Results of Operations

Liquidity and Capital Resources

Environmental Matters

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.