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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Arkansas Best Corporation (the “Company”) is a diversified holding company engaged through its subsidiaries primarily in less-than-truckload (“LTL”) and truckload motor carrier operations, logistics and freight forwarding operations and truck tire retreading and new tire sales. Principal subsidiaries owned are ABF Freight System, Inc. (“ABF”), Treadco, Inc. (“Treadco”), and, effective September 30, 1994, Clipper Exxpress Company (“Clipper”). Also, effective August 12, 1995, pursuant to its acquisition of WorldWay Corporation (“WorldWay”), the Company owns Cardinal Freight Carriers, Inc. (“Cardinal”), G.I. Trucking Company (“G.I. Trucking”), CaroTrans International, Inc. (“CaroTrans”), The Complete Logistics Company (“Complete Logistics”) and Innovative Logistics Incorporated (“ILI”). (See discussion below.) 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, the Company consummated the purchase of all outstanding stock of the Clipper Group. Assets of approximately $26.2 million were acquired and liabilities of approximately $14.7 million were assumed. The Company’s total purchase price was $60.9 million. The Clipper acquisition has been accounted for under the purchase method, effective September 30, 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. On July 14, 1995, ABC Acquisition Corporation (the “Purchaser”), a wholly owned subsidiary of the Company, commenced a tender offer (the “Offer”) to purchase all outstanding shares of common stock of WorldWay Corporation at a purchase price of $11 per share (the “Acquisition”). Pursuant to the Offer, on August 11, 1995, the Purchaser accepted for payment shares of WorldWay validly tendered, representing approximately 91% of the shares outstanding. On October 12, 1995, the remaining shares of WorldWay’s common stock were converted into the right to receive $11 per share in cash. For financial statement purposes, the WorldWay Acquisition has been accounted for under the purchase method effective August 12, 1995. Consequently, the accompanying financial statements include the results of operations for WorldWay and its subsidiaries from August 12, 1995 through December 31, 1995. The allocation of the purchase cost in the accompanying financial statements is preliminary and subject to change. Final values may differ from those set forth in these financial statements, but differences are not expected to be material. Assets with a fair value of approximately $309 million were acquired and liabilities with a fair value of approximately $235 million were assumed. The Company’s total purchase price was $76 million. Approximately $2 million of goodwill was recorded as a result of the purchase allocation and is being amortized over a 30-year period. |
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