-----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, SsIV1D8DGKKZqOrXznuZIzswRtHwKma8wRP3QVc/hxZ9prvY+Kk791SzyDlVe/d/ L/lo6Hqh0lhwrDyeJmHkBw== 0000950134-99-007249.txt : 19990813 0000950134-99-007249.hdr.sgml : 19990813 ACCESSION NUMBER: 0000950134-99-007249 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990812 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: SEC FILE NUMBER: 000-19969 FILM NUMBER: 99686089 BUSINESS ADDRESS: STREET 1: 3801 OLD GREENWOOD RD CITY: FORT SMITH STATE: AR ZIP: 72903 BUSINESS PHONE: 5017856000 MAIL ADDRESS: STREET 1: P O BOX 48 CITY: FORT SMITH STATE: AR ZIP: 72902 10-Q 1 FORM 10-Q FOR QUARTER ENDED JUNE 30, 1999 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended June 30, 1999 ----------------- [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______ to ______ Commission file number 0-19969 ARKANSAS BEST CORPORATION - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 6711 71-0673405 - ------------------------------------- ------------------------------------ --------------------------------------- (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code No.) Identification No.)
3801 Old Greenwood Road Fort Smith, Arkansas 72903 (501) 785-6000 - ------------------------------------------------------------------------------- (Address, including zip code, and telephone number, including area code, of the registrant's principal executive offices) Not Applicable - ------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of The Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at July 31, 1999 ---------------------------------- --------------------------------- Common Stock, $.01 par value 19,667,333 shares 2 ARKANSAS BEST CORPORATION INDEX
PAGE PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets -- June 30, 1999 and December 31, 1998 ................................................... 3 Consolidated Statements of Operations -- For the Three and Six Months Ended June 30, 1999 and 1998 .............................. 5 Consolidated Statements of Shareholders' Equity For the Six Months Ended June 30, 1999 ................................................. 7 Condensed Consolidated Statements of Cash Flows -- For the Six Months Ended June 30, 1999 and 1998 ........................................ 8 Notes to Consolidated Financial Statements - June 30, 1999 ............................... 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .................................................... 16 Item 2a. Quantitative and Qualitative Disclosures about Market Risk................................ 26 PART II. OTHER INFORMATION Item 1. Legal Proceedings ........................................................................ 27 Item 2. Changes in Securities .................................................................... 27 Item 3. Defaults Upon Senior Securities .......................................................... 27 Item 4. Submission of Matters to a Vote of Security Holders ...................................... 27 Item 5. Other Information ........................................................................ 27 Item 6. Exhibits and Reports on Form 8-K ......................................................... 27 SIGNATURES ................................................................................................... 28
3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ARKANSAS BEST CORPORATION CONSOLIDATED BALANCE SHEETS - -------------------------------------------------------------------------------
JUNE 30 DECEMBER 31 1999 1998 ------------ ------------ (UNAUDITED) NOTE ($ thousands) ASSETS CURRENT ASSETS Cash and cash equivalents ........................... $ 4,436 $ 4,543 Trade receivables less allowances (1999 -- $5,573,000; 1998 -- $7,051,000) ......... 174,543 166,520 Inventories ......................................... 31,239 33,150 Prepaid expenses .................................... 8,104 12,700 Deferred income taxes ............................... 852 874 Net assets of discontinued operations ............... 1,145 3,546 Other ............................................... 3,367 5,467 ------------ ------------ TOTAL CURRENT ASSETS ............................. 223,686 226,800 PROPERTY, PLANT AND EQUIPMENT Land and structures ................................. 219,261 218,250 Revenue equipment ................................... 280,294 256,474 Manufacturing equipment ............................. 15,688 17,506 Service, office and other equipment ................. 77,835 73,891 Leasehold improvements .............................. 9,974 9,484 ------------ ------------ 603,052 575,605 Less allowances for depreciation and amortization ... (269,988) (255,732) ------------ ------------ 333,064 319,873 OTHER ASSETS ........................................... 41,218 35,682 GOODWILL, less amortization (1999 -- $34,348,000; 1998 -- $36,740,000) ................................ 111,433 124,975 ------------ ------------ $ 709,401 $ 707,330 ============ ============
NOTE: The balance sheet at December 31, 1998, has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying notes are an integral part of the consolidated financial statements. 3 4 ARKANSAS BEST CORPORATION CONSOLIDATED BALANCE SHEETS - -------------------------------------------------------------------------------
JUNE 30 DECEMBER 31 1999 1998 --------------- -------------- (UNAUDITED) NOTE ($ thousands) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Bank overdraft and drafts payable ........................................... $ 15,992 $ 19,830 Trade accounts payable ...................................................... 73,910 69,983 Accrued expenses............................................................. 156,290 145,432 Federal and state income taxes............................................... 5,699 8,179 Current portion of long-term debt ........................................... 19,119 17,504 --------------- -------------- TOTAL CURRENT LIABILITIES ................................................ 271,010 260,928 LONG-TERM DEBT, less current portion ........................................... 207,663 196,079 OTHER LIABILITIES .............................................................. 25,590 20,577 DEFERRED INCOME TAXES .......................................................... 15,296 22,319 MINORITY INTEREST IN TREADCO, INC............................................... - 33,512 SHAREHOLDERS' EQUITY Preferred stock, $.01 par value, authorized 10,000,000 shares; issued and outstanding 1,495,000 shares .................................. 15 15 Common stock, $.01 par value, authorized 70,000,000 shares; issued and outstanding 1999: 19,634,133 shares; 1998: 19,610,213 shares .................................................. 196 196 Additional paid-in capital .................................................. 193,282 193,117 Retained earnings (deficit) ................................................. (3,651) (19,413) Accumulated other comprehensive income....................................... - - ---------------- -------------- TOTAL SHAREHOLDERS' EQUITY ............................................... 189,842 173,915 COMMITMENTS AND CONTINGENCIES .................................................. --------------- -------------- $ 709,401 $ 707,330 =============== ==============
NOTE: The balance sheet at December 31, 1998, has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying notes are an integral part of the consolidated financial statements. 4 5 ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS - --------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 1999 1998 1999 1998 ------------ ------------ ------------ ------------ (UNAUDITED) ($ thousands, except per share data) CONTINUING OPERATIONS: OPERATING REVENUES Transportation operations ..................... $ 372,772 $ 359,133 $ 726,687 $ 699,011 Tire operations ............................... 46,133 46,456 86,593 83,523 ------------ ------------ ------------ ------------ 418,905 405,589 813,280 782,534 ------------ ------------ ------------ ------------ OPERATING EXPENSES AND COSTS Transportation operations ..................... 347,793 341,327 683,533 669,275 Tire operations ............................... 45,807 45,248 86,734 82,927 ------------ ------------ ------------ ------------ 393,600 386,575 770,267 752,202 ------------ ------------ ------------ ------------ OPERATING INCOME ................................. 25,305 19,014 43,013 30,332 OTHER INCOME (EXPENSE) Net gains (losses) on sales of property and non-revenue equipment .................. (32) 756 464 1,348 Interest expense .............................. (4,784) (4,449) (9,327) (8,831) Minority interest in Treadco, Inc. ............ -- (470) 245 (129) Other, net .................................... (1,356) (1,982) (2,376) (3,445) ------------ ------------ ------------ ------------ (6,172) (6,145) (10,994) (11,057) ------------ ------------ ------------ ------------ INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES ............. 19,133 12,869 32,019 19,275 FEDERAL AND STATE INCOME TAXES (CREDIT) Current ....................................... 7,144 4,407 13,832 8,316 Deferred ...................................... 892 743 (388) (519) ------------ ------------ ------------ ------------ 8,036 5,150 13,444 7,797 ------------ ------------ ------------ ------------ INCOME FROM CONTINUING OPERATIONS ................ 11,097 7,719 18,575 11,478 ------------ ------------ ------------ ------------ DISCONTINUED OPERATIONS: Loss from discontinued operations (net of tax benefits of $112 for the three months ended June 30, 1998 and $394 and $140 for the six months ended June 30, 1999 and 1998, respectively) ......... -- (318) (664) (459) ------------ ------------ ------------ ------------ LOSS FROM DISCONTINUED OPERATIONS ................ -- (318) (664) (459) ------------ ------------ ------------ ------------ NET INCOME ....................................... 11,097 7,401 17,911 11,019 Preferred stock dividends ..................... 1,074 1,074 2,149 2,149 ------------ ------------ ------------ ------------ NET INCOME FOR COMMON SHAREHOLDERS ....................... $ 10,023 $ 6,327 $ 15,762 $ 8,870 ============ ============ ============ ============
5 6 ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS -- Continued - -------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 1999 1998 1999 1998 -------------- -------------- -------------- -------------- (UNAUDITED) ($ thousands, except per share data) NET INCOME (LOSS) PER COMMON SHARE BASIC: Continuing operations (1) ........... $ 0.51 $ 0.34 $ 0.83 $ 0.47 Discontinued operations ............. -- (0.02) (0.03) (0.02) -------------- -------------- -------------- -------------- NET INCOME PER SHARE (1) ............... $ 0.51 $ 0.32 $ 0.80 $ 0.45 ============== ============== ============== ============== AVERAGE COMMON SHARES OUTSTANDING (BASIC): ............................ 19,632,533 19,610,213 19,623,093 19,607,713 ============== ============== ============== ============== DILUTED: Continuing operations (2) ........... $ 0.47 $ 0.32 $ 0.79 $ 0.46 Discontinued operations ............. -- (0.01) (0.03) (0.02) -------------- -------------- -------------- -------------- NET INCOME PER SHARE (2) ............... $ 0.47 $ 0.31 $ 0.76 $ 0.44 -------------- -------------- -------------- -------------- AVERAGE COMMON SHARES OUTSTANDING (DILUTED) ........................... 23,780,913 23,850,481 23,681,525 20,065,431 ============== ============== ============== ============== CASH DIVIDENDS PAID PER COMMON SHARE ... $ -- $ -- $ -- $ -- ============== ============== ============== ==============
(1) Gives consideration to preferred stock dividends of $1.1 million per quarter. (2) For the six months ended June 30, 1998, consideration is given to preferred dividends of $2.1 million. Conversion of preferred stock into common would be antidilutive for the six months ended June 30, 1998. For the three months ended June 30, 1999 and 1998, and the six months ended June 30, 1999, conversion of preferred shares into common is assumed. 6 7 ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - -------------------------------------------------------------------------------
ACCUMULATED ADDITIONAL RETAINED OTHER PREFERRED COMMON PAID-IN EARNINGS COMPREHENSIVE TOTAL STOCK STOCK CAPITAL (DEFICIT) INCOME EQUITY --------- ------ ------- --------- ------------ ------ (UNAUDITED) ($ thousands) Balances at January 1, 1999 ........... $ 15 $ 196 $ 193,117 $ (19,413) $ -- $ 173,915 Net income ............................ -- -- -- 17,911 -- 17,911 Common stock issued on exercise of stock options............ -- -- 158 -- -- 158 Tax effect of stock options exercised . -- -- 7 -- -- 7 Dividends paid on preferred stock ..... -- -- -- (2,149) -- (2,149) ----- ------- ---------- ---------- ------ ---------- Balances at June 30, 1999 ............. $ 15 $ 196 $ 193,282 $ (3,651) $ -- $ 189,842 ===== ======= ========== ========== ====== ==========
7 8 ARKANSAS BEST CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - -------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30 1999 1998 ---------- ---------- (UNAUDITED) ($ thousands) OPERATING ACTIVITIES Net cash provided by operating activities ............... $ 54,004 $ 26,881 INVESTING ACTIVITIES Purchases of property, plant and equipment, less capitalized leases ............................... (28,736) (39,694) Purchase of Treadco, Inc. stock ......................... (23,673) -- Proceeds from asset sales and other ..................... 9,085 9,463 ---------- ---------- NET CASH USED BY INVESTING ACTIVITIES ...................... (43,324) (30,231) ---------- ---------- FINANCING ACTIVITIES Deferred financing costs and expenses ................... (125) (688) Borrowings under revolving credit facilities ............ 231,250 291,700 Payments under revolving credit facilities .............. (222,500) (261,700) Payments on long-term debt .............................. (13,409) (12,922) Payments under term loan facilities ..................... -- (13,000) Dividends paid .......................................... (2,149) (2,149) Other, net .............................................. (3,854) 1,250 ---------- ---------- NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES ........... (10,787) 2,491 ---------- ---------- NET DECREASE IN CASH AND CASH EQUIVALENTS .................. (107) (859) Cash and cash equivalents at beginning of period ........ 4,543 7,203 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ................. $ 4,436 $ 6,344 ========== ==========
8 9 ARKANSAS BEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 1999 - ------------------------------------------------------------------------------- NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS Arkansas Best Corporation (the "Company") is a diversified holding company engaged through its subsidiaries primarily in motor carrier transportation operations, intermodal transportation operations and truck tire retreading and new tire sales (see Note H). Principal subsidiaries are ABF Freight System, Inc., ("ABF"); Treadco, Inc. ("Treadco"); Clipper Exxpress Company and related companies ("Clipper Domestic"); G.I. Trucking Company ("G.I. Trucking"); and FleetNet America, Inc. Approximately 79% of ABF's employees are covered under a five-year collective bargaining agreement, which began on April 1, 1998, with the International Brotherhood of Teamsters ("IBT"). NOTE B - FINANCIAL STATEMENT PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 1999 and 1998, are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. For further information, refer to the Company's financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. The differences between the effective tax rates for the three and six month periods ended June 30, 1999 and 1998, and the federal statutory rate resulted from state income taxes, amortization of nondeductible goodwill, minority interest, nondeductible tender offer response costs (incurred by Treadco) and other nondeductible expenses. NOTE C - DISCONTINUED OPERATIONS The Company has engaged, since 1995, in international ocean freight services through its subsidiary CaroTrans International, Inc. ("Clipper International"), a non-vessel operating common carrier (N.V.O.C.C.). On February 28, 1999, the Company completed a formal plan to exit its international ocean freight N.V.O.C.C. services by disposing of the business and assets of Clipper International. On April 17, 1999, the Company closed the sale of the business and certain assets of Clipper International, including the trade name "CaroTrans International, Inc." Remaining assets will be liquidated. The aggregate of the selling price of these assets and the estimated liquidation value of the remaining Clipper International assets was approximately $5.0 million which is approximately equal to the Company's net investment in the related assets. 9 10 ARKANSAS BEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued - -------------------------------------------------------------------------------- Results of operations of the international ocean freight services segment have been reported as discontinued operations as of June 30, 1999 and the statements of operations for all periods have been restated to remove revenue and expenses of this segment. Results of Clipper International included in discontinued operations are summarized as follows:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 1999 1998 1999 1998 ---------- ---------- ---------- ---------- ($ thousands, except per share data) Revenues .................................... $ -- $ 11,269 $ 6,777 $ 22,231 Operating loss .............................. -- (338) (1,114) (420) Pre-tax loss ................................ -- (430) (1,058) (599)
NOTE D - INVENTORIES
JUNE 30 DECEMBER 31 1999 1998 ---------- ---------- ($ thousands) Finished goods ................................................................. $ 23,609 $ 25,523 Materials ...................................................................... 4,844 5,147 Repair parts, supplies and other ............................................... 2,786 2,480 ---------- ---------- $ 31,239 $ 33,150 ========== ==========
NOTE E - LEGAL PROCEEDINGS AND ENVIRONMENTAL MATTERS Various legal actions, the majority of which arise in the normal course of business, are pending. None of these legal actions are expected to have a material adverse effect on the Company's financial condition, cash flows or results of operations. The Company maintains liability insurance against risks arising out of the normal course of its business, subject to certain self-insured retention limits. The Company's subsidiaries store some fuel for its tractors and trucks in approximately 81 underground tanks located in 26 states. Maintenance of such tanks is regulated at the federal and, in some cases, state levels. The Company believes that it is in substantial compliance with all such regulations. The Company is not aware of any leaks from such tanks that could reasonably be expected to have a material adverse effect on the Company. Environmental regulations have been adopted by the United States Environmental Protection Agency ("EPA") that required the Company to upgrade its underground tank systems by December 1998. The Company successfully completed the upgrades prior to the deadline set by the EPA. The Company has received notices from the EPA and others that it has been identified as a potentially responsible party ("PRP") under the Comprehensive Environmental Response Compensation and Liability Act or other federal or state environmental statutes at several hazardous waste sites. After investigating the Company's or its subsidiaries' involvement in waste disposal or waste generation at such sites, the Company has either agreed to de minimis settlements (aggregating approximately $300,000 over the last five years), or believes its obligations with respect to such sites would involve immaterial monetary liability, although there can be no assurances in this regard. 10 11 ARKANSAS BEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued - -------------------------------------------------------------------------------- As of June 30, 1999, the Company has accrued approximately $3.1 million to provide for environmental-related liabilities. The Company's environmental accrual is based on management's best estimate of the actual liability. The Company's estimate is founded on management's experience in dealing with similar environmental matters and on actual testing performed at some sites. Management believes that the accrual is adequate to cover environmental liabilities based on the present environmental regulations. Accruals for environmental liability are included in the balance sheet as accrued expenses. NOTE F - RECENT ACCOUNTING PRONOUNCEMENTS In March 1998, the Accounting Standards Executive Committee of The American Institute of CPA's ("AcSEC") issued Statement of Position ("SOP") 98-1, Accounting for Costs of Computer Software Developed For or Obtained For Internal Use. Under the SOP, qualifying computer software costs incurred during the "application development stage" are required to be capitalized and amortized over the software's estimated useful life. The Company adopted SOP 98-1 January 1, 1999. The SOP results in capitalization of costs related to internal computer software development. All such costs were previously expensed. The amount of costs capitalized within any period is dependent on the nature of software development activities and projects in each period. For the three and six months ended June 30, 1999, the Company capitalized internal software development costs amounting to approximately $.7 million and $1.1 million, respectively, which increased net income (basic and diluted) and income from continuing operations (basic and diluted) by $.02 per share and $.03 per share, respectively. In April 1998, the AcSEC issued Statement of Position 98-5, Reporting on the Costs of Start-Up Activities. Under the SOP, certain costs associated with start-up activities are required to be expensed as incurred. The Company adopted SOP 98-5 in 1999. The Company has historically expensed start-up costs and, therefore, there is no impact of adoption on the Company's financial statements and related disclosures. In June 1998, the FASB issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. The Statement addresses the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. The Statement will require the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If a derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged asset, liability, or firm commitment through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. The Statement is effective for the Company in 2001. The Company is evaluating the impact the Statement will have on its financial statements and related disclosures. 11 12 ARKANSAS BEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued - -------------------------------------------------------------------------------- NOTE G - EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 1999 1998 1999 1998 ------------ ------------ ------------ ------------ ($ thousands, except per share data) NUMERATOR: Numerator for basic earnings per share -- Net income .................................... $ 11,097 $ 7,401 $ 17,911 $ 11,019 Preferred stock dividends ....................... (1,074) (1,074) (2,149) (2,149) ------------ ------------ ------------ ------------ Numerator for basic earnings per share -- Net income available to common shareholders ... 10,023 6,327 15,762 8,870 Effect of dilutive securities (1) ............... 1,074 1,074 2,149 -- ------------ ------------ ------------ ------------ Numerator for diluted earnings per share -- Net income available to common shareholders ... $ 11,097 $ 7,401 $ 17,911 $ 8,870 ============ ============ ============ ============ DENOMINATOR: Denominator for basic earnings per share -- weighted-average shares .............. 19,632,533 19,610,213 19,623,093 19,607,713 Effect of dilutive securities: Conversion of preferred stock (1) ............. 3,796,852 3,796,852 3,796,852 -- Employee stock options ........................ 351,528 443,416 261,580 457,718 ------------ ------------ ------------ ------------ Denominator for diluted earnings per share -- adjusted weighted-average shares and assumed conversions ................ 23,780,913 23,850,481 23,681,525 20,065,431 ============ ============ ============ ============ NET INCOME (LOSS) PER COMMON SHARE BASIC: Continuing operations ........................... $ 0.51 $ 0.34 $ 0.83 $ 0.47 Discontinued operations ......................... -- (0.02) (0.03) (0.02) ------------ ------------ ------------ ------------ NET INCOME PER SHARE ............................... $ 0.51 $ 0.32 $ 0.80 $ 0.45 ============ ============ ============ ============ AVERAGE COMMON SHARES OUTSTANDING (BASIC): ............................. 19,632,533 19,610,213 19,623,093 19,607,713 ============ ============ ============ ============ DILUTED: Continuing operations ........................... $ 0.47 $ 0.32 $ 0.79 $ 0.46 Discontinued operations ......................... -- (0.01) (0.03) (0.02) ------------ ------------ ------------ ------------ NET INCOME PER SHARE ............................... $ 0.47 $ 0.31 $ 0.76 $ 0.44 ============ ============ ============ ============ AVERAGE COMMON SHARES OUTSTANDING (DILUTED): ........................... 23,780,913 23,850,481 23,681,525 20,065,431 ============ ============ ============ ============ CASH DIVIDENDS PAID PER COMMON SHARE ............... $ -- $ -- $ -- $ -- ============ ============ ============ ============
(1) For the six months ended June 30, 1998, consideration is given to preferred dividends of $2.1 million. Conversion of preferred stock into common would be antidilutive for the six months ended June 30, 1998. For the three months ended June 30, 1999 and 1998, and the six months ended June 30, 1999, conversion of preferred shares into common is assumed. 12 13 ARKANSAS BEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued - -------------------------------------------------------------------------------- NOTE H- ACQUISITION OF MINORITY INTEREST IN TREADCO, INC. On January 22, 1999, the Company announced that it had submitted a formal proposal to Treadco's Board of Directors in which the outstanding shares of Treadco's common stock not owned by the Company would be acquired for $9.00 per share in cash. The announcement stated that the proposal had the support of Shapiro Capital Management Company, Inc., Treadco's largest independent stockholder, which beneficially owned 1,132,775 shares (or approximately 22%) of the common stock of Treadco. On March 15, 1999, the Company and Treadco signed a definitive merger agreement for the acquisition of all shares of Treadco's stock not owned by the Company for $9.00 per share in cash via a tender offer. The tender offer commenced on March 23, 1999, and closed on April 20, 1999. A total of approximately 2,457,000 shares were tendered to the Company. Including the tendered shares, the Company owned approximately 98% of Treadco at the closing of the tender. At a June 10, 1999 special meeting, the shareholders of Treadco, Inc. approved the merger of Treadco Acquisition Corporation, a wholly owned subsidiary of the Company, into Treadco, Inc. This transaction resulted in Treadco, Inc. becoming a wholly owned subsidiary of the Company. Subject to the terms of the merger agreement, shares of common stock not tendered were converted into the right to receive $9.00 per share. As a result of the merger, the Company voluntarily delisted Treadco Inc.'s common stock from trading on The Nasdaq Stock Market, Inc. on June 10, 1999. The cost of the Treadco shares and related expenses of $23.7 million was funded with the Company's Revolving Credit Facility. The acquisition of the Treadco stock was accounted for as a purchase. The application of purchase accounting to the acquired assets and liabilities of Treadco resulted in the elimination of Treadco's goodwill of approximately $12.0 million and a reduction of Treadco's fixed assets of approximately $4.0 million. Pro forma information (as if the acquisition and related transactions were completed at the beginning of their respective periods) for the six months ended June 30, 1999 and 1998 is as follows:
SIX MONTHS ENDED JUNE 30 ------------------------- 1999 1998 Operating revenues ................. $ 813,280 $ 782,534 Net income.......................... 17,699 11,245 Net income per share (diluted)...... 0.75 0.45
NOTE I - OPERATING SEGMENT DATA The Company used 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 decision-makers use 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 operating segments. During the periods being reported on, the Company operated in four defined reportable operating segments: 1) ABF; 2) G.I. Trucking; 3) Clipper Domestic; and 4) Treadco. 13 14 ARKANSAS BEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued - -------------------------------------------------------------------------------- Results of operations for Clipper International, previously reflected as a reportable segment, have been reported as discontinued operations for the three and six months ended June 30, 1999, and the statements of operations for all prior periods have been restated to remove the revenue and expense of the ocean freight services N.V.O.C.C. segment (see Note C). The Company eliminates intercompany transactions in consolidation. However, the information used by the Company's management with respect to its reportable segments is before intersegment eliminations of revenues and expenses. Intersegment revenues and expenses are not significant. Further classifications of operations or revenues by geographic location beyond the descriptions provided above are impractical, and are, therefore, not provided. The Company's foreign operations are not significant. No material changes have occurred in the total assets, for any reportable operating segment since December 31, 1998, except for the impact of purchase accounting on Treadco's assets as discussed in Note H, and the reclassification of Clipper International's assets to discontinued operations. 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 operating revenues, operating expenses and operating income.
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 1999 1998 1999 1998 ------------- ------------- ------------- ------------ (UNAUDITED) ($ thousands) OPERATING REVENUES ABF Freight System, Inc.............................. $ 308,667 $ 293,832 $ 604,119 $ 574,099 G.I. Trucking Company................................ 34,913 31,816 66,447 60,414 Clipper Domestic..................................... 26,810 31,856 51,275 62,101 Treadco, Inc......................................... 46,684 47,094 87,629 84,599 Other revenues and eliminations...................... 1,831 991 3,810 1,321 ------------- ------------- ------------- ------------ Total consolidated operating revenues.............. $ 418,905 $ 405,589 $ 813,280 $ 782,534 ============= ============= ============= ============ OPERATING EXPENSES AND COSTS ABF FREIGHT SYSTEM, INC. Salaries and wages................................... $ 201,658 $ 199,146 $ 398,374 $ 389,890 Supplies and expenses................................ 34,515 31,416 65,542 62,053 Operating taxes and licenses......................... 9,114 9,396 18,722 18,883 Insurance............................................ 4,809 4,445 9,827 9,468 Communications and utilities......................... 3,882 3,383 7,543 6,708 Depreciation and amortization........................ 7,296 6,294 14,284 12,160 Rents and purchased transportation................... 23,160 23,054 45,602 45,142 Other................................................ 1,140 1,491 2,499 2,945 (Gain) on sale of revenue equipment ................. (207) (1,501) (248) (1,619) ------------- ------------- ------------- ------------ 285,367 277,124 562,145 545,630 ------------- ------------- ------------- ------------
14 15 ARKANSAS BEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -- Continued - --------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 1999 1998 1999 1998 ------------ ------------ ------------ ------------ (UNAUDITED) ($ thousands) G.I. TRUCKING COMPANY Salaries and wages ................................. 15,938 14,550 30,722 28,105 Supplies and expenses .............................. 2,826 2,644 5,370 5,297 Operating taxes and licenses ....................... 813 595 1,574 1,240 Insurance .......................................... 1,004 1,197 2,035 2,232 Communications and utilities ....................... 427 417 855 776 Depreciation and amortization ...................... 763 852 1,505 1,540 Rents and purchased transportation ................. 10,979 10,149 20,768 18,765 Other .............................................. 796 812 1,693 1,575 (Gain) on sale of revenue equipment ................ (48) (57) (54) (62) ------------ ------------ ------------ ------------ 33,498 31,159 64,468 59,468 ------------ ------------ ------------ ------------ CLIPPER DOMESTIC Cost of services ................................... $ 22,932 $ 27,400 $ 44,423 $ 53,952 Selling, administrative and general ................ 3,383 4,010 6,715 8,161 (Gain) on sale of revenue equipment ................ (2) (44) (33) (64) ------------ ------------ ------------ ------------ 26,313 31,366 51,105 62,049 ------------ ------------ ------------ ------------ TREADCO, INC .......................................... Cost of sales ...................................... 32,562 32,902 61,469 59,917 Selling, administrative and general ................ 13,629 12,691 25,922 23,757 ------------ ------------ ------------ ------------ 46,191 45,593 87,391 83,674 ------------ ------------ ------------ ------------ Other expenses and eliminations ....................... 2,231 1,333 5,158 1,381 ------------ ------------ ------------ ------------ Total consolidated operating expenses and costs .... $ 393,600 $ 386,575 $ 770,267 $ 752,202 ============ ============ ============ ============ OPERATING INCOME (LOSS) ABF Freight System, Inc. .............................. $ 23,300 $ 16,708 $ 41,974 $ 28,469 G.I. Trucking Company ................................. 1,415 657 1,979 946 Clipper Domestic ...................................... 497 490 170 52 Treadco, Inc. ......................................... 493 1,501 238 925 Other income (loss) and eliminations .................. (400) (342) (1,348) (60) ------------ ------------ ------------ ------------ Total consolidated operating income ................ $ 25,305 $ 19,014 $ 43,013 $ 30,332 ============ ============ ============ ============
15 16 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- OPERATING SEGMENT DATA The following table sets forth, for the periods indicated, a summary of the Company's operating expenses by segment as a percentage of revenue for the applicable segment. The Company has restated its prior period segment information to conform to the current year's segment presentation, which is in accordance with the requirements of FAS No. 131. Note I to the Consolidated Financial Statements contains additional information regarding the Company's operating segments.
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 1999 1998 1999 1998 -------- -------- -------- -------- (UNAUDITED) OPERATING EXPENSES AND COSTS ABF FREIGHT SYSTEM, INC. Salaries and wages .......................... 65.3% 67.8% 65.9% 67.9% Supplies and expenses ....................... 11.2 10.7 10.8 10.8 Operating taxes and licenses ................ 3.0 3.2 3.1 3.3 Insurance ................................... 1.6 1.5 1.6 1.6 Communications and utilities ................ 1.3 1.2 1.2 1.2 Depreciation and amortization ............... 2.4 2.1 2.4 2.1 Rents and purchased transportation .......... 7.5 7.8 7.5 7.9 Other ....................................... 0.3 0.5 0.6 0.5 (Gain) on sale of revenue equipment ......... (0.1) (0.5) -- (0.3) -------- -------- -------- -------- 92.5% 94.3% 93.1% 95.0% -------- -------- -------- -------- G.I. TRUCKING COMPANY Salaries and wages .......................... 45.7% 45.7% 46.2% 46.5% Supplies and expenses ....................... 8.1 8.3 8.1 8.8 Operating taxes and licenses ................ 2.3 1.9 2.4 2.1 Insurance ................................... 2.9 3.8 3.1 3.7 Communications and utilities ................ 1.2 1.3 1.3 1.3 Depreciation and amortization ............... 2.2 2.7 2.3 2.5 Rents and purchased transportation .......... 31.4 31.9 31.3 31.1 Other ....................................... 2.2 2.5 2.4 2.5 (Gain) on sale of revenue equipment ......... (0.1) (0.2) (0.1) (0.1) -------- -------- -------- -------- 95.9% 97.9% 97.0% 98.4% -------- -------- -------- -------- CLIPPER DOMESTIC Cost of services ............................ 85.5% 86.0% 86.6% 86.9% Selling, administrative and general ......... 12.6 12.6 13.2 13.1 (Gain) on sale of revenue equipment ......... -- (0.1) (0.1) (0.1) -------- -------- -------- -------- 98.1% 98.5% 99.7% 99.9% -------- -------- -------- -------- TREADCO, INC. Cost of sales ............................... 69.7% 69.9% 70.1% 70.8% Selling, administrative and general ......... 29.2 26.9 29.6 28.1 -------- -------- -------- -------- 98.9% 96.8% 99.7% 98.9% -------- -------- -------- -------- OPERATING INCOME (LOSS) ABF Freight System ....................... 7.5% 5.7% 6.9% 5.0% G.I. Trucking Company .................... 4.1% 2.1% 3.0% 1.6% Clipper Domestic ......................... 1.9% 1.5% 0.3% 0.1% Treadco, Inc. ............................ 1.1% 3.2% 0.3% 1.1%
16 17 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued - ------------------------------------------------------------------------------- RESULTS OF OPERATIONS THREE AND SIX MONTHS ENDED JUNE 30, 1999, COMPARED TO THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 Consolidated revenues from continuing operations of the Company for the three and six months ended June 30, 1999, increased 3.3% and 3.9%, respectively, compared to the same periods in 1998, due primarily to increases in revenues for ABF and G.I. Trucking. These increases were offset somewhat by declines in Clipper Domestic revenues. The Company's operating income from continuing operations for the three and six months ended June 30, 1999, increased 33.1% and 41.8% compared to the same periods in 1998. Increases in operating income from continuing operations are attributable to improved operations at ABF and G.I. Trucking, offset, in part, by a decline in the operating income of Treadco. Income from continuing operations for the three and six months ended June 30, 1999, increased 43.8% and 61.8% from the same periods in 1998. The improvements in income from continuing operations reflect primarily the improvements in operating income. Diluted earnings per share from continuing operations improved 46.8% to $0.47 per share and 71.7% to $0.79 per share for the three and six months ended June 30, 1999, when compared to the same periods in 1998. ABF FREIGHT SYSTEM, INC. Effective January 1, 1999, and January 1, 1998, ABF implemented overall rate increases of 5.5% and 5.3%, respectively. Revenues for the three and six months ended June 30, 1999, increased 5.0% and 5.2% to $308.7 million and $604.1 million, respectively, from $293.8 million and $574.1 million for the same periods in 1998. ABF generated operating income for the three and six months ended June 30, 1999, of $23.3 million and $42.0 million compared to $16.7 million and $28.5 million for the three and six months ended June 30, 1998. ABF's increase in revenue is due primarily to increases in LTL revenue per hundredweight of 5.6% and 5.4% to $19.28 and $19.23 when the three and six months ended June 30, 1999, are compared to the same periods in 1998, reflecting a continuing favorable pricing environment. ABF's LTL tonnage declined slightly, 0.1%, for the three months ended June 30, 1999, compared to the same period in 1998; however, LTL tonnage increased slightly, 0.3%, for the six months ended June 30, 1999, when compared to the same period in 1998. ABF's operating ratio improved to 92.5% and 93.1% for the three and six months ended June 30, 1999, from 94.3% and 95.0% for the same periods in 1998, as a result of the revenue yield improvements previously described and as a result of improvements in certain operating expense categories as follows: Salaries and wages expense decreased as a percent of revenue 2.5% and 2.0% for the three and six months ended June 30, 1999, compared to the same periods in 1998. This decrease is due in part to lower line-haul costs due to driver retirements, a lower effective wage rate associated with more new hires and an increase in rail utilization for freight transportation. Rail usage increased to 16.4% of total miles for both the three and six months ended June 30, 1999, compared to 15.2% and 14.4% in the same periods of 1998. In addition, a portion of salaries and wages expense is generally fixed in nature and declines as a percent of revenue with increases in revenue levels. 17 18 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued - ------------------------------------------------------------------------------- Supplies and expenses, as a percent of revenue, remained constant, as a percent of revenue, for the first six months of 1999, compared to the first six months of 1998. However, supplies and expenses increased 0.5% of revenue from the second quarter of 1998 to the second quarter of 1999. This increase is due primarily to trailer repair costs associated with the installation of conspicuity tape to road and city trailers, in accordance with Federal regulations. Such regulations require that the installation process be complete by June 1, 2001. As of June 30, 1999, the Company has completed the installation on over 48% of all road trailers and a small number of city trailers. In addition, fuel costs, as a percent of revenue, were slightly above second quarter 1998, due to higher diesel prices, which increased 4.5% for the second quarter of 1999 compared to the second quarter of 1998. Depreciation and amortization increased 0.3% as a percent of revenue for the three and six months ended June 30, 1999, compared to the same periods in 1998. Increases in depreciation resulted from an increase in the number of road tractors under capital leases. A larger portion of ABF's road tractor fleet was under operating leases in the first six months of 1998. Rents and purchased transportation expense decreased 0.3% and 0.4% as a percent of revenue for the three and six months ended June 30, 1999, compared to same periods in 1998, due primarily to declines in operating lease expense, reflecting ABF's replacement of road tractors under operating leases with road tractors under capital leases. This decrease was offset, in part, by the increase in rail utilization. As described above, ABF's rail usage increased for the three and six months ended June 30, 1999, compared to the same periods in 1998. G.I. TRUCKING Effective November 1, 1998, G.I. Trucking implemented a general rate increase of 5.5%. Revenues increased 9.7% and 10.0% to $34.9 million and $66.4 million for the three and six months ended June 30, 1999, compared to $31.8 million and $60.4 million for the same periods in 1998. The revenue increase resulted from increases in revenue per hundredweight of 1.8% and 1.5%, to $10.80 and $10.76, respectively, for the three and six months ended June 30, 1999, compared to the same periods in 1998. In addition, tonnage increased 7.8% and 8.4% for the three and six months ended June 30, 1999, compared to the same periods in 1998. G.I. Trucking's operating ratio improved to 95.9% and 97.0% for the three and six months ended June 30, 1999, from 97.9% and 98.4% for the same periods in 1998. The improvement results from the revenue yield improvement discussed above and improvements in certain operating expenses as follows: Salaries and wages expense declined 0.3% as a percent of revenue during the six months ended June 30, 1999, as compared to the same period in 1998. This decrease is due to lower pension costs and improved productivity of the labor force. Supplies and expenses decreased 0.2% and 0.7% as a percent of revenue for the three and six months ended June 30, 1999, as compared to the same periods during 1998. This decrease is due primarily to the fact that repair and maintenance costs on revenue equipment were lower during the three and six months ended June 30, 1999, compared to the same periods in 1998, reflecting new equipment purchased during 1998 and 1999 to replace older equipment which required more maintenance. 18 19 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued - ------------------------------------------------------------------------------- Operating taxes and licenses increased 0.4% and 0.3% as a percent of revenue for the three and six months ended June 30, 1999, compared to the same periods during 1998. This increase is due primarily to real estate taxes associated with the six new terminals opened during 1998. In addition, vehicle licenses and registration fees increased for the three and six months ended June 30, 1999, as compared to the same periods during 1998, due to G.I. Trucking's increased fleet size resulting from the purchase of 91 tractors and 145 trailers during the first six months of 1999. G.I. Trucking expects to dispose of some old equipment during the last half of 1999. Insurance expense declined 0.9% and 0.6% as a percent of revenue for the three and six months ended June 30, 1999, compared to the same periods in 1998. This improvement was due to favorable claims experience for worker's compensation. Depreciation and amortization expense decreased 0.5% and 0.2% as a percent of revenue for the three and six months ended June 30, 1999, compared to the same periods during 1998 due primarily to several older tractors and trailers becoming fully depreciated during the first six months of 1999. Rents and purchased transportation expenses decreased 0.5% as a percent of revenue from the three months ended June 30, 1998 to the three months ended June 30, 1999, primarily as a result of lower purchased transportation costs, offset in part by an increase in G.I. Trucking's terminal rent cost, related to the opening of new terminals during 1998. For the six months ended June 30, 1999, compared to the six months ended June 30, 1998, rents and purchased transportation increased 0.2% as a percent of revenue due primarily to an increase in G.I. Trucking's terminal rent costs, also related to the opening of new terminals during 1998. CLIPPER DOMESTIC. Revenues from Clipper Domestic were $26.8 million and $51.3 million for the three and six months ended June 30, 1999, representing a decrease of 15.8% and 17.4% from the three and six months ended June 30, 1998, which had revenues of $31.9 million and $62.1 million, respectively. Beginning in the fourth quarter of 1997, Clipper Domestic was adversely affected by the service problems with the U.S. rail system. During the fourth quarter of 1998, Clipper Domestic experienced some improvements in the on-time service levels of its rail suppliers. In the first and second quarters of 1999, rail service continued to improve; however, in certain lanes, rail service remains inconsistent. Clipper Domestic's intermodal shipments declined 9.3% and 8.6% for the three and six months ended June 30, 1999, compared to the same periods in 1998. These declines result primarily from business lost as a result of inconsistent rail service in 1998. Clipper Domestic is aggressively trying to regain this business but is faced with competition from truckload carriers and other rail service providers. Clipper Domestic experienced declines of 10.9% and 6.4% in the number of LTL shipments from the three and six months ended June 30, 1998 to the three and six months ended June 30, 1999. The declines in LTL shipments resulted from management's decision to concentrate on metro-to-metro, long-haul lanes, therefore eliminating certain unprofitable lanes. In addition, LTL business levels were negatively impacted by the heavy snowfall in the Chicago, Illinois area in January 1999. Clipper Domestic's operating ratio improved to 98.1% and 99.7% for the three and six months ended June 30, 1999, from 98.5% and 99.9% for the three and six months ended June 30, 1998. Clipper Domestic's operating ratio improvements result from the elimination of certain unprofitable lanes, higher 19 20 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued - ------------------------------------------------------------------------------- percentage of rail utilization of 57.8% and 56.4% for the three and six months ended June 30, 1999, compared to 48.4% and 49.4% for the same periods during 1998 and cost reductions implemented because of lower revenue levels. TREADCO, INC. Revenues for Treadco, Inc. were $46.7 million and $87.6 million for the three and six months ended June 30, 1999, compared to $47.1 million and $84.6 million for the same periods in 1998. For the three months ended June 30, 1999, "same store" sales decreased 1.1% compared to the same period in 1998. For the six months ended June 30, 1999, "same store" sales increased 2.9% compared to the same period in 1998. "New store" sales increased 0.2% and 0.7% from the three and six months ended June 30, 1998. "Same store" sales includes both production locations and sales locations that have been in existence for the entire periods presented. "New store" sales resulted from two new sales locations. Revenues from retreading for the three months ended June 30, 1999, were $17.9 million, representing a decrease of 3.0% from $18.4 million for the three months ended June 30, 1998. Retread revenues for the six months ended June 30, 1999, were $34.0 million, which equaled retread revenues for the same period in 1998. Retread revenues for the three months ended June 30, 1999, were lower due to a decrease in the volume of units sold of approximately 5.4% from the same period in 1998. This decrease was offset in part by an increase in the sales price per unit of approximately 2.4% from the three months ended June 30, 1998. Revenues from new tire sales decreased slightly, 0.9%, to $23.5 million for the second quarter 1999, from $23.7 million during the same period in 1998, due to a 3.0% decrease in the sales price per unit, offset in part by a 2.1% increase in unit sales from the second quarter 1998. However, revenues from new tire sales increased 4.2% to $43.7 million for the six months ended June 30, 1999, from $42.0 million during the same period in 1998, due primarily to a 5.9% increase in units sold, offset, in part, by a decrease in the sales price per unit of 1.6%. Service revenues for the three and six months ended June 30, 1999, were $5.3 million and $9.9 million, compared to $5.0 million and $8.7 million during the same periods in 1998. Service revenues increased due to Treadco's continued emphasis on its service operations. Treadco's operating ratio increased to 98.9% and 99.7% for the three and six months ended June 30, 1999, from 96.8% and 98.9% during the same periods in 1998. The decrease in cost of sales of 0.2% and 0.7% of revenue for the three and six months ended June 30, 1999, resulted primarily from improvements in retread margins, offset, in part, by lower new tire margins. The increase in selling, administrative, and general expenses of 2.3% and 1.5% for the three and six months ended June 30, 1999, from the same periods in 1998 resulted primarily from higher salaries and wages as a percent of revenue due to increased service and inventory control personnel. In addition, during the second quarter of 1999, Treadco incurred $.4 million in costs associated with stock option and performance plan payments made as a result of the Company's purchase of the non-ABC-owned shares of Treadco. These increases were offset in part by decreases in legal fees due to the settlement of the litigation with Bandag, Inc. in the fourth quarter of 1998. In addition, bad debt expense was lower as the result of improved aging and collection of accounts receivable. INTEREST EXPENSE. Interest expense increased $0.4 million and $0.5 million for the three and six months ended June 30, 1999, due primarily to the purchase of the non-ABC-owned shares of Treadco (see Note H). INCOME TAXES. The differences between the effective tax rates for the three and six month periods ended June 30, 1999, and the federal statutory rate resulted from state income taxes, amortization of 20 21 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued - ------------------------------------------------------------------------------- nondeductible goodwill, minority interest, nondeductible tender offer response costs incurred by Treadco and other nondeductible expenses. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities for the six months ended June 30, 1999, was $54.0 million compared to $26.9 million for the six months ended June 30, 1998. The increase is due primarily to the improvement in operating results and net income, as well as increases in accrued expenses including income taxes for the six months ended June 30, 1999, compared to the same periods during 1998. Cash provided by operations, proceeds from asset sales of $9.1 million and borrowings were used to purchase revenue equipment and other property and equipment in the amount of $28.7 million, to purchase the non-ABC-owned shares of Treadco for $23.7 million and to pay down outstanding debt during the six months ended June 30, 1999. During the six months ended June 30, 1998, cash provided by operations, proceeds from the sale of assets of $9.5 million and borrowings were used to purchase operating assets of $39.7 million. The Company is party to a five-year, $250 million credit agreement (the "Credit Agreement") with Societe Generale, Southwest Agency, as Administrative Agent and with Bank of America National Trust and Savings Association and Wells Fargo Bank (Texas), N.A., as Co-Documentation Agents. The Credit Agreement provides for up to $250 million of revolving credit loans (including letters of credit) and extends through 2003. At June 30, 1999, there were $129.6 million of Revolver Advances and approximately $38.2 million of letters of credit outstanding. At June 30, 1999, the Company had approximately $82.2 million of borrowing availability under the Credit Agreement. The Credit Agreement contains various covenants, which limit, among other things, indebtedness, distributions, disposition of assets and capital expenditures, and require the Company to meet certain quarterly financial ratio tests. As of June 30, 1999, the Company was in compliance with the covenants. The Company is party to an interest rate swap on a notional amount of $110 million. The purpose of the swap is to limit the Company's exposure to increases in interest rates from current levels on $110 million of bank borrowings over the seven-year term of the swap. The interest rate under the swap is fixed at 5.845% plus the Credit Agreement margin, which was .625% at June 30, 1999. The Company borrowed $17.8 million under capital lease obligations for the six months ended June 30, 1999. Funds from these borrowings were used to purchase revenue equipment. Treadco was a party to a revolving credit facility with Societe Generale (the "Treadco Credit Agreement"), providing for borrowings up to the lesser of $20 million or the applicable borrowing base. The Treadco Credit Agreement was terminated on June 25, 1999. Management believes, based upon the Company's current levels of operations, that the Company's cash, capital resources, borrowings available under the Credit Agreement and cash flow from operations will be sufficient to finance current and future operations and meet all present and future debt service requirements. 21 22 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued - ------------------------------------------------------------------------------- YEAR 2000 The Year 2000 issue derives from computer programs being written using two digits rather than four to determine the applicable year. The Company recognizes that the approach of the Year 2000 brings a unique challenge to the ability of computer systems to recognize the date change from December 31, 1999, to January 1, 2000. As a result, the arrival of the Year 2000 could result in system failures or miscalculations, causing disruption of operations, including, among other things, a temporary inability to process transactions or to conduct other normal business activity. Management of the Company began addressing the impact of the Year 2000 on its business operations in 1996. The Company concluded that the Year 2000 would impact its internal information technology (IT) and non-information technology (non-IT) systems. In addition, the Company believes that the Year 2000 will impact its supplier chain environment and electronic data-interchange environment. Beginning in 1996, and continuing since that time, the Company has designated a group of personnel, who work primarily for the Company's computer information services subsidiary, Data-Tronics Corp., to manage the conversion process for its own internal systems, including purchased software, and to monitor the conversion process for supplier chain environment systems and effects, as well as for the Company's data-interchange environment. Internal IT and Non-IT Systems Year 2000 conversions within the Company's mainframe environment have been completed. The mainframe environment, which is Year 2000 ready and operational, includes the Company's computer hardware and operating system, its customized application software, and its purchased software. The Year 2000 readiness of computer mainframe hardware, operating systems, and system utilities has been verified by vendors and tested by Data-Tronics Corp. The Company's customized application software required renovation and regression testing and the revised Year 2000 ready software was installed and operational by the end of 1998. Purchased software has been upgraded to a vendor defined Year 2000 ready version, or replaced by another vendors' Year 2000 ready version. The carrying value of software systems that were replaced for Year 2000 compliance is nominal. The Year 2000 readiness upgrades and testing of the numerous PC servers is complete for all PC servers significant to the Company's business. Server hardware has been tested and is Year 2000 ready. All operating systems have been converted and upgraded with Year 2000 ready upgrades. From time to time, vendors release new Year 2000 upgrades. The Company will continually monitor various vendor resources for Year 2000-related compliance and install new upgrade packages as necessary. The Company's desktop PC hardware, operating systems, and applications have been tested for Year 2000 readiness. All desktop PC environments that are significant to the Company's business have been upgraded and are Year 2000 ready. The Company's embedded systems are those that are automated with embedded computerized microprocessor chips. The Company's evaluation of embedded systems has revealed that all affected systems are Year 2000 ready. The Company has completed Year 2000 conversions of its electronic data-interchange software. 22 23 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued - ------------------------------------------------------------------------------- External IT and Non-IT Systems The Company has completed the process of identifying critical exposures arising from the Company's suppliers. The Company's list of critical suppliers includes financial institutions, telecommunications providers, utility companies, and insurance providers, as well as basic suppliers critical to the operations of the Company's subsidiaries and to the Company. The Company has sent and is continuing to send questionnaires to suppliers considered to be significant to operations to determine their status with respect to Year 2000 issues. The Company continually updates its list of critical exposures. The Company does not have any single customer that would be material to the Company as a whole. However, the Company has some customers who, in the aggregate, are significant to the Company's operations and financial results. Year 2000 Costs The Company is using existing personnel who work primarily for Data-Tronics Corp., to perform Year 2000 conversions and evaluations of third-party systems. Since the beginning of the process, the Company estimates its expenditures at approximately $1.4 million, including labor costs and costs that relate to equipment and software purchases. Since 1996, Year 2000 costs have been absorbed in the Company's normal operating expenses, which are funded with the Company's internally generated funds or its revolving credit facility. The Company's cash flows have not been adversely impacted to a material degree by Year 2000 costs. Costs incurred through the current date for the Year 2000 conversion represent less than 7% of the Company's budgeted information services costs for 1999. It is management's conclusion that there have been no significant projects deferred as a result of Year 2000 efforts. The Company estimates it will spend an additional $0.4 million in Year 2000 related costs. The Company expects to continue to expend these costs in normal operations and to fund them with internally generated funds or its revolving credit facility. Contingency Planning Management of the Company has assessed its most reasonably likely worst case scenario using currently available information regarding the status of the internal and external IT systems and non-IT systems. As described above, the Company has completed Year 2000 conversions within the Company's mainframe environment, certain purchased software and its critical PC server and desktop environments. The primary risk the Company faces is with third-party suppliers and vendors not becoming Year 2000 compliant. The Company is still in the process of receiving and in some cases sending follow-up questionnaires to critical suppliers of its subsidiaries. The Company mailed more than 10,000 Year 2000 readiness questionnaires in order to assess Year 2000 readiness of vendors, suppliers and other third parties. To date, the Company has received the following response rates with respect to its questionnaires: 65.3% for fuel vendors, 82.8% for communications suppliers, 70.1% for utility suppliers and 54.6% of its other suppliers. Substantially all responses received have indicated that Year 2000 issues are being addressed and that the respondents plan to achieve Year 2000 readiness. The Company continues to monitor and assess questionnaires received and to follow up where considered necessary. 23 24 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued - ------------------------------------------------------------------------------- The Company has a written contingency plan that outlines procedures to deal with Year 2000 risks and uncertainties that do not rise to the level of a most reasonably likely worst case scenario. The Company's contingency plan includes plans to assess the need to increase fuel inventories in late 1999, identification of alternate fuel suppliers, identification of substitute data collection points for localized power shortages, adjustments to staffing as required for changing business levels, dynamic adjustments to freight routes to bypass temporarily bottlenecked distribution centers, and stockpiles of freight forms and reference lists for manual workarounds. The Company's contingency plan also includes additional staffing levels to test certain critical systems immediately after the Year 2000 rollover on January 1, 2000. Management of the Company intends to continually monitor and update its Year 2000 contingency plan as appropriate. Based on responses contained in the questionnaires and other available information, the Company believes that fuel supply shortages, widespread communications systems interruptions, widespread utility systems interruptions and tire and rubber products shortages (which would most affect Treadco) are not most reasonably likely occurrences. The Company believes the most reasonably likely worst case scenario is that some smaller customers will experience data processing system problems because of non Year 2000 compliant software or hardware and that the flow of freight from these customers could be disrupted as a result. Such an event would impact the Company to a limited degree, resulting in lower revenue in the early part of Year 2000. The Company also believes that there could be spot shortages of fuel as a result of the Year 2000 issue, primarily as a result of stockpiling by fuel users. The result of stockpiling of fuel and other supplies by companies attempting to prepare for Year 2000 could result in short-term increases in the cost of such products to the Company. Although the Company has fuel surcharge provisions in its freight contracts, it is uncertain that the Company would be able to increase prices to its customers to cover all the additional costs the Company would incur in such a scenario. With respect to the Company's primary business of freight transportation, if stockpiling of industrial and other supplies by businesses and by consumers of consumer goods is widespread in the fourth quarter of 1999, such stockpiling would most likely decrease freight volumes in the first quarter of Year 2000 as stockpiles are used. The most likely result of this combination of factors is that the Company will experience lower freight volumes and higher costs in the first quarter of Year 2000 and that operating results will be adversely impacted. Management does not presently believe that any individual factor described or the combination of factors described will likely have a material long-term impact on the Company, although there can be no assurance in this regard. If there are any major disruptions to the overall economy or business levels resulting from Year 2000 issues, the Company could be materially adversely impacted. The Company could also be the subject of litigation for computer systems products failure such as, for example, equipment shutdown or failure to properly date business records. The amount of potential liability, increased costs or lost revenue from any Year 2000 issue cannot be predicted at this time. Like virtually all other public and private companies, the Company and its suppliers and customers are dependent on telecommunications services, banking services, and utility services provided by a large number of entities. At this time, the Company is not aware of any of these entities or of any significant supplier that has disclosed that it will not be Year 2000 compliant by January 1, 2000. However, many of these entities are still engaged in the process of attempting to become Year 2000 compliant. As described previously, the Company has attempted to and continues to attempt to obtain written assurance of Year 2000 compliance from all entities which management considers critical to the operations of the Company and its subsidiaries. However, it is likely that some critical suppliers will not give written assurance as to 24 25 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued - ------------------------------------------------------------------------------- Year 2000 compliance because of concerns as to legal liability. Even where written assurance is provided by critical suppliers and even if the Company has a contingency plan in place to deal with possible non-compliance by other critical suppliers, the Year 2000 conversion process will continue to create risk to the Company which is outside the control of the Company. There can be no assurance that a major Year 2000 disruption will not occur in a critical supplier which would have an impact on the Company that could be material. SEASONALITY ABF and G.I. Trucking are affected by seasonal fluctuations, which affect tonnage to be transported. Freight shipments, operating costs and earnings are also affected adversely by inclement weather conditions. The third calendar quarter of each year usually has the highest tonnage levels while the first quarter has the lowest. Clipper Domestic's operations are similar to motor carrier operations with revenues being weaker in the first quarter and stronger during the months of September and October. Treadco's operations are somewhat seasonal with the last nine months of the calendar year generally having the highest levels of sales. FORWARD-LOOKING STATEMENTS Statements contained in the Management's Discussion and Analysis section of this report that are not based on historical facts are "forward-looking statements." Terms such as "estimate," "expect," "predict," "plan," "anticipate," "believe," "intend," "should," "would," "scheduled," 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 union relations; availability and cost of capital; shifts in market demand; weather conditions; the performance and needs of industries served by Arkansas Best's subsidiaries; actual future costs of operating expenses such as fuel and related taxes; self-insurance claims and employee wages and benefits; actual costs of continuing investments in technology, the timing and amount of capital expenditures; the accuracy of assessments and estimates relating to Year 2000 computer issues; competitive initiatives and pricing pressures; general economic conditions; and other financial, operational and legal risks and uncertainties detailed from time to time in the Company's SEC public filings. 25 26 ITEM 2a - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - ------------------------------------------------------------------------------- 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. In February 1998, the Company entered into an interest rate swap effective April 1, 1998. The swap agreement is a contract to exchange floating interest rate payments for fixed rate payments over the life of the instrument. The notional amount is used to measure interest to be paid or received and does not represent the exposure to credit loss. The purpose of the swap is to limit the Company's exposure to increases in interest rates on the notional amount of bank borrowings over the term of the swap. The fixed interest rate under the swap is 5.845% plus the Credit Agreement margin (currently .625%). This instrument is not recorded on the balance sheet of the Company. Details regarding the swap, as of June 30, 1999 are as follows:
Notional Rate Rate Fair Amount Maturity Paid Received Value (2) ------- -------- ---- -------- --------- $110.0 million April 1, 2005 5.845% Plus Credit Agreement LIBOR rate (1) $2.0 million Margin (currently .625%) Plus Credit Agreement Margin (currently .625%) (1) LIBOR rate is determined two London Banking Days prior to the first day of every month, and continues up to and including the maturity date. (2) The fair value is an estimated amount the Company would have received at June 30, 1999, to terminate the agreement.
OTHER MARKET RISKS Since December 31, 1998, there have been no significant changes in the Company's other market risks, as reported in the Company's Form 10-K Annual Report. 26 27 PART II. OTHER INFORMATION ARKANSAS BEST CORPORATION ITEM 1. LEGAL PROCEEDINGS. From time to time, the Company is named as a defendant in legal actions, the majority of which arise out of the normal course of its business. The Company is not a party to any pending legal proceeding which the Company's management believes to be material to the financial condition of the Company. The Company maintains liability insurance in excess of self-retention levels of certain risks arising out of the normal course of its business (see Note E to the Company's Unaudited Consolidated Financial Statements). ITEM 2. CHANGES IN SECURITIES. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Company's Annual Meeting of Shareholders was held on May 6, 1999. The first proposal considered at the Annual Meeting was to elect two persons to serve as directors of the Company. The results of this proposal are as follows:
Directors Votes For Votes Withheld William A. Marquard 16,278,320 216,257 Alan J. Zakon 16,331,151 163,426
The second proposal was to ratify the appointment of Ernst & Young LLP as independent auditors for the fiscal year 1999. This proposal received 16,417,868 votes for adoption, 59,990 against adoption, 16,719 abstentions and -0- broker non-votes. ITEM 5. OTHER INFORMATION. Effective April 16, 1999, the Company entered into a three-year, $13.2 million capital lease agreement with Mercedes-Benz Credit Corporation for the purchase of 250 tractors. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) EXHIBITS. 10.2 Three-year, $13.2 million capital lease agreement with Mercedes-Benz Credit Corporation effective April 16, 1999. Financial Data Schedule (b) REPORTS ON FORM 8-K. None. 27 28 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 11, 1999 /s/ David E. Loeffler ------------------------------------------------- David E. Loeffler Vice President-Treasurer, Chief Financial Officer and Principal Accounting Officer 28 29 INDEX TO EXHIBITS
Exhibit No. Description ----------- ----------- 10.2 Three-year, $13.2 million capital lease agreement with Mercedes-Benz Credit Corporation effective April 16, 1999. 27.1 Financial Data Schedule 27.2 Restated Financial Data Schedule
EX-10.2 2 3 YR $13.2 MILION CAPITAL LEASE AGREEMENT 1 EXHIBIT 10.2 MASTER LEASE AGREEMENT (Quasi) THIS MASTER LEASE AGREEMENT, dated as of April 16, 1999 ("Agreement"), between Mercedes-Benz Credit Corporation, with an office at 1011 Warrenville Road, Suite 600, Lisle IL 60532 (hereinafter called, together with its successors and assigns, if any, "Lessor"), and ABF Freight System, Inc., a corporation organized and existing under the laws of the State of Delaware with its mailing address and chief place of business at 3801 Old Greenwood Road, Fort Smith, AR 72903 (hereinafter called "Lessee"). WITNESSETH: I. LEASING: (a) Subject to the terms and conditions set forth below, Lessor agrees to lease to Lessee, and Lessee agrees to lease from Lessor, the equipment ("Equipment") described in Annex A to any schedule hereto ("Schedule"). Terms defined in a schedule and not otherwise defined herein shall have the meanings ascribed to them in such Schedule. (b) The obligation of Lessor to purchase Equipment from the manufacturer or supplier thereof ("Supplier") and to lease the same to Lessee under any Schedule shall be subject to receipt by Lessor, prior to the Lease Commencement Date (with respect to such Equipment), of each of the following documents in form and substance satisfactory to Lessor: (i) a Schedule relating to the Equipment then to be leased hereunder, (ii) paid in full invoice or other evidence of ownership of the Equipment, (iii) evidence of insurance which complies with the requirements of Section IX, and (iv) such other documents as Lessor may reasonably request. As a further condition to such obligations of Lessor, Lessee shall, upon delivery of such Equipment (but not later than the Last Delivery Date specified in the applicable Schedule) execute and deliver to Lessor a Certificate of Acceptance (in the form of Annex C to the applicable Schedule) covering such Equipment. Lessor hereby appoints Lessee its agent for inspection and acceptance of the Equipment from the Supplier. Upon execution by Lessee of any Certificate of Acceptance, the Equipment described thereon shall be deemed to have been delivered to, and irrevocably accepted by, Lessee for lease hereunder. II. TERM, RENT AND PAYMENT: (a) The rent payable hereunder and Lessee's right to use the Equipment shall commence on the date of execution by Lessee of the Certificate of Acceptance for such Equipment ("Lease Commencement Date"). The term of this Agreement shall be the period specified in the applicable Schedule. If any term is extended, the word "term" shall be deemed to refer to all extended terms, and all provisions of this Agreement shall apply during any extended terms, except as may be otherwise specifically provided in writing. (b) Rent shall be paid to Lessor at its address stated above, except as otherwise directed by Lessor. Payments of rent shall be in the amount set forth in, and due in accordance with, the provisions of the applicable Schedule. If one or more Advance Rentals are payable, such Advance Rental shall be (i) set forth on the applicable Schedule, (ii) due upon acceptance by Lessor of such Schedule, and (iii) when received by Lessor, applied to the first rent payment and the balance, if any, to the final rental payment(s) under such 2 Schedule. In no event shall any Advance Rental or any other rent payments be refunded to Lessee. If rent is not paid within ten (10) days of its due date, Lessee agrees to pay a late charge of five cents ($0.05) per dollar on, and in addition to, the amount of such rent but not exceeding the lawful maximum, if any. III. TAXES: Lessee shall have no liability for taxes imposed by the United States of America or any State or political subdivision thereof which are on or measured by the net income of Lessor. Lessee shall report (to the extent that it is legally permissible) and pay promptly all other taxes, fees and assessments due, imposed, assessed or levied against any Equipment (or the purchase, ownership, delivery, leasing, possession, use or operation thereof), this Agreement (or any rentals or receipts hereunder), any Schedule, Lessor or Lessee by any foreign, federal, state or local government or taxing authority during or related to the term of this Agreement, including, without limitation, all license and registration fees, and all sales, use, personal property, excise, gross receipts, franchise, stamp or other taxes, imposts, duties and charges, together with any penalties, fines or interest, thereon (all hereinafter called "Taxes"). Lessee shall (i) reimburse Lessor upon receipt of written request for reimbursement for any Taxes charged to or assessed against Lessor, (ii) on request of Lessor, submit to Lessor written evidence of Lessee's payment of Taxes, (iii) send a copy thereof to Lessor. IV. REPORTS: (a) Lessee will notify Lessor in writing, within ten (10) days after any tax or other lien shall attach to any Equipment, of the full particulars thereof and of the location of such Equipment on the date of such notification. (b) Lessee will within 90 days of the close of each fiscal year of Lessee, deliver to Lessor, Lessee's balance sheet and profit and loss statement, certified by a recognized firm of certified public accountants. Upon request Lessee will deliver to Lessor quarterly, within 90 days of the close of each fiscal quarter of Lessee, in reasonable detail, copies of Lessee's quarterly financial report certified by the chief financial officer of Lessee. (c) Lessee will permit Lessor to inspect any Equipment during normal business hours. (d) Lessee will keep the Equipment at the Equipment location (specified in the applicable schedule) and will promptly notify Lessor of any relocation of the Equipment. Upon the written request of Lessor, Lessee will notify Lessor forthwith in writing of the location of any Equipment as of the date of such notification. (e) Within 60 days after any request by Lessor, Lessee will furnish a certificate of an authorized officer of Lessee stating that he has reviewed the activities of Lessee and that, to the best of his knowledge, there exists no default (as described in Section XI) or event which with notice or lapse of time (or both) would become such a default. V. DELIVERY, USE AND OPERATION: (a) All Equipment shall be shipped directly from the Supplier to Lessee. (b) Lessee agrees that the Equipment will be used by Lessee solely in the conduct of its business and in a manner complying with all applicable federal, state, and local laws and regulations. (c) LESSEE SHALL NOT ASSIGN, MORTGAGE, SUBLET OR HYPOTHECATE ANY EQUIPMENT, OR THE INTEREST OF LESSEE HEREUNDER, NOR SHALL 3 LESSEE REMOVE ANY EQUIPMENT FROM THE CONTINENTAL UNITED STATES, MEXICO, OR CANADA WITHOUT THE PRIOR WRITTEN CONSENT OF THE LESSOR. (d) Lessee will keep the Equipment free and clear of all liens and encumbrances other than those which are granted in favor of or result from acts of Lessor. VI. SERVICE: (a) Lessee will, at its sole expense, maintain each unit of Equipment in good operating order, repair, condition and appearance in accordance with manufacturer's recommendations, normal wear and tear excepted. Lessee shall, if at any time requested by Lessor, affix in a prominent position on each unit of Equipment plates, tags or other identifying labels showing ownership thereof by Lessee and Lessor's security interest therein. (b) Lessee will not, without the prior consent of Lessor, affix or install any accessory, equipment or device on any Equipment if such addition will impair the originally intended function or use of such Equipment. All additions, repairs, parts, supplies, accessories, equipment, and devices furnished, attached or affixed to any Equipment which are not readily removable shall be made only in compliance with applicable law; and shall become subject to the lien of Lessor. Lessee will not, without the prior written consent of Lessor and subject to such conditions as Lessor may impose for its protection, affix or install any Equipment to or in any other personal or real property. (c) Any alterations or modifications to the Equipment that may, at any time during the term of this Agreement, be required to comply with any applicable law, rule, or regulation shall be made at the expense of Lessee. VII. STIPULATED LOSS VALUE: Lessee shall use its best efforts to promptly notify Lessor in writing if any unit of Equipment shall be or become worn out, lost, stolen, destroyed, irreparably damaged in the reasonable determination of Lessee, or permanently rendered unfit for use from any cause whatsoever (such occurrences being hereinafter called "Casualty Occurrences"). On the rental payment date next succeeding a Casualty Occurrence (the "Payment Date"), Lessee shall pay Lessor the sum of (x) the Stipulated Loss Value of such unit calculated as of the rental payment date next preceding such Casualty Occurrence ("Calculation Date"); and (y) all rental and other amounts which are due hereunder as of the Payment Date. Upon payment of all sums due hereunder, the term of this lease as to such unit shall terminate and (except in the case of the loss, theft, or complete destruction of such unit) provided no event of default shall have occurred and be continuing hereunder, Lessee shall be entitled to possession of such unit. VIII. LOSS OR DAMAGE: Lessee hereby assumes and shall bear the entire risk of any loss, theft, damages to, or destruction of, any unit of Equipment from any cause whatsoever from the time the Equipment is shipped to Lessee. IX. INSURANCE: Unless (and then only to the extent) waived by Lessor in writing, Lessee shall, at its own expense, keep all Equipment insured for casualty loss for such amounts and against such 4 hazards as Lessor may require, including, but not limited to, insurance for damage to or loss of such Equipment and liability coverage for personal injuries, death or property damage, with Lessor named as additional insured on the liability coverage and with a loss payable clause in favor of Lessor as regards physical damage coverage and as its interest may appear, irrespective of any breach of warranty or other act or omission of Lessee. The insurance shall provide (i) liability coverage in an amount equal to at least ONE MILLION U.S. DOLLARS ($1,000,000.00) total liability per occurrence, and (ii) casualty coverage in an amount equal at a minimum to the Stipulated Loss Value or the full replacement cost of the Equipment; or at such other amounts as may be required by Lessor. Any such policies shall be with companies, and on terms, mutually satisfactory to Lessor and Lessee. Upon Lessor's declaration, Lessee agrees to deliver to Lessor evidence of insurance satisfactory to Lessor. No insurance shall be subject to any co-insurance clause. Lessee hereby appoints Lessor as Lessee's attorney-in-fact to make proof of loss and claim for damages and to receive payment of and execute or endorse all documents, checks or drafts in connection with such claims for damage. Any expense of Lessor in adjusting or collecting insurance shall be borne by Lessee. Said policies shall provide that the insurance may not be altered or cancelled by the insurer until after thirty (30) days written notice to Lessor. Lessor may, at its option, apply any proceeds of insurance, in whole or in part, to (i) repair or replace Equipment or any portion thereof, or (ii) satisfy any obligation of Lessee to Lessor hereunder. X. RETURN OF EQUIPMENT: (a) Subject to the provisions of Section XX of this Lease, upon any expiration or termination of this Agreement or any Schedule, Lessee shall promptly, at its own cost and expense return the Equipment to a location within the continental United States as Lessor shall direct. (b) Until Lessee has fully complied with the requirements of Section X(a) above, Lessee's rent payment obligation and all other obligations under this Agreement shall continue from month to month notwithstanding any expiration or termination of the lease term. Lessor may terminate such continued leasehold interest upon ten (10) days notice to Lessee. XI. DEFAULT: (a) Lessor may in writing declare this Agreement in default if: Lessee breaches its obligation to pay rent or any other sum when due and fails to cure the breach within ten (10) days after Lessor has sent to Lessee written notice of said default; Lessee fails to comply with its notification obligations under Section VII hereof; Lessee breaches any of its insurance obligations under Section IX; Lessee breaches any of its other obligations to Lessor hereunder or under any instrument, document or agreement between Lessor and Lessee and fails to cure that breach within thirty (30) days after written notice thereof; any representation or warranty made by Lessee in connection with this Agreement shall be false or misleading in any material respect; Lessee becomes insolvent or ceases to do business as a going concern; Lessee is not owned and/or controlled by Arkansas Best Corporation or one of its wholly-owned subsidiaries and Lessee's Tangible Net Worth, as defined in accordance with GAAP, is equal to or less than $120 million and the Total Liabilities divided by Total Net Worth, both terms as defined in accordance with GAAP, is greater than 3:1 immediately following the change of ownership or control: If Lessee 5 is not owned and/or controlled by Arkansas Best Corporation, Lessee will maintain a Total Liabilities divided by Total Net Worth less than or equal to 3:1 and a Tangible Net Worth greater than $120 million on a continuing basis measured quarterly; any Equipment is illegally used; or a petition is filed by or against Lessee under any bankruptcy or insolvency laws. Such declaration shall apply to all Schedules except as specifically excepted by Lessor. (b) After default, at the request of Lessor, Lessee shall comply with the provisions of Section X(a) above. Lessee hereby authorizes Lessor upon the default of Lessee (and failure to cure within any applicable cure period) to enter, with or without legal process, any premises where any Equipment is believed to be and take possession thereof. Lessee shall, without further demand, forthwith pay to Lessor (i) as liquidated damages for loss of a bargain and not as a penalty, the Stipulated Loss Value of the Equipment (calculated as of the rental next preceding the declaration of default), and (ii) all rentals and other sums then due hereunder. Lessor may, but shall not be required to, sell Equipment at private or public sale, in bulk or in parcels, with or without notice, and without having the Equipment present at the place of sale; or Lessor may, but shall not be required to, lease, otherwise dispose of or keep idle all or part of the Equipment; and Lessor may use Lessee's premises for any or all of the foregoing without liability for rent, costs, damages or otherwise, except to the extent of damages directly caused by the negligence or misconduct of Lessor. The proceeds of sale, lease or other disposition, if any, shall be applied in the following order of priorities: (1) to pay all of the Lessor's costs, charges and expenses incurred in taking, removing, holding, repairing and selling, leasing or otherwise disposing of Equipment; then, (2) to the extent not previously paid by Lessee to pay Lessor all sums due from Lessee, hereunder; then (3) to reimburse to Lessee any sums previously paid by Lessee as liquidated damages; and (4) any surplus shall be retained by Lessee. Lessee shall pay any deficiency in (1) and (2) forthwith. (c) The foregoing remedies are cumulative, and any or all thereof may be exercised in lieu of or in addition to each other or any remedies at law, in equity, or under statute. Lessee waives notice of sale or other disposition (and the time and place thereof), and the manner and place of any advertising. Lessee shall pay Lessor's actual attorney's fees incurred in connection with the enforcement, assertion, defense or preservation of Lessor's rights and remedies hereunder, or if prohibited by law, such lesser sum as may be permitted. Waiver of any default shall not be a waiver of any other or subsequent default. (d) Any default under the terms of this or any other agreement between Lessor and Lessee may be declared by Lessor a default under this and any other such agreement. XII. ASSIGNMENT: (a) Lessor may not assign its rights hereunder without Lessee's prior written consent, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, in the event Lessor does assign all or any part of its rights hereunder in violation of this section and Lessee objects to such assignment, Lessor shall have thirty (30) days from its receipt of written notice thereof from Lessee to remedy such assignment by repurchasing the Lease from the assignee, by commencing a new Lease with the Lessee on the same terms as previously applicable, covering the affected Equipment, or affecting such other remedy as may be reasonably acceptable to Lessee in its discretion. (b) Subject to the provisions of subsection (a) above, if Lessee receives written notice of an assignment from Lessor, Lessee will pay all rent and other amounts payable under any assigned 6 Equipment Schedule to such assignee as instructed by Lessor. Lessee further agrees to confirm in writing receipt of a notice of assignment as may be reasonably requested by assignee. Lessee hereby agrees not to assert against any such assignee, or assignee's assigns, any defense, set-off, recoupment claim or counterclaim ("Claims") which Lessee has or may at any time have against Lessor for any reason whatsoever. However, nothing contained in the foregoing sentence shall limit whatever rights Lessee would otherwise have (i) to assert directly against such assignee those Claims which arise out of the acts or omissions of such assignee, or (ii) to assert directly against Lessor those Claims which arise out of the acts or omissions of Lessor. (c) Lessee may not assign its rights hereunder without Lessor's prior written consent, which consent shall not be unreasonably withheld. XIII. NET LEASE; NO SET-OFF, ETC: This Agreement is a net lease. Lessee's obligation to pay rent and other amounts due hereunder, shall be absolute and unconditional. Lessee shall not be entitled to any abatement or reductions of, or set-offs against, said rent or other amounts, including, without limitation, those arising or allegedly arising out of claims (present or future, alleged or actual, and including claims arising out of strict tort of negligence of Lessor) of Lessee against Lessor under this Agreement of otherwise. Nor shall this Agreement terminate or the obligations of Lessee be affected by reason of any defect in or damage to, or loss of possession, use or destruction of, any Equipment from whatsoever cause. It is in the intention of the parties that rents and other amounts due hereunder shall continue to be payable in all events in the manner and at the times set forth herein unless the obligation to do so shall have been terminated pursuant to the express terms hereof. XIV. INDEMNIFICATION: (a) Lessee hereby agrees to indemnify, save and keep harmless Lessor, its agents, employees, successors and assigns from and against any and all losses, damages, penalties, injuries, claims, actions and suits, including legal expenses, of whatsoever kind and nature, in contract or tort, except to the extent directly caused by the negligence or misconduct of Lessor, and including, but not limited to, Lessor's strict liability in tort, arising out of (i) the selection, manufacture, purchase, acceptance or rejection of Equipment, the ownership of Equipment during the term of this Agreement, and the delivery, lease, possession, maintenance, uses, condition, return or operation of Equipment (including, without limitation, latent and other defects, whether or not discoverable by Lessor or Lessee and any claim for patent, trademark or copyright infringement or environmental damage) or (ii) the condition of Equipment sold or disposed of after use by Lessee, any sublessee or employees of Lessee. Lessee shall, upon request, defend any actions based on, or arising out of, any of the foregoing. (b) All of Lessor's rights, privileges and indemnities contained in this Section XIV shall survive the expiration or other termination of this Agreement and the rights, privileges and indemnities contained herein are expressly made for the benefit of, and shall be enforceable by Lessor, its successors and assigns. 7 XV. DISCLAIMER: LESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE EQUIPMENT WITHOUT ANY ASSISTANCE FROM LESSOR, ITS AGENTS OR EMPLOYEES. LESSOR DOES NOT MAKE, HAS NOT MADE, NOR SHALL BE DEEMED TO MAKE OR HAVE MADE, ANY WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE EQUIPMENT LEASED HEREUNDER OR ANY COMPONENT THEREOF, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY AS TO DESIGN, COMPLIANCE WITH SPECIFICATIONS, QUALITY OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE, USE OR OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE. All such risks, as between Lessor and Lessee, are to be borne by Lessee. Without limiting the foregoing, Lessor shall have no responsibility or liability to Lessee or any other person with respect to any of the following, except to the extent directly resulting from the negligence or misconduct of Lessor: (i) any liability, loss or damage caused or alleged to be caused directly or indirectly by any Equipment, any inadequacy thereof, any deficiency or defect (latent or otherwise) therein, or any other circumstance in connection therewith; (ii) the use, operation or performance of any Equipment or any risks relating thereto; (iii) any interruption of service, loss of business or anticipated profits or consequential damages; or (iv) the delivery, operation, servicing, maintenance, repair, improvement or replacement of any Equipment. If, and so long as, no default exists under this Lease, Lessee shall be, and hereby is, authorized during the term of this Lease to assert and enforce, at Lessee's sole cost and expense, from time to time, in the name of and for the account of Lessor and/or Lessee, as their interests may appear, whatever claims and rights Lessor may have against any Supplier of the Equipment. XVI. REPRESENTATIONS AND WARRANTIES OF LESSEE: Lessee hereby represents and warrants to Lessor that on the date hereof and on the date of execution of each Schedule; (a) Lessee has adequate power and capacity to enter into, and perform under, this Agreement and all related documents (together, the "Documents") and is duly qualified to do business wherever necessary to carry on its present business and operations, including the jurisdiction(s) where the Equipment is or is to be located. (b) The Documents have been duly authorized, executed and delivered by Lessee and constitute valid, legal and binding agreements, enforceable in accordance with their terms, except to the extent that the enforcement of remedies therein provided may be limited under applicable bankruptcy and insolvency laws. (c) No approval, consent or withholding of objections is required from any governmental authority or instrumentality with respect to the entry into or performance by Lessee of the Documents except such as have already been obtained. (d) The entry into and performance by Lessee of the Documents will not: (i) violate any judgement, order, law or regulation applicable to Lessee or any provision of Lessee's Certificate of Incorporation or By-Laws; or (ii) result in any breach of, constitute a default under or result in the creation of any lien, charge, security interest or other encumbrance upon any Equipment pursuant to any indenture, mortgage, deed of trust, bank loan or credit agreement or other instrument (other than this Agreement) to which Lessee is a party. (e) There are no suits or proceedings pending or threatened in court or before any commission, board or other 8 administrative agency against or affecting Lessee, which will have a material adverse effect on the ability of Lessee to fulfill its obligations under this Agreement. (f) The Equipment accepted under any Certificate of Acceptance is and will remain tangible personal property. (g) Each Balance Sheet and Statement of Income delivered to Lessor has been prepared in accordance with generally accepted accounting principles, and since the date of most recent such Balance Sheet and Statement of Income, there has been no material adverse changes. (h) Lessee is and will be at all times validly existing and in good standing under the laws of the State of its incorporation (specified in the first sentence of this Agreement). (i) The Equipment will at all times be used for commercial or business purposes. XVII. OWNERSHIP FOR TAX PURPOSES, GRANT OF SECURITY INTEREST; USURY SAVINGS: (a) For income tax purposes, the parties hereto agree that it is their mutual intention that Lessee shall be considered the owner of the Equipment. Accordingly, Lessor agrees (i) to treat Lessee as the owner of the equipment on its federal income tax return, (ii) not to take actions or positions inconsistent with such treatment on or with respect to its federal income tax return, and (iii) not to claim any tax benefits available to an owner of the Equipment on or with respects to its federal income tax return. The foregoing undertakings by Lessor shall not be violated by Lessor's taking a tax position inconsistent with the foregoing sentence to the extent such a position is required by law or is taken through inadvertence so long as such inadvertent tax position is reversed by Lessor promptly upon its discovery. Lessor shall in no event be liable to Lessee if Lessee fails to secure any of the tax benefits available to the owner of the Equipment. (b) Lessee hereby grants to Lessor a first security interest in the Equipment, together with all additions, attachments, accessions, accessories and accessions thereto whether or not furnished by the Supplier of the Equipment and any and all substitutions, replacements or exchanges therefor, and any and all insurance and/or other proceeds of the property in and against which a security interest is granted hereunder. Notwithstanding anything to the contrary contained elsewhere in this Agreement, to the extent that Lessor asserts a purchase money security interest in any items of Equipment ("PMSI Equipment"): (i) the PMSI Equipment shall secure only those sums which have been advanced by Lessor for the purchase of the PMSI Equipment, or the acquisition of rights therein, or the use thereof (the "PMSI Indebtedness"), and (ii) no other Equipment shall secure the PMSI Indebtedness. (c) It is the intention of the parties hereto to comply with any applicable usury laws to the extent that any Schedule is determined to be subject to such laws; accordingly, it is agreed that, notwithstanding any provision to the contrary in any Schedule or the Lease, in no event shall any Schedule require the payment or permit the collection of interest in excess of the maximum amount permitted by applicable law. If any such excess interest is contracted for, charged or received under any Schedule or the Lease, or in the event that all of the principal balance shall be prepaid, so that under any of such circumstances the amount of interest contracted for, charged or received under any Schedule or the Lease shall exceed the maximum amount of interest permitted by applicable law, then in such event (a) the provisions of this paragraph shall govern and control, (b) neither Lessee nor any other person or entity now or hereafter liable for the payment hereof shall be obligated to pay the amount of such interest to the extent that it 9 is in excess of the maximum amount of interest permitted by applicable law, (c) any such excess which may have been collected shall be either applied as a credit against the then unpaid principal balance or refunded to Lessee, at the option of the Lessor, and (d) the effective rate of interest shall be automatically reduced to the maximum lawful contract rate allowed under applicable law as now or hereafter construed by the courts having jurisdiction thereof. It is further agreed that without limitation of the foregoing, all calculations of the rate of interest contracted for, charged or received under any Schedule or the Lease which are made for the purpose of determining whether such rate exceeds the maximum lawful contract rate, shall be made, to the extent permitted by applicable law, by amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of the indebtedness evidenced hereby, all interest at any time contracted for, charged or received from the Lessee or otherwise by Lessor in connection with such indebtedness; provided, however, that if any applicable state law is amended or the law of the United States of America preempts any applicable state law, so that it becomes lawful for Lessor to receive a greater interest per annum rate than is presently allowed, the Lessee agrees that, on the effective date of such amendment or preemption, as the case may be, the lawful maximum hereunder shall be increased to the maximum interest per annum rate allowed by the amended state law or the law of the United States of America. XVIII. EARLY TERMINATION (a) On or after the First Termination Date (specified in the applicable Schedule), Lessee may, so long as no default exists hereunder, terminate this Agreement as to all (but not less than all) of the Equipment on such Schedule as of a Rent Payment Date ("Termination Date") upon at least 90 days prior written notice to Lessor. (b) Lessee shall, and Lessor may, solicit cash bids for the Equipment on an AS IS, WHERE IS BASIS without recourse to or warranty from Lessor, express or implied ("AS IS BASIS"). Prior to the Termination Date, Lessee shall (i) certify to Lessor any bids received by Lessee and (ii) pay to Lessor (A) the Termination Value (calculated as of the rental due on the Termination Date) for the Equipment, and (B) all rent and other sums due and unpaid as of the Termination Date. (c) Provided that all amounts due hereunder have been paid on the Termination Date, Lessor shall (i) sell the Equipment on an AS IS BASIS for cash to the highest bidder and (ii) refund the proceeds of such sale (net of any related expenses) to Lessee up to the amount of the Termination Value. If such sale is not consummated, no termination shall occur and Lessor shall refund the Termination Value (less any expenses incurred by Lessor) to Lessee. (d) Notwithstanding the foregoing, Lessor may elect by written notice, at any time prior to the Termination Date, not to sell the Equipment. In that event, on the Termination Date Lessee shall (i) return the Equipment (in accordance with Section X) and (ii) pay to Lessor all amounts required under Section XVIII(b) less the amount of the highest bid certified by Lessee to Lessor. XIX. EARLY PURCHASE OPTION: (a) Provided that the Lease has not been earlier terminated and provided further that Lessee is not in default under the Lease or any other agreement between Lessor and Lessee, Lessee may, UPON AT LEAST 30 DAYS BUT NO MORE THAN 270 DAYS PRIOR WRITTEN NOTICE TO LESSOR OF LESSEE'S IRREVOCABLE ELECTION 10 TO EXERCISE SUCH OPTION, purchase all (but not less than all) of the Equipment listed and described in this schedule on any Rent Payment Date following the First Termination Date as set forth in this Schedule, and prior to the date which is the scheduled expiration of this Lease (the "Early Purchase Date"), for a price equal to (i) the Termination Value (calculated as of the Early Purchase Date) for the Equipment, and (ii) all rent and other sums due and unpaid as of the Purchase Date (the "Early Option Price"), plus all applicable sales taxes on an AS IS BASIS, (The purchase option granted by this subsection shall be referred to herein as the "Early Purchase Option"). (b) If Lessee exercises its Early Purchase Option with respect to the Equipment leased hereunder, then on the Early Purchase Date, Lessee shall pay to Lessor any rent and other sums due and unpaid on the Early Purchase Date and Lessee shall pay the Early Option Price, plus all applicable sales taxes, to Lessor in cash. XX. PURCHASE OPTION: (a) So long as no default exists hereunder and the lease has not been earlier terminated, Lessee may at lease expiration purchase all (but not less than all) of the Equipment in any Schedule on an AS IS, WHERE IS BASIS for cash equal to the amount indicated in such Schedule (the "Option Payment"). The Option Payment shall be due and payable in immediately available funds on the Expiration Date. (b) Lessee shall be deemed to have waived this option unless it provides Lessor with written notice of its irrevocable election to exercise the same not less than 90 days prior to the Expiration Date. XXI. MISCELLANEOUS: Any controversy or claim arising out of or relating to this Lease shall be governed by the substantive laws of the State of Illinois, and shall be heard by a Federal Court located in the State of Illinois; provided, however, that Lessor may also institute suit in any jurisdiction where any of the Equipment, or any guarantor or their assets may be located. (b) Unless and until Lessee exercises its rights under Section XIX above, nothing herein contained shall give or convey to Lessee any right, title or interest in and to any Equipment except as a lessee. Any cancellation or termination by Lessor, pursuant to the provision of this Agreement, any Schedule, supplement or amendment hereto, or the lease of any Equipment hereunder, shall not release Lessee from any then outstanding obligations to Lessor hereunder. All Equipment shall at all times remain personal property of Lessor regardless of the degree of its annexation to any real property and shall not by reason of any installation in, or affixation to, real or personal property become a part thereof. (c) Time is of the essence of this Agreement. Lessor's failure at any time to require strict performance by Lessee of any of the provisions hereof shall not waive or diminish Lessor's right thereafter to demand strict compliance therewith. Lessee agrees, upon Lessor's request, to execute any instrument necessary or expedient for filing, recording or perfecting the interest of Lessor. All notices required to be given hereunder shall be deemed adequately given if sent by registered or certified mail to the addressee at its address stated herein, or at such other place as such addressee may have designated in writing. This Agreement and any Schedule and Annexes thereto constitute the entire agreement of the parties with respect to the subject matter hereof. NO VARIATION OR MODIFICATION OF THIS AGREEMENT OR ANY WAIVER OF ANY OF ITS PROVISIONS OR CONDITIONS, SHALL BE VALID UNLESS IN 11 WRITING AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE PARTIES HERETO. ______________ Initials (d) In case of a failure of Lessee to comply with any provision of this Agreement, Lessor shall have the right, ten (10) days after sending written notice thereof to Lessee, but shall not be obligated to, effect such compliance, in whole or in part; and all moneys spent and expenses and obligations incurred or assumed by Lessor in effecting such compliance shall constitute additional rent due to Lessor within five days after the date Lessor sends notice to Lessee requesting payment. Lessor's effecting such compliance shall not be a waiver of Lessee's default. (e) Any rent or other amount not paid to Lessor when due hereunder shall bear interest, both before and after any judgment or termination hereof, at the lesser of eighteen percent per annum or the maximum rate allowed by law. Any provisions in this Agreement and any Schedule which are in conflict with any statute, law or applicable rule shall be deemed omitted, modified or altered to conform thereto. IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to be executed by their duly authorized representatives as of the date first above written. LESSOR: LESSEE: Mercedes-Benz Credit Corporation ABF Freight System, Inc. By: By: ----------------------------- ----------------------------- Name: Name: ---------------------------- --------------------------- Title: Title: -------------------------- -------------------------- EX-27.1 3 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ARKANSAS BEST CORPORATION QUARTERLY REPORT ON FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000894405 ARKANSAS BEST CORPORATION 1,000 6-MOS DEC-31-1999 JUN-30-1999 4,436 0 174,543 5,573 31,239 223,686 603,052 269,988 709,401 271,010 207,663 0 15 196 189,631 709,401 86,593 813,280 61,469 770,267 0 827 9,327 32,019 13,444 18,575 (664) 0 0 17,911 .80 .76
EX-27.2 4 RESTATED FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ARKANSAS BEST CORPORATION QUARTERLY REPORT ON FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1998 AS RESTATED FOR DISCONTINUED OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000894405 ARKANSAS BEST CORPORATION 1,000 6-MOS DEC-31-1998 JUN-30-1998 6,344 0 160,742 7,019 30,459 235,323 554,263 238,546 717,716 259,880 221,675 0 15 196 157,928 717,716 83,523 782,534 59,917 752,202 0 1,734 8,831 19,275 7,797 11,478 (459) 0 0 11,019 .45 .44
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