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UNITED STATES
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, 2002.
| | 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 479-785-6000
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
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 | |.
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes |X| No | |
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of February 24, 2003, was $520,598,538.
The number of shares of Common Stock, $.01 par value, outstanding as of February
24, 2003, was 24,923,924.
Documents incorporated by reference into the Form 10-K:
1) The following sections of the 2002 Annual Report to Stockholders:
- Market and Dividend Information
- Selected Financial Data
- Management's Discussion and Analysis of Financial Condition and
Results of Operations
- Quantitative and Qualitative Disclosures About Market Risk
- Financial Statements and Supplementary Data
2) Proxy Statement for the Annual Stockholders' meeting to be held
April 23, 2003.
INTERNET:WWW.ARKBEST.COM
ARKANSAS BEST CORPORATION
FORM 10-K
TABLE OF CONTENTS
ITEM PAGE
NUMBER NUMBER
PART I
Item 1. Business .................................................................................... 3
Item 2. Properties .................................................................................. 10
Item 3. Legal Proceedings ........................................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders ......................................... 11
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters ....................... 12
Item 6. Selected Financial Data ..................................................................... 12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations .................................................................. 12
Item 7A. Quantitative and Qualitative Disclosures About Market Risk................................... 12
Item 8. Financial Statements and Supplementary Data ................................................. 12
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ........................................................ 12
PART III
Item 10. Directors and Executive Officers of the Registrant .......................................... 13
Item 11. Executive Compensation ...................................................................... 13
Item 12. Security Ownership of Certain Beneficial Owners and Management .............................. 13
Item 13. Certain Relationships and Related Transactions .............................................. 13
Item 14. Controls and Procedures ..................................................................... 13
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ............................ 14
SIGNATURES............................................................................................... 16
MANAGEMENT CERTIFICATIONS................................................................................ 17
2
PART I
Except for historical information contained herein, the following discussion
contains forward-looking statements that involve risks and uncertainties.
Arkansas Best Corporation's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in Item 1, "Business."
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
CORPORATE PROFILE
Arkansas Best Corporation (the "Company") is a diversified holding company
engaged through its subsidiaries primarily in motor carrier transportation
operations and intermodal transportation operations. Principal subsidiaries are
ABF Freight System, Inc. ("ABF"); Clipper Exxpress Company and related companies
("Clipper"); FleetNet America, LLC ("FleetNet"); and until August 1, 2001, G.I.
Trucking Company ("G.I. Trucking") (see Note Q appearing on page 50 of the
registrant's Annual Report). The Company's operations included the truck tire
retreading and new tire sales operations of Treadco, Inc. ("Treadco") until
October 31, 2000 (see Note P appearing on page 50 of the registrant's Annual
Report).
HISTORICAL BACKGROUND
The Company was publicly owned from 1966 until 1988, when it was acquired in a
leveraged buyout by a corporation organized by Kelso & Company, L.P. ("Kelso").
In 1992, the Company completed a public offering of Common Stock, par value $.01
(the "Common Stock"). The Company also repurchased substantially all the
remaining shares of Common Stock beneficially owned by Kelso, thus ending
Kelso's investment in the Company.
In 1993, the Company completed a public offering of 1,495,000 shares of $2.875
Series A Cumulative Convertible Exchangeable Preferred Stock ("Preferred
Stock"). The Company's Preferred Stock is traded on The Nasdaq National Market
("Nasdaq") under the symbol "ABFSP."
On July 10, 2000, the Company purchased 105,000 shares of its Preferred Stock at
$37.375 per share, for a total cost of $3.9 million. All of the shares purchased
were retired. As of December 31, 2000, the Company had outstanding 1,390,000
shares of Preferred Stock.
On August 13, 2001, the Company announced the call for redemption of its
Preferred Stock. As of August 10, 2001, 1,390,000 shares of Preferred Stock were
outstanding. At the end of the extended redemption period on September 14, 2001,
1,382,650 shares of the Preferred Stock were converted to 3,511,439 shares of
Common Stock. A total of 7,350 shares of Preferred Stock were redeemed at the
redemption price of $50.58 per share. The Company paid $0.4 million to the
holders of these shares in redemption of their Preferred Stock. The Company
delisted its Preferred Stock trading on Nasdaq under the symbol "ABFSP" on
September 12, 2001, eliminating the Company's annual dividend requirement.
In August 1995, pursuant to a tender offer, a wholly owned subsidiary of the
Company purchased the outstanding shares of common stock of WorldWay Corporation
("WorldWay"), at a price of $11 per share (the "Acquisition"). WorldWay was a
publicly held company engaged through its subsidiaries in motor carrier
operations. The total purchase price of WorldWay amounted to approximately $76.0
million.
3
ITEM 1. BUSINESS - continued
During the first half of 1999, the Company acquired 2,457,000 shares of Treadco
common stock for $23.7 million via a cash tender offer pursuant to a definitive
merger agreement. As a result of the transaction, Treadco became a wholly owned
subsidiary of the Company. On September 13, 2000, Treadco entered into an
agreement with The Goodyear Tire & Rubber Company ("Goodyear") to contribute its
business to a new limited liability company called Wingfoot Commercial Tire
Systems, LLC ("Wingfoot") (see Note P appearing on page 50 of the registrant's
Annual Report). The transaction closed on October 31, 2000.
On August 1, 2001, the Company sold the stock of G.I. Trucking for $40.5 million
in cash to a company formed by the senior executives of G.I. Trucking and Estes
Express Lines ("Estes") (see Note Q appearing on page 50 of the registrant's
Annual Report).
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The response to this portion of Item 1 is included in "Note L - Operating
Segment Data" appearing on pages 44 through 46 of the registrant's Annual Report
to Stockholders for the year ended December 31, 2002, and is incorporated herein
by reference under Item 15.
(c) NARRATIVE DESCRIPTION OF BUSINESS
GENERAL
During the periods being reported on, the Company operated in four defined
reportable operating segments: (1) ABF; (2) G.I. Trucking (which was sold on
August 1, 2001) (see Note Q appearing on page 50 of the registrant's Annual
Report); (3) Clipper; and (4) Treadco (which was contributed to Wingfoot on
October 31, 2000) (see Note P appearing on page 50 of the registrant's Annual
Report). Note L to the Consolidated Financial Statements contains additional
information regarding the Company's operating segments and appears on pages 44
through 46 of the registrant's Annual Report to Stockholders for the year ended
December 31, 2002, and is incorporated herein by reference under Item 15.
EMPLOYEES
At December 31, 2002, the Company and its subsidiaries had a total of 12,216
employees of which approximately 74% are members of a labor union.
MOTOR CARRIER OPERATIONS
LESS-THAN-TRUCKLOAD MOTOR CARRIER OPERATIONS
GENERAL
The Company's less-than-truckload ("LTL") 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"), Land-Marine Cargo,
Inc. ("Land-Marine"), FreightValue, Inc. ("FreightValue") and ABF Freight System
de Mexico, Inc. ("ABF-Mexico") (collectively "ABF") and until August 1, 2001,
G.I. Trucking Company (see Note Q appearing on page 50 of the registrant's
Annual Report).
LTL carriers offer services to shippers, transporting a wide variety of large
and small shipments to geographically dispersed destinations. LTL carriers pick
up small shipments throughout the vicinity of a local terminal and consolidate
them at the terminal. Shipments are consolidated by destination for
transportation by intercity units to their destination cities or to distribution
centers. Shipments from various locations can be reconsolidated for
transportation to distant destinations, other distribution centers or local
terminals. Once delivered to a local
4
ITEM 1. BUSINESS - continued
terminal, a shipment is delivered to the customer by local trucks operating from
the 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 trailer load. A trailer is then dispatched to that destination
without the freight having to be rehandled.
COMPETITION, PRICING AND INDUSTRY FACTORS
The trucking industry is highly competitive. The Company's LTL motor carrier
subsidiaries actively compete 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, most of the 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,
the Company's LTL motor carrier subsidiaries offer and negotiate various
discounts.
One of ABF's major competitors, Consolidated Freightways Corporation ("CF"),
filed for bankruptcy protection and ceased operations in early September 2002.
CF's operations were estimated to be two times the size of ABF's. The closing of
CF resulted in a capacity reduction within the LTL trucking industry and, as a
result, the competitive pricing environment strengthened in stability.
The trucking industry, including the Company's LTL motor carrier subsidiaries,
is directly affected by the state of the overall economy. The trucking industry
faces rising costs including government regulations on safety, maintenance and
fuel economy. The trucking industry is dependent upon the availability of
adequate fuel supplies. The Company has not experienced a lack of available fuel
but could be adversely impacted if a fuel shortage were to develop. In addition,
seasonal fluctuations also affect tonnage to be transported. Freight shipments,
operating costs and earnings also are affected adversely by inclement weather
conditions.
INSURANCE AND SAFETY
Generally, claims exposure in the motor carrier industry consists of cargo loss
and damage, third-party casualty and workers' compensation. The Company's motor
carrier subsidiaries are effectively self-insured for the first $150,000 of each
cargo loss, $1,000,000 of each workers' compensation loss and $1,000,000 of each
third-party casualty loss. The Company maintains insurance which it believes is
adequate to cover losses in excess of such self-insured amounts. However, the
Company has experienced situations where excess insurance carriers have become
insolvent (see Note R appearing on page 51 of the registrant's Annual Report).
The Company pays premiums to state guaranty funds in states where it has
workers' compensation self-insurance authority. In some of these self-insured
states, depending on each state's rules, the guaranty funds will pay excess
claims if the insurer cannot, due to insolvency. However, there can be no
certainty of the solvency of individual state guaranty funds. The Company has
been able to obtain what it believes to be adequate coverage for 2003 and is not
aware of problems in the foreseeable future which would significantly impair its
ability to obtain adequate coverage at market rates for its motor carrier
operations.
ABF FREIGHT SYSTEM, INC.
Headquartered in Fort Smith, Arkansas, ABF is the largest subsidiary of the
Company. ABF accounted for approximately 90.0% of the Company's consolidated
revenues for 2002. ABF is one of North America's largest LTL motor carriers,
based on revenues for 2002 as reported to the U.S. Department of Transportation
("D.O.T."). ABF provides direct service to over 98.6% of the cities in the
United States having a population of 25,000 or more. ABF provides interstate and
intrastate direct service to more than 40,000 points through 302 terminals 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 been in continuous service since
1923. ABF was incorporated in Delaware in 1982 and is the successor to Arkansas
Motor Freight, a
5
ITEM 1. BUSINESS - continued
business originally organized in 1935. Arkansas Motor Freight was the successor
to a business originally organized in 1923.
ABF offers national and regional transportation of general commodities through
standard, expedited and guaranteed LTL services. 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, 2002, no single customer accounted for more than 3.0% of ABF's
revenues, and the ten largest customers accounted for less than 10.0% of ABF's
revenues.
EMPLOYEES
At December 31, 2002, ABF employed 11,630 persons. Employee compensation and
related costs are the largest components of ABF's operating expenses. In 2002,
such costs amounted to 66.2% of ABF's revenues. Approximately 77% of ABF's
employees are covered under a collective bargaining agreement with the
International Brotherhood of Teamsters ("IBT"). The Company's current five-year
agreement with the IBT expires on March 31, 2003. On February 6, 2003, the
Company announced that a tentative new five-year collective bargaining agreement
had been reached, subject to ratification by the freight members of the IBT. The
agreement provides for annual contractual wage and benefit increases of
approximately 3.2% - 3.4%. The effective date of the proposed new agreement is
April 1, 2003. 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 IBT. 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.
Many of the largest LTL carriers are unionized and generally pay comparable
amounts for wages and benefits. Union companies typically have somewhat higher
wage costs and significantly higher fringe benefit costs than non-union
companies. Due to its national reputation and its high pay scale, ABF has not
historically experienced any significant difficulty in attracting or retaining
qualified drivers.
G.I. TRUCKING COMPANY
On August 1, 2001, the Company sold the stock of G.I. Trucking for $40.5 million
in cash to a company formed by the senior executives of G.I. Trucking and Estes
(see Note Q appearing on page 50 of the registrant's Annual Report).
6
ITEM 1. BUSINESS - continued
INTERMODAL OPERATIONS
GENERAL
The Company's intermodal transportation operations are conducted through
Clipper, headquartered in Lemont, Illinois. Clipper operates through two
business units: Clipper Freight Management ("CFM") and Clipper LTL, and offers
domestic intermodal freight services, utilizing a variety of transportation
modes including rail and over-the-road.
COMPETITION, PRICING AND INDUSTRY FACTORS
Clipper operates in highly competitive environments. Competition is based on the
most consistent transit times, freight rates, damage-free shipments and on-time
delivery of freight. Clipper competes with other intermodal transportation
operations, freight forwarders and railroads, as well as with other national and
regional LTL and truckload motor carrier operations. Intermodal transportation
operations are akin to motor carrier operations in terms of market conditions,
with revenues being weaker in the first quarter and stronger during the months
of June through October. Freight shipments, operating costs and earnings are
also affected by the state of the overall economy and inclement weather. The
reliability of rail service is also a critical component of Clipper's ability to
provide service to its customers.
CLIPPER
Clipper's revenues accounted for approximately 8.0% of consolidated revenues for
2002. During the year ended December 31, 2002, Clipper's largest customer
accounted for approximately 11.5% of Clipper's revenues.
CFM
CFM provides services through Clipper Exxpress Company ("Clipper Exxpress") and
Agricultural Express of America, Inc. (d/b/a/ Clipper Controlled Logistics). CFM
accounted for approximately 71.0% of Clipper's revenues during 2002.
CFM provides an extensive list of transportation services such as intermodal and
truck brokerage, warehousing, consolidation, transloading, repacking, and other
ancillary services. As an intermodal marketing operation, CFM 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. CFM'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 Controlled Logistics provides high quality, temperature-controlled
intermodal transportation 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. As of December 31, 2002, Clipper
Controlled Logistics owned or leased 506 temperature-controlled trailers that it
deployed 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, Clipper Controlled Logistics 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. Clipper
Controlled Logistics' services also include transportation of non-produce loads
requiring protective services and leasing trailers during non-peak produce
seasons.
7
ITEM 1. BUSINESS - continued
CLIPPER LTL
Clipper LTL operates primarily through Clipper Exxpress. Management believes
Clipper Exxpress is one of the largest intermodal consolidators and forwarders
of LTL shipments in the United States. Clipper LTL accounted for approximately
29.0% of Clipper's 2002 revenues.
Clipper LTL's collection and distribution network consists of 21 locations
geographically dispersed throughout the United States. Clipper LTL's 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
41.0% of Clipper's LTL revenue. A majority of Clipper's LTL revenue is derived
from long-haul, metro area-to-metro area transportation.
Although pickup and delivery and terminal handling is performed by independent
agents, Clipper LTL has an operations and customer service staff located at or
near many of its principal agents' terminals to monitor service levels and
provide an interface between customers and agents.
TREADCO, INC.
On September 13, 2000, Treadco entered into an agreement with Goodyear to form a
new limited liability company called Wingfoot Commercial Tire Systems, LLC (see
Note P appearing on page 50 of the registrant's Annual Report). The transaction
closed on October 31, 2000.
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. In addition, the Company is
subject to significant regulations dealing with underground fuel storage tanks.
The Company's subsidiaries, or lessees, store fuel for use in tractors and
trucks in approximately 77 underground tanks located in 26 states. Maintenance
of such tanks is regulated at the federal and, in some cases, state levels. The
Company believes that it is in substantial compliance with all such regulations.
The Company's underground tanks are required to have leak detection systems. The
Company is not aware of any leaks from such tanks that could reasonably be
expected to have a material adverse effect on the Company.
The Company has received notices from the 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 $195,000 over the last 10 years, primarily at seven
sites), or believes its obligations with respect to such sites would involve
immaterial monetary liability, although there can be no assurances in this
regard.
As of December 31, 2002, the Company had accrued approximately $2.7 million to
provide for environmental-related liabilities. The Company's environmental
accrual is based on management's best estimate of the actual liability. The
Company's estimate is founded on management's experience in dealing with similar
environmental matters and on actual testing performed at some sites. Management
believes that the accrual is adequate to cover environmental liabilities based
on the present environmental regulations. Accruals for environmental liability
are included in the balance sheet as accrued expenses.
8
ITEM 1. BUSINESS - continued
(d) FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS
Classifications of operations or revenues by geographic location beyond the
descriptions previously provided is impractical and is, therefore, not provided.
The Company's foreign operations are not significant.
(e) AVAILABLE INFORMATION
The Company files its annual reports on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, amendments to those reports, proxy and
information statements and other information electronically with the Securities
and Exchange Commission ("SEC"). All reports and financial information can be
obtained, free of charge, through the Company's Web site located at
www.arkbest.com or through the SEC Web site located at www.sec.gov, as soon as
reasonably practical after such material is electronically filed with the SEC.
9
ITEM 2. PROPERTIES
The Company owns its executive office building in Fort Smith, Arkansas, which
contains approximately 185,000 square feet.
ABF
ABF currently operates out of 302 terminal facilities of which it owns 76,
leases 47 from an affiliate and leases the remainder from non-affiliates. ABF's
principal terminal facilities are as follows:
No. of Doors Square Footage (1)
------------ ------------------
Owned:
Dayton, Ohio 330 249,765
Ellenwood, Georgia 226 153,209
South Chicago, Illinois 274 152,990
Carlisle, Pennsylvania 260 156,468
Dallas, Texas 194 144,170
Leased from affiliate, Transport Realty:
North Little Rock, Arkansas 196 148,712
Albuquerque, New Mexico 85 71,004
Pico Rivera, California 99 57,460
Leased from non-affiliate:
Winston-Salem, North Carolina 150 160,700
Salt Lake City, Utah 92 44,400
(1) Includes shop and driver room square footage.
CLIPPER
Clipper operates from 21 locations, geographically dispersed throughout the
United States. All of the locations are facilities leased by Clipper or are
agent locations.
10
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 are expected to have a
material adverse effect on the Company's financial condition, cash flows or
results of operations. The Company maintains insurance against certain risks
arising out of the normal course of its business, subject to certain
self-insured retention limits.
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, 2002.
11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information set forth under the caption "Market and Dividend Information" on
page 9 of the registrant's Annual Report to Stockholders for the year ended
December 31, 2002, is incorporated by reference under Item 14 herein.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth under the caption "Selected Financial Data" on page 8
of the registrant's Annual Report to Stockholders for the year ended December
31, 2002, is incorporated by reference under Item 15 herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," appearing on pages 10 through 21 of the registrant's Annual Report
to Stockholders for the year ended December 31, 2002, is incorporated by
reference under Item 15 herein.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
"Quantitative and Qualitative Disclosures About Market Risk," appearing on page
22 of the registrant's Annual Report to Stockholders for the year ended December
31, 2002, is incorporated by reference under Item 15 herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of independent auditors, consolidated financial statements and
supplementary information, appearing on pages 23 through 53 of the registrant's
Annual Report to Stockholders for the year ended December 31, 2002, are
incorporated by reference under Item 15 herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
12
PART III
ITEM 10. DIRECTORS AND EXECUTIVE 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
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's Proxy
Statement for the Annual Meeting of Stockholders to be filed by the Company with
the Securities and Exchange Commission ("Definitive Proxy Statement") set forth
certain information with respect to the directors, the nominee for election as
director and executive officers of the Company and are incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The sections entitled "Summary Compensation Table," "Aggregated Options/SAR
Exercises in Last Fiscal Year and Fiscal Year-End Options/SAR Values," "Stock
Option Grants," "Executive Compensation and Development Committee Interlocks and
Insider Participation," "Retirement and Savings Plans," "Employment Contracts
and Termination of Employment and Change-in-Control Arrangements," the paragraph
concerning directors' compensation in the section entitled "Board of Directors
and Committees," "Report on Executive Compensation by the Executive Compensation
and Development Committee and Stock Option Committee" and "Stock Performance
Graph" in the Company's Definitive Proxy Statement set forth certain information
with respect to compensation of management of the Company and are incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section entitled "Principal Stockholders and Management Ownership" in the
Company's Definitive Proxy Statement 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
Definitive Proxy Statement sets forth certain information with respect to
relations of and transactions by management of the Company and is incorporated
herein by reference.
ITEM 14. CONTROLS AND PROCEDURES
Within the 90-day period prior to the filing of this report, an evaluation was
performed under the supervision and with the participation of the Company's
management, including the CEO and CFO, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures. Based on that
evaluation, the Company's management, including the CEO and CFO, concluded that
the Company's disclosure controls and procedures were effective as of December
31, 2002. There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect internal controls
subsequent to December 31, 2002.
13
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) FINANCIAL STATEMENTS
The following information appearing in the 2002 Annual Report to Stockholders is
incorporated by reference in this Form 10-K Annual Report as Exhibit (13):
Page
----
Market and Dividend Information 9
Selected Financial Data 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 21
Quantitative and Qualitative Disclosures About Market Risk 22
Report of Independent Auditors 23
Consolidated Financial Statements 24 - 51
Quarterly Results of Operations 49
With the exception of the aforementioned information, the 2002 Annual Report to
Stockholders is not deemed filed as part of this report. Financial statements
other than those listed are omitted for the reason that they are not required or
are not applicable. The following additional financial data should be read in
conjunction with the consolidated financial statements in such 2002 Annual
Report to Stockholders.
(a)(2) FINANCIAL STATEMENT SCHEDULES
For the years ended December 31, 2002, 2001, and 2000.
Schedule II - Valuation and Qualifying Accounts and Reserves Page 19
Schedules other than those listed are omitted for the reason that they are not
required or are not applicable, or the required information is shown in the
financial statements or notes thereto.
(a)(3) EXHIBITS
The exhibits filed with this report are listed in the Exhibit Index,
which is submitted as a separate section of this report.
(b) REPORTS ON FORM 8-K
The Company filed Form 8-K dated March 7, 2002, for Item No. 5 -
Other Events. The filing announced the Company's non-cash impairment
charge of $23.9 million on its Clipper goodwill.
The Company filed Form 8-K dated May 17, 2002, for Item No. 5 -
Other Events. The filing announced the Company's new three-year
$225.0 million Credit Agreement dated as of May 15, 2002.
The Company filed Form 8-K dated June 21, 2002, for Item No. 5 -
Other Events. The filing announced the Company's general rates and
charges increase that took effect August 1, 2002.
The Company filed Form 8-K dated August 12, 2002, for Item No. 9 -
Regulation Fair Disclosure. The filing disclosed the statements made
under oath by Robert A. Young III, President and Chief Executive
Officer of the Company and David E. Loeffler, Vice President - Chief
Financial Officer and Treasurer of the Company, pursuant to Order
4-460 with regard to facts and circumstances relating to certain
Exchange Act filings of the Company, pursuant to Section 21(a)(1) of
the Securities Exchange Act of 1934.
14
The Company filed Form 8-K dated August 15, 2002, for Item No. 5 -
Other Events. The filing announced the Company's favorable
settlement reached with the Internal Revenue Service.
The Company filed Form 8-K dated October 17, 2002, for Item No. 5 -
Other Events. The filing announced the retirement of David E.
Stubblefield, President and Chief Executive Officer of ABF, and the
appointment of Robert A. Davidson as his successor.
(c) EXHIBITS
See Item 15(a)(3) above.
(d) FINANCIAL STATEMENT SCHEDULES
The response to this portion of Item 15 is submitted as a separate
section of this report.
15
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/David E. Loeffler
------------------------------------
David E. Loeffler
Vice President - Chief Financial
Officer and Treasurer
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 February 21, 2003
- ---------------------------- -----------------
William A. Marquard
/s/ Robert A. Young, III Director, Chief Executive Officer February 26, 2003
- ---------------------------- and President (Principal -----------------
Robert A. Young, III Executive Officer)
/s/ David E. Loeffler Vice President - Chief Financial Officer February 26, 2003
- ---------------------------- and Treasurer -----------------
David E. Loeffler
/s/ Frank Edelstein Director February 26, 2003
- ---------------------------- -----------------
Frank Edelstein
/s/ Arthur J. Fritz Director February 26, 2003
- ---------------------------- -----------------
Arthur J. Fritz
/s/ John H. Morris Director February 26, 2003
- ---------------------------- -----------------
John H. Morris
/s/ Alan J. Zakon Director February 23, 2003
- ---------------------------- -----------------
Alan J. Zakon
/s/ William M. Legg Director February 21, 2003
- ---------------------------- -----------------
William M. Legg
16
MANAGEMENT CERTIFICATION
I, Robert A. Young III, President and Chief Executive Officer of Arkansas Best
Corporation, ("Registrant") certify that:
1. I have reviewed this annual report on Form 10-K of Arkansas Best
Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Registrant as of, and for, the periods presented in this annual
report;
4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we
have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
(b) evaluated the effectiveness of the Registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit
committee of Registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to record,
process, summarize and report financial data and have identified for the
Registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: February 26, 2003 /s/ Robert A. Young III
----------------------- ----------------------------------------
Robert A. Young III
President and Chief Executive Officer
17
MANAGEMENT CERTIFICATION
I, David E. Loeffler, Vice President - Chief Financial Officer and Treasurer of
Arkansas Best Corporation, ("Registrant") certify that:
1. I have reviewed this annual report on Form 10-K of Arkansas Best
Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Registrant as of, and for, the periods presented in this annual
report;
4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we
have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
(b) evaluated the effectiveness of the Registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit
committee of Registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to record,
process, summarize and report financial data and have identified for the
Registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: February 26, 2003 /s/ David E. Loeffler
----------------------- ----------------------------------------
David E. Loeffler
Vice President - Chief Financial Officer
and Treasurer
18
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
ARKANSAS BEST CORPORATION
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
-------- -------- -------- -------- -------- --------
ADDITIONS
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER ACCOUNTS DEDUCTIONS - BALANCE AT
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE END OF PERIOD
----------- ---------- ---------- -------------- ------------ -------------
($ thousands)
Year Ended December 31, 2002:
Deducted from asset accounts:
Allowance for doubtful
accounts receivable
and revenue adjustments .... $3,483 $1,593 $ 958(A) $3,092(B) $2,942
====== ====== ====== ====== ======
Year Ended December 31, 2001:
Deducted from asset accounts:
Allowance for doubtful $ 274(D)
accounts receivable
and revenue adjustments .... $4,595 $2,966 $1,104(A) 4,908(B) $3,483
====== ====== ====== ====== ======
Year Ended December 31, 2000:
Deducted from asset accounts:
Allowance for doubtful $6,381(B)
accounts receivable
and revenue adjustments .... $5,775 $3,797 $2,598(A) 1,194(C) $4,595
====== ====== ====== ====== ======
Note A - Recoveries of amounts previously written off.
Note B - Uncollectible accounts written off.
Note C - The allowance for doubtful accounts for Treadco, Inc., as of the
date of the contribution of substantially all of Treadco's assets
and liabilities to Wingfoot (see Note P appearing on page 50 of the
registrant's Annual Report).
Note D - The allowance for doubtful accounts for G.I. Trucking, as of the
date of the sale (see Note Q appearing on page 50 of the
registrant's Annual Report).
19
FORM 10-K -- ITEM 14(C)
EXHIBIT INDEX
ARKANSAS BEST CORPORATION
The following exhibits are filed with this report or are incorporated by
reference to previously filed material.
EXHIBIT
NO.
3.1* Restated Certificate of Incorporation of the Company (previously
filed as Exhibit 3.1 to the Company's Registration Statement on Form
S-1 under the Securities Act of 1933 filed with the Commission on
March 17, 1992, Commission File No. 33-46483, and incorporated
herein by reference).
4.1* Form of Indenture, between the Company and Harris Trust and Savings
Bank, with respect to $2.875 Series A Cumulative Convertible
Exchangeable Preferred Stock (previously filed as Exhibit 4.4 to
Amendment No. 2 to the Company's Registration Statement on Form S-1
under the Securities Act of 1933 filed with the Commission on
January 26, 1993, Commission File No. 33-56184, and incorporated
herein by reference).
4.2* Indenture between Carolina Freight Corporation and First Union
National Bank, Trustee with respect to 6 1/4% Convertible
Subordinated Debentures Due 2011 (previously filed as Exhibit 4-A to
the Carolina Freight Corporation's Registration Statement on Form
S-3 filed with the Commission on April 11, 1986, Commission File No.
33-4742, and incorporated herein by reference).
10.1*# Stock Option Plan (previously filed as Exhibit 10.3 to the Company's
Registration Statement on Form S-1 under the Securities Act of 1933
filed with the Commission on March 17, 1992, Commission File No.
33-46483, and incorporated herein by reference).
10.2* First Amendment dated as of January 31, 1997 to the $346,971,321
Amended and Restated Credit Agreement dated as of February 21, 1996,
among the Company as Borrower, Societe Generale as Managing Agent
and Administrative Agent, NationsBank of Texas, N.A. as
Documentation Agent and the Banks named herein as the Banks
(previously filed as Exhibit 10.1 to the Company's Current Report on
Form 8-K, filed with the Commission on February 27, 1997, Commission
File No. 0-19969, and incorporated herein by reference).
10.3* First Amendment dated as of January 31, 1997, to the $30,000,000
Credit Agreement dated as of February 21, 1996, among the Company as
Borrower, Societe Generale as Agent, and the Banks named herein as
the Banks (previously filed as Exhibit 10.3 to the Company's Current
Report on Form 8-K, filed with the Commission on February 27, 1997,
Commission File No. 0-19969, and incorporated herein by reference).
20
FORM 10-K -- ITEM 14(C)
EXHIBIT INDEX
ARKANSAS BEST CORPORATION
(CONTINUED)
EXHIBIT
NO.
10.4*# Arkansas Best Corporation Performance Award Unit Program effective
January 1, 1996 (previously filed as Exhibit 10.6 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1995, Commission File No. 0-19969, and incorporated herein by
reference).
10.5* Second Amendment, dated July 15, 1997, to the $346,971,312 Amended
and Restated Credit Agreement among the Company as Borrower, Societe
Generale as Managing Agent and Administrative Agent, NationsBank of
Texas, N.A., as Documentation Agent, and the Banks named herein as
the Banks (previously filed as Exhibit 10.3 to the Company's Current
Report on Form 8-K, filed with the Commission on August 1, 1997,
Commission File No. 0-19969, and incorporated herein by reference).
10.6* Interest rate swap Agreement effective April 1, 1998 on a notional
amount of $110,000,000 with Societe Generale (previously filed as
Exhibit 10.1 to the Company's Form 10-Q filed with the Commission on
May 13, 1998, Commission File No. 0-19969, and incorporated herein
by reference).
10.7* $250,000,000 Credit Agreement dated as of June 12, 1998 with Societe
Generale as Administrative Agent and Bank of America National Trust
Savings Association and Wells Fargo Bank (Texas), N.A., as
Co-Documentation Agents (previously filed as Exhibit 10.2 to the
Company's Form 10-Q filed with the Commission on August 6, 1998,
Commission File No. 0-19969, and incorporated herein by reference).
10.8*# The Company's Supplemental Benefit Plan (previously filed as Exhibit
4.1 to the Company's Registration Statement on Form S-8 filed with
the Commission on December 22, 1999, Commission File No. 333-93381,
and incorporated herein by reference).
10.9* The Company's National Master Freight Agreement covering
over-the-road and local cartage employees of private, common,
contract and local cartage carriers for the period of April 1, 1998
through March 31, 2003.
10.10* First amendment dated as of February 12, 1999, to the $250,000,000
Credit Agreement dated as of June 12, 1998, among the Company as
Borrower; Societe Generale, Southwest Agency, as Administrative
Agent; and Bank of America National Trust and Savings Association
and Wells Fargo Bank (Texas), N.A., as Co-Documentation Agents.
10.11* Amendment dated March 15, 1999, to Amendment No. 1 dated as of
February 12, 1999, to the $250,000,000 Credit Agreement dated as of
June 12, 1998, among the Company as Borrower; Societe Generale,
Southwest Agency, as Administrative Agent; and Bank of America
National Trust and Savings Association and Wells Fargo Bank (Texas),
N.A., as Co-Documentation Agents.
10.12* Second amendment dated as of August 2, 2000, to the $250,000,000
Credit Agreement dated as of June 12, 1998, among the Company as
Borrower; Wells Fargo Bank (Texas), N.A., as Administrative Agent;
and Bank of America National Trust and Savings Association and Wells
Fargo Bank (Texas), N.A., as Co-Documentation Agents, as amended by
Amendment No. 1 and Consent and Waiver dated as of February 12, 1999
and Amendment to Amendment No. 1 and Consent and Waiver dated as of
March 15, 1999.
21
FORM 10-K -- ITEM 14(C)
EXHIBIT INDEX
ARKANSAS BEST CORPORATION
(CONTINUED)
EXHIBIT
NO.
10.13* Third amendment dated as of September 30, 2000, to the $250,000,000
Credit Agreement dated as of June 12, 1998, among the Company as
Borrower; Wells Fargo Bank (Texas), N.A., as Administrative Agent;
and Bank of America National Trust and Savings Association and Wells
Fargo Bank (Texas), N.A., as Co-Documentation Agents, as amended by
Amendment No. 1 and Consent and Waiver dated as of February 12,
1999, Amendment to Amendment No. 1 and Consent and Waiver dated as
of March 15, 1999, and Amendment No. 2 dated as of August 2, 2000
(as amended, the "Credit Agreement").
10.14* Agreement dated September 13, 2000, by and among The Goodyear Tire &
Rubber Company and Treadco, Inc., a wholly owned subsidiary of
Arkansas Best Corporation.
10.15* Stock Purchase Agreement by and between Arkansas Best Corporation
and Estes Express Lines dated as of August 1, 2001.
10.16*# Letter re: Proposal to adopt the Company's 2002 Stock Option Plan
10.17 Amended and Restated Bylaws of the Company dated as of February 17,
2003.
13 2002 Annual Report to Stockholders
21 List of Subsidiary Corporations
23 Consent of Ernst & Young LLP, Independent Auditors
99.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
* Previously filed with the Securities and Exchange Commission and
incorporated herein by reference.
# Designates a compensation plan for Directors or Executive Officers.
22