-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, K1wELHyX+A/T198P+W4c4904fwoxRTJ3QKa0HAyEsHSI8EpwOc48A2gtC6ZK/T+B 21w7tMR7aSwTXmgrILCIXw== 0000894405-95-000002.txt : 19950616 0000894405-95-000002.hdr.sgml : 19950616 ACCESSION NUMBER: 0000894405-95-000002 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950322 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARKANSAS BEST CORP /DE/ CENTRAL INDEX KEY: 0000894405 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 710673405 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-19969 FILM NUMBER: 95522450 BUSINESS ADDRESS: STREET 1: 1000 SOUTH 21 ST CITY: FORT SMITH STATE: AR ZIP: 72901 BUSINESS PHONE: 5017856000 MAIL ADDRESS: STREET 1: P O BOX 48 CITY: FORT SMITH STATE: AR ZIP: 72902 10-K405 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year December 31, 1994 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _____________ to ______________. Commission file number 0-19969 ARKANSAS BEST CORPORATION (Exact name of registrant as specified in its charter) Delaware 71-0673405 - ---------------------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3801 Old Greenwood Road, Fort Smith, Arkansas 72903 - ---------------------------------------------- ---------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 501-785-6000 ------------ Securities registered pursuant to Section 12(b) of the Act: None ---------------- (Title of Class) Securities registered pursuant to Section 12(g) of the Act: Name of each exchange Title of each class on which registered - -------------------------------------- ----------------------- Common Stock, $.01 Par Value Nasdaq Stock Market/NMS $2.875 Series A Cumulative Convertible Exchangeable Preferred Stock, $.01 Par Value Nasdaq Stock Market/NMS Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of The Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [X]. The aggregate market value of the voting stock held by non-affiliates of the Registrant as of March 1, 1995, was $207,712,691. The number of shares of Common Stock, $.01 par value, outstanding as of March 1, 1995, was 19,513,708. Documents incorporated by reference: Portions of the proxy statement for the Arkansas Best Corporation annual shareholders' meeting to be held May 9, 1995 are incorporated by reference into Part III. ARKANSAS BEST CORPORATION FORM 10-K TABLE OF CONTENTS ITEM PAGE NUMBER NUMBER PART I Item 1. Business 3 Item 2. Properties 22 Item 3. Legal Proceedings 23 Item 4. Submission of Matters to a Vote of Security Holders 23 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 24 Item 6. Selected Financial Data 25 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 27 Item 8. Financial Statements and Supplementary Data 37 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 37 PART III Item 10. Directors and Executive Officers of the Registrant 38 Item 11. Executive Compensation 38 Item 12. Security Ownership of Certain Beneficial Owners and Management 38 Item 13. Certain Relationships and Related Transactions 38 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 39 PART I. ITEM 1. BUSINESS (a) General Development of Business Corporate Profile Arkansas Best Corporation, (the "Company") is engaged, through its motor carrier subsidiaries, in less-than-truckload ("LTL") shipments of general commodities. The Company is also engaged, through its 46%-owned subsidiary, Treadco, Inc. ("Treadco"), in truck tire retreading and new truck tire sales and, through its freight forwarding subsidiaries, in intermodal marketing and freight logistics services. ABF Freight System, Inc. ("ABF") founded in 1935, is the Company's largest motor carrier subsidiary and currently accounts for approximately 77% of the Company's consolidated revenues (revenue percentages of total revenue in this discussion are based on 1994 amounts adjusted to consider the anticipated full-year impact of the Clipper acquisition discussed below). Based on revenues for 1994, as reported to the Interstate Commerce Commission (the "ICC"), ABF has grown to the 5th largest LTL motor carrier of general commodities in the United States from the 48th largest in 1965. Clipper Exxpress Company ("Clipper"), the Company's largest freight forwarding subsidiary, was acquired in 1994 and currently accounts for approximately 8% of the Company's consolidated revenues. Clipper is a knowledge-based intermodal marketing and freight logistics company. Treadco, which currently accounts for approximately 11% of the Company's consolidated revenues, is the nation's largest independent tire retreader for the trucking industry and the second largest commercial truck tire dealer. Historical BackgroundIn July 1988, the Company was acquired in a leveraged buyout by a corporation organized by Kelso & Company, L.P., the predecessor of Kelso & Company, Inc. In May 1992, the Company completed a recapitalization, which included (i) an initial public offering of Common Stock par value $.01 (the "Common Stock") by the Company, the net proceeds of which were used to repurchase approximately $114 million in principal amount of its 14% Senior Subordinated Notes due 1998 (the "Notes") pursuant to a tender offer and related consent solicitation and to pay related fees and expenses, and (ii) the refinancing of the Company's existing bank indebtedness. On November 13, 1992, the Company repurchased approximately 4,439,000 shares of Common Stock beneficially owned by Kelso Best Partners, L.P. for approximately $55.5 million in the aggregate, or $12.50 per share (a discount of $1.50 per share to the then quoted NASDAQ/NMS sale price). Prior to the repurchase, Kelso Partners was the Company's largest stockholder, with beneficial ownership of approximately 21.7% of the total outstanding shares of the Company's Common Stock. Kelso Partners distributed its remaining 650,000 shares to certain of its individual partners, thus ending Kelso Partners' investment in the Company. To pay for the repurchase of such shares, the Company borrowed $50 million under a new five-year term loan credit facility (the "Term Loan") provided by its existing bank group through an amendment and restatement of its existing credit agreement and used $5.5 million in available cash. See "Management's Discussion and Analysis -- Liquidity and Capital Resources." On February 3, 1993, the Company completed a public offering of 1,495,000 shares of preferred stock ("Preferred Stock"). The Company used the net proceeds of $72.3 million to repay the $50 million Term Loan and for general corporate purposes. See "Management's Discussion and Analysis -- Liquidity and Capital Resources." (b) Financial Information about Industry Segments The response to this portion of Item 1 is included in "Note M - Business Segment Data" of the notes to the Company's consolidated financial statements for the year ended December 31, 1994, which is submitted as a separate section of this report. (c) Narrative Description of Business Motor Carrier Operations General The Company's motor carrier operations are conducted through ABF, ABF Freight System (B.C.), Ltd. ("ABF-BC"), ABF Freight System Canada, Ltd. ("ABF- Canada"), ABF Cartage, Inc. ("Cartage"), and Land-Marine Cargo, Inc. ("Land- Marine"). ABF, which concentrates on long-haul transportation of general commodities freight, involving primarily LTL shipments, is the Company's largest motor carrier subsidiary, accounting for approximately 98% of the Company's motor carrier revenues for 1994. ABF-BC and ABF Canada operate out of 14 terminals in Canada. Cartage focuses on shipments in and out of Hawaii and Land-Marine currently concentrates on shipments in and out of Puerto Rico. ABF Freight System, Inc. ABF is the largest subsidiary of the Company, currently accounting for approximately 77% of the Company's consolidated revenues. ABF has grown to become the fifth largest LTL motor carrier in the United States from the forty-eighth largest in 1965, based on revenues for 1994 as reported to the ICC. ABF, which concentrates on long-haul LTL shipments, provides direct service to 939 of the 952 cities in the United States having a population of 25,000 or more. ABF and the Company's other motor carrier subsidiaries have 338 terminals and operate in all 50 states, Canada and Puerto Rico. Through an alliance and relationships with trucking companies in Mexico, ABF provides motor carrier services to customers in that country as well. ABF has more than 50,000 customers, including approximately 335 national accounts. ABF was incorporated in Delaware in 1982 and is the successor to Arkansas Motor Freight, a business originally organized in 1935. ABF concentrates on long-haul transportation of general commodities freight, involving primarily LTL shipments. General commodities include all freight except hazardous waste, dangerous explosives, commodities of exceptionally high value, commodities in bulk and those requiring special equipment. ABF's general commodities shipments differ from shipments of bulk raw materials which are commonly transported by railroad, pipeline and water carrier. General commodities transported by ABF include, among other things, food, textiles, apparel, furniture, appliances, chemicals, non-bulk petroleum products, rubber, plastics, metal and metal products, wood, glass, automotive parts, machinery and miscellaneous manufactured products. During the year ended December 31, 1994, no single customer accounted for more than 3% of ABF's revenues, and the ten largest customers accounted for less than 10% of ABF's revenues. LTL Operations LTL carriers differ substantially from full truckload carriers by offering service to shippers which is tailored to the need to transport a wide variety of large and small shipments to geographically dispersed destinations. Generally, full truckload companies operate from the shipper's dock to the receiver's facility and require very little fixed investment beyond the cost of the trucks. LTL carriers pick up small shipments throughout the vicinity of a local terminal with local trucks and consolidate them at each terminal according to destination for transportation by intercity units to their destination cities or to breakbulk (rehandling) terminals, where shipments from various locations can be reconsolidated for transportation to distant destinations, other breakbulk terminals or local terminals. In most cases, a single driver's trip will consist of a day's run to the terminal or relay point which is appropriately located on the route, where the trailer containing the shipments will be transferred to continue towards its destination. Once delivered to a local terminal, a shipment is delivered to the customer by local trucks operating from such terminal. In some cases, when a sufficient number of different shipments at one origin terminal are going to a common destination, they can be combined to make a full trailerload. A trailer then is dispatched to that destination without having to rehandle the freight. In order to improve efficiency, reduce labor costs and enhance customer service, ABF seeks to minimize the number of times it handles freight. ABF estimates that at its breakbulk terminals it handles its LTL shipments, on average, approximately one and a quarter times. ABF's low average handling per shipment tends to result in fewer damage claims and reduced transit time. International Markets ABF-Canada and ABF-BC's Canadian operations are comprised of 14 terminals in the provinces of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland, Nova Scotia, Prince Edward Island, Ontario, and Quebec. In addition, ABF maintains a national account sales office in Montreal. Also available is simplified rating to and from Canada, similar to the zip-rating program which ABF uses in the United States. Through an alliance with Mexico's largest LTL specialist, ABF provides motor carrier services to that country as well. This service gives ABF customers a practically seamless operation featuring single-billing including all freight charges, through-cargo claims liability and tracing, diskette rating, voice- response rate quotes and shipment status, hazardous materials service, and payment in either U.S. dollars or in Mexico pesos. This service is offered to and from all points serviced through ABF tariffs to and from specified points in Mexico. ABF has expanded its Mexico sales and customer support staffs and maintains ABF sales offices in Mexico City, Monterey and Guadalajara. Since entering the worldwide market in 1992, ABF has put together a seamless, single-bill service to more than 200 ports in 124 countries throughout the world. The service also allows electronic shipment tracing from origin to destination. Specialized Services Through an alliance with Burnham Service Corporation, ABF's TurnKey service provides customers a seamless, one-source transportation system featuring door-to-door/through-the-door deliveries plus personalized unpack and set-up services. ABF picks up the products from the shipper and delivers them to a Burnham center nearest the consignee's address. From that point, Burnham contacts the customer and arranges the most suitable delivery time. TurnKey has one-call access, single-carrier liability, through-rates and one-source invoicing. It uses the most sophisticated state-of-the-art satellite communications, bar-coding technology, and computer linkage between ABF and the customer for on-going up-to-the-minute status checks on shipments. The service is available from any point served by the ABF system to any point in the contiguous 48 states. TimeKeeper is another in our line of specialized services. TimeKeeper provides the customer with a money-back guaranteed, expedited service in those instances when a shipment absolutely must be delivered by a certain day. TimeKeeper is a premium service that provides an option to air freight, at rates that are lower than most air freight rates and other expedited options. Statistical Information The following table sets forth certain statistical information regarding ABF's operations (including inter-company operations) for the five years ended December 31, 1994.
Year Ended December 31 1994 1993 1992 1991 1990 (Unaudited) Operating ratio 96.4% 95.8% 94.9% 96.3% 95.1% Average length of haul (miles) 1,214 1,198 1,201 1,192 1,175 Employees (1) 11,876 10,719 10,545 10,184 10,159 Miles per gallon 6.32 6.12 5.87 5.65 5.62 Fuel cost per mile (2) $.085 $.094 $.110 $.116 $.132 Terminals (at end of period)(3) 322 323 317 320 319 Tractors Road Tractors 1,498 1,385 1,385 1,385 1,338 City Tractors 2,483 2,469 2,474 2,368 2,188 Trailers Road Trailers -- doubles 12,734 12,263 11,718 11,405 10,679 Road Trailers -- long 230 231 251 274 274 City Trailers 1,364 1,395 1,365 1,187 1,219 Less-than-Truckload (4) Revenue (000's) $797,393 $772,872 $748,470 $697,602 $661,611 Percent of total revenue 88.3% 88.3% 88.8% 89.1% 88.2% Tonnage (000's) 2,677 2,620 2,542 2,384 2,326 Percentage of total tonnage 76.8% 76.5% 77.2% 78.5% 76.9% Shipments (000's) 4,935 4,948 4,899 4,793 4,779 Revenue per hundredweight $14.89 $14.75 $14.72 $14.63 $14.22 Average weight per shipment (pounds) 1,085 1,059 1,038 995 973 Truckload Revenue (000's) $105,798 $102,635 $ 94,242 $ 85,013 $ 88,917 Tonnage (000's) 809 807 752 654 700 Shipments (000's) 98 96 89 78 82 Revenue per hundredweight $6.54 $6.36 $6.27 $6.50 $6.36 Average weight per shipment (pounds) 16,502 16,776 16,858 16,707 17,034 (1) At end of period for salaried employees and mid-December for hourly employees. (2) Excludes fuel tax per mile of $.059, $.069, $.067, $.071 and $.073 for 1990 through 1994, respectively. (3) Does not include terminals of ABF-BC, ABF Canada, Land Marine and Cartage. (4) Defined by the ICC as shipments weighing less than 10,000 pounds.
Marketing Prior to the partial deregulation of the trucking industry beginning in 1980, rates were extensively regulated by the ICC and were not a significant competitive factor, but now marketing, cost and rate of return have become an integral part of carrier operations. By expanding ABF's transcontinental system through the addition of terminals, ABF has increased its ability to service a greater number of customers directly. Maintaining ABF's competitive position requires operational and sales support that is customer oriented. To achieve this objective, ABF has sales representation in all cities in which it has terminals and also has ten separate national account sales offices. To improve service, ABF makes information readily accessible to its customers through various electronic pricing, billing and tracing services, referred to by ABF as the "Q-Family" of services. The ABF Q-Family offers a complete package of computer-supported information services. Q-Stat provides a monthly statistical report of a customer's shipping activity with ABF. Q- Bill offers most of the functions of a traffic department in a PC software package. Q-Bill provides for bill-of-lading preparation, automatic rating with an ABF tariff or competitor tariff, case label production and summary manifesting. Q-EDI is ABF's computer-to-computer electronic data interchange (EDI) system. The following standard transactions are presently supported:(i) shipment status information for shipment tracking and performance monitoring; (ii) freight bills for payment and auditing, and (iii) bill-of-lading information for carrier billing and rating. Q-Info is a PC-based shipment status information system designed to aid ABF customers in the performance of their daily traffic-related functions. Q-Info provides customized shipment status reports, up-to-the-minute tracing information and freight bill copies. Q-Line is a nationwide hotline which can be reached 24-hours a day, seven days a week, from any touch-tone telephone. It is a voice response system which allows "conversation" with the ABF computer for tracing, rates, loss and damage claims, and transit time information. ABF originated diskette rating and, in management's opinion, continues to set the industry standard. Q-Rate provides North American rating on diskette. In addition to supporting the ABF tariffs, information regarding coverage, transit times, and mileage is provided. ABF Q-Fax is the newest member to the Q-Family. Q-Fax provides tracking and tracing information to shippers without the computer sophistication to utilize Q-Info or Q-EDI. Customized reports showing shipment activity are faxed directly from ABF's mainframe computer to the customer's facsimile machine. Quality Improvement Process In 1984, ABF began implementing a Quality Improvement Process to focus on the specific requirements of customers and to develop measurement systems that determine the degree of success or failure in conforming to those requirements. Non-conforming results trigger a structured approach to problem solving, error identification and classification. The Quality Improvement Process requires that all levels of employees be educated in the process itself and trained in their respective job responsibilities so that the focus on customer requirements drives job performance. In that vein, ABF maintains permanent educational facilities in strategic locations to teach the Quality Improvement Process to sales personnel, branch managers and operations personnel in classroom environments. ABF believes that the Quality Improvement Process has enhanced performance in a number of areas. Revenue Equipment and Truck Terminals In anticipation of the partial deregulation of the trucking industry, ABF began in 1978 to expand carrier services and geographic coverage. ABF and the Company's other motor carrier subsidiaries have increased their market coverage by expanding the number of terminals from 67 in early 1978 to 338 currently. A rapid period of terminal expansion from 1978 gave ABF substantially complete national geographic coverage and has not continued at the same pace since 1988. ABF owns 27 of its terminal facilities, leases 81 terminals from its affiliate, ABC Treadco, Inc. ("ABC Treadco") and leases the remaining terminals from independent third parties. ABF's equipment replacement policy generally provides for replacing intercity tractors every three years, intracity tractors every five to seven years, and trailers (which have a depreciable life of seven years) on an as needed basis (generally seven years or more), resulting in a relatively new and efficient tractor fleet and minimizing maintenance expenses. ABF presently intends to continue its tractor and trailer replacement policy. ABF has a comprehensive preventive maintenance program for its tractors and trailers to minimize equipment downtime and prolong equipment life. Repairs and maintenance are performed regularly at ABF's facilities and at independent contract maintenance facilities. In late 1993, ABF initiated a new computerized maintenance program which tracks equipment activity and provides automatic notification of the maintenance needs of each tractor, trailer and converter gear. The program keeps records of preventive maintenance schedules and governmental inspection requirements for each piece of equipment and routes the unit to the nearest ABF maintenance facility where the service can be performed. As of December 31, 1994, ABF owned or operated the following revenue equipment, which, excluding operating leases, had an aggregate net book value of approximately $96.2 million:
Total No. Units by ModelYear of Units `95 `94 `93 `92 `91 `90 `89 Pre-'89 Intercity Tractors (1) 1,498 10 375 499 499 115 Intercity Trailers (2) 230 230 Intercity Trailers-Doubles (3) 12,734 500 820 600 749 499 410 9,156 Intracity Tractors (4) 2,483 209 217 319 280 300 391 45 722 Intracity Trailers 1,364 1,364 Pickup/Delivery Trucks 85 14 17 54 Converters (used to connect two 28-foot trailers) (5) 2,785 250 2,535 (1) Includes 1,008 tractors being leased under operating lease. (2) Includes 100 trailers being leased under capitalized lease. (3) Includes 923 trailers being leased under operating lease and 5,130 trailers being leased under capitalized lease. (4) Includes 686 tractors being leased under capitalized lease. (5) Includes 50 converters being leased under capitalized lease.
In 1994, under its equipment replacement program, ABF acquired 385 intercity tractors, 350 intracity tractors and 500 trailers. Internally generated funds, borrowings under the credit agreement and leases have been sufficient to finance these additions. Data Processing The Company, through a wholly owned subsidiary, is able to provide timely information, such as the status of all shipments in the system at any given point in time, that assists its operating personnel, as well as aids the marketing efforts of ABF. ABF continues to develop its on-line Freight Management System (FMS) aimed at perfecting service to customers and internal cost controls. The use of Trailer Profiles was deployed in 1994. A computer program assesses the transit progress of each shipment and from this produces a profile on each load of freight moving through the ABF system. This profile then drives the order in which these loads are unloaded and dispatched through the breakbulk and linehaul network. This effectively corrects the movement of a shipment that is running behind schedule without jeopardizing the on-time delivery of other shipments. The City Planning System was also completed this year. It provides a more dynamic way for terminal management to inventory and route shipments for delivery. Since it resides on the mainframe computer, it is available to all ABF terminals and offers features usually found only on expensive PC-based inbound planning systems. The Origin Terminal Consolidation Analysis was also completed. It provides a means by which terminal management can collect data pertaining to their outbound shipments available on a given day and determine the best points to which those shipments should be consolidated and loaded. This reduces the cost of handling as well as transit time. A battery of new programs was completed that will engage executive management more timely and efficiently into exceptions arising in daily operations. These programs continually assess various functions deemed critical to service and/or costs, and include the Delivery Backlog Report, Manning Strategy Model, Outbound Backlog Report, Tardy Spots Report, and Inbound Break Analysis. They are generated only when exceptions are detected. This essentially puts ABF controls on auto-pilot. It provides an efficient means for executive management to stay informed as to what is taking place in daily operations without taking away from their broader responsibilities. As long as operations remain normal, executive management can devote time to long- range planning. Yet when exceptions occur, they are poised to react quickly and decisively, preventing exceptions from becoming problems without having to sift through reams of data. Other such programs are planned for 1995. During 1994, ABF installed a new customer database management system, AIMS (Account Information Management System). AIMS provides a centralized management tool for maintaining customer information. For example, a file of customer receiving requirements is maintained in AIMS. AIMS can be accessed on-line by all ABF general office departments and terminals. The service bureau is staffed with 186 data processing specialists. The Company believes that its allocation of resources to data processing has assisted ABF in providing the type of quality services required by a sophisticated shipping public. Employees At December 31, 1994, ABF employed 11,876 persons. Employee compensation and related costs are the largest components of carrier operating expenses. In 1994, such costs amounted to 66.7% of carrier operations revenues. ABF is a signatory with the Teamsters to the National Master Freight Agreement (the "National Agreement") which became effective April 1, 1994, and expires March 31, 1998. Under the National Agreement, employee wages and benefits increased an average of 2.7% annually during 1994 and will increase an average of 3.3% annually effective April 1, 1995, 3.8% on April 1, 1996 and 3.9% on April 1, 1997. Under the terms of the National Agreement, ABF is required to contribute to various multiemployer pension plans maintained for the benefit of its employees who are members of the Teamsters. Amendments to the Employee Retirement Income Security Act of 1974 ("ERISA") pursuant to the Multiemployer Pension Plan Amendments Act of 1980 (the "MPPA Act") substantially expanded the potential liabilities of employers who participate in such plans. Under ERISA, as amended by the MPPA Act, an employer who contributes to a multiemployer pension plan and the members of such employer's controlled group are jointly and severally liable for their proportionate share of the plan's unfunded liabilities in the event the employer ceases to have an obligation to contribute to the plan or substantially reduces its contributions to the plan (i.e., in the event of plan termination or withdrawal by the Company from the multiemployer plans). Although the Company has no current information regarding its potential liability under ERISA in the event it wholly or partially ceases to have an obligation to contribute or substantially reduces its contributions to the multiemployer plans to which it currently contributes, management believes that such liability would be material. The Company has no intention of ceasing to contribute or of substantially reducing its contributions to such multiemployer plans. ABF is also a party to several smaller union contracts. Approximately 77% of ABF's employees are unionized, of whom approximately 1% are members of unions other than the Teamsters. Five of the six largest LTL carriers are unionized and generally pay comparable wages. Non-union companies typically pay employees less than union companies. Since December 1989, the Department of Transportation ("DOT") has required ABF and other domestic motor carriers to implement drug testing programs for their truck drivers to deter drug use. In December 1991, ABF implemented a random testing program to cover its entire driver work force. ABF has since April 1992 been testing as required by the federal government at an average rate of 50% annually of its driver work force. Statistics for 1994 indicate that ABF has administered 4,658 random, biennial re-certification and post- accident tests to its employees, with a pass rate of 99.4%. Due to its national reputation and its high pay scale, ABF has not historically experienced any significant difficulty in attracting or retaining qualified drivers. Insurance and Safety Generally, claims exposure in the motor carrier industry consists of cargo loss and damage, auto liability, property damage and bodily injury and workers' compensation. The Company's motor carrier subsidiaries are effectively self-insured for the first $100,000 of each cargo loss, $300,000 of each workers' compensation loss and $200,000 of each general and auto liability loss, plus an aggregate of $750,000 of auto liability losses between $200,000 and $500,000. The Company maintains insurance contracts covering the excess of such losses in amounts it believes are adequate. While insurance for motor carriers has become increasingly more expensive and more difficult to obtain, it remains essential to the continuing operations of a motor carrier. Although such insurance has become more difficult to obtain, the Company has been able to obtain adequate coverage and is not aware of problems in the foreseeable future which would significantly impair its ability to obtain adequate coverage at comparable rates. ABF also believes that it has one of the best safety records in the trucking industry, based in part on having received first, second or third place safety awards from the American Trucking Associations ("ATA") every year for the past 22 years. ABF was awarded the ATA's President's Trophy in 1993, 1989 and 1984. The President's Trophy is awarded to the company with the most outstanding safety program. ABF's tractors are equipped with electronic control modules which prevent speeds in excess of 57 mph, thereby maximizing safety and fuel economy. Of the ABF general commodities shipments handled during the year ended December 31, 1994, more than 99% were free of any cargo claim, and of those having cargo claims, 89% were settled within 30 days of the claim date. The following table shows accidents and claims results for the last five years:
Year Ended December 31 1994 1993 1992 1991 1990 Linehaul miles (000) per DOT linehaul accident (1) 2,201 1,868 1,962 1,816 1,543 Selected categories of insurance expense as a percent of revenue: Cargo loss and damage claims 1.14% 1.00% 0.94% 1.03% 1.03% Public liability 0.82 0.86 1.08 0.98 0.69 Workers' Compensation 1.87 1.79 1.83 2.00 1.61 ----- ----- ----- ----- ----- Total 3.83% 3.65% 3.85% 4.01% 3.33% ===== ===== ===== ===== ===== (1) An accident, as defined by the DOT, involves personal injury with treatment sought immediately away from the scene of the accident or disabling damage that requires a vehicle to be towed from the scene of the accident.
Fuel The motor carrier industry is dependent upon the availability of diesel fuel. Material adverse effects on the operations and profitability of the industry, as well as ABF, could occur as a result of significant increases in fuel costs, fuel taxes or shortages of fuel. Management, however, believes that ABF would be impacted to a lesser extent than truckload carriers if prices increased dramatically because fuel costs are a smaller percentage of costs for LTL carriers. Further, management believes that ABF's operations and financial condition are no more susceptible to fuel price increases or fuel shortages than its competitors. On October 1, 1993, the new Federal Diesel Fuel Regulations went into effect. The new regulations require the use of low sulfur highway diesel in all on- road diesel powered motor vehicles. ABF is in compliance with the new regulations. Competition, Pricing and Industry Factors The trucking industry is highly competitive. ABF actively competes for freight business with other national, regional and local motor carriers and, to a lesser extent, with private carriage, freight forwarders, railroads and airlines. Competition is based primarily on personal relationships, price and service. In general, ABF and most of the other principal motor carriers use similar tariffs to rate interstate shipments. Competition for freight revenue, however, has resulted in discounting which effectively reduces prices paid by shippers. In an effort to maintain and improve its market share, ABF offers and negotiates various discounts. See "Business -- Motor Carrier Operations -- Regulation." Deregulation of the trucking industry has resulted in easier entry into the industry and increased competition, although there has also been consolidation in the industry, as a number of companies have since gone out of business. See "Business -- Motor Carrier Operations -- Regulation." New entrants (some of which have grown rapidly in regional markets) include some non-union carriers which have lower labor costs. ABF conducts the ABF Profit Improvement Program, which is designed to improve the overall profitability of ABF by working with those accounts which do not have an acceptable profit margin. Action to improve profitability may include changing the packaging and price renegotiation. The trucking industry, including ABF, is affected directly by the state of the overall economy. In addition, seasonal fluctuations also affect tonnage to be transported. Freight shipments, operating costs and earnings also are affected adversely by inclement weather conditions. Regulation ABF's operations in interstate commerce are regulated by the ICC which has power to authorize motor carrier operations; require periodic financial reporting; and approve certain mergers, consolidations and acquisitions. The Federal Aviation Administration Authority Act of 1994, effective January 1, 1995, preempts the states' regulation of price, route and service in intrastate freight transportation. However, the states continue to have authority to regulate insurance and safety areas of intrastate freight transportation. ABF, like other interstate motor carriers, is subject to certain safety requirements governing interstate operations prescribed by the DOT. ABF has earned a "satisfactory" rating (the highest of three grading categories) from the DOT. In addition, vehicle weight and dimensions remain subject to both federal and state regulations. More restrictive limitations on vehicle weight and size or on trailer length or configuration could adversely affect the profitability of ABF. The Motor Carrier Act of 1980 (the "MCA") was the start of an effort to increase competition among motor carriers and reduce the level of regulation in the industry. The MCA enables applicants to obtain ICC operating authority easily and allows interstate motor carriers, such as ABF, to change their rates by a certain percentage per year without ICC approval and to provide discounts to shippers. The MCA also resulted in the removal of route and commodity restrictions on the transportation of freight, making it easier for interstate motor carriers to obtain nationwide authority to carry general commodities throughout the continental United States. Management believes that ABF is in compliance in all material respects with applicable regulatory requirements relating to its operations. The failure of ABF to comply with the regulations of ICC, DOT or state agencies could result in substantial fines or revocation of ABF's operating authorities. Specialized Motor Carriers In addition to ABF, the Company has four other motor carrier subsidiaries: ABF-BC, ABF-Canada, Land-Marine and Cartage. ABF-BC and ABF-Canada concentrate on shipments of general commodities freight primarily in Canada. Land-Marine currently concentrates on shipments of general commodities freight in and out of Puerto Rico and has ICC common carrier authority to operate in the continental United States. Cartage focuses on shipments in and out of Hawaii. In 1994, ABF-BC, ABF-Canada, Land-Marine and Cartage collectively provided approximately 2% of the Company's motor carrier revenues. Tire Operations Treadco, Inc. Treadco is the nation's largest independent tire retreader for the trucking industry and the second largest commercial truck tire dealer. Treadco's revenues currently account for approximately 11% of the Company's consolidated revenues and are divided approximately 55% and 45% between retread sales and new tire sales, respectively. In 1994, Treadco sold approximately 612,000 retreaded truck tires, which were manufactured at its production facilities in Arizona, Arkansas, Florida, Georgia, Louisiana, Missouri, Ohio, Oklahoma and Texas, and sold approximately 353,000 new tires. Retreaded truck tires are significantly less expensive than new truck tires (about one-third of the cost) and generally last as long as new tires used in similar applications. Moreover, most tire casings can be retreaded one or two times. The retail selling price of Treadco's retread tires ranges from about $80 to $110 with an average retail selling price of $85, compared to $260 to $325 for a new tire. Treadco also sells retreads including casings not supplied by the customer for $150 to $180, averaging about $169 per tire. Since tire expenses are a significant operating cost for the trucking industry, many truck fleet operators develop comprehensive periodic tire replacement and retread management programs. On its weekly sales routes, Treadco picks up a fleet's casings and returns them the following week, thus providing a continuous supply of both retreads and new tires as needed. In order to fully service its customers, Treadco also sells new truck tires manufactured by Bridgestone, Michelin, General, Dunlop, Sumitomo, Kumho, and other manufacturers. According to Bridgestone and Dunlop, Treadco is their largest domestic truck tire dealer, and according to Michelin, Treadco is one of its largest domestic truck tire dealers. Treadco was organized in June 1991 as the successor to the tire business conducted and developed by ABC Treadco, a wholly owned subsidiary of the Company. ABC Treadco transferred the tire business-related assets, including the Bandag Incorporated ("Bandag") franchise agreements, to Treadco in exchange for all the outstanding capital stock of Treadco. In October 1991, Treadco completed an initial public offering of 2,679,300 shares (including 179,300 shares sold by ABC Treadco pursuant to an over-allotment option) of its common stock at $16.00 per share (the "Treadco Offering). In December 1993, ABC Treadco's shares in Treadco were transferred to the Company. As of December 31, 1994, the Company's percentage ownership of Treadco was 45.9%, while retaining control of Treadco by reason of its stock ownership, board representation and provision of management services. As a result, Treadco is consolidated with the Company for financial reporting purposes, with the ownership interest of the other stockholders reflected as a minority interest. The Bandag Relationship Treadco retreads truck tires in 26 locations pursuant to multi-year franchise agreements with Bandag. Each of Treadco's production facilities is covered by a separate Bandag franchise agreement that grants Treadco the non-exclusive right to retread truck tires at the facility using Bandag's retreading process, materials and equipment and to sell such retread tires, using the "Bandag" trademark, without any territorial restrictions. In return, each of Treadco's production facilities covered by a Bandag franchise agreement must purchase its rubber requirements from Bandag at prices established by Bandag. The franchises also provide Treadco with a number of support programs, including training for technical and sales personnel, field-service engineering back-up, marketing programs and ongoing research and development. Bandag has informed Treadco that Treadco, with its 26 separate franchise locations, is Bandag's largest domestic franchisee in terms of the number of Bandag franchises and rubber purchases from Bandag. In 1991, Treadco renewed and amended its existing franchise agreements with Bandag, for terms ranging from five to seven years each. Each Bandag franchise agreement grants Treadco the non-exclusive right to make, use and sell tires retreaded by the Bandag method, within certain defined geographical areas, during the term of the agreement. Treadco has the right to sell Bandag retreads wherever, to whomever and at any price Treadco may choose, but Treadco may manufacture retreaded tires using the Bandag method only at the authorized location referred to in each agreement. The new franchise agreements do not provide Treadco with an exclusive production or sales territory, nor do they prohibit Treadco (or any other Bandag franchisees) from opening sales offices in other desired locations. Alternative Retread Processes Treadco is exploring alternatives in retreading processes in some new geographical markets. In the second quarter of 1995, Treadco has plans to open a precure production facility in Las Vegas, Nevada which will initially purchase its tread rubber from Hercules Tire and Rubber Co. The Company has the option of purchasing tread rubber and supplies from suppliers other than Hercules for the Las Vegas facility. The Company plans to open an additional retreading facility in the second half of 1995. This production facility will be a mold cure retread facility. The facility will use tread rubber compounds provided by Bridgestone/ Firestone, Inc. and Bridgestone/Firestone, Inc. will also provide technical support. The process will produce quality retreads with the Bridgestone- Treadco name molded into the tread. Sales and Marketing Treadco's sales and marketing strategy is based on its service strengths, network of production and sales facilities and strong regional reputation. In addition to excellent service, Treadco offers broad geographical coverage across the South, Southwest and the lower Midwest. This coverage is important for customers because they are able to establish uniform pricing, utilize national account billing processes of the major new tire suppliers, and generally reduce the risk of price fluctuations when service is needed. None of Treadco's customers for retreads and new tires, including ABF or other affiliates, represented more than 4% of Treadco's revenues for 1994. ABF accounted for approximately $2.0 million of Treadco's revenues in 1994 (1.4%), and has not accounted for more than 6% of Treadco's revenues in the last ten years. Treadco's customers are primarily mid-sized companies that maintain their own in-house trucking operations and rely on Treadco's expertise in servicing their tire management programs. Treadco markets its products through sales personnel located at each of its 26 production facilities and, in addition, through 19 "satellite" sales locations maintained in Arizona, Arkansas, Florida, Georgia, Kansas, Louisiana, Mississippi, Missouri, Ohio and Texas. These satellite sales locations are supplied with retreads by nearby Treadco production facilities. Treadco locates its production facilities and sales locations in close proximity to interstate highways and operates mobile service trucks to provide ready accessibility and convenience to its customers, particularly fleet owners. Employees At December 31, 1994, Treadco employed 700 full-time employees. Fourteen employees at one Treadco facility are represented by a union. Treadco's management believes it enjoys a good relationship with its employees. The Clipper Group On September 30, 1994, the Company consummated the purchase of all the outstanding stock of Clipper Exxpress Company ("Clipper"), Agricultural Express of America, Inc. ("AXXA"), and Agile Freight System, Inc. ("Agile"),(collectively known as the "Clipper Group") pursuant to a stock purchase agreement. The Clipper Group is a non-asset, non-labor intensive, knowledge-based provider of transportation and logistics services. Through the three closely integrated operating companies, the Clipper Group provides a full range of transportation services. Clipper is the largest consolidator and forwarder of LTL shipments and one of the largest intermodal marketing companies ("IMC") in the United States. AXXA provides high quality temperature- controlled intermodal service to fruit and produce brokers, growers, shippers and receivers and supermarket chains, primarily from the West to the Midwest, Canada, and the eastern United States. Agile provides "near air freight" truckload service in tightly focused lanes and also provides some line-haul transportation for Clipper's LTL consolidation service. Clipper Exxpress Company Clipper, founded in 1938, is the largest of the three Clipper Group companies. Clipper accounted for approximately 91% of the Company's forwarding operations revenues during the fourth quarter of 1994. Clipper provides contract freight management and LTL freight forwarding services to its customers. Clipper's executive offices are located in Lemont, Illinois ( a suburb of Chicago) and its 40 branch offices are dispersed throughout the United States. At December 31, 1994, Clipper employed 191 persons (comprised of 49 sales representatives, 66 administrative personnel and 76 operations personnel). Contract Freight Management. Through its contract freight management business unit, Clipper provides logistics and transportation services, including intermodal and truck brokerage, warehousing, consolidation, transloading, repacking, and other ancillary services. As an IMC, Clipper arranges for loads to be picked up by a drayage company, tenders them to a railroad, and then arranges for a drayage company to deliver the shipment on the other end of the move. Clipper's role in this process is to select the most cost-effective means to provide quality service, and to expedite movement of the loads at various interface points to ensure seamless door-to-door transportation. Clipper's substantial volume of consistently high margin traffic is extremely attractive to its railroad partners. As a result, Clipper has been able to enter into contracts with major railroads and stack train operations that contain very competitive rates. LTL Freight Forwarding. Clipper is one of the nation's oldest and largest LTL freight forwarders. Its collection and distribution network consists of 40 geographically dispersed locations throughout the United States. Selection of markets depends on size (lane density), availability of quality rail service and truck line-haul service, length of haul and competitor profile. Traffic moving between its ten most significant market pairs generates approximately 36% of Clipper's LTL revenue. Virtually all of Clipper's LTL revenue is derived from long-haul, metro area to metro area transportation. Clipper's specific strategy for the LTL forwarding business is to provide expedited LTL transportation service only between major markets within the United States. It has chosen not to serve the regional markets or where freight volume is limited. In addition, Clipper concentrates its sales and marketing efforts in the close-in metro areas in the major cities that it serves. This strategy helps reduce Clipper's pickup and delivery costs and assures that LTL freight picked up by Clipper's agent is available for outbound loading on the same day. Additionally, this strategy allows Clipper to quickly build sufficient lane density to ship directly to destination terminals. With the effective use of reliable rail service and trucks with two driver teams, Clipper can provide customers a significant improvement in transit time. Rather than hiring its own employees and owning transportation equipment, Clipper uses independent agents to pick up, sort, and consolidate LTL shipments into truckload shipments. A truckload carrier or premium service intermodal train will then linehaul the consolidated truckload to a destination terminal where another agent will deconsolidate the line-haul trailer and deliver its contents to the ultimate consignees. Although pickup and delivery and terminal handling is performed by agents, Clipper has an operations and customer service staff located at or near the agent's terminal to monitor service levels and provide an interface between customers and agents. Because Clipper enters new markets without a large financial commitment and with only a few company employees, it is able to constantly explore new ideas without significant risk and to quickly take advantage of new opportunities. The Clipper Group serves a diverse base of more than one thousand shippers with which it strives to establish long-term relationships. These efforts have had positive results as evidenced by the fact that many of Clipper's customers have been doing business with Clipper for more than 15 years. Clipper's customers are a diverse group, with no concentration in any particular industry. During the year ended December 31, 1994, no single customer accounted for more than 6% of Clipper's revenues, and the ten largest customers accounted for less than 15% of Clipper's revenues. Advanced information systems. Clipper has recently invested significant resources into its information systems. This new MIS system enables Clipper to coordinate and track the performance of different phases of each movement. It will also enable Clipper to provide EDI linkages with its customers and suppliers in the near future. Clipper was the first IMC to achieve mainframe- to-mainframe EDI linkage with Conrail. Agricultural Express of America, Inc. AXXA owns 388 temperature-controlled trailers that it deploys in the seasonal fruit and vegetable markets. These markets are carefully selected in order to take advantage of various seasonally high rates which peak at different times of the year. By focusing on the spot market for produce transport, AXXA is able to generate on average, a higher revenue per load compared to standard temperature-controlled carriers that pursue more stable year round temperature-controlled freight. AXXA has also achieved lower cost than these competitors because it utilizes railroads for the line-haul segment of the shipment. AXXA and Clipper are closely integrated, with Clipper relying on AXXA equipment to move its westbound freight, particularly during the winter months. AXXA counts on Clipper to reload its equipment promptly to harvest areas, especially during the peak produce season. Because a large percentage of produce is usually harvested during certain short periods of time, dependable equipment availability is one of the most important factors that shippers consider. In addition, companies in this niche have difficulty achieving high utilization of their fleets due to the cyclical nature of the business, the geographical shifting of loading points as different crops mature and the challenge of finding backhauls to harvest areas. Consequently, the supply of specialized temperature-controlled equipment can be rather limited during harvest season, often resulting in severe equipment shortages. Thus, customers are willing to pay high rates during the peak months of June and July to secure the necessary equipment. AXXA has a distinct competitive advantage because it is able to generate a higher rate of equipment utilization by obtaining backhauls through Clipper's 40-office network. AXXA's reputation for integrity, combined with its strong financial condition, has earned it the highest rating from both the Blue Book and the Red Book, the two primary produce industry rating journals for the produce- hauling markets. These ratings are compiled from survey feedback given by the trade to the two rating agencies, and are evidence of the shipper's level of confidence of AXXA. Agile Freight System, Inc. Agile is a non-asset intensive, premium service, long haul truckload carrier that utilizes two person driver teams provided primarily by owner-operators. Agile operates in tightly focused longhaul lanes that originate or terminate near a Clipper market. Much of Agile's value to the Clipper Group is that it can be relied upon if other carriers are not available to move full truckloads of consolidated LTL shipments by Clipper. Integrated Distribution, Inc. The Company is continuing to diversify into transportation areas outside its traditional longhaul LTL service. In October 1994, Integrated Distribution, Inc., a wholly owned subsidiary of the Company, expanded its current warehousing operations and added distribution services by the acquisition of two Little Rock, Arkansas companies. The business lines of Integrated Distribution are storage, consolidation, packaging, and distribution. Integrated Distribution's strategy is to add value to merchandise in various ways rather than just warehousing. An example of adding value would be transporting truckload or containerload shipments of consumer goods to a warehouse, then packaging the goods into retail-size containers, applying labels and bar codes, and distributing in the desired mix to retail outlets. Best Logistics, Inc. Best Logistics, Inc. ("Best"), a wholly owned subsidiary of Arkansas Best Corporation, engages in third-party logistics management. Best provides logistics consulting and management services to companies desiring to outsource these activities. Companies choosing to outsource logistics management do so to reduce logistics costs, to concentrate on their core business or to improve customer service. Logistics focuses on the management of inventory and information through the supply chain from supplier to consumer. Best's role is to design the logistics network, contract with the required carriers and warehouses to implement and then manage the design. Although third-party logistics is a relatively new industry, a large number of participants exist in the market. Many are related to transportation or warehousing companies. Environmental and Other Government Regulations The Company is subject to federal, state and local environmental laws and regulations relating to, among other things, contingency planning for spills of petroleum products, and its disposal of waste oil. Additionally, the Company is subject to significant regulations dealing with underground fuel storage tanks. ABF stores some of its fuel for its trucks and tractors in approximately 98 underground tanks located in 27 states. The Company believes that it is in substantial compliance with all such environmental laws and regulations and is not aware of any leaks from such tanks that could reasonably be expected to have a material adverse effect on the Company's competitive position, operations or financial condition. The Company has in place policies and methods designed to conform with these regulations. The Company estimates that capital expenditures for upgrading underground tank systems and costs associated with cleaning activities for 1995 will not be material. 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 $250,000 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. The Company remains responsible for certain environmental claims that arose with respect to its ownership of Riverside Furniture Corporation ("Riverside") prior to its sale in 1989. Riverside was notified in 1988 that it has been identified as a PRP for hazardous wastes shipped to two separate sites in Arkansas. To date, the Company, as a part of a PRP group, has paid approximately $50,000 on Riverside's behalf related to one site, with additional assessments expected related to that site. Riverside was dismissed as a PRP from the second site in March 1993. Management currently believes that resolution of its remaining site is unlikely to have a material adverse effect on the Company, although there can be no assurance in this regard. Treadco is affected by a number of governmental regulations relating to the development, production and sale of retreaded and new tires, the raw materials used to manufacture such products (including petroleum, styrene and butadiene), and to environmental, tax and safety matters. In addition, the retreading process creates rubber particulate, or "dust," which requires gathering and disposal, and Treadco disposes of used and nonretreadable tire casings, both of which require compliance with environmental and disposal laws. In some situations, Treadco could be liable for disposal problems, even if the situation resulted from previous conduct of Treadco that was lawful at the time or from improper conduct of, or conditions caused by, persons engaged by Treadco to dispose of particulate and discarded casings. Such cleanup costs or costs associated with compliance with environmental laws applicable to the tire retreading process could be substantial and have a material adverse effect on Treadco's financial condition. Treadco believes that it is in substantial compliance with all laws applicable to such operations, however, and is not aware of any situation or condition that could reasonably be expected to have a material adverse effect on Treadco's financial condition. ITEM 2. PROPERTIES Directly or indirectly through its subsidiaries, the Company owns its executive offices in Fort Smith, Arkansas, and owns or leases approximately 413 other operating facilities, approximately 398, 24 and 45 of which relate to its motor carrier operations, forwarding operations, and tire retreading and sales operations, respectively. In addition to its executive offices, the Company's principal motor carrier facilities are as follows: Location --------- North Little Rock, Arkansas Los Angeles, California Sacramento, California Denver, Colorado Ellenwood, Georgia Springfield, Illinois Albuquerque, New Mexico Asheville, North Carolina Dayton, Ohio Portland, Oregon Harrisburg/Camp Hill, Pennsylvania Dallas, Texas Salt Lake City, Utah The properties listed above are leased by ABF from ABC Treadco, with the exception of the facilities in Asheville, North Carolina and Sacramento, California, which are owned by ABF, and the facilities in Portland, Oregon and Salt Lake City, Utah, which are leased from outside third parties. There are three facilities at the Harrisburg/Camp Hill, Pennsylvania location. The Camp Hill and one of the Harrisburg facilities are leased from outside third parties. ITEM 3. LEGAL PROCEEDINGS Various legal actions, the majority of which arise in the normal course of business, are pending. None of these legal actions is expected to have a material adverse effect on the Company's financial condition. The Company maintains liability insurance against most risks arising out of the normal course of its business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of stockholders during the fourth quarter ended December 31, 1994. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market and Dividend Information The Company's Common Stock trades on The Nasdaq Stock Market under the symbol "ABFS". The following table sets forth the high and low recorded last sale prices of the Common Stock during the periods indicated as reported by Nasdaq and the cash dividends declared:
Cash High Low Dividend 1994 First quarter $15.750 $12.625 $.01 Second quarter 13.375 10.125 .01 Third quarter 14.375 11.375 .01 Fourth quarter 14.125 10.250 .01 1993 First quarter $16.750 $12.125 $.01 Second quarter 13.000 8.375 .01 Third quarter 11.500 8.500 .01 Fourth quarter 15.625 11.125 .01
At February 27, 1995, there were 19,513,708 shares of the Company's stock outstanding which were held by 798 shareholders of record and through approximately 5,000 nominee or street name accounts with brokers. The declaration and payment of, and the timing, amount and form of future dividends on the Common Stock will be determined by the Company's results of operations, financial condition, cash requirements, certain corporate law requirements and other factors deemed relevant by the board of directors. The Company's credit agreement limits the total amount of "restricted payments" that the Company may make, including dividends on its capital stock, to $10 million in any one calendar year. The annual dividend requirements on the Company's preferred stock issued February 3, 1993 (approximately $4.3 million) and dividends paid on the Common Stock at the quarterly rate of $.01 per share (approximately $0.8 million based on the current number of issued and outstanding shares) would aggregate dividends of approximately $5.1 million on an annual basis. ITEM 6. SELECTED FINANCIAL DATA Selected Financial Data - Five-Year Summary
Arkansas Best Corporation Year Ended December 31 1994 1993 1992 1991 1990 ($ in thousands except per share amounts) Statement of Operations Data: Operating revenues $1,098,421 $1,009,918 $959,949 $884,498 $848,737 Operating income 48,115 51,369 57,255 43,123 47,671 Gain on sale of subsidiary stock - - - 14,141 - Minority interest in subsidiary 3,523 3,140 2,825 690 - Other expenses, net 968 731 1,496 6,638 4,533 Interest expense 6,985 7,248 17,285 34,421 39,257 Income before income taxes, extraordinary item and cumulative effect of accounting change 36,639 40,250 35,649 15,515 3,881 Provisions for income taxes 17,932 19,278 16,894 7,763 3,415 Income before extraordinary item and cumulative effect of accounting change 18,707 20,972 18,755 7,752 466 Extraordinary item (1) - (661) (15,975) (515) - Cumulative effect on prior years of change in revenue recognition method (2) - - (3,363) - - Net income (loss) 18,707 20,311 (583) 7,237 466 Income per common share before extraordinary item and cumulative effect of accounting change .74 .89 .99 .61 .04 Net income (loss) per common share .74 .85 (.03) .57 .04 Cash dividends paid per common share (3) .04 .04 .02 - - Pro Forma Data (4): Income (loss) before extraordinary item $ 18,707 $ 20,972 $ 18,755 $ 8,253 $ (1,124) Income (loss) before extraordinary item per common share .74 .89 .99 .65 (.09) Net income (loss) 18,707 20,311 2,780 7,738 (1,124) Net income (loss) per common share .74 .85 .15 .61 (.09) Selected Financial Data - Five-Year Summary (Continued) Arkansas Best Corporation Year Ended December 31 1994 1993 1992 1991 1990 ($ in thousands except per share amounts) Balance Sheet Data (as of the end of the period): Total assets $569,045 $447,733 $428,345 $447,098 $475,487 Current portion of long-term debt 65,161 15,239 28,348 34,995 39,957 Long-term debt (including capital leases and excluding current portion) 59,295 43,731 107,075 210,987 270,193 Other Data Capital expenditures (5) $ 64,098 $ 33,160 $ 26,596 $ 19,369 $ 31,336 Depreciation and amortization 28,087 28,266 34,473 39,755 40,002 Goodwill amortization 3,527 3,064 3,034 3,024 3,024 Other amortization 501 319 755 2,290 3,103 (1) For 1993, represents an extraordinary charge of $661,000 (net of tax of $413,000) from the loss on extinguishment of debt. For 1992, represents an extraordinary charge of $15,975,000 (net of tax of $9,700,000) from the loss on extinguishment of debt relating to the Recapitalization in May 1992. For 1991, represents an extraordinary charge of $515,000 (net of tax of $320,000) from the loss on extinguishment of debt relating to the Treadco Offering in September 1991. (2) Represents a charge of $3,363,000 (net of tax of $2,100,000) to reflect the cumulative effect on prior years of the change in method of accounting for the recognition of revenue as required under the Financial Accounting Standards Board's Emerging Issues Task Force Ruling 91-9 ("EITF 91-9"). (3) No cash dividends were paid by the Company from 1990 until the third quarter of 1992. (4) Assumes the change in accounting method for recognition of revenue as required under EITF 91-9 occurred January 1, 1990. (5) Net of equipment trade-ins. Does not include revenue equipment placed in service under operating leases, which amounted to $24.8 million in 1993, $25.5 million in 1992, $15 million in 1991, and $5 million in 1990. There were no operating leases for revenue equipment entered into for 1994. See "Management's Discussion and Analysis-Liquidity and Capital Resources."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company is engaged, through its motor carrier subsidiaries, in LTL shipments of general commodities. The Company is also engaged through its 46%-owned subsidiary, Treadco, Inc., in truck tire retreading and new truck tire sales and, through its freight forwarding subsidiaries, in intermodal marketing and freight logistics services. The Company in 1991 reduced its ownership in Treadco, through an initial public offering of Treadco common stock, to approximately 46%, while retaining control of Treadco by reason of its stock ownership, board representation and provision of management services. As a result, Treadco is consolidated with the Company for financial reporting purposes, with the ownership interests of the other stockholders reflected as minority interest. On September 30, 1994, Arkansas Best Corporation consummated the purchase of all outstanding stock of Clipper Exxpress Company ("Clipper"), Agricultural Express of America, Inc. ("AXXA") and Agile Freight System, Inc. ("Agile") (collectively the "Clipper Group") pursuant to a stock purchase agreement entered into on August 18, 1994. Assets of approximately $26.2 million were acquired and liabilities of approximately $14.7 million were assumed. The Company's total purchase price is $60.8 million in cash, subject to certain closing audit adjustments. The Company paid an initial payment of $54 million to the Clipper Group shareholders from cash on hand and funds provided under its receivables purchase agreement. The remaining $6.8 million due is included in the current portion of long-term debt in the accompanying financial statements. The final payment, which is due on May 15, 1995, will be funded from cash on hand and/or funds available under existing credit facilities. The acquisition has been accounted for under the purchase method, effective September 30, 1994, with operations of Clipper included for the three-month period ended December 31, 1994. The purchase price has been allocated to assets and liabilities based on their estimated fair values as of the date of acquisition. Approximately $49.4 million of goodwill was recorded as a result of this purchase and is being amortized over a 30-year period. A final allocation of the purchase price will be completed in 1995 based on determination of the final purchase price. The final allocation is not expected to vary materially from amounts previously recorded. On October 12, 1994, the Company issued 310,191 shares of common stock for all of the outstanding stock of Traveller Enterprises and subsidiaries and Commercial Warehouse Company, collectively (the "Traveller Group"). The acquisition of the Traveller Group has been accounted for as a pooling of interests. The Traveller Group's operations are not material in relation to the Company's consolidated financial statements for any period; therefore, financial statements for periods prior to the merger have not been restated, and the financial statements include operations of the Traveller Group from the date of the combination. The final number of shares that will be issued in conjunction with this transaction are subject to certain audit closing adjustments. Segment Data The following tables reflect information prepared on a business segment basis, which includes reclassification of certain expenses and costs between the Company and its subsidiaries and elimination of the effects of intercompany transactions. Operating profit on a business segment basis differs from operating income as reported in the Company's Consolidated Financial Statements. Other income and other expenses (which include amortization expense), except for interest expense and minority interest, which appear below the operating income line in the Company's Statement of Operations, have been allocated to individual segments for the purpose of calculating operating profit on a segment basis.
Year Ended December 31 1994 1993 1992 ($ thousands) OPERATING REVENUES Carrier operations $ 918,663 $ 893,504 $858,755 Forwarding operations 31,468 - - Tire operations 138,666 111,585 96,254 Other 9,625 4,829 4,940 ---------- ---------- -------- $1,098,422 $1,009,918 $959,949 ========== ========== ======== OPERATING EXPENSES AND COSTS CARRIER OPERATIONS Salaries and wages $ 613,187 $ 594,213 $560,460 Supplies and expenses 96,210 99,146 99,613 Operating taxes and licenses 35,928 35,152 32,697 Insurance 18,237 16,835 17,567 Communications and utilities 22,639 23,680 23,782 Depreciation and amortization 24,302 25,714 32,370 Rents 67,550 53,192 39,561 Other 4,299 3,779 4,324 Other non-operating (net) 689 148 1,656 ---------- ---------- -------- 883,041 851,859 812,030 FORWARDING OPERATIONS Cost of services 26,817 - - Selling, administrative and general 3,542 - - Other non-operating (net) 414 - - ---------- ---------- -------- 30,773 - - TIRE OPERATIONS Cost of sales 100,909 79,718 69,070 Selling, administrative and general 26,206 21,522 18,412 Other non-operating (net) 471 159 5 ---------- ---------- -------- 127,586 101,399 87,487 SERVICE AND OTHER 9,875 6,022 4,673 ---------- ---------- -------- $1,051,275 $ 959,280 $904,190 ========== ========== ======== OPERATING PROFIT (LOSS) Carrier operations $ 35,622 $ 41,645 $ 46,725 Forwarding operations 695 - - Tire operations 11,080 10,186 8,767 Other (250) (1,193) 267 ---------- ---------- -------- TOTAL OPERATING PROFIT 47,147 50,638 55,759 INTEREST EXPENSE 6,985 7,248 17,285 MINORITY INTEREST 3,523 3,140 2,825 ---------- ---------- -------- INCOME BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE $ 36,639 $ 40,250 $ 35,649 ========== ========== ========
The following table sets forth for the periods indicated a summary of the Company's operations as a percentage of revenues presented on a business segment basis as shown in the table on the preceding page. The basis of presentation for business segment data differs from the basis of presentation for data the Company provides to the ICC.
Year Ended December 31 1994 1993 1992 CARRIER OPERATIONS Salaries and wages 66.7% 66.5% 65.3% Supplies and expenses 10.5 11.1 11.6 Operating taxes and licenses 3.9 3.9 3.8 Insurance 2.0 1.9 2.0 Communications and utilities 2.5 2.7 2.8 Depreciation and amortization 2.6 2.9 3.8 Rents 7.4 5.9 4.6 Other 0.4 0.4 0.5 Other non-operating (net) 0.1 - 0.2 ---- ---- ---- Total Carrier Operations 96.1% 95.3% 94.6% ==== ==== ==== FORWARDING OPERATIONS Cost of services 85.2% - - Selling, administrative and general 11.3 - - Other non-operating (net) 1.3 - - ---- ---- ---- Total Forwarding Operations 97.8% - - ==== ==== ==== TIRE OPERATIONS Cost of sales 72.8% 71.5% 71.8% Selling, administrative and general 18.9 19.3 19.1 Other non-operating (net) 0.3 0.1 - ---- ---- ---- Total Tire Operations 92.0% 90.9% 90.9% ==== ==== ==== OPERATING PROFIT Carrier operations 3.9% 4.7% 5.4% Forwarding operations 2.2 - - Tire operations 8.0 9.l 9.1
Results of Operations 1994 as Compared to 1993 Consolidated revenues of the Company for 1994 were $1.1 billion compared to $1.0 billion for 1993. Operating profit for the Company was $47.1 million for 1994 compared to operating profit of $50.6 million for 1993. Net income for 1994 was $18.7 million, or $.74 per common share (after giving consideration to preferred stock dividends of $4.3 million), compared to net income of $20.3 million, or $.85 per common share for 1993 (after giving consideration to preferred stock dividends of $3.9 million). The net income of $18.7 million, or $.74 per common share, also compares to income before extraordinary item of $21.0 million, or $.89 per common share for 1993. During 1993, the Company recorded an extraordinary loss of $661,000 (net of income tax benefit of $413,000), or $.04 per common share for the net loss on extinguishments of debt. Net income for 1993 was reduced by $828,000, or $.04 per common share (assuming full dilution), to reflect the retroactive increase in the corporate federal tax rate under the Revenue Reconciliation Act of 1993. Average common shares outstanding for 1994 were 19.4 million shares compared to 19.2 million shares for 1993. Outstanding shares for 1994 and 1993 do not assume conversion of preferred stock to common shares, because conversion would be anti-dilutive for these periods. Consolidated revenues and income for 1994 were adversely affected by the 24- day labor strike by the Teamsters' Union employees of ABF in April. As a result of the strike, the Company incurred a consolidated net loss of $12.7 million during the month of April 1994, which had the effect of reducing earnings per common share by $.62 for the year. Motor Carrier Operations Segment. ABF's labor agreement with the International Brotherhood of Teamsters ("IBT") expired on March 31, 1994. On April 6, 1994, when the terms of a new agreement had not been agreed to between the industry's bargaining group, Trucking Management, Inc. ("TMI"), and the IBT, the ABF Teamsters' employees and 20 other carriers went on strike. On April 29, 1994, TMI and the IBT reached a tentative agreement on a new four-year contract. ABF Teamsters employees began returning to work at 12:01 a.m. on April 30, 1994. The contract was voted on and ratified by the IBT membership. During the strike, the non-union employees of the Company were given an across-the-board pay reduction instead of having lay-offs. The 40% reduction in pay for the non-union employees during the strike amounted to approximately $3.3 million. Revenue and income for 1994 were negatively affected by the strike. Under the new labor contract which was effective retroactive to April 6, 1994, salaries, wages and benefits for full-time employees will increase 2.7% annually during the first year of the contract. The increase will be offset in part by the option to use casual workers on the dock after 40 hours of work is provided to all regular employees, a freeze on some casual workers' pay for the life of the contract and a reduction in new hire step rates. The new contract allows ABF to use intermodal or rail service for up to 28% of the line-haul operations. An increased use of rail will result in higher rent expense and may reduce over-the-road and labor costs. Even after the negative impact of the strike, revenues from motor carrier operations still increased 2.8% to $918.7 million in 1994 from $893.5 million in 1993. Total tonnage increased 1.7%, consisting of a 2.2% increase in LTL tonnage and a 0.2% increase in truckload tonnage. The 4.5% rate increase effective January 1, 1994 was partially discounted by rate competition during 1994. For 1994, ABF's revenue per hundredweight reflected a 0.9% increase compared to the average for 1993. Effective January 1, 1995, ABF implemented a general freight rate increase of 4% which is expected to result in a 3 to 3.5% initial impact on revenues. The diminished effect is the result of pricing that is on a contract basis which can only be increased when the contract is renewed. During the previous three years, ABF has financed its road tractor replacement program with operating leases instead of capital leases, which decreased both interest and depreciation expense and increased rent expense. In 1994, ABF, utilizing borrowings under its Credit Agreement, purchased road tractors under its replacement program, which will increase depreciation and interest expense and decrease rent expense. Forwarding Operations Segment. Effective October 1, 1994, with the purchase of the Clipper Group, the Company began reporting a new business segment, forwarding operations. The Company's consolidated financial statements for the year ended December 31, 1994 include only three months of financial information for the forwarding operations segment and therefore, comparisons of results of operations are not presented. Tire Operations Segment. Treadco's revenues for 1994 increased 24.3% to $138.7 million from $111.6 million for 1993. For 1994, "same store" sales increased 9.6% and "new store" sales accounted for 14.7% of the total increase from the nine months ended September 30, 1993. "Same store" sales include both production locations and satellite sales locations that have been in existence for all of 1994 and 1993. "Same store" sales increased primarily as a result of a higher demand for both new replacement and retreaded truck tires during the period and an increase in market share in the areas served. "New store" sales resulted primarily from the addition of four production and one sales facility through the August 1993 acquisition of Trans-World Tire Corporation in Florida. Revenues from retreading for 1994 increased 21.5% to $75.2 million from $61.9 million for 1993. Revenues from new tire sales increased 27.7% to $63.5 million for 1994 from $49.7 million for 1993. Treadco will continue to seek available Bandag franchises that meet Treadco's requirements. Treadco's ability to continue expanding its business through the addition of new Bandag franchises, however, is contingent on the availability and competitiveness of suitable Bandag franchises on favorable terms and Bandag's approval of Treadco's acquisition of such franchises, whether directly from Bandag or from other Bandag franchisees. Also, Treadco is exploring alternatives to the Bandag process in some new geographical markets. Treadco has plans to open a precure production facility in Las Vegas, Nevada, in the second quarter of 1995, which will initially purchase its tread rubber from Hercules Tire and Rubber Co. Treadco has the option of purchasing tread rubber and supplies from other companies for the Las Vegas facility. The Company plans to open an additional retreading facility in the second half of 1995. This production facility will be a mold cure retread facility. The facility will use tread rubber compounds provided by Bridgestone/Firestone, Inc. and Bridgestone/Firestone, Inc. will also provide technical support. The process will produce quality retreads with the Bridgestone-Treadco name molded into the tread. Tire operations segment operating expenses as a percent of revenues were 92.0% for 1994 compared to 90.9% for 1993. Cost of sales for the tire operations segment as a percent of revenues increased to 72.8% for 1994 from 71.5% for 1993, resulting in part from integrating the August 1993 acquisition of five Florida facilities into Treadco. Although the integration is progressing as planned, the cost of sales as a percent of revenues are higher at the Florida locations than at other Treadco facilities. Also, effective October 1, 1994, Bandag, Inc. announced a 4% price increase on tread rubber, which has been difficult to pass on to Treadco's customers. Selling, administrative and general expenses for the tire operations segment decreased to 18.9% for 1994 from 19.3% for 1993. The decrease resulted primarily from the increase in sales and the fact that a portion of selling, administrative and general expenses are fixed costs. Interest. Interest expense was $7.0 million for 1994 compared to $7.2 million during 1993. Lower average interest rates under the Company's borrowing arrangements and the utilization of operating leases resulted in the decrease in interest expense offset in part by higher long-term debt outstanding. The increase in long-term debt consisted primarily of debt incurred in the acquisition of the Clipper Group and a term loan used to finance construction of the Company's corporate office building. Income Taxes. The difference between the effective tax rate for 1994 and the federal statutory rate resulted primarily from state income taxes, amortization of goodwill, minority interest, and other nondeductible expenses (see Note G to the consolidated financial statements). 1993 as Compared to 1992 Consolidated revenues of the Company for 1993 were $1.0 billion compared to $959.9 million for 1992. Operating profit for the Company was $50.6 million in 1993 compared to $55.8 million during 1992. Net income for 1993 was $20.3 million, or $.85 per common share, compared to a net loss of $(583,000), or $(.03) per common share in 1992. Income before extraordinary item was $21.0 million, or $.89 per common share for 1993, compared to income before extraordinary item and cumulative effect of accounting change of $18.8 million, or $.99 per common share for 1992. During 1993, the Company recorded an extraordinary loss of $(661,000) (net of income tax benefit of $413,000), or $(.04) per common share, for the net loss on extinguishments of debt. During 1992, the Company recorded an extraordinary loss of $(16.0) million (net of income tax benefit of $9.7 million), or $(.84) per common share, for the net loss on extinguishments of debt. Also, during 1992, the Company recorded a charge for the cumulative effect on prior years of an accounting change in the recognition of revenue of $(3.4) million (net of income tax benefit of $2.1 million), or $(.18) per common share. Earnings per common share for 1993 give consideration to preferred stock dividends of $3.9 million. Average common shares outstanding for 1993 were 19.2 million shares compared to 19.0 million shares for 1992. As reported in the third quarter, net income for 1993 was reduced by $828,000, or $.04 per common share, to reflect the effect on current and deferred taxes of the retroactive corporate tax rate increase which became law in the third quarter of 1993. Motor Carrier Operations Segment. Revenues for the motor carrier operations segment increased 4.0% to $893.5 million in 1993 from $858.8 million in 1992, reflecting primarily a 4.0% increase in total tonnage. The increase in total tonnage consisted of a 3.1% increase LTL tonnage and a 7.3% increase in truckload tonnage. The 4.6% rate increase effective January 1, 1993 was aggressively discounted by rate competition during the first six months of 1993. The discounting stabilized in the last half of the year and for the fourth quarter of 1993, ABF's LTL revenue per hundredweight reflected a 1.0% increase over the fourth quarter of 1992. For 1993, ABF's LTL revenue per hundredweight was up .2% compared to the average for 1992. Discounting and a relatively slow economy during the first half of the year also affected tonnage growth for 1993. Effective January 1, 1994, ABF implemented a general freight rate increase of 4.5% which is expected to result in a 3 to 3.25% initial impact on revenues. The diminished effect is the result of pricing that is on a contract basis which can only be increased when the contract is renewed. Motor carrier segment operating expenses as a percent of revenues was 95.3% for 1993 compared to 94.6% for 1992. Salaries and wages for motor carrier operations as a percent of revenues increased to 66.5% in 1993 from 65.3% in 1992, resulting primarily from contractual wage increases (averaging 2.7% annually for 1993) which went into effect in April 1993 under the current collective bargaining agreement. Supplies and expenses for motor carrier operations as a percent of revenues decreased to 11.1% in 1993 from 11.6% in 1992 resulting primarily from the covering of the fixed portion of supplies and expenses by increased revenues. Depreciation and amortization expense for motor carrier operations as a percent of revenues decreased to 2.9% in 1993 from 3.8% in 1992. During the last three years, ABF financed its road tractor replacement program with operating leases instead of capital leases, which decreased both interest and depreciation expense and increased rent expense. Rent expense for motor carrier operations as a percent of revenues increased to 5.9% in 1993 from 4.6% in 1992. The additional rent expense was incurred primarily as a result of the operating leases discussed above and the utilization of alternate modes of outside transportation. Tire Operations Segment. Treadco's revenues for 1993 increased 15.9% to $111.6 million from $96.3 million in 1992. The increase resulted primarily from internal growth and the addition of four production facilities and one sales facility through the August 30, 1993 acquisition of Trans-World Tire Corporation in Florida. Revenues from retreading in 1993 increased 17.6% to $61.9 million from $52.6 million in 1992. Revenues from new tire sales increased 13.9% to $49.7 million in 1993 from $43.7 million in 1992. Tire operations segment operating expenses as a percent of revenues were 90.9% for each of 1993 and 1992. Cost of sales for the tire operations segment as a percent of revenues decreased to 71.5% in 1993 from 71.8% in 1992. Selling, administrative and general expenses for the tire operations segment increased to 19.3% in 1993 from 19.1% in 1992. Interest. Interest expense decreased 58.1% to $7.2 million in 1993 from $17.3 million during 1992. A reduction in long-term debt outstanding using proceeds from the Company's stock offerings, lower interest rates and utilization of operating leases resulted in the decrease in interest expense. The reduction in long-term debt consisted primarily of retiring its 14% Senior Subordinated Notes due 1998, maintaining a lesser average balance outstanding under the revolving credit facilities, and financing a portion of its revenue equipment with operating leases. Income Taxes. The difference between the effective tax rate in 1993 and the federal statutory rate resulted primarily from state income taxes, amortization of goodwill, minority interest, undistributed earnings of Treadco and other nondeductible expenses (see Note G to the consolidated financial statements). In August 1993, the Revenue Reconciliation Act of 1993 was enacted, which required a retroactive increase in the corporate federal tax rate. This resulted in an increase in the tax expense and a corresponding decrease in net income of $828,000. The increase in the corporate federal tax rate was accounted for in accordance with Financial Accounting Standards Board Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS 109"). Liquidity and Capital Resources The Company and certain banks are parties to a Credit Agreement with Societe Generale, as Agent and NationsBank of Texas as Co-Agent (the "Credit Agreement") which provides funds available under a three-year Revolving Credit Facility of $150 million, including $40 million for letters of credit. There were no borrowings outstanding under the Revolving Credit Facility and approximately $32.7 million of letters of credit outstanding at December 31, 1994. The Revolving Credit Facility is payable on June 30, 1998. Outstanding revolving credit advances may not exceed a borrowing base calculated using the Company's revenue equipment, real property, the Treadco common stock owned by the Company, eligible receivables and other eligible assets. At December 31, 1994, the borrowing base was $107.0 million. The Company has paid and will continue to pay certain customary fees for such commitments and loans. Amounts advanced under the revolving credit facility bear interest, at the Company's option, at a rate per annum of either:(i) the greater of (a) the agent bank's prime rate and (b) the Federal Funds Rate plus 1/2%; or (ii) LIBOR plus 3/4%. The Credit Agreement contains various covenants which limit, among other things, dividends, indebtedness, capital expenditures, loans and investments, as well as requiring the Company to meet certain financial tests. As of December 31, 1994, these covenants have been met. If there is an event of default which is not remedied or waived within 10 days, the Credit Agreement will become secured to the extent of amounts then outstanding of all of the Company's receivables (excluding receivables sold under the receivables purchase agreement), revenue equipment, real property and common stock included in the borrowing base (subject to certain exceptions). The Credit Agreement also, at December 1992, included a $50 million Term Loan Facility. In February 1993, the Company completed its public offering of 1,495,000 shares of Preferred Stock. The Company used the net proceeds of approximately $71.9 million to repay the Term Loan and for general corporate purposes. The Preferred Stock is convertible at the option of the holder into Common Stock at the rate of 2.5397 shares of Common Stock for each share of Preferred Stock. Annual dividends are $2.875 and are cumulative. The Preferred Stock is redeemable at the Company's option on or after February 15, 1996 at $52.0125 per share plus accumulated unpaid dividends, and is exchangeable at the option of the Company for the Company's 5 3/4% Convertible Subordinated Debentures due February 15, 2018 at a rate of $50 principal amount of debentures for each share of Preferred Stock. The holders of the Preferred Stock have no voting rights unless dividends are in arrears six quarters or more, at which time the holders have the right to elect two directors of the Company until all dividends have been paid. The Company entered into a $20 million term credit agreement, dated as of April 25, 1994, with NationsBank of Texas, N.A., as agent, and Societe Generale Southwest Agency. The proceeds from the agreement are being used in financing the construction of the Company's corporate office which was completed in March 1995. Amounts advanced and unpaid bear interest of 8.07% per annum. The Company shall repay the outstanding principal amount in 40 equal installments, each in the amount of $500,000, due and payable on the fifteenth day of each January, April, July, and October, commencing on July 15, 1994. At December 31, 1994, there was $19.0 million outstanding. On March 2, 1994, ABF, Renaissance Asset Funding Corp. ("Renaissance") and Societe Generale entered into a receivables purchase agreement. The agreement allows ABF to sell to Renaissance an interest in up to $55 million in a pool of receivables. At December 31, 1994, ABF had $40 million of receivables financed through this facility. Treadco is a party to a revolving credit facility with Societe Generale (the "Treadco Credit Agreement") providing for borrowings of up to the lesser of $12 million or the applicable borrowing base. At December 31, 1994, the borrowing base was $25.6 million. Borrowings under the Treadco Credit Agreement are collateralized by accounts receivable and inventory. Borrowings under the agreement bear interest, at Treadco's option, at 1% above the bank's LIBOR rate, or at the higher of the bank's prime rate or the "federal funds rate" plus 1/2%. At December 31, 1994, the interest rate was 7.1%. At December 31, 1994, Treadco had $3 million outstanding under the Treadco Credit Agreement. Treadco pays a commitment fee of 3/8% on the unused amount under the Treadco Credit Agreement. The Treadco Credit Agreement contains various convenants which limit, among other things, dividends, disposition of receivables, indebtedness and investments, as well as requiring Treadco to meet certain financial tests which have been met. Under the Treadco Credit Agreement, Treadco's assets are subject to pledge and, therefore, are available for use only by that subsidiary. On September 30, 1994, the Company paid an initial payment of $54 million to the Clipper Group shareholders from cash on hand and funds provided under its existing lines of credit. The final $6 million payment (subject to certain closing audit and other contractual adjustments) which is due May 15, 1995 will be funded from cash and/or funds provided under its existing lines of credit. On October 12, 1994, the Company issued 310,191 shares of common stock for all of the outstanding stock of the Traveller Group. The final number of shares that will be issued in conjunction with this transaction are subject to certain closing audit adjustments. The following table sets forth the Company's historical capital expenditures (net of equipment trade-ins) for the periods indicated below:
Year Ended December 31 1994 1993 1992 ($ millions) Carrier operations $ 44.2 $ 48.6 $ 47.7 Tire operations 4.3 6.1 2.2 Service and other 15.6 3.3 2.2 ------ ------ ------ 64.1 58.0 52.1 Less: Operating leases - (24.8) (25.5) ------ ------ ------ Total $ 64.1 $ 33.2 $ 26.6 ====== ====== ======
The amounts presented in the table under operating leases reflect the estimated purchase price of the equipment had the Company purchased the equipment versus financing through operating lease transactions. In 1995, the Company anticipates spending approximately $85.9 million in total capital expenditures net of proceeds from equipment sales. It is expected that approximately $26.2 million of equipment expenditures will be financed by capital leases, $24.6 million will be financed by operating leases and the remaining $35.1 million will be financed through internally generated funds and borrowings under the Credit Agreement and Treadco Credit Agreement.
Capital Expenditures Program for 1995 Net of Equipment Trade-Ins Facilities Equipment Miscellaneous Total ($ millions) Carrier operations $16.5 $37.1 $4.0 $57.6 Forwarding operations 0.0 0.3 0.0 0.3 Tire operations 0.8 5.7 0.5 7.0 Service and other 9.0 7.5 4.5 21.0 ----- ----- ---- ----- $26.3 $50.6 $9.0 $85.9 ===== ===== ==== =====
Management believes, based upon the Company's current levels of operations and anticipated growth, the Company's cash, capital resources, borrowings available under the Credit Agreement and cash flow from operations will be sufficient to finance current and future operations and meet all present and future debt service requirements. The motor carrier segment is affected by seasonal fluctuations, which affect tonnage to be transported. Freight shipments, operating costs and earnings are also affected adversely by inclement weather conditions. The third calendar quarter of each year usually has the highest tonnage levels while the first quarter has the lowest. Forwarding operations are similar to the motor carrier segment with revenues being weaker in the first quarter and stronger during the months of September and October. Treadco's operations are somewhat seasonal with the last six months of the calendar year generally having the highest levels of sales. Environmental Matters ABF stores some fuel for its tractors and trucks in approximately 98 underground tanks located in 27 states. Maintenance of such tanks is regulated at the federal and, in some cases, state levels. ABF believes that it is in substantial compliance with all such regulations. ABF is not aware of any leaks from such tanks that could reasonably be expected to have a material adverse effect on the Company. Environmental regulations have been adopted by the United States Environmental Protection Agency ("EPA") that will require ABF to upgrade its underground tank systems by December 1998. ABF currently estimates that such upgrades, which are currently in process, will not have a material adverse effect on the Company. The Company has received notices from the EPA and others that it has been identified as a potentially responsible party ("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 $250,000 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. The Company remains responsible for certain environmental claims that arose with respect to its ownership of Riverside prior to its sale in 1989. Riverside was notified in 1988 that it had been identified as a PRP for hazardous wastes shipped to two separate sites in Arkansas. To date, the Company, as a part of a PRP group, has paid approximately $50,000 on Riverside's behalf related to one site, with additional assessments expected related to that site. Riverside was dismissed as a PRP from the second site in March 1993. Management currently believes that resolution of its remaining site is unlikely to have a material adverse effect on the Company, although there can be no assurance in this regard. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The response of this item is submitted in a separate section of this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III. ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT The sections entitled "Election of Directors," "Directors of the Company," "Board of Directors and Committees," "Executive Officers of the Company" and "Compliance with Section 16(a) of the Securities Exchange Act of 1934" in the Company's proxy statement for the annual meeting of stockholders to be held on May 9, 1995, set forth certain information with respect to the directors, nominees for election as directors and executive officers of the Company and are incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The sections entitled "Executive Compensation," "Aggregated Options/SAR Exercised in Last Fiscal Year and Fiscal Year-End Options/SAR Values," "Executive Compensation and Development Committee Interlocks and Insider Participation," "Retirement and Savings Plan," "Termination of Employment Agreements" and the paragraph concerning directors compensation in the section entitled "Board of Directors and Committees" in the Company's proxy statement for the annual meeting of stockholders to be held on May 9, 1995, set forth certain information with respect to compensation of management of the Company and are incorporated herein by reference, provided however, the information contained in the sections entitled "Report on Executive Compensation by the Executive Compensation and Development Committee and Stock Option Committee" and "Stock Performance Graph" are not incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The section entitled "Principal Shareholders and Management Ownership" in the Company's proxy statement for the annual meeting of stockholders to be held on May 9, 1995, sets forth certain information with respect to the ownership of the Company's voting securities and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The section entitled "Certain Transactions and Relationships" in the Company's proxy statement for the annual meeting of stockholders to be held on May 9, 1995, sets forth certain information with respect to relations of and transactions by management of the Company and is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a)(1) Financial Statements The response to this portion of Item 14 is submitted as a separate section of this report. (a)(2) Financial Statement Schedules The response to this portion of Item 14 is submitted as a separate section of this report. (a)(3) Exhibits Exhibit 11 - Statement Re: Computation of Per Share Earnings (Loss) Exhibit 22 - List of Subsidiary Corporations Exhibit 23 - Consent of Ernst & Young LLP, Independent Auditors (b) Reports on Form 8-K Form 8-K dated September 30, 1994 Item 2. Acquisition or Disposition of Assets -- Acquisition of Clipper Exxpress Company, Agricultural Express of America, Inc. and Agile Freight System, Inc. Item 7. Financial Statements and Exhibits -- Financial statements of Clipper Exxpress, Agricultural Express of America, Inc. and Agile Freight System, Inc. and pro forma financial information to be filed under cover of Form 8-K/A as soon as practible. Stock Purchase Agreement dated August 18, 1994 by and among Arkansas Best Corporation and the Shareholders of Clipper Exxpress Company, Agile Freight System, Inc. and Agricultural Express of America, Inc. Form 8-K/A No. 1 dated September 30, 1994 Item 7. Financial Statements and Exhibits -- Audited financial statements of Clipper Exxpress Company, Agricultural Express of America, Inc. and Agile Freight System, Inc. for the years ended December 31, 1993 and 1992. Unaudited financial statements of Clipper Exxpress Company, Agricultural Express of America, Inc. and Agile Freight System, Inc. for the six months ended June 30, 1994 and 1993. Pro forma condensed consolidated statements of income for the year ended December 31, 1993 and the six months ended June 30, 1994 and the pro forma condensed consolidated balance sheet as of June 30, 1994. (c) Exhibits See Item 14(a)(3) above. (d) Financial Statements Schedules The response to this portion of Item 14 is submitted as a separate section of this report. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ARKANSAS BEST CORPORATION By: s/Donald L. Neal -------------------------------- Donald L. Neal Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- s/William A. Marquard Chairman of the Board, Director 3/15/95 - ---------------------------- ------- William A. Marquard s/Robert A. Young, III Director, Chief Executive Officer 3/17/95 - ---------------------------- and President (Principal ------- Robert A. Young, III Executive Officer) s/Donald L. Neal Senior Vice President - Chief 3/17/95 - ---------------------------- Financial Officer (Principal ------- Donald L. Neal Financial and Accounting Officer) s/Frank Edelstein Director 3/16/95 - ---------------------------- ------- Frank Edelstein s/Arthur J. Fritz Director 3/16/95 - ---------------------------- ------- Arthur J. Fritz s/John H. Morris Director 3/16/95 - ---------------------------- ------- John H. Morris s/Alan J. Zakon Director 3/16/95 - ---------------------------- ------- Alan J. Zakon ANNUAL REPORT ON FORM 10-K ITEM 8, ITEM 14(a)(1) and (2), (c) and (d) LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA CERTAIN EXHIBITS FINANCIAL STATEMENT SCHEDULES YEAR ENDED DECEMBER 31, 1994 ARKANSAS BEST CORPORATION FORT SMITH, ARKANSAS FORM 10-K -- ITEM 14(a)(1) and (2) LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES ARKANSAS BEST CORPORATION The following consolidated financial statements of Arkansas Best Corporation are included in Item 8: Consolidated Balance Sheets -- December 31, 1994 and 1993 Consolidated Statements of Operations -- Years ended December 31, 1994, 1993 and 1992 Consolidated Statements of Shareholders' Equity -- Years ended December 31, 1994, 1993 and 1992 Consolidated Statements of Cash Flows -- Years ended December 31, 1994, 1993 and 1992 The following consolidated financial statement schedule of Arkansas Best Corporation is included in Item 14(d): Schedule II -- Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted. REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS Shareholders and Board of Directors Arkansas Best Corporation We have audited the accompanying consolidated balance sheets of Arkansas Best Corporation and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1994. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and the schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Arkansas Best Corporation and subsidiaries at December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Note C to the consolidated financial statements, in 1992 the Company changed its revenue recognition method. ERNST & YOUNG LLP Little Rock, Arkansas January 27, 1995 ARKANSAS BEST CORPORATION CONSOLIDATED BALANCE SHEETS
December 31 1994 1993 ($ thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 3,458 $ 6,962 Trade receivables, less allowances for doubtful accounts (1994 -- $2,825,000; 1993 -- $2,200,000) 136,144 104,598 Inventories -- Notes D and E 32,463 29,086 Prepaid expenses 13,734 9,916 --------- --------- TOTAL CURRENT ASSETS 185,799 150,562 PROPERTY, PLANT AND EQUIPMENT -- (Notes C, E and I) Land and structures 110,424 108,422 Revenue equipment 200,250 169,573 Manufacturing equipment 7,467 5,997 Service, office and other equipment 40,516 33,913 Leasehold improvements 9,421 8,096 Construction in progress -- Note I 13,939 - --------- --------- 382,017 326,001 Less allowances for depreciation and amortization (166,436) (147,799) --------- --------- 215,581 178,202 OTHER ASSETS 15,705 12,839 GOODWILL, less amortization (1994 -- $19,794,000; 1993 --$16,267,000) -- Notes B and C 151,960 106,130 --------- --------- $ 569,045 $ 447,733 ========= =========
ARKANSAS BEST CORPORATION CONSOLIDATED BALANCE SHEETS
December 31 1994 1993 ($ thousands) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Bank overdraft $ 5,989 $ - Bank drafts payable 10,779 7,661 Trade accounts payable 49,368 36,143 Accrued expenses -- Note F 82,157 71,278 Federal and state income taxes -- Note G 5,786 6,398 Deferred income taxes - Note G 4,159 3,503 Current portion of long-term debt -- Note E 65,161 15,239 --------- --------- TOTAL CURRENT LIABILITIES 223,399 140,222 LONG-TERM DEBT, less current portion -- Note E 59,295 43,731 OTHER LIABILITIES 5,915 3,933 DEFERRED INCOME TAXES -- Note G 28,842 26,158 MINORITY INTEREST -- Note B 34,989 31,699 SHAREHOLDERS' EQUITY -- Notes A, H and P 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 1994: 19,513,708 shares; 1993: 19,185,325 shares 195 192 Additional paid-in capital 207,636 206,457 Stock payable to employee benefit plans -- Note K - 205 Predecessor basis adjustment -- Note A (15,371) (15,371) Retained earnings 24,130 10,492 --------- --------- TOTAL SHAREHOLDERS' EQUITY 216,605 201,990 COMMITMENTS AND CONTINGENCIES (Notes I, J, K and P) --------- --------- $ 569,045 $ 447,733 ========= ========= See notes to consolidated financial statements.
ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31 1994 1993 1992 ($ thousands, except per share data) OPERATING REVENUES Carrier operations $ 918,663 $ 893,504 $ 858,755 Forwarding operations -- Note B 31,468 - - Tire operations 138,665 111,585 96,254 Service and other 9,625 4,829 4,940 ----------- ----------- ----------- 1,098,421 1,009,918 959,949 OPERATING EXPENSES AND COSTS -- Note L Carrier operations 882,351 851,711 810,374 Forwarding operations 30,359 - - Tire operations 127,115 101,240 87,482 Service and other 10,481 5,598 4,838 ----------- ----------- ----------- 1,050,306 958,549 902,694 ----------- ----------- ----------- OPERATING INCOME 48,115 51,369 57,255 OTHER INCOME Gains on asset sales 2,168 2,509 2,127 Other 1,437 465 533 ----------- ----------- ----------- 3,605 2,974 2,660 OTHER EXPENSES Interest 6,985 7,248 17,285 Other 4,573 3,705 4,156 Minority interest in subsidiary -- Note B 3,523 3,140 2,825 ----------- ----------- ----------- 15,081 14,093 24,266 ----------- ----------- ----------- INCOME BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 36,639 40,250 35,649 FEDERAL AND STATE INCOME TAXES (CREDIT) -- Note G Current 14,743 21,386 15,682 Deferred 3,189 (2,108) 1,212 ----------- ----------- ----------- 17,932 19,278 16,894 ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Continued) Year Ended December 31 1994 1993 1992 ($ thousands, except per share data) INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE $ 18,707 $ 20,972 $ 18,755 EXTRAORDINARY ITEM Loss on extinguishments of debt -- Notes A and B - (661) (15,975) CUMULATIVE EFFECT ON PRIOR YEARS OF ACCOUNTING CHANGE IN RECOGNITION OF REVENUE --Note C - - (3,363) ----------- ----------- ----------- NET INCOME (LOSS) $ 18,707 $ 20,311 $ (583) =========== =========== =========== PER COMMON SHARE -- Notes C and H Income before extraordinary item and cumulative effect of accounting change $ .74 $ .89 $ .99 Extraordinary item - (.04) (.84) Cumulative effect on prior years of accounting change - - (.18) ----------- ----------- ----------- Net income (loss) $ .74 $ .85 $ (.03) =========== =========== =========== CASH DIVIDENDS PAID PER COMMON SHARE $ .04 $ .04 $ .02 =========== =========== =========== AVERAGE COMMON SHARES OUTSTANDING --Note C 19,351,796 19,193,582 19,040,103 =========== =========== =========== See notes to consolidated financial statements.
ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Additional Stock Payable Predecessor Retained Preferred Common Paid-In to Employee Basis Earnings Treasury Stock Stock Capital Benefit Plans Adjustment (Deficit) Stock ($ thousands) Balances at January 1, 1992 $ - $ 128 $ 48,285 $ 744 $ (15,371) $ (4,096) $(43) Net loss - - - - - (583) - Issuance of common stock -- Note A - 106 140,760 - - - - Purchase of common stock for employee benefit plan -- Note K - - - (744) - - - Retirement of common stock -- Note K - (43) (55,766) - - - 43 Stock payable to employee benefit plans -- Note K - - - 701 - - - Dividends paid - - - - - (470) - ---- ----- --------- ------- --------- -------- ---- Balances at December 31, 1992 - 191 133,279 701 (15,371) (5,149) - Net income - - - - - 20,311 - Issuance of common stock to employee benefit plans -- Note K - 1 1,299 (701) - - - Stock payable to employee benefit plans -- Note K - - - 205 - - - Issuance of preferred stock -- Note H 15 - 71,879 - - - - Dividends paid - - - - - (4,670) - ---- ----- --------- ------- --------- -------- ---- Balances at December 31, 1993 15 192 206,457 205 (15,371) 10,492 - Net income - - - - - 18,707 - Issuance of common stock to employee benefit plans -- Note K - - 205 (205) - - - Stock options exercised - - 36 - - - - Acquisition of Traveller Group -- Note B - 3 938 - - - - Dividends paid - - - - - (5,069) - ---- ----- --------- ------- --------- -------- ---- Balances at December 31, 1994 $ 15 $ 195 $ 207,636 $ - $ (15,371) $ 24,130 $ - ==== ===== ========= ======= ========= ======== ==== See notes to consolidated financial statements.
ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31 1994 1993 1992 ($ thousands) OPERATING ACTIVITIES Net income (loss) $ 18,707 $ 20,311 $ (583) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Loss on extinguishments of debt - 661 15,975 Cumulative effect of accounting change in method of revenue recognition - - 3,363 Depreciation and amortization 28,087 28,266 34,473 Amortization of intangibles 3,527 3,064 3,034 Other amortization 501 319 755 Contribution of stock to employee benefit plans - 804 (43) Provision for losses on accounts receivable 2,070 1,902 2,343 Provision for deferred income taxes 3,189 (2,108) 1,212 Gain on asset sales (2,168) (2,509) (2,127) Gain on sale or issuance of subsidiary stock (45) (37) - Minority interest in subsidiary 3,773 3,390 3,076 Changes in operating assets and liabilities, net of acquisition: Accounts receivable (15,312) (14,152) (12,172) Inventories and prepaid expenses (6,428) (5,985) (3,377) Other assets (1,521) 1,859 (2,266) Accounts payable, bank drafts payable, taxes payable, accrued expenses and other liabilities 14,373 (193) 15,775 --------- --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 48,753 35,592 59,438 INVESTING ACTIVITIES Purchases of property, plant and equipment, less capitalized leases (47,298) (13,692) (21,105) Proceeds from asset sales 7,841 10,839 10,417 Acquisition of the Clipper Group, net of cash acquired -- Note B (49,556) - - Acquisition of Trans-World Tire Corp. - (2,500) - --------- --------- --------- NET CASH USED BY INVESTING ACTIVITIES (89,013) (5,353) (10,688) ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Year Ended December 31 1994 1993 1992 ($ thousands) FINANCING ACTIVITIES Deferred financing costs and expenses incurred in borrowing activities $ (147) $ (47) $ (721) Proceeds from receivables purchase agreement 56,000 - - Payments under receivables purchase agreement (16,000) - - Borrowings under revolving credit and term loan facilities 54,000 35,000 90,000 Principal payments under revolving credit and term loan facilities (39,000) (98,000) (53,000) Payments to retire 14% senior subordinated notes - (8,437) (135,507) Net proceeds from the issuance of common stock 37 - 140,868 Net proceeds from the issuance of preferred stock - 71,894 - Principal payments on other long-term debt and capital leases (18,616) (24,766) (35,613) Dividends paid to minority shareholders of subsidiary (438) (432) (429) Dividends paid (5,069) (4,133) (470) Repurchase of common stock -- Note H - - (55,768) Net increase in bank overdraft 5,989 - - --------- --------- --------- NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 36,756 (28,921) (50,640) --------- --------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,504) 1,318 (1,890) Cash and cash equivalents at beginning of year 6,962 5,644 7,534 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,458 $ 6,962 $ 5,644 ========= ========= ========= See notes to consolidated financial statements.
ARKANSAS BEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1994 NOTE A - ORGANIZATION, PUBLIC OFFERINGS AND DESCRIPTION OF BUSINESS Arkansas Best Corporation (the "Company") is a diversified holding company engaged through its subsidiaries primarily in motor carrier, freight forwarding operations (see Note M), and truck tire retreading and sales. Principal subsidiaries owned are ABF Freight System, Inc., ("ABF"), Treadco, Inc. ("TREADCO"), and, effective September 30, 1994, Clipper Exxpress Company and related companies (the "Clipper Group") (see Note B). Due to the extent of management shareholders of a predecessor company continuing their ownership interest in the Company subsequent to a 1988 acquisition, the equity interest of these management shareholders was valued at the predecessor basis rather than at fair market value. Accordingly, the new basis of reporting for the Company's net assets using fair market values at the date of the acquisition was reduced by $15,371,000 to reflect the carryover basis of the management shareholders. In February 1993, the Company completed a public offering of 1,495,000 shares of $2.875 Series A Cumulative Convertible Exchangeable Preferred Stock at $50 per share. The total net proceeds to the Company were approximately $71.9 million and were used to repay a $50 million term loan. This transaction resulted in a loss on extinguishment of debt of $167,000 (net of income tax benefit of $103,000), which is reported as an extraordinary item in the accompanying consolidated financial statements. The Company completed an initial public offering of 15.7 million shares of common stock at $14 per share (the "Offering") on May 13, 1992. The Company sold 10.7 million shares with the remaining shares being sold by a shareholder. The total net proceeds to the Company as a result of the Offering were approximately $140.9 million and were used to repurchase $113.9 million of the Company's outstanding 14% Senior Subordinated Notes due 1998 (the "Notes") and to make premium and consent payments and pay certain other related expenses. This transaction resulted in a loss on extinguishment of debt of $15.9 million (net of income tax benefit of $9.7 million) which is reported as an extraordinary item in the accompanying consolidated financial statements. In 1993, the remaining notes outstanding were redeemed at a premium, which resulted in an extraordinary loss of $494,000 (net of income tax benefit of $310,000). Treadco was organized in 1991 as the successor to the tire business previously conducted by another wholly owned subsidiary of the Company. Also in 1991, Treadco completed an initial public offering of 2,679,300 of its common shares. As of December 31, 1994, the Company's percentage ownership of TREADCO was 46%. The Company's consolidated financial statements reflect full consolidation of the accounts of TREADCO, with the ownership interests of the other stockholders reflected as minority interest, because the Company controls TREADCO through stock ownership, board representation and management services provided under a transition services agreement. Summarized condensed financial information for TREADCO is as follows:
December 31 1994 1993 ($ thousands) Current assets $58,187 $50,950 Property, plant and equipment, net 15,723 14,320 Other assets 15,673 16,162 ------- ------- Total assets $89,583 $81,432 ======= ======= Current liabilities $20,822 $15,338 Long-term debt and other 4,323 7,606 Stockholders' equity 64,438 58,488 ------- ------- Total liabilities and stockholders' equity $89,583 $81,432 ======= =======
1994 1993 1992 ($ thousands) Sales $140,678 $113,277 $ 98,833 Operating expenses and costs 129,625 103,671 90,417 Interest expense 270 195 51 Other (income) expense 9 (252) (377) Income taxes 4,265 3,832 3,471 -------- -------- -------- Net income $ 6,509 $ 5,831 $ 5,271 ======== ======== ========
NOTE B - ACQUISITIONS On September 30, 1994, Arkansas Best Corporation consummated the purchase of all outstanding stock of the Clipper Group pursuant to a stock purchase agreement entered into on August 18, 1994. Assets of approximately $26.2 million were acquired and liabilities of approximately $14.7 million were assumed. The Company's total purchase price is $60.8 million in cash, subject to certain closing audit adjustments. The Company paid an initial payment of $54 million to the Clipper Group shareholders from cash on hand and funds provided under its receivables purchase agreement. The remaining $6.8 million due is included in the current portion of long-term debt in the accompanying consolidated financial statements. The final payment, which is due on May 15, 1995, will be funded from cash on hand and/or funds available under existing credit facilities. The acquisition has been accounted for under the purchase method, effective September 30, 1994, with operations of Clipper included for the three-month period ended December 31, 1994. The purchase price has been allocated to assets and liabilities based on their estimated fair values as of the date of acquisition. Approximately $49.4 million of goodwill was recorded as a result of the purchase allocation and is being amortized over a 30-year period. A final allocation of the purchase price will be completed in 1995 based on determination of the final purchase price. The final allocation is not expected to vary materially from amounts previously recorded. On October 12, 1994, the Company issued 310,191 shares of common stock for all of the outstanding stock of Traveller Enterprises and subsidiaries and Commercial Warehouse Company, collectively (the "Traveller Group"). The acquisition of the Traveller Group has been accounted for as a pooling of interests. The Traveller Group's operations are not material in relation to the Company's consolidated financial statements for any period; therefore, financial statements for periods prior to the merger have not been restated, and the financial statements include operations of the Traveller Group from the date of the combination. The final number of shares that will be issued in conjunction with this transaction are subject to certain audit closing adjustments. Pro forma unaudited information (as if the Clipper Group and Traveller Group acquisitions were completed at the beginning of the respective periods) for 1994 and 1993 is as follows:
1994 1993 ($ thousands) Operating revenues $ 1,209,054 $ 1,149,627 Operating expenses 1,152,858 1,094,340 ----------- ----------- 56,196 55,287 Interest expense, net 9,715 10,602 Minority interest in subsidiary 3,523 3,140 Other expense, net 2,051 2,331 Provision for income taxes 19,592 18,874 ----------- ----------- Income before extraordinary item $ 21,315 $ 20,340 =========== =========== Earnings per common share before extraordinary item .87 .84 =========== =========== Average common shares outstanding 19,662 19,504 =========== ===========
The above pro forma unaudited information does not purport to be indicative of the results which actually would have occurred had the acquisitions been made at the beginning of the respective periods. On August 29, 1993, TREADCO purchased substantially all of the assets and assumed certain liabilities of Trans-World Tire Corporation Inc., a new and retread truck tire operation. Assets of approximately $8.2 million were acquired and liabilities of approximately $6.4 million were assumed. The purchase price was approximately $2.9 million. A total of $1.1 million of goodwill was recognized in connection with the purchase. The pro forma effect of the Trans-World Tire Corporation acquisition is not material to the Company's operations for any period. NOTE C - ACCOUNTING POLICIES Consolidation: The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. Cash and Cash Equivalents: Short term investments which have a maturity of ninety days or less when purchased are considered cash equivalents. Concentration of Credit Risk: The Company's services are provided primarily to customers throughout the United States and Canada. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. Historically, credit losses have not been significant. Inventories: Inventories are stated at the lower of cost (first-in, first- out basis) or market. Property, Plant and Equipment: Purchases of property, plant and equipment are recorded at cost. For financial reporting purposes, such property is depreciated principally by the straight-line method. For tax reporting purposes, accelerated depreciation or cost recovery methods are used. Gains and losses on asset sales are reflected in the year of disposal. Trade-in allowances in excess of the book value of revenue equipment traded are accounted for by adjusting the cost of assets acquired. Tires and tubes purchased with revenue equipment are capitalized as a part of the cost of such equipment, with replacement tires and tubes being expensed when placed in service. Goodwill: Excess cost over fair value of net assets acquired (goodwill) is amortized on a straight-line basis over 15 to 40 years. The carrying value of goodwill will be reviewed if the facts and circumstances suggest that it may be impaired. If this review indicates that goodwill will not be recoverable, as determined based on the undiscounted cash flows over the remaining amortization period, the Company's carrying value of the goodwill would be reduced. No reduction has been required for any period. Income Taxes: Effective January 1, 1993, the Company adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS 109"). As permitted under the new rules, prior years' financial statements have not been restated. The Company previously used the liability method required by FAS 96. The adoption of FAS 109 as of January 1, 1993, had no impact on net income. Under FAS 109, the liability method is used in accounting for income taxes. Under this method, deferred income taxes relate principally to asset and liability basis differences arising from the 1988 purchase transaction, to the timing of the depreciation and cost recovery deductions previously described and to temporary differences in the recognition of certain revenues and expenses of carrier operations. Revenue Recognition: Prior to 1992, carrier operating revenues were recognized on the date the shipments were picked up from the customer, with expenses recognized as incurred. In January 1992, the Emerging Issues Task Force of the Financial Accounting Standards Board reached a consensus that recognition of revenue for freight when picked up from the customer was no longer an acceptable accounting method. As a result, the Company adopted a new revenue recognition method effective January 1, 1992 whereby revenue is recognized based on relative transit time in each reporting period with expenses continuing to be recognized as incurred. This change in accounting method resulted in a charge to earnings in the first quarter of 1992 having a cumulative effect of approximately $3,400,000 (net of income taxes of $2,000,000). Earnings (Loss) Per Share: The calculation of earnings (loss) per share is based on the weighted average number of common and common equivalent shares outstanding during the applicable period and retroactively adjusted for the effect of a March 1992 2.797 for 1 stock split in the form of a stock dividend. (See Note H.) The calculation reduces income available to common shareholders by preferred stock dividends paid or accrued during the period. Accounting for Sales of Stock by Subsidiaries: It is the Company's policy to recognize gains and losses on sales of subsidiary stock when incurred. Claims Liabilities: The Company is self-insured up to certain limits for workers' compensation, cargo loss and damage and certain property damage and liability claims. Provision has been made for the estimated liabilities for such claims as incurred. NOTE D - INVENTORIES
December 31 1994 1993 ($ thousands) Finished goods $ 22,764 $ 20,240 Materials 7,487 6,784 Repair parts, supplies and other 2,212 2,062 -------- -------- $ 32,463 $ 29,086 ======== ========
NOTE E - LONG-TERM DEBT AND CREDIT AGREEMENTS
December 31 1994 1993 ($ thousands) Revolving Credit Facility (1) $ - $ - Receivables Purchase Agreement (2) 40,000 - Term Loan Agreement (3) 19,000 - Payable to Clipper shareholders (Note B) 6,774 - Treadco Credit Agreement (4) 3,000 7,000 Capitalized lease obligations (5) 51,060 49,419 Other 4,622 2,551 -------- -------- 124,456 58,970 Less current portion 65,161 15,239 -------- -------- $ 59,295 $ 43,731 ======== ========
(1) Revolving Credit Facility: The Company and certain banks are parties to a Credit Agreement with Societe Generale, as Agent and NationsBank of Texas as Co-Agent (the "Credit Agreement") which provides funds available under a three-year Revolving Credit Facility of $150 million, including $40 million for letters of credit. There are no borrowings outstanding under the Revolving Credit Facility and approximately $32.7 million of letters of credit outstanding at December 31, 1994. The Revolving Credit Facility is payable on June 30, 1998. The Credit Agreement also requires mandatory prepayments to be made under certain circumstances, including the sales of certain assets and net cash proceeds from the issuance of certain equity or debt securities. The Company pays a commitment fee of 3/8% on the unused amount under the Revolving Credit Facility. Amounts advanced under the Credit Agreement bear interest, at the Company's option, at a rate per annum of either:(i) the greater of (a) the agent bank's prime rate and (b) the Federal Funds Rate plus 1/2%; or (ii) LIBOR plus 3/4%. The Credit Agreement contains various covenants which limit, among other things, dividends, indebtedness, capital expenditures, loans and investments, as well as requiring the Company to meet certain financial tests. As of December 31, 1994, these covenants have been met. If there is an event of default which is not remedied or waived within 10 days, the Credit Agreement will become secured to the extent of amounts then outstanding of all of the Company's receivables (excluding receivables sold under the receivables purchase agreement), revenue equipment, real property and TREADCO common stock included in the borrowing base (subject to certain exceptions). (2) On March 2, 1994, ABF, Renaissance Funding Corp. ("Renaissance") and Societe Generale entered into a receivables purchase agreement. The agreement allows ABF to sell to Renaissance an interest in up to $55 million in a pool of receivables. The term can range from 30 to 180 days, at ABF's option. At the end of the term, ABF is required to repurchase any uncollected receivables. At December 31, 1994, ABF had $40 million financed through this facility. The interest rate under this agreement is variable based on underlying commercial paper rates, which was 5.9% as of December 31, 1994. (3) The Company entered into a ten-year, $20 million term loan agreement dated as of April 25, 1994 with NationsBank of Texas, N.A., as agent, and Societe Generale Southwest Agency. The proceeds from the agreement are being used to finance the construction of the Company's new corporate office building which is expected to be completed in February 1995 (Note I). Amounts borrowed under the agreement bear interest at 8.07%. The Company shall repay the outstanding amount in 40 equal quarterly installments of $500,000 plus interest, which began on July 15, 1994. (4) TREADCO is a party to a revolving credit facility with Societe Generale (the "TREADCO Credit Agreement") providing for borrowings of up to the lesser of $12 million or the applicable borrowing base. Borrowings under the TREADCO Credit Agreement are collateralized by accounts receivable and inventory. Borrowings under the agreement bear interest, at TREADCO's option, at 1% above the bank's LIBOR rate, or at the higher of the bank's prime rate or the "federal funds rate" plus 1/2%. At December 31, 1994, the interest rate was 7.1%. At December 31, 1994, TREADCO had $3 million outstanding under the Revolving Credit Agreement. The TREADCO credit agreement is payable in September 1997. TREADCO pays a commitment fee of 3/8% on the unused amount under the TREADCO Credit Agreement. The TREADCO Credit Agreement contains various covenants which limit, among other things, dividends, disposition of receivables, indebtedness and investments, as well as requiring TREADCO to meet certain financial tests which have been met. Under the TREADCO Credit Agreement, TREADCO's assets are subject to pledge and, therefore, are available for use only by that subsidiary. (5) Includes approximately $49,100,000 relative to leases of carrier revenue equipment with an aggregate net book value of approximately $49,856,000 at December 31, 1994. These leases have a weighted average interest rate of approximately 7.0%. Also includes approximately $1,960,000 relative to leases of various terminals and a data processing building expansion, financed by Industrial Revenue Bond Issues, with a weighted average interest rate of approximately 7.4%. The net book value of the related assets was approximately $2,897,000 at December 31, 1994. Annual maturities on long-term debt, excluding capitalized lease obligations (see Note I), in 1995 through 1999 aggregate approximately $50,065,000; $3,113,000; $5,931,000; $2,466,000 and $2,483,000, respectively. Interest paid, net of interest capitalized of $582,000, was $6,656,000 in 1994, $7,226,000 in 1993, and $22,174,000 in 1992. Interest capitalized in 1993 and 1992 was not material. The Company is a party to an interest rate cap arrangement to reduce the impact of increases in interest rates on its floating-rate long-term debt. The Company will be reimbursed for the difference in interest rates if the LIBOR rate exceeds a fixed rate of 9% applied to notional amounts, as defined in the contract, ranging from $50 million as of December 31, 1994 to $2.5 million as of October 1999. As of December 31, 1994, the LIBOR rate was 6.5%; therefore, no amounts were due to the Company under this arrangement. Fees totaling $385,000 were paid in 1994 to enter into this arrangement. These fees are being amortized to interest expense over the life of the contract. A subsidiary of the Company is party to an interest rate exchange agreement with Citibank, with a notional amount of $3,520,000 as of December 31, 1994, that is used to convert the variable interest rate on bonds to a fixed rate of interest. The terms of the agreement require the Company to pay 11.45% interest and receive the Citibank base rate, calculated on the notional amount. Payments under the agreement are recognized as an adjustment to interest expense. The agreement expires in January 1996. NOTE F - ACCRUED EXPENSES
December 31 1994 1993 ($ thousands) Accrued salaries, wages and incentive plans $ 12,397 $ 11,969 Accrued vacation pay 22,114 21,074 Accrued interest 1,964 1,053 Taxes other than income 4,946 4,736 Loss, injury, damage and workers' compensation claims reserves 35,348 29,229 Pension costs 1,312 989 Other 4,076 2,228 --------- --------- $ 82,157 $ 71,278 ========= =========
NOTE G - FEDERAL AND STATE INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets are as follows (in thousands).
December 31 1994 1993 Deferred tax liabilities: Depreciation and basis differences for property, plant and equipment $ 22,332 $ 19,277 Revenue recognition 4,610 4,182 Basis difference on asset and stock sale 3,113 3,037 Prepaid expenses 5,019 3,818 Equity in earnings of TREADCO 1,254 1,064 --------- --------- Total deferred tax liabilities 36,328 31,378 Deferred tax assets: Accrued expenses 2,743 1,452 Uniform capitalization of inventories 162 154 Postretirement benefits other than pensions 241 111 Other 181 - --------- --------- Total deferred tax assets 3,327 1,717 --------- --------- Net deferred tax liabilities $ 33,001 $ 29,661 ========= =========
Significant components of the provision for income taxes are as follows:
December 31 1994 1993 Current: Federal $ 12,595 $ 18,263 State 2,148 3,123 --------- --------- Total current 14,743 21,386 Deferred (credit): Federal 2,670 (1,786) State 519 (322) --------- --------- Total deferred (credit) 3,189 (2,108) --------- --------- Total income tax expense $ 17,932 $ 19,278 ========= =========
Components of the provision for deferred income taxes for 1992 are as follows:
Depreciation, capital leases and gains on asset sales $ (603) Accured expenses 762 Revenue recognition 522 Prepaid expenses 58 Revenue equipment tires 221 Deferred charges (545) Equity in earnings of TREADCO 788 Other 9 --------- Deferred income tax expense $ 1,212 =========
A reconciliation between the effective income tax rate, as computed on income before extraordinary items and the cumulative effect of an accounting change, and the statutory federal income tax rate is presented in the following table:
Year Ended December 31 1994 1993 1992 ($ thousands) Income tax at the statutory federal rate of 35% for 1994 and 1993, and 34% for 1992 $ 12,824 $ 14,088 $ 12,121 Federal income tax effects of: State income taxes (933) (981) (812) Amortization of nondeductible goodwill 1,031 1,058 1,003 Other nondeductible expenses 969 490 476 Minority interest 1,233 1,099 961 Undistributed earnings of TREADCO 210 189 705 Rate difference for TREADCO (108) (98) - Retroactive tax rate change effect on deferred taxes - 677 - Other 39 (45) 53 --------- --------- --------- Federal income taxes 15,265 16,477 14,507 State income taxes 2,667 2,801 2,387 --------- --------- --------- $ 17,932 $ 19,278 $ 16,894 ========= ========= ========= Effective tax rate 48.9% 47.9% 47.4% ========= ========= =========
Income taxes paid were $12,368,000 in 1994, $20,740,000 in 1993, and $6,302,000 in 1992. In August 1993, the Revenue Reconciliation Act of 1993 was enacted, which required a retroactive increase in the corporate federal tax rate. This resulted in an increase in the tax expense and a corresponding decrease in net income of $828,000. The increase in the corporate federal tax rate was accounted for in accordance with FAS 109. NOTE H - SHAREHOLDERS' EQUITY Preferred Stock. On February 19, 1993, the Company completed a public offering of 1,495,000 shares of Preferred Stock at $50 per share. The preferred stock is convertible at the option of the holder into Common Stock at the rate of 2.5397 shares of Common Stock for each share of Preferred Stock. Annual dividends are $2.875 and are cumulative. The Preferred Stock is exchangeable, in whole or in part, at the option of the Company on any dividend payment date beginning February 15, 1995, for the Company's 5 3/4% Convertible Subordinated Debentures due February 15, 2018, at a rate of $50 principal amount of debentures for each share of Preferred Stock. The Preferred Stock is redeemable at any time on or after February 15, 1996, in whole or in part, at the Company's option, initially at a redemption price of $52.0125 per share and thereafter at redemption prices declining to $50 per share on or after February 15, 2003, plus unpaid dividends to the redemption date. Holders of Preferred Stock have no voting rights unless dividends are in arrears six quarters or more, at which time they have the right to elect two directors of the Company until all dividends have been paid. Total dividends paid during 1994 and 1993 were $4,298,000 and $3,904,000, respectively. Stock Split. On March 13, 1992, the Company's Board of Directors voted to amend its Certificate of Incorporation to increase the Company's authorized Common Stock, $.01 par value, from 9,000,000 to 70,000,000 shares. In addition, the Company declared a 2.797 for 1 stock split of the Common Stock, $.01 par value (effected in the form of a stock dividend of 1.797 shares on each outstanding share). All references to share and per share data in the accompanying consolidated financial statements have been retroactively restated to give effect to the stock split. Repurchase of Common Stock. On November 13, 1992, 4,439,000 shares of Common Stock were repurchased from Kelso Best Partners, L.P. ("Kelso"), which was the Company's largest shareholder at that time. These were purchased at a cost of $12.50 per share (a discount of $1.50 per share from the then quoted NASDAQ NMS sale price). These shares were subsequently retired by the Company. Stock Options. On March 13, 1992, the Company adopted a stock option plan which provides 1,000,000 shares of Common Stock for the granting of options to directors and key employees of the Company. In May 1993, the Company adopted a disinterested directors stockholder plan, which provides 225,000 shares of common stock for the granting of options to directors who administer the Company's stock option plan and are not permitted to receive stock option grants under such plan. These options are exercisable at the date they are granted. This plan was terminated in May 1994. The options previously granted under this plan will continue in effect according to their terms. Option transactions are summarized as follows:
1994 1993 Options outstanding at the beginning of the year 589,100 551,600 Options granted 54,700 37,500 Options cancelled (11,460) - Options exercised (3,440) - ------- ------- Options outstanding as of December 31 628,900 589,100 ======= ======= Option price range as of December 31 $9.50 to $13.88 =============== Options exercisable at December 31, 1994 222,180 =======
Shareholders' Rights Plan. Each issued and outstanding share of Common Stock has associated with it one Common Stock purchase right to purchase a share of Common Stock from the Company at a price of $60.00. Such rights are not exerciseable until certain events occur as detailed in the rights agreement. NOTE I - LEASES AND COMMITMENTS Rental expense amounted to approximately $72,802,000 in 1994, $58,369,000 in 1993, and $45,875,000 in 1992. The future minimum rental commitments, net of future minimum rentals to be received under noncancelable subleases, as of December 31, 1994 for all noncancellable operating leases are as follows ($ thousands):
Terminals Equipment and Retread and Period Total Plants Other 1995 $ 25,401 $ 10,113 $ 15,288 1996 14,383 7,219 7,164 1997 8,693 4,339 4,354 1998 5,839 2,597 3,242 1999 3,921 1,882 2,039 Thereafter 9,140 8,014 1,126 -------- -------- -------- $ 67,377 $ 34,164 $ 33,213 ======== ======== ========
Certain of the leases are renewable for substantially the same rentals for varying periods. Future minimum rentals to be received under noncancellable subleases totaled approximately $3,021,000 at December 31, 1994. The future minimum payments under capitalized leases at December 31, 1994, consisted of the following ($ thousands):
1995 $ 18,361 1996 11,467 1997 7,691 1998 9,403 1999 7,717 Thereafter 5,860 -------- Total minimum lease payments 60,499 Amounts representing interest 9,439 -------- Present value of net minimum lease included in long-term debt - Note E $ 51,060 ========
Assets held under capitalized leases are included in property, plant and equipment as follows:
December 31 1994 1993 ($ thousands) Revenue equipment $ 80,318 $ 84,882 Land and structures 4,726 7,498 --------- --------- 85,044 92,380 Less accumulated amortization 32,291 40,134 --------- --------- $ 52,753 $ 52,246 ========= =========
The revenue equipment leases have remaining terms from one to seven years and contain renewal or fixed price purchase options. The lease agreements require the lessee to pay property taxes, maintenance and operating expenses. Lease amortization is included in depreciation expense. Capital lease obligations of $15,793,000, $17,885,000 and $5,491,000 were incurred for the years ended December 31, 1994, 1993 and 1992, respectively. Commitments for purchase of revenue equipment aggregated approximately $47,409,000 at December 31, 1994. Commitments for capital expenditures aggregate approximately $9.1 million at December 31, 1994 for construction of a new corporate office building. The total construction cost of the new building is anticipated to approximate $23 million, of which $13.9 million is included in construction in progress as of December 31, 1994. The Company incurred annual fees of $300,000 in 1992 for services rendered by a former shareholder. An additional $1,000,000 was paid as an advisory fee in connection with the repurchase of the Notes (Note A). The service agreement with this shareholder was terminated effective December 31, 1992. NOTE J - LEGAL PROCEEDINGS AND ENVIRONMENTAL MATTERS In August 1990, a lawsuit was filed in the United States District Court for the Southern District of New York, by Riverside Holdings, Inc., Riverside Furniture Corporation ("Riverside") and MR Realty Associates, L.P. ("Plaintiffs") against the Company and ABC Treadco. Plaintiffs have asserted state law, Employee Retirement Income Security Act of 1974 and securities claims against the Company in connection with the Company's sale of Riverside in April 1989. Plaintiffs are seeking approximately $4 million in actual damages and $10 million in punitive damages. The Company is vigorously contesting the lawsuit. After consultation with legal counsel, the Company has concluded that resolution of the foregoing lawsuit is not expected to have a material adverse effect on the Company's financial condition. Various other legal actions, the majority of which arise in the normal course of business, are pending. None of these other legal actions is expected to have a material adverse effect on the Company's financial condition. The Company maintains liability insurance against risks arising out of the normal course of its business, subject to certain self-insured retention limits. ABF stores some fuel for its tractors and trucks in approximately 98 underground tanks located in 27 states. Maintenance of such tanks is regulated at the federal and, in some cases, state levels. ABF believes that it is in substantial compliance with all such regulations. ABF is not aware of any leaks from such tanks that could reasonably be expected to have a material adverse effect on the Company. Environmental regulations have been adopted by the United State Environmental Protection Agency ("EPA") that will require ABF to upgrade its underground tank systems by December 1998. ABF currently estimates that such upgrades, which are currently in process, will not have a material adverse effect on the Company. The Company has received notices from the EPA and others that it has been identified as a potentially responsible party ("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 $250,000 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. The Company remains responsible for certain environmental claims that arose with respect to its ownership of Riverside prior to its sale in 1989. Riverside was notified in 1988 that it has been identified as a PRP for hazardous wastes shipped to two separate sites in Arkansas. To date, the Company, as a part of a PRP group, has paid approximately $50,000 on Riverside's behalf related to one site, with additional assessments expected related to that site. Riverside was dismissed as a PRP from the second site in March 1993. Management currently believes that resolution of its remaining site is unlikely to have a material adverse effect on the Company, although there can be no assurance in this regard. NOTE K - EMPLOYEE BENEFIT PLANS The Company and its subsidiaries have noncontributory defined benefit pension plans covering substantially all noncontractual employees. Benefits are based on years of service and employee compensation. Contributions are made based upon at least the minimum amounts required to be funded under provisions of the Employee Retirement Income Security Act of 1974, with the maximum amounts not to exceed the maximum amount deductible under the Internal Revenue Code. The plans' assets are held in a common bank-administered trust fund and are primarily invested in government and equity securities. Additionally, the Company participates in several multiemployer plans, which provide defined benefits to the Company's union employees. In the event of insolvency or reorganization, plan terminations or withdrawal by the Company from the multiemployer plans, the Company may be liable for a portion of the plan's unfunded vested benefits, the amount of which, if any, has not been determined. A summary of the components of net periodic pension costs for the defined benefit plans for the periods indicated and the total contributions charged to pension expense for the multiemployer plans follows:
Year Ended December 31 1994 1993 1992 ($ thousands) Defined Benefit Plans Service cost - benefits earned during the year $ 4,492 $ 4,225 $ 3,683 Interest cost on projected benefit obligations 5,249 5,675 5,162 Actual return on plan assets 220 (6,656) (3,601) Net amortization and deferral (5,379) 1,542 (1,851) -------- -------- -------- Net pension cost of defined benefit plans 4,582 4,786 3,393 Multiemployer Plans 40,833 37,846 36,066 -------- -------- -------- Total pension expense $ 45,415 $ 42,632 $ 39,459 ======== ======== ========
Assumptions used in determining net periodic pension cost for the defined benefit plans were:
Year Ended December 31 1994 1993 1992 Weighted average discount rate 7.24% 8.49% 8.90% Annual compensation increases 3.00% 5.00% 5.00% Expected long-term rates of return on assets 9.00% 9.25% 9.75%
The following sets forth the funded status and amounts recognized in the consolidated balance sheets for the Company's defined benefit pension plans at December 31:
1994 1993 ($ thousands) Actuarial present value of benefit obligations: Vested benefit obligation $ (50,826) $ (56,798) ========= ========= Accumulated benefit obligation $ (57,630) $ (65,303) ========= ========= Projected benefit obligation $ (72,469) $ (79,195) Plan assets at fair value 67,403 68,515 --------- --------- Projected benefit obligation in excess of plan assets (5,066) (10,680) Unrecognized net loss 9,159 15,095 Prior service benefit not yet recognized in net periodic pension cost 206 218 Unrecognized net asset at January 1, 1987, net of amortization (68) (73) Adjustment required to recognize minimum liability (212) - --------- --------- Net pension asset $ 4,019 $ 4,560 ========= =========
At December 31, 1994, the net pension asset is reflected in the accompanying financial statements as an accrued expense of $1,312,000 and a noncurrent asset of $5,331,000 included in other assets. At December 31, 1993, the net pension asset is reflected in the accompanying financial statements as an accrued expense of $989,000 and a noncurrent asset of $5,549,000 included in other assets. The following assumptions were used in determining the pension obligation:
December 31 1994 1993 Weighted average discount rate 8.73% 7.24% Annual compensation increases 3.00% 3.00% Expected long-term rates of return on assets 9.00% 9.25%
The Company has deferred compensation agreements with certain executives for which liabilities aggregating $1,309,000 and $975,000 as of December 31, 1994 and 1993, respectively, have been recorded. The Company also has a supplemental benefit plan for the purpose of supplementing benefits under the Company's retirement plans. The plan will pay sums in addition to amounts payable under the retirement plans to eligible participants. Participation in the plan is limited to employees of the Company who are participants in the Company's retirement plans and who are also either participants in the Company's executive incentive plan or are designated as participants in the plan by the Company's Board of Directors. As of December 31, 1994, the Company has a liability of $2,005,000 for future costs under this plan with $1,234,000 reflected in the accompanying consolidated financial statements as an accrued expense and $771,000 included in other liabilities. In July 1993, the Employee Stock Ownership Plan (the "ESOP") was merged with another defined contribution plan to create a new plan known as the Arkansas Best Corporation Employees' Investment Plan (the "Investment Plan"). Participant account balances were transferred from the ESOP to the Investment Plan. The Investment Plan covers substantially all full-time, noncontractual employees of the Company and its subsidiaries. The Investment Plan permits participants to defer up to 15% of their salary by salary reduction as provided in Section 401(k) of the Internal Revenue Code. The percentage of Company match is set annually. In 1994, 1993 and 1992 up to 4% of a participant's compensation contributed to the Investment Plan was matched by a Company deposit of 25% of such contribution. The Company's matching contribution can be made in cash or common stock of the Company. The matching contributions charged to operations under the investment plans totaled approximately $846,000 for 1994, $875,000 for 1993, and $805,000 for 1992. At December 31, 1993, the contribution payable was reflected as a component of shareholders' equity. In 1994, 14,752 shares were issued in settlement of the 1993 contributions payable. TREADCO has an employee stock ownership plan (the "TREADCO ESOP") and a related trust (the "TREADCO Trust") covering substantially all employees of TREADCO. The cost of the TREADCO ESOP is borne by TREADCO through annual contributions to the TREADCO Trust in amounts determined by TREADCO's Board of Directors. Contributions may be paid in cash or in shares of TREADCO Common Stock. Participants become 100% vested after five years of service from January 1, 1990. Distribution of balances normally would be made in TREADCO's Common Stock. Charges to operations for contributions to the TREADCO ESOP totaled $250,000 for 1994, $250,000 for 1993 and $250,000 for 1992. The stock contributions to the ESOP and investment plans do not have a material effect on earnings per share. Clipper has a Retirement Benefit Plan that covers substantially all full- time employees. The Plan permits participants to defer up to 8% of their salary by salary reduction as provided in Section 401(k) of the Internal Revenue Code, with up to 4% of a participant's compensation matched by the Company. Also, the Plan has a discretionary profit sharing contribution determined annually by its Board of Directors (6% of compensation paid to employees for 1994). For the three months ended December 31, 1994, the Company's contributions under this Plan totaled $109,000. The Company sponsors plans that provide postretirement medical benefits, life insurance and accident and vision care to full-time officers of the Company. The plan is noncontributory, with the Company paying up to 80% of covered charges incurred by participants of the plan. In 1993, the Company adopted FAS 106, "Employers' Accounting for Postretirement Benefits Other than Pensions." The effect of adopting the new rules increased net periodic postretirement benefit cost by $275,000 and decreased 1993 net income by $179,000. These costs are based on a 20- year amortization of the transition obligation. Postretirement benefit costs for prior years, which was recorded on a cash basis, have not been restated. The following table represents the amounts recognized in the Company's consolidated balance sheets:
December 31 1994 1993 Accumulated postretirement benefit obligation: Retirees $ (1,268) $ (1,354) Fully eligible active plan participants (400) (489) Other active plan participants (1,036) (1,159) --------- --------- (2,704) (3,002) Unrecognized net (gain) loss (315) 171 Unrecognized transition obligation 2,421 2,556 --------- --------- Accrued postretirement benefit cost $ (598) $ (275) ========= =========
Net periodic postretirement benefit cost includes the following components:
1994 1993 1992 Service cost $ 59 $ 53 Interest cost 212 223 Amortization of transition obligation over 20 years 135 134 --------- --------- --------- Net periodic postretirement benefit cost $ 406 $ 410 $ 72 ========= ========= =========
The weighted-average annual assumed rate of increase in the per capita cost of covered benefits (in health care cost trend) is 10.5% for 1995 (10.5% for 1994) and is assumed to decrease gradually to 4.5% in years 2006 and later. The health care cost trend rate assumption has a significant effect on the amounts reported. For example, increasing the assumed health care cost trend rates by 1% in each year would increase the accumulated postretirement benefit obligation as of December 31, 1994, by $363,000 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for 1994 by $48,000. The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 8.73% at December 31, 1994 and 7.24% at December 31, 1993. Additionally, the Company's union employees are provided postretirement health care benefits through defined benefit multiemployer plans. The cost of such benefits cannot be readily separated between retirees and active employees. The aggregate contribution to the multiemployer health and welfare benefit plans totaled approximately $48,300,000 and $45,400,000 for the years ended December 31, 1994 and 1993, respectively. NOTE L - OPERATING EXPENSES AND COSTS
Year Ended December 31 1994 1993 1992 ($ thousands) CARRIER OPERATIONS Salaries and wages $ 613,187 $ 594,213 $ 560,460 Supplies and expenses 96,210 99,146 99,613 Operating taxes and licenses 35,928 35,152 32,697 Insurance 18,237 16,835 17,567 Communications and utilities 22,639 23,680 23,782 Depreciation and amortization 24,302 25,714 32,370 Rents 67,550 53,192 39,561 Other 4,298 3,779 4,324 ---------- --------- --------- 882,351 851,711 810,374 FORWARDING OPERATIONS Cost of services 26,817 - - Selling, administrative, and general 3,542 - - ---------- --------- --------- 30,359 - - TIRE OPERATIONS Cost of sales 100,909 79,718 69,070 Selling, administrative and general 26,206 21,522 18,412 ---------- --------- --------- 127,115 101,240 87,482 SERVICE AND OTHER 10,481 5,598 4,838 ---------- --------- --------- $1,050,306 $ 958,549 $ 902,694 ========== ========= =========
NOTE M - BUSINESS SEGMENT DATA The Company operates principally in three industries: carrier operations, tire operations, and, effective October 1, 1994 with the acquisition of the Clipper Group, freight forwarding operations. Carrier operations include freight transportation services as a common carrier of general commodities and import/export container cargo between ports and inland points. These services are provided to a wide range of customers in various industries. Forwarding operations consist primarily of intermodal transportation brokerage services. Tire operations include the cold-cap retreading of truck tires and the sale of new tires primarily for trucks. Intersegment sales are not significant. Operating profit is total revenue less operating expenses, excluding interest. Identifiable assets by business segment include both assets directly identified with those operations and an allocable share of jointly used assets. General corporate assets consist primarily of cash and other investments. The following information reflects selected business segment data (information relative to revenues is reflected in the consolidated statements of operations):
Year Ended December 31 1994 1993 1992 ($ thousands) OPERATING PROFIT (LOSS) Carrier operations $ 35,622 $ 41,645 $ 46,725 Forwarding operations 695 - - Tire operations 11,079 10,186 8,767 Other (249) (1,193) 267 --------- --------- --------- TOTAL OPERATING PROFIT 47,147 50,638 55,759 Interest expense 6,985 7,248 17,285 Minority interest 3,523 3,140 2,825 --------- --------- --------- INCOME BEFORE INCOME TAXES, EXTRAORDINARY ITEMS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE $ 36,639 $ 40,250 $ 35,649 ========= ========= ========= IDENTIFIABLE ASSETS Carrier operations $ 374,128 $ 331,507 $ 332,604 Tire operations 89,231 80,377 65,480 Forwarding operations 73,816 - - Other 12,607 10,008 8,139 --------- --------- --------- 549,782 421,892 406,223 General corporate assets 19,263 25,841 22,122 --------- --------- -------- TOTAL ASSETS $ 569,045 $ 447,733 $ 428,345 ========= ========= ========= DEPRECIATION AND AMORTIZATION EXPENSE Carrier operations $ 26,630 $ 28,043 $ 35,284 Tire operations 3,444 2,614 2,221 Forwarding operations 609 - - Other 1,432 992 757 --------- --------- --------- $ 32,115 $ 31,649 $ 38,262 ========= ========= ========= CAPITAL EXPENDITURES Carrier operations $ 58,110 $ 26,530 $ 24,001 Tire operations 5,684 6,137 2,339 Forwarding operations 19 - - Other 285 492 256 --------- --------- --------- $ 64,098 $ 33,159 $ 26,596 ========= ========= =========
NOTE N - FAIR VALUES OF FINANCIAL INSTRUMENTS The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: Cash and Cash Equivalents. The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair value. Long- and Short-term Debt. The carrying amounts of the Company's borrowings under its revolving credit agreements and the receivables purchase agreement approximate their fair values, since the interest rate under these agreements is variable. Also, the carrying amount of long-term debt was estimated to approximate their fair values. The carrying amounts and fair value of the Company's financial instruments at December 31, 1994 are as follows:
Carrying Fair Amount Value ($ thousands) Cash and cash equivalents $ 3,458 $ 3,458 Short-term debt 50,065 50,082 Long-term debt 23,331 24,773
NOTE O - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The tables below present unaudited quarterly financial information for 1994 and 1993:
1994 Three Months Ended March 31 June 30 September 30 December 31 ($ thousands, except per share amount) Operating revenues $ 264,981 $ 210,760 $ 294,251 $ 328,429 Operating expenses and costs 252,363 212,331 274,753 310,859 --------- -------- --------- --------- Operating income (loss) 12,618 (1,571) 19,498 17,570 Other expense - net 2,382 2,483 2,767 3,844 Income taxes (credit) 4,661 (646) 7,530 6,387 --------- --------- --------- --------- Net income (loss) $ 5,575 $ (3,408) $ 9,201 $ 7,339 ========= ========= ========= ========= Net income (loss) per share $ .23 $ (.23) $ .42 $ .32 ========= ========= ========= ========= Average shares out- standing - Note H 19,339,389 19,200,077 19,306,326 19,491,560 ========== ========== ========== ==========
1993 Three Months Ended March 31 June 30 September 30 December 31 ($ thousands, except per share amount) Operating revenues $ 229,210 $ 244,622 $ 267,106 $ 268,980 Operating expenses and costs 221,415 234,243 247,718 255,173 --------- --------- --------- --------- Operating income 7,795 10,379 19,388 13,807 Other expense - net 3,334 2,069 2,504 3,212 Income taxes 2,299 3,879 8,130 4,970 --------- --------- --------- --------- Income before extra- ordinary item 2,162 4,431 8,754 5,625 Loss on extinguishment of debt (167) (162) - (332) --------- --------- --------- --------- Net income $ 1,995 $ 4,269 $ 8,754 $ 5,293 ========= ========= ========= ========= Income per common share before extraordinary item $ .08 $ .18 $ .38 $ .24 Loss on extinguishment of debt per common share (.01) (.01) - (.02) -------- --------- --------- --------- Net income per common share $ .07 $ .17 $ .38 $ .22 ========= ========= ========= ========= Average common shares outstanding 19,194,595 19,127,064 22,971,916 19,288,988 ========== ========== ========== ==========
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES ARKANSAS BEST CORPORATION
Column A Column B Column C Column D Column E Column F Additions (1) (2) Balance at Charged to Charged to beginning costs and other accounts Deductions - Balance at Description of period expenses describe describe end of period Year Ended December 31, 1994: Deducted from asset accounts: Allowance for doubtful accounts receivable $ 2,200,000 $ 2,935,228 $ 961,663(A) $ 3,271,956(B) $ 2,824,935 ============ ============ ============ ============ ============ Year Ended December 31, 1993: Deducted from asset accounts: Allowance for doubtful accounts receivable $ 1,850,000 $ 1,901,958 $ 909,223(A) $ 2,461,181(B) $ 2,200,000 ============ ============ ============ ============ ============ Year Ended December 31, 1992: Deducted from asset accounts: Allowance for doubtful accounts receivable $ 1,460,924 $ 2,343,419 $ 1,167,842(A) $ 3,122,185(B) $ 1,850,000 ============ ============ ============ ============ ============ Note A - Recoveries of amounts previously written off. Note B - Uncollectible accounts written off.
FORM 10-K -- ITEM 14(c) LIST OF EXHIBITS ARKANSAS BEST CORPORATION The following exhibits are filed with this report. Exhibit No. Page 11 Statement Re: Computation of Earnings per Share 75 22 List of Subsidiary Corporations 77 23 Consent of Ernst & Young LLP, Independent Auditors 79 EX-11 2 EXHIBIT 11 EXHIBIT 11 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE ARKANSAS BEST CORPORATION
Year Ended December 31 1994 1993 1992 ($ thousands, except per share data) PRIMARY: Average shares outstanding 19,249,209 19,132,386 19,005,887 Net effect of dilutive stock options -- Based on the treasury stock method using average market price 102,587 61,196 34,216 ---------- ---------- ---------- Average common shares outstanding 19,351,796 19,193,582 19,040,103 ========== ========== ========== Income before extraordinary item and cumulative effect of accounting change $ 18,707 $ 20,972 $ 18,755 Less: preferred stock dividend 4,298 3,904 - ---------- ---------- ---------- 14,409 17,068 18,755 Extraordinary item: Loss on extinguishments of debt - (661) (15,975) Cumulative effect on prior years of change in recognition of revenue - - (3,363) ---------- ---------- ---------- Net income (loss) available for common shareholders $ 14,409 $ 16,407 $ (583) ========== ========== ========== Per common and common equivalent share: Income before extraordinary item and cumulative effect of accounting change $ .74 $ .89 $ .99 Extraordinary item: Loss on extinguishments of debt - (.04) (.84) Cumulative effect on prior years of change in recognition of revenue - - (.18) ---------- ---------- ---------- $ .74 $ .85 $ (.03) ========== ========== ==========
EX-22 3 EXHIBIT 22 EXHIBIT 22 LIST OF SUBSIDIARY CORPORATIONS ARKANSAS BEST CORPORATION The Registrant owns and controls the following subsidiary corporations: Jurisdiction of % of Voting Name Incorporation Securities Owned Subsidiary of Arkansas Best Corporation: ABF Freight System, Inc. Delaware 100 Treadco, Inc. Delaware 45.9 ABC-Treadco, Inc. Arkansas 100 Data-Tronics Corp. Arkansas 100 Clover Insurance Company, Ltd. Bermuda 100 Arkansas Underwriters Corporation Arkansas 100 Advertising Counselors, Inc. Arkansas 100 ABF Cartage, Inc. Delaware 100 ABF Farms, Inc. Arkansas 100 Land-Marine Cargo, Inc. Puerto Rico 100 Integrated Distribution, Inc. Arkansas 100 ABF Freight System Canada, Ltd. Canada 100 ABF Freight System de Mexico, Inc. Delaware 100 Best Logistics, Inc. Delaware 100 Agile Freight System, Inc. Delaware 100 Agricultural Express of America, Inc. Delaware 100 Clipper Exxpress Company Delaware 100 Subsidiary of ABF Freight System, Inc.: ABF Freight System (B.C.), Ltd. British Columbia 100 Subsidiary of Treadco, Inc.: Trans World Casings, Inc. Delaware 100 EX-23 4 EXHIBIT 23 EXHIBIT 23 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-66694) pertaining to the Arkansas Best Corporation Stock Option Plan and Arkansas Best Corporation Disinterested Director Stockholder Plan of our report dated January 27, 1995, with respect to the consolidated financial statements and schedule of Arkansas Best Corporation included in this Annual Report (Form 10-K) for the year ended December 31, 1994. ERNST & YOUNG LLP Little Rock, Arkansas March 21, 1995 EX-27 5
5 The schedule contains summary financial information extracted from the Arkansas Best Corporation Form 10-K for the year ended December 31, 1994 and is qualified in its entirety by reference to such financial statements. 0000894405 ARKANSAS BEST CORPORATION 1,000 12-MOS DEC-31-1994 DEC-31-1994 3,458 0 138,969 2,825 32,463 185,799 382,017 166,436 569,045 223,399 59,295 195 0 15 216,395 569,045 138,665 1,098,421 127,115 1,050,306 0 2,070 6,985 36,639 17,932 18,707 0 0 0 18,707 .74 .74
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