXHIBIT 31.2 - CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 Exhibit 31.2 - Certifications Pursuant to Section
         
EXHIBIT 31.2
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Judy R. McReynolds, certify that:
1.  
I have reviewed this Quarterly Report on Form 10-Q of Arkansas Best Corporation;
2.  
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.  
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.  
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.  
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
         
Date: August 5, 2009  /s/ Judy R. McReynolds    
  Judy R. McReynolds   
  Senior Vice President — Chief Financial Officer,
Treasurer and Principal Accounting Officer 
 

 

 

EX-32 4 c88837exv32.htm EXHIBIT 32 - CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 to Section 906 of the Sarbanes-Oxley Act of 2002
         
EXHIBIT 32
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the filing of the Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, (the “Report”) by Arkansas Best Corporation (the “Registrant”), each of the undersigned hereby certifies that:
  1.  
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and
 
  2.  
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
         
  ARKANSAS BEST CORPORATION
(Registrant)
 
 
Date: August 5, 2009  /s/ Robert A. Davidson    
  Robert A. Davidson   
  President — Chief Executive Officer and
Principal Executive Officer 
 
 
  ARKANSAS BEST CORPORATION
(Registrant)
 
 
Date: August 5, 2009  /s/ Judy R. McReynolds    
  Judy R. McReynolds   
  Senior Vice President — Chief Financial Officer,
Treasurer and Principal Accounting Officer 
 
 

 

 

-----END PRIVACY-ENHANCED MESSAGE-----