1995 as Compared to 1994

Consolidated revenues of the Company for 1995 were $1.4 billion compared to $1.1 billion for 1994. The Company had an operating loss of $28.6 million for 1995 compared to operating profit of $47.1 million for 1994. For 1995, the Company had a net loss of $32.8 million, or a loss of $1.90 per common share, compared to net income of $18.7 million, or $.74 per common share for 1994. Revenues for 1995 increased due to the Acquisition of WorldWay and the Acquisition adversely impacted operating results for the same period. For the period from August 12 to September 30, 1995, WorldWay incurred a consolidated after-tax net loss of $13.6 million and a pre-tax loss from operations of $20.4 million. The WorldWay loss is attributable to Carolina Freight and Red Arrow which as of September 24, 1995 were merged into ABF. Consolidated revenues and income for 1994 were adversely affected by the 24-day labor strike by the Teamsters’ union employees of ABF in April 1994.

Earnings per common share for 1995 and 1994 give consideration to preferred stock dividends of $4.3 million. Average common shares outstanding for 1995 were 19.5 million shares compared to 19.4 million shares for 1994. Outstanding shares for 1995 and 1994 do not assume conversion of preferred stock to common shares, because conversion would be anti-dilutive for these periods.

Less-Than-Truckload Motor Carrier Operations Segment. The Company’s LTL motor carrier operations are conducted primarily through ABF and effective August 12, 1995 through G.I. Trucking.

Comparisons for 1995 were affected by the Acquisition of WorldWay in August 1995 and by the ABF Teamsters’ employees strike in April 1994 (see discussion above). Therefore, comparisons of the results of operations for the LTL motor carrier operations segment are not meaningful and are not presented. As a result of the Acquisition of WorldWay, LTL motor carrier operations segment includes the results of Carolina Freight and Red Arrow for the period from August 12, 1995 to their merger into ABF on September 24, 1995.

Revenues from the LTL motor carrier operations segment for 1995 were $1.1 billion, with an operating loss of $32.9 million. Earnings at ABF were negatively affected by a slowing economy and increased pricing pressure which resulted in tonnage levels below Company expectations for 1995.

ABF retained less revenue from the merger of Carolina Freight and Red Arrow than was originally estimated, resulting in over-staffing and excess equipment. This shortfall in revenue was compounded by weakened shipper demand and continued price competition during the fourth quarter. The over-staffing resulted in increased salaries and wages expense while depreciation expense was higher because of the excess revenue equipment.

Effective with the merger, ABF inherited Carolina Freight’s regional distribution terminal operations, which reconfigured the way freight flowed through ABF’s terminal system. This reconfiguration created many operating inefficiencies in ABF’s system. Labor dollars as a percent of revenue increased, empty miles increased and weight per trailer decreased, which all had an adverse impact on expenses.

ABF has implemented a combination of cost cutting and revenue raising measures to stem its operating losses. ABF has closed a number of regional distribution terminal operations which it inherited when Carolina Freight and Red Arrow were merged into ABF. These closings will realign ABF to its normal terminal system configuration. ABF implemented a 5.8% freight rate increase on January 1, 1996 and is in process of selling excess real estate and revenue equipment resulting from the Carolina Freight and Red Arrow merger.

Salaries, wages and benefits increased 3.3% annually effective April 1, 1995, pursuant to ABF’s collective bargaining agreement with its Teamsters’ employees and will increase 3.8% annually effective April 1, 1996.

Forwarding Operations Segment. Effective September 30, 1994, with the purchase of the Clipper Group, the Company began reporting a new business segment, forwarding operations. The Company’s forwarding operations are conducted primarily through the Clipper Group, effective September 30, 1994, and CaroTrans, effective August 12, 1995.

Comparisons for 1995 were affected by the Acquisition of WorldWay in August 1995 and by the acquisition of the Clipper Group in September 1994. Therefore, comparisons of the results of operations for the forwarding operations segment are not meaningful and are not presented.

For 1995, the forwarding operations segment had revenues of $140.7 million with an operating profit of $2.8 million. Forwarding operations were adversely affected during 1995 by soft economic conditions.

Truckload Motor Carrier Operations Segment. Effective August 12, 1995, with the Acquisition of WorldWay, the Company began reporting a new business segment, truckload motor carrier operations. The Company’s truckload motor carrier operations are conducted through Cardinal.

From August 12, 1995 to December 31, 1995, Cardinal had revenues of $28.0 million with an operating profit of $3.0 million. Cardinal’s operations were adversely affected during 1995 by soft economic conditions.

Logistics Operations Segment. Effective August 12, 1995, with the Acquisition of WorldWay, the Company began reporting a new business segment, logistics operations. The Company’s logistics operations are conducted through Integrated Distribution, Inc. and effective August 12, 1995, through Complete Logistics and ILI.

For 1995, the logistics operations segment had operating revenues of $31.7 million with an operating loss of $2.6 million.

Tire Operations Segment. Treadco’s revenues for 1995 increased 4.7% to $145.1 million from $138.7 million for 1994. For 1995, “same store” sales increased 2.4% and “new store” sales accounted for 2.7% of the increase from 1994. Same store sales include both production locations and satellite sales locations that have been in existence for the all of 1995 and 1994. Although a softer economy during the quarter slowed demand for both new replacement and retreaded truck tires, same store sales were higher primarily as a result of an increase in market share in the areas served. Treadco has seen increased competition as Bandag Incorporated (“Bandag”) has granted additional franchises in some locations currently being served by Treadco. Revenues from retreading for 1995 increased 1.6% to $76.4 million from $75.2 million for 1994. Revenues from new tire sales increased 8.3% to $68.7 million for 1995 from $63.5 million for 1994.

Tire operations segment operating expenses as a percent of revenues were 97.0% for 1995 compared to 92.0% for 1994. Cost of sales for the tire operations segment as a percent of revenues increased to 74.9% for 1995 from 72.8% for 1994. Bandag, Treadco’s tread rubber supplier, implemented three price increases, totaling 9.6%, during 1994 and the beginning of 1995 which Treadco has been unsuccessful, so far, in fully passing along to our customers. Selling, administrative and general expenses for the tire operations segment increased to 21.8% for 1995 from 18.9% for 1994. The increase resulted primarily from an increase in bad debt expense, costs associated with employee medical benefits and data processing costs associated with the installation of a production and inventory control system.

In August 1995, Bandag, Treadco’s tread rubber supplier and franchiser of the retreading process used by substantially all of Treadco’s locations, announced that certain franchise agreements would not be renewed upon expiration in 1996. Bandag subsequently advised Treadco that unless Treadco uses the Bandag process exclusively, Bandag would not renew any of Treadco’s franchise agreements when they expire.

In October 1995, Treadco announced it had reached an agreement for the Oliver Rubber Company (“Oliver”) to be a supplier of equipment and related materials for Treadco’s truck tire precure retreading business. The agreement provides that Oliver will supply Treadco with retreading equipment and related materials for the eight production facilities whose Bandag franchises expire in 1996 and any other Treadco facilities which cease being a Bandag franchised location.

Treadco has converted its Little Rock (AR), Pine Bluff (AR), West Memphis (AR) and Phoenix (AZ) Bandag franchises to Oliver licensed facilities. Based on Treadco’s current plans, all remaining Bandag franchises will convert to the Oliver process by the end of the third quarter, 1996.

While the equipment removal and replacement is expected to cause temporary disruptions to Treadco’s operations, it is not expected to have a significant impact on Treadco’s ability to meet its customers’ needs. However, Treadco’s management believes its national account relationships have been and will continue to be negatively impacted as a result of Bandag’s actions and the conversion from Bandag to Oliver. Also as a result of the conversion, Treadco continues to be targeted by other dealers in soliciting customers, causing margins to be under intense competitive pressure. Although the conversion will have a negative impact on the results of operations during the next 12 months, Treadco’s management believes the Oliver process produces retreads of equal or better quality and durability than the Bandag process. After the transition period, Treadco’s management believes Treadco will be in a better position to control its costs and deliver true value to its customers, while having unrestricted opportunities to expand into new markets.

Interest. Interest expense was $17.0 million for 1995 compared to $7.0 million for 1994 primarily due to a higher level of outstanding debt. The increase in long-term debt consisted primarily of debt incurred in the acquisition of WorldWay and debt incurred for working capital requirements during the fourth quarter of 1995. Also, the Company incurred additional debt in the latter part of 1994 in the acquisition of the Clipper Group and a term loan used to finance construction of the Company’s corporate office building which was completed in 1995.

Income Taxes. The difference between the effective tax rate for 1995 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).

At December 31, 1995, the Company had deferred tax assets of $45.6 million, net of a valuation allowance of $1.2 million, and deferred tax liabilities of $62.0 million. The Company believes that the benefits of the deferred tax assets of $45.6 million will be realized through the reduction of future taxable income.

Management has considered appropriate factors in assessing the probability of realizing these deferred tax assets. These factors include the deferred tax liabilities of $62.0 million and the presence of significant taxable income in 1993 and 1994 and the extended carryforward period for net operating losses included in deferred tax assets. The valuation allowance has been provided for the benefits of net operating loss carryovers in certain states where operations were affected by the merger of Carolina Freight into ABF.

Management intends to evaluate the realizability of deferred tax assets on a quarterly basis by assessing the need for any additional valuation allowance.

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, ABF’s 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. 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.

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.

In order to explore alternatives to the Bandag process in some new geographical markets, Treadco opened a precure production facility in Las Vegas, Nevada, in the second quarter of 1995, which purchases 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 opened an additional retreading facility in the second half of 1995. This production facility is a mold cure retread facility. The facility uses tread rubber compounds provided by Bridgestone/Firestone, Inc. and Bridgestone/Firestone, Inc. provides technical support. The process produces 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).

Liquidity and Capital Resources

The ratio of current assets to current liabilities was 1.06:1 at December 31, 1995 compared to 0.83:1 at December 31, 1994. Net cash used by operating activities for 1995 was $66.2 million c ompared to net cash provided of $48.8 million in 1994. The decrease is due primarily to the net loss from operations, increase in receivables and reductions in assumed WorldWay accounts payable and accrued expenses.

On August 10, 1995 the Company entered into a $350 million credit agreement (the “Credit Agreement”) with Societe Generale, Southwest Agency as Managing and Administrative Agent and NationsBank of Texas, N.A., as Documentation Agent, and with 15 other participating banks. The Credit Agreement includes a $75 million term loan and provides for up to $275 million of revolving credit loans (including letters of credit).

Term Loan and Revolving Credit advances bear interest at one of the following rates, at the Company’s option: (a) Prime Rate advance or (b) Eurodollar Rate advance. A Prime Rate advance bears an interest rate equal to the lesser of (i) the Adjusted Prime Rate plus the Applicable Margin and (ii) the maximum nonusurious interest rate under applicable law. The Adjusted Prime Rate is equal to the greater of the prime rate offered by Societe Generale or the Federal Funds Rate plus 1/2%. The Applicable Margin is determined as a function of the ratio of the Company’s consolidated indebtedness to its consolidated earnings before interest, taxes, depreciation and amortization. Eurodollar Rate advances shall bear an interest rate per annum equal to the lesser of (i) the Eurodollar Rate offered by Societe Generale plus the Applicable Margin and (ii) the maximum nonusurious interest rate under applicable law. The Company has paid and will continue to pay certain customary fees for such commitments and advances. At December 31, 1995, the average interest rate on the Credit Agreement was 7.6%. The Company pays a commitment fee at a rate per annum equal to the Applicable Margin on the unused amount of the Company’s revolving credit commitment.

There were $203 million of Revolver Advances, $75 million of Term Advances and approximately $64.1 million of letters of credit outstanding at December 31, 1995. Outstanding revolving credit advances may not exceed a borrowing base calculated using the Company’s revenue equipment, the Treadco common stock owned by the Company, and eligible receivables.

The Term Advances are payable in varying installments commencing in November 1996.

The Credit Agreement replaced a $150 million credit agreement with Societe Generale and a receivable purchase agreement with Renaissance Funding Corp. and Societe Generale which allowed ABF to sell to Renaissance Funding Corp. an interest in up to $55 million in a pool of receivables.

The Credit Agreement contains various covenants which limit, among other things, indebtedness, distributions, asset sales, restricted payments, investments, loans and advances, as well as requiring the Company to meet certain financial tests. As of December 31, 1995, the Company was not in compliance with certain covenants relating to financial tests. On February 21, 1996, the Company obtained an amendment to the credit agreement which revised the agreement so that the Company is now in compliance with all covenants. Under the amended credit agreement, the Company has pledged substantially all revenue equipment and real property not already pledged under other debt obligations or capital leases.

The amendment also revised the maturity schedule of the term loan agreement to revise the loans to be paid off in graduated principal installments through August 1998. The current portion of long-term debt and the five year maturity schedule reflected in the consolidated financial statements have been revised to reflect the amended repayment schedule. The amendment also requires that net proceeds received from certain asset sales be applied against the term loan balance.

Also, on February 21, 1996, the Company obtained an additional credit agreement which provides for borrowings of up to $30 million. This agreement bears interest at either an adjusted prime rate plus 2% or a maximum rate as defined in the agreement in the case of prime rate advances, or the Eurodollar rate plus 3% or a maximum rate as defined in the agreement in the care of Eurodollar rate advances. The maturity date of this agreement is March 31, 1997. This agreement contains covenants that are substantially the same as the covenants contained in the primary credit agreement.

The Company assumed the Subordinated Debentures of WorldWay which were issued in April 1986. The debentures bear interest at 6.25% per annum, payable semi-annually, on a par value of $50,000,000. The debentures are payable April 15, 2011. The Company may redeem the debentures at a price of 101.25% declining to 100% at April 15, 1996. The Company is required to redeem through a mandatory sinking fund commencing before April 15, in each of the years from 1997 to 2010, an amount in cash sufficient to redeem $2,500,000 annually of the aggregate principal amount of the debentures issued.

The Company entered into a ten-year, $20 million general office 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 were used to finance the construction of the Company’s new corporate office building which was completed in February 1995. Amounts borrowed under the agreement bear interest at 8.07% quarterly, with installments of $500,000 plus interest due through July 2004.

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 $20 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 3/4% 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, 1995, the interest rate was 7.1%. At December 31, 1995, TREADCO had $10 million outstanding under the Revolving Credit Agreement.

The TREADCO credit agreement is payable in September 1998. 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.

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 3/4% applied to notional amounts, as defined in the contract, ranging from $40 million as of December 31, 1995 to $2.5 million as of October 1999. As of December 31, 1995 and 1994, the LIBOR rate was 5.5% and 6.5%, respectively; therefore, no amounts were due to the Company under this arrangement. In the event that amounts are due under this agreement in the future, the payments to be received would be recognized as a reduction of interest expense (the accrual accounting method). Fees totaling $385,000 were paid in 1994 to enter into this arrangement. These fees are included in other assets and are being amortized to interest expense over the life of the contract.

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
                                            1995        1994        1993    
                                                     ($ millions)

LTL motor carrier operations            $   75.0    $   44.2    $   48.6
Forwarding operations                        0.4           -           -
Truckload motor carrier operations           2.1           -           -
Logistics operations                         5.3           -           -
Tire operations                              4.5         4.3         6.1
Service and other                           12.1        15.6         3.3    
                                            99.4        64.1        58.0
    Less: Operating leases                 (24.6)          -       (24.8)   
Total                                   $   74.8    $   64.1    $   33.2    

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 1996, the Company anticipates spending approximately $33 million in total capital expenditures net of proceeds from equipment sales. Of the $33 million, Treadco is budgeted for $13 million of expenditures for retreading equipment and facilities. ABF is budgeted for approximately $18.3 million to be used primarily for terminal facilities and Cardinal has $1.7 million budgeted for revenue equipment purchases.

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 the Treadco 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.

Seasonality

The LTL and truckload 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 LTL and truckload segments 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 188 underground tanks located in 34 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.

As of December 31, 1995, the Company has accrued approximately $1,700,000 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.

New Accounting Pronouncements

In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of”, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. Statement 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The Company will adopt Statement 121 in the first quarter of 1996 and, based on current circumstances, does not believe the effect of adoption will be material.