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Arkansas Best Corporation (the "Company") is a diversified holding company located in Fort Smith, Arkansas. The Company is engaged through its motor carrier subsidiaries in less-than-truckload ("LTL") and truckload shipments of general commodities, through its freight forwarding and logistics subsidiaries in intermodal marketing and freight logistics services and through its 46%-owned subsidiary, Treadco, Inc. ("Treadco") in truck tire retreading and new truck tire sales.
Less-Than-Truckload ABF Freight System, Inc. The largest subsidiary of the Company, ABF Freight System, Inc. ("ABF") currently accounts for approximately 69% of the Company’s consolidated revenues and 94% of LTL operations revenue. ABF has grown to become the fourth largest LTL motor carrier in the United States from the forty-eighth largest in 1965, based on revenues for 1995 as reported to the U.S. Department of Transportation ("D.O.T."). ABF provides direct service to over 98.5% of the cities in the United States having a population of 25,000 or more. ABF and its affiliated companies, which make up the ABF System, provide interstate and intrastate direct service to more than 38,500 points through 343 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 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 manu-factured products. During the year ended December 31, 1995, no single customer accounted for more than 3% of ABF’s revenues, and the ten largest customers accounted for less than 8% of ABF’s revenues. International Markets ABF Freight System Canada, Ltd.’s and ABF Freight System (B.C.), Ltd.’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 one of Mexico’s largest LTL specialists, 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, Monterrey and Guadalajara. Worldwide, ABF’s international services offers less-than-containerload service to 161 countries through 301 ports. In addition, ABF offers full-containerload service to Europe, the United Kingdom and Ireland, Scandinavia, the Baltic Region, South Africa, the Far East, Southeast Asia, Australia, New Zealand, Ecuador, Peru, Chile, Brazil, Argentina, Uruguay and Paraguay. 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 ABF’s 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 airfreight, at rates that are lower than most airfreight rates and other expedited options. ABF’s "On-the-Date" Program (ON) was developed to meet the needs of its Just In Time customers. Shipments will be delivered ON the ABF advertised due date, not prior to the due date or after the due date. Under the "By-the-Date" Program (BY) shipments will be delivered BY the ABF advertised due date, not after the due date. ABF’s "Between the Date" Program (BE) was developed to meet the needs of customers who have delivery windows. Shipments will be delivered between specific dates consistent with ABF advertised transit times. Participating customers’ delivery receipts display special "ON", "BY" or "BE" flags indicating the delivery requirements. ABF developed its Special Handling Program to meet the needs of customers with unusual pickup, delivery or freight-handling requirements. Specific handling requirements are stored in Q-Net, ABF’s online communications network, and are accessible by all terminals involved in the handling of a shipment. Participating customers’ delivery receipts display a special "HANDL" flag. 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. 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 operating personnel and aids marketing efforts of ABF. ABF continues to develop its on-line Freight Manage-ment System (FMS) aimed at perfecting both service to customers and internal cost controls. 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. ABF has in place several programs which 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, which gives ABF automatic controls. When exceptions occur, these controls allow management to react quickly and decisively, preventing exceptions from becoming problems without having to sift through reams of data. ABF’s customer database management system, AIMS (Account Information Management System), provides a centralized management tool for maintaining customer information. For example, a file of customer receiving require-ments is maintained in AIMS. AIMS can be accessed on-line by all ABF general office departments and terminals.
G.I. Trucking Company Headquartered in La Mirada, California, G.I. Trucking Company ("G.I. Trucking") is a non-union regional LTL motor carrier. G.I. Trucking provides transportation services and coverage throughout 13 Western states and the Western Canadian provinces of Alberta and British Columbia, as well as service to Hawaii and Alaska. One- to three-day regional service is provided through 52 service centers. Transcontinental service is facilitated through a partnership with two other regional carriers providing service through six major hub terminals located throughout the Midwest and East Coast. Customer service is enhanced through EDI communications between partners, allowing for single pro tracing, invoicing and a full range of other EDI and information management services. G.I. Trucking’s Hawaiian container operation, located in La Mirada, provides excellent transit times to the Islands. Service to points in Alaska and Western Canada is provided through the company’s new facility in Seattle, Washington. G.I. Trucking’s linehaul structure utilizes company solo drivers, company sleeper teams, contract power and one-way carriers, providing total flexibility in maintaining superior service and lane balance. Truckload Operations Cardinal Freight Carriers, Inc. Cardinal Freight Carriers, Inc. ("Cardinal") is an irregular route carrier providing dry van and flatbed service throughout the eastern two-thirds of the United States and Canada. Headquartered in Concord, North Carolina, Cardinal operates via a central dispatch system, utilizing a state-of-the-art computer system. Cardinal has grown from 14 company-owned power units in 1981 to more than 600 tractors in the van division and over 100 tractors in the flatbed division. The trailer fleet consists of 1,169 53-foot vans and 117 48-foot and 45-foot aluminum flatbeds. The fleet is one of the most modern in the industry, averaging just under two years old. Cardinal’s services, both van and flatbed, can be labeled as interregional. Cardinal’s system averages 530 miles per trip, providing next day, on-time service that patterns today’s manufac-turing and distribution system of closer proximity to their customer base. With the flexibility for both long-haul and short-haul, Cardinal offers one-thousand-mile plus service, along with regional length of haul, including intrastate service in 11 states. Cardinal has a facility network consisting of 6 locations to perform timely preventive maintenance to better ensure safety in the community and equipment reliability. Cardinal operates in a competitive and highly service-sensitive market and, therefore, is committed to providing its customers with premier quality service. Cardinal’s customers have defined a premier quality service as on-time, claim-free pickups and deliveries, accurately invoiced, and thorough communications, along with information support technology.
Forwarding Operations The Clipper Group 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 Exxpress Company ("Clipper") is the largest consolidator and forwarder of LTL shipments and one of the largest intermodal marketing companies ("IMC") in the United States. Agricultural Express of America, Inc. ("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 Freight System, Inc. ("Agile") provides "near airfreight" truckload service in tightly focused lanes and also provides some line-haul transportation for Clipper’s LTL consolidation service. Clipper Exxpress Company Clipper provides contract freight management and LTL freight forwarding services to its customers. Contract Freight Management. Through its contract freight management business unit, Clipper provides logistics and transportation services, including intermodal and truck brokerage, warehousing, consolidation, trans-loading, 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 38 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. 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 trans-portation 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 indepen-dent 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. Agricultural Express of America, Inc. (D/B/A Clipper Controlled Logistics) AXXA owns 436 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 trans-port, 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. 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 shippers’ 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 long-haul 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. CaroTrans International, Inc. CaroTrans International, Inc. ("CaroTrans") is a neutral, non-vessel operating common carrier ("NVOCC") providing import and export, door-to-door and door-to-port service to more than 140 countries with 225 ports of discharge. Headquartered in Cherryville, North Carolina, CaroTrans is considered one of the largest NVOCC’s in the world, offering more destinations by a "master loader" than any other NVOCC. One of CaroTrans’ strengths is its North American office and receiving network. Through sales offices in Los Angeles, Houston, New Orleans, Atlanta, Erie, Cincinnati, Boston, New York, Baltimore, Norfolk, Charleston, Charlotte, Jacksonville, Orlando, Miami, Toronto, Mexico City, Guadalajara and Monterrey, CaroTrans serves thousands of shippers, receivers and freight forwarders. CaroTrans truly covers the continent with experienced, knowledgeable international personnel. CaroTrans offers 23 ocean bills of lading via North American receiving stations located in San Francisco, Los Angeles, Houston, Mexico City, Guadalajara, Monterrey, New Orleans, Chicago, St. Louis, Miami, Jacksonville, Savannah, Atlanta, Charleston, Charlotte, Norfolk, Baltimore, Cleveland, Philadelphia, New York, Boston, Toronto and Montreal. The ability to offer such a large number of bills of lading reduces the shipper’s cost, since the inland transport is shorter and closer to the actual point/port where ocean containers are loaded. In addition to being one of the largest less-than-containerload carriers in the world, CaroTrans also offers a full containerload service which is coordinated, quoted and booked through the Cherryville headquarters. CaroTrans also provides its customers with E-Sea Sail, a state-of-the-art software package designed for international shipping. This revolutionary system allows the customer to obtain quick rate quotations, verify sailing schedules, obtain a copy of a booking and generate copies of ocean bills of lading. It is anticipated that in the near future, overseas offices and agents will have direct access to E-Sea Sail to electronically extract documents. Overseas, CaroTrans is recognized as a leader in international shipping between North America and many worldwide destinations. CaroTrans maintains offices in Rotterdam, Holland; London and Liverpool, United Kingdom; Singapore and San Juan. These strategically located offices direct the operations and sales activities of the carefully selected agents within its geographic region.
Logistics Operations The Complete Logistics Company The Complete Logistics Company ("Complete Logistics") is a logistics organization dedicated to providing supply chain management to its customers, including such services as equipment leasing, logistics modeling, communications networks, warehouse management, consolidation and cross-dock facilities, computerized routing, and experienced drivers, dock workers, super-visors, and clerical staff. All services are controlled through an integrated computer system which allows Complete Logistics to administer all services provided in a seamless manner. As an asset-based, third-party, single-source logistics company, Complete Logistics has the capability to manage and coordinate a customer’s logistics resources to meet their competitive requirements. Complete Logistics listens carefully to a customer’s needs and then offers a range of customized options designed to give the customers control over their costs and performance. Once a customer has selected the services they want, Complete Logistics works closely with them to guarantee the smoothest possible transition. Ongoing success is ensured by maintaining constant communication and a close working partnership with the customer. Innovative Logistics Incorporated Innovative Logistics Incorporated ("ILI") is a management-based third party logistics service provider. ILI offers freight bill audit/payment and reporting, logistics modeling, inventory warehouse/in-transit control systems, and dynamic shipment rating and dispatch systems. In addition, ILI provides transportation management services, EDI/systems management, and warehouse management services. As a licensed property broker and non-vessel operating common carrier, Innovative Logistics offers nationwide truckload and intermodal services and international full container services to its clients. ILI supports its clients by performing logistics management services. ILI will identify and contract with qualified carriers and warehouse providers, manage their utilization and provide integrated logistics information systems. ILI’s mission is to (i) provide innovative and value-added services for clients who wish to outsource their transportation and warehousing operations, (ii) establish long-term partnering relationships with clients to provide cost-effective and efficient services in a quality manner, and (iii) work seamlessly with clients to the extent Innovative is viewed as another operating department within the client’s organization. Integrated Distribution, Inc. Integrated Distribution is a logistics company that manages the flow of goods and related information. Integrated Distribution’s services include truckload and large LTL transportation, customized handling, freight consolidation, contract and public warehousing, and logistics. Transportation services are aimed at pickup and delivery of truckload and large LTL shipments. Integrated’s trucks are equipped with satellite tracking and communications so that a customer always knows the location of their product. An in-house licensed brokerage service supplements the carrier operations. Through its customized handling of a customer’s product, Integrated Distribution adds value by cross-docking, building store-ready displays, making final assemblies, applying bar code and price labels, and packaging. Integrated Distribution offers freight consolidation for membership clubs, grocery chains and distributors, and mass merchandisers. Integrated’s program offers scheduled deliveries of LTL shipments with the economy of truckload rates. Integrated Distribution locates warehouses in major distribution cities and supports EDI, bar codes, and RFID. Logistics services include development and implementation of the optimal solution for a customer’s distribution requirements using owned or subcontracted assets.
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 10% of the Company’s consolidated revenues and are divided approximately 54% and 46% between retread sales and new tire sales, respectively. In 1995, Treadco sold approximately 633,000 retreaded truck tires and approximately 394,000 new tires. After opening sales facilities in Fulton, Kentucky and Ft. Pierce, Florida during the first quarter of 1996, Treadco has a total of 51 locations positioned across the South, Southwest, lower Midwest and West. Treadco retreads truck tires at 28 production facilities located in Arizona, Arkansas, Florida, Georgia, Louisiana, Missouri, Nevada, Ohio, Oklahoma and Texas. The remaining 23 locations are sales facilities located in the states listed above as well as California, Kansas, Kentucky, Mississippi and Tennessee. Retreading truck tires is significantly less expensive than buying new truck tires (about one-third of the cost) and retreaded tires generally last as long as new tires used in similar applications. Moreover, most tire casings can be retreaded one or two times. Treadco’s average retail charge for retreading a customer’s casing is approximately $85, compared to an average retail selling price of approximately $235 for a new tire. Treadco also sells retreads including casings not supplied by the customer for approximately $167 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, 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. Retread Processes In October 1995, Treadco announced it had reached an agreement with Oliver Rubber Company ("Oliver") to be a supplier of equipment and related materials for Treadco’s truck tire precure retreading business. Treadco converted its Little Rock (AR), Pine Bluff (AR), West Memphis (AR) and Phoenix (AZ) Bandag franchises to Oliver licensed facilities during the first quarter, 1996. Based on Treadco’s current plans, all remaining Bandag franchises will convert to the Oliver process by the end of the third quarter, 1996. On February 1, 1996, Treadco gained Bridgestone certification to produce and sell the ONCOR remanufactured tires at its St. Louis (MO) production facility. This is the first plant in the United States using Bridgestone’s "ONCOR Tread Renewal System". However, the Bridgestone mold cure process has been used for many years outside the United States, predominately in Japan. Carolina Breakdown Service, Inc. Carolina Breakdown Service, Inc., ("CBS") is a third-party vehicle maintenance logistics company operating from a Cherryville, North Carolina base, with service capabilities in 48 contiguous states, and Central and Eastern Canada. The CBS nationwide operation provides any and all necessary scheduled and unscheduled vehicle repairs and driver assistance to all classes and types of trucks, trailers, and combination units 24 hours a day, 7 days a week. In-house maintenance expertise and regimentation also allows for the additional business as a technical assistance provider to the OEM community, and through the use of strategic outsourcing via a qualified vendor network of over 53,000 nationwide, the operation handles over 79 service and technical calls a day from its client base of 492 trucking and OEM accounts. Carolina Breakdown Service, Inc., was incorporated in 1993 but derives its professional training from over four decades of experience, having serviced equipment for Carolina Freight. |
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