EXHIBIT 13

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

MARKET AND DIVIDEND INFORMATION

The Common Stock of Arkansas Best Corporation ("the Company") trades on The
Nasdaq National Market under the symbol "ABFS." The following table sets forth
the high and low recorded last sale prices of the Common Stock during the
periods indicated as reported by Nasdaq and the cash dividends declared:

CASH
HIGH LOW DIVIDEND
---- --- --------

2002
First quarter ..................... $ 31.190 $ 23.700 $ --
Second quarter .................... 27.390 23.000 --
Third quarter ..................... 29.900 18.640 --
Fourth quarter .................... 32.040 25.700 --

2001
First quarter ..................... $ 24.688 $ 15.625 $ --
Second quarter .................... 23.050 15.000 --
Third quarter ..................... 27.860 19.140 --
Fourth quarter .................... 30.230 18.950 --

At February 24, 2003, there were 24,923,924 shares of the Company's Common Stock
outstanding, which were held by 459 stockholders of record.

The Company's Board of Directors suspended payment of dividends on the Company's
Common Stock during the second quarter of 1996. On January 23, 2003, the Company
announced that its Board of Directors had declared a quarterly cash dividend of
eight cents per share to holders of record of its Common Stock on February 5,
2003, payable on February 19, 2003. The Company also announced a program to
repurchase, in the open market or in privately negotiated transactions, up to a
maximum of $25.0 million of the Company's Common Stock. The repurchases may be
made either from the Company's cash reserves or from other available sources.

The Company's Credit Agreement limits the total amount of "restricted payments"
that the Company may make. Restricted payments include payments for the
prepayment, redemption or purchase of subordinated debt, dividends on Common
Stock, and other distributions that are payments for the purchase, redemption or
acquisition of any shares of capital stock. Dividends on the Company's Common
Stock are limited to the greater of 25% of net income from the preceding year,
excluding extraordinary items, accounting changes and one-time non-cash charges,
or $15.0 million in any one calendar year. The Company may repurchase Common
Stock up to $50.0 million, provided the Company meets certain debt to EBITDA
ratio requirements.

The annual dividend requirements on the Company's Preferred Stock totaled
approximately $2.5 million and $4.1 million during 2001 and 2000, respectively.
There were no Preferred Stock dividends paid during 2002. On August 13, 2001,
the Company announced the call for redemption of its $2.875 Series A Cumulative
Convertible Exchangeable Preferred Stock ("ABFSP"). 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 The Nasdaq
National Market under the symbol "ABFSP" on September 12, 2001, eliminating the
Company's annual Preferred Stock dividend requirement.

SELECTED FINANCIAL DATA

YEAR ENDED DECEMBER 31
2002 2001(1) 2000(1) 1999 1998
----------- ---------- ----------- ----------- -----------
($ thousands, except per share data)

STATEMENT OF OPERATIONS DATA:
Operating revenues ................................ $ 1,422,297 $1,526,206 $ 1,839,567 $ 1,721,586 $ 1,607,403
Operating income .................................. 68,221 75,934 140,152 109,707 69,977
Minority interest income (expense) in
Treadco, Inc. ................................... -- -- -- 245 (3,257)
Other (income) expenses, net ...................... (3,286) 1,221 (647) 3,920 3,255
Fair value net gain - Wingfoot
Commercial Tire Systems, LLC (2) ................ -- -- 5,011 -- --
Gain on sale of G.I. Trucking Company (6) ......... -- 4,642 -- -- --
Settlement of litigation (3) ...................... -- -- -- -- 9,124
IRS interest settlement (7) ....................... 5,221 -- -- -- --
Interest expense, net ............................. 8,097 12,636 16,687 18,395 18,146
Income from continuing operations,
before income taxes ............................. 68,631 66,719 129,123 87,637 54,443
Provision for income taxes (9) .................... 27,876 25,315 52,968 36,455 23,192
Income from continuing operations,
before accounting change ........................ 40,755 41,404 76,155 51,182 31,251
Cumulative effect of change in accounting
principle net of tax benefits of $13,580 (8) .... (23,935) -- -- -- --
Loss from discontinued operations,
net of tax (10) ................................. -- -- -- (786) (2,576)
Reported net income ............................... 16,820 41,404 76,155 50,396 28,675
Amortization of goodwill, net of tax (11) ......... -- 3,411 3,409 3,509 3,812
Adjusted net income (11) .......................... 16,820 44,815 79,564 53,905 32,487
Income per common share, diluted from
continuing operations before accounting change .. 1.60 1.66 3.17 2.14 1.32
Reported net income per common share,
diluted ......................................... 0.66 1.66 3.17 2.11 1.21
Goodwill amortization, per common share,
diluted (11) .................................... -- 0.14 0.14 0.15 0.16
Adjusted net income per common share,
diluted (11) .................................... 0.66 1.80 3.31 2.26 1.37
Cash dividends paid per common share (4) .......... -- -- -- -- --

BALANCE SHEET DATA:
Total assets ...................................... 756,372 723,153 797,124 731,929 707,330
Current portion of long-term debt ................. 328 14,834 23,948 20,452 17,504
Long-term debt (including capital leases
and excluding current portion) .................. 112,151 115,003 152,997 173,702 196,079

OTHER DATA:
Gross capital expenditures ........................ 58,313 74,670 93,585 76,209 86,446
Net capital expenditures (5) ...................... 46,439 64,538 83,801 61,253 70,243
Depreciation and amortization ..................... 49,219 50,315 52,186 45,242 40,674

(1) Selected financial data is not comparable to the prior years' information
due to the contribution of Treadco, Inc.'s ("Treadco") assets and
liabilities to Wingfoot Commercial Tire Systems, LLC ("Wingfoot") on
October 31, 2000 (see Note P to the Consolidated Financial Statements) and
the sale of G.I. Trucking Company ("G.I. Trucking") on August 1, 2001 (see
Note Q).

(2) Fair value net gain on the contribution of Treadco's assets and
liabilities to Wingfoot.

(3) Income results from the settlement of Treadco's litigation with Bandag
Incorporated.

(4) Cash dividends on the Company's Common Stock were suspended by the Company
as of the second quarter of 1996. On January 23, 2003, the Company
announced that it had declared a quarterly cash dividend of eight cents
per share to holders of record of its Common Stock on February 5, 2003,
payable on February 19, 2003.

(5) Capital expenditures, net of proceeds from the sale of property, plant and
equipment.

(6) Gain on the sale of G.I. Trucking on August 1, 2001 (see Note Q).

(7) IRS interest settlement (see Note E).

(8) Non-cash impairment loss of $23.9 million, net of taxes ($0.94 per diluted
common share), due to the write-off of Clipper goodwill (see Note C).

(9) 2001 provision for income taxes includes a non-recurring tax benefit of
approximately $1.9 million ($0.08 per diluted common share) resulting from
the resolution of certain tax contingencies originating in prior years.

(10) Discontinued operations for 1999 and 1998 include the operations of
CaroTrans International, Inc., which was sold on April 17, 1999.

(11) Net income and earnings per share, as adjusted, excluding goodwill
amortization (see Note C).

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 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 regarding the sale of G.I.
Trucking). 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 regarding the contribution of substantially all of Treadco's assets and
liabilities to Wingfoot Commercial Tire Systems, LLC ("Wingfoot")).

The Company utilizes tractors and trailers primarily in its motor carrier
transportation operations. Tractors and trailers are commonly referred to as
"revenue equipment" in the transportation business.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

The Company's accounting estimates (many of which are determined by the
Company's accounting policies - see Note B) that are "critical," or the most
important, to understand the Company's financial condition and results of
operations and that require management of the Company to make the most difficult
judgments are described as follows:

Management of the Company utilizes a bill-by-bill analysis to establish
estimates of revenue in transit to recognize in each reporting period under the
Company's accounting policy for revenue recognition. The Company uses a method
prescribed by Emerging Issues Task Force Issue No. 91-9 ("EITF 91-9"), Revenue
and Expense Recognition for Freight Services in Process, where revenue is
recognized based on relative transit times in each reporting period with
expenses being recognized as incurred.

The Company estimates its allowance for doubtful accounts based on the Company's
historical write-offs, as well as trends and factors surrounding the credit risk
of specific customers. In order to gather information regarding these trends and
factors, the Company performs ongoing credit evaluations of its customers. The
Company's allowance for revenue adjustments is an estimate based on the
Company's historical revenue adjustments. Actual write-offs or adjustments could
differ from the allowance estimates the Company makes as a result of a number of
factors. These factors include unanticipated changes in the overall economic
environment or factors and risks surrounding a particular customer. The Company
continually updates the history it uses to make these estimates so as to reflect
the most recent trends, factors and other information available. Actual
write-offs and adjustments are charged against the allowances for doubtful
accounts and revenue adjustments.

Under its accounting policy for property, plant and equipment, management
establishes appropriate depreciable lives and salvage values for the Company's
revenue equipment (tractors and trailers) based on their estimated useful lives
and estimated fair values to be received when the equipment is sold or traded
in. Management has a policy of purchasing its revenue equipment or entering into
capital leases rather than utilizing off-balance-sheet financing.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued

The Company and its subsidiaries have noncontributory defined benefit pension
plans covering substantially all noncontractual employees. Benefits are
generally based on years of service and employee compensation. The Company
accounts for its non-union pension plan in accordance with Statement of
Financial Accounting Standards No. 87 ("FAS 87"), Employer's Accounting for
Pensions. The Company's pension expense and related asset and liability balances
is an estimate which is based upon a number of assumptions. The assumptions with
the greatest impact on the Company's expense are the assumed compensation cost
increase, the expected return on plan assets and the discount rate used to
discount the plans' obligations.

The following table provides the key assumptions the Company used for 2002
compared to those it is utilizing to estimate 2003 pension expense:

YEAR ENDED DECEMBER 31
2003 2002
---- ----

Discount rate ............................ 6.9% 6.9%
Expected return on plan assets ........... 7.9% 9.0%
Rate of compensation increase ............ 4.0% 4.0%

The assumptions used establish the pension expense for a particular year. If
actual results vary from the assumption, an actuarial gain or loss is created
and amortized into pension expense over the average remaining service period of
the plan participants beginning in the following year. The decline in the stock
market during 2002 negatively impacted plan assets and created a plan actuarial
loss. The Company reduced its expected return on plan assets in 2003 to reflect
the historical returns on the investments the plan holds, which includes the
investment returns experienced during 2002. The reduction in the expected return
on plan assets, lower assets on which to earn a return and actuarial losses
increase the Company's pension expense. A 1.0% decrease in the Company's
expected return on plan assets, based upon pension plan assets at December 31,
2002, would increase pension expense by approximately $1.3 million. The Company
anticipates its pension expense for non-union plans to be approximately $10.0
million for 2003 compared to $5.3 million for 2002.

The Company has elected to follow Accounting Principles Board Opinion No. 25
("APB 25"), Accounting for Stock Issued to Employees and related interpretations
in accounting for stock options because the alternative fair value accounting
provided for under the Statement of Financial Accounting Standards No. 123 ("FAS
123"), Accounting for Stock-Based Compensation, requires the use of option
valuation models that were not developed for use in valuing employee stock
options and are theoretical in nature. Under APB 25, because the exercise price
of the Company's employee and director options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.

The Company is self-insured up to certain limits for workers' compensation and
certain third-party casualty claims. For 2002, these limits were $1.0 million
per claim for workers' compensation claims and $500,000 per claim for
third-party casualty claims. For 2003, the Company increased its third-party
casualty self-insurance exposure by increasing its retention to $1.0 million per
claim. The Company's self-insured retention level for workers' compensation
remained the same for 2003. Workers' compensation and property damage claims
liabilities recorded in the financial statements totaled $49.1 million and $46.3
million at December 31, 2002 and 2001, respectively. The Company does not
discount its claims liabilities. Under the Company's accounting policy for
claims, management annually estimates the development of the claims based upon
the Company's historical development factors over a number of years. The Company
utilizes a third party to calculate the development factors and analyze
historical trends. Actual payments may differ from management's estimates as a
result of a number of factors. These factors include increases in medical costs

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued

and the overall economic environment, as well as many other factors. The actual
claims payments are charged against the Company's accrued claims liabilities.

The Company hedged its interest rate risk by entering into a fixed rate interest
rate swap on $110.0 million of revolving Credit Agreement borrowings. The
Company's accounting policy for derivative financial instruments is as
prescribed by Statement of Financial Accounting Standards No. 133 ("FAS 133"),
Accounting for Derivative Financial Instruments and Hedging Activities. The
Company's fixed rate interest rate swap is an effective hedge on $110.0 million
of revolving Credit Agreement borrowings in accordance with its accounting
policy. As a result, the fair value of the swap, as estimated by Societe
Generale, was a liability of ($9.9) million and ($5.4) million at December 31,
2002 and 2001, respectively, and is recorded on the Company's balance sheet
through other comprehensive income rather than through the income statement. If
the swap terminated at December 31, 2002, the Company would have had to pay $9.9
million. Future changes in the fair value of the swap will also be reflected in
other comprehensive income as long as the swap remains in place and is
effectively hedged. The Company's interest rate swap is effectively hedged as of
December 31, 2002. Future changes in the swap arrangement (including termination
of the swap agreement), swap notional amount, hedged portion or forecasted
credit agreement borrowings below $110.0 million may result in a
reclassification of any gain or loss reported in other comprehensive income,
into earnings, as interest expense.

The Company's accounting policy for its 19% investment in Wingfoot Commercial
Tire Systems, LLC ("Wingfoot") is the equity method of accounting, similar to a
partnership investment. The Company has the right to sell its 19% ownership in
Wingfoot to The Goodyear Tire & Rubber Company ("Goodyear") at any time after
April 30, 2003 and before April 30, 2004. Under the terms of the LLC operating
agreement, the Company does not share in the profits or losses of Wingfoot
during the term of the Company's "Put" option. Therefore, the Company's
investment balance of $59.3 million at December 31, 2002 should not change
during the "Put" period. If the Company exercises its put right, the Company
could be in receipt of approximately $67.0 to $68.0 million in cash which
represents the "Put Price" of $71.3 million, net of estimated income taxes. If
the Company is in receipt of these cash proceeds, net of taxes, it could
consider paying down debt with the net proceeds, which could substantially
reduce the Company's outstanding debt. However, the Company continues to have
substantial cash needs for capital expenditures (see Liquidity), Common Stock
dividends and the repurchase of Common Stock (see Note S) as well as other cash
needs. As previously discussed, if the Company pays its debt down below $110.0
million, it will no longer have an effective cash flow hedge on its interest
rate swap, which would require all or a portion of the swap's value to be
recorded in the Company's income statement during 2003. The Company will record
a pre-tax gain in the amount of $12.0 million when the "Put" transaction is
closed. If Goodyear "calls" the Company's interest in Wingfoot, the Company will
record a pre-tax gain of $17.0 million when the "Call" transaction is closed
(see Note P).

RECENT ACCOUNTING PRONOUNCEMENTS

On August 15, 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 143 ("FAS 143"), Accounting for
Asset Retirement Obligations. FAS 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated retirement costs. This Statement applies to legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development and/or the normal operation of a
long-lived asset, except for certain obligations of lessees. The Statement is
effective for the Company in 2003. The impact on the Company's financial
statements and related disclosures is not expected to be material.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued

In July 2002, the FASB issued Statement of Financial Accounting Standards No.
146 ("FAS 146"), Accounting for Costs Associated with Exit or Disposal
Activities. FAS 146 addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies Emerging Issues Task
Force Issue No. 94-3 ("EITF 94-3"), Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring). This Statement requires that a liability for
a cost associated with an exit or disposal activity be recognized when the
liability is incurred rather than at the date of a commitment to an exit or
disposal plan. The Statement is effective for the Company in 2003. The impact on
the Company's financial statements and related disclosures is not expected to be
material.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents totaled $39.6 million and $14.9 million at December
31, 2002 and 2001, respectively. During 2002, cash provided by operations of
$88.7 million, proceeds from asset sales of $11.9 million, borrowings of $2.6
million and available cash were used primarily to purchase revenue equipment and
other property and equipment totaling $58.3 million, retire the remaining $5.0
million in face value of the Company's WorldWay 6 1/4% Convertible Subordinated
Debentures (see Note F) and reduce outstanding debt obligations. Revenue
equipment includes tractors and trailers used primarily in the Company's motor
carrier transportation operations.

During 2001, cash provided by operations of $64.8 million, proceeds from asset
sales of $10.1 million, gross proceeds from the sale of G.I. Trucking of $40.5
million and available cash were used primarily to purchase revenue equipment and
other property and equipment totaling $74.7 million, reduce outstanding debt,
including the retirement of $24.9 million in face value of the Company's
WorldWay 6 1/4% Convertible Subordinated Debentures (see Note F), and pay
approximately $33.0 million in tax and interest payments to the IRS, related to
a tax pension issue (see Note E).

On August 13, 2001, the Company announced the call for redemption of its $2.875
Series A Cumulative Convertible Exchangeable Preferred Stock ("ABFSP"). 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
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. As a result of this transaction, the
Company no longer has an obligation to pay Preferred Stock dividends, which
approximated $4.0 million per year. Outstanding shares of Preferred Stock had
historically been included in the Company's diluted earnings per share on an
as-converted basis. Therefore, the conversion of preferred shares into common
did not result in an increase in the Company's diluted common shares.

On May 15, 2002, the Company entered into a new three-year $225.0 million Credit
Agreement ("Credit Agreement") with Wells Fargo Bank Texas, National
Association, as Administrative Agent and Lead Arranger, and Fleet National Bank
and Suntrust Bank as Co-Syndication Agents, and Wachovia Bank, National
Association as Documentation Agent. The new Credit Agreement replaces the
Company's five-year $250.0 million credit agreement dated as of June 12, 1998
with Wells Fargo Bank Texas, National Association, as Administrative Agent and
with Bank of America National Trust and Savings Association and Wells Fargo Bank
Texas, National Association, as Co-Documentation Agents, which was terminated on
May 15, 2002. The Credit Agreement provides for up to $225.0 million of
revolving credit loans (including a $100.0 million sublimit for letters of
credit) and extends into 2005. The Credit Agreement allows the Company to
request extensions of the maturity date for a period not to exceed two years,
subject to participating bank approval. The Credit Agreement also allows the
Company to request an increase in the amount of revolving

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued

credit loans as long as the total revolving credit loans do not exceed $275.0
million, subject to the approval of participating banks.

At December 31, 2002, there were $110.0 million of Revolver Advances and
approximately $66.4 million of letters of credit outstanding. At December 31,
2002, the Company had approximately $48.6 million of borrowing availability
under the Credit Agreement. The Credit Agreement contains various covenants,
which limit, among other things, indebtedness, distributions and dispositions of
assets and require the Company to meet certain quarterly financial ratio tests.
As of December 31, 2002, the Company was in compliance with the covenants.

The Company's Credit Agreement contains a pricing grid that determines its LIBOR
margin, facility fees and letter of credit fees. The pricing grid is based on
the Company's senior debt rating agency ratings. A change in the Company's
senior debt ratings could potentially impact its Credit Agreement pricing. In
addition, if the Company's senior debt ratings fall below investment grade, the
Company's Credit Agreement provides for limits on additional permitted
indebtedness without lender approval, acquisition expenditures and capital
expenditures. The Company is currently rated BBB by Standard & Poor's Rating
Service and Baa3 by Moody's Investors Service, Inc. On October 21, 2002, S&P
revised its outlook on the Company from stable to positive, citing, "...the
trucking company's robust operating performance in a difficult environment." The
Company has no downward rating triggers that would accelerate the maturity of
its debt.

The Company is party to an interest rate swap on a notional amount of $110.0
million. The purpose of the swap is to limit the Company's exposure to increases
in interest rates on $110.0 million of bank borrowings over the seven-year term
of the swap. The interest rate under the swap is fixed at 5.845% plus the Credit
Agreement margin, which was 0.825% and 0.575% at December 31, 2002 and 2001,
respectively. The fair value of the Company's interest rate swap was ($9.9)
million at December 31, 2002 and ($5.4) million at December 31, 2001. The fair
value of the swap is impacted by changes in rates of similarly termed Treasury
instruments. The liability is recognized on the Company's balance sheet in
accordance with FAS 133, at December 31, 2002 and December 31, 2001, through
other comprehensive income, net of income tax benefits.

The Company's primary subsidiary, ABF, maintains ownership of most all of its
larger terminals or distribution centers. Both ABF and Clipper lease certain
terminal facilities. At December 31, 2002, the Company has future minimum rental
commitments, net of noncancellable subleases, totaling $42.1 million for
terminal facilities and $0.4 million primarily for revenue equipment.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued

The following is a table providing the aggregate annual obligations of the
Company including debt, capital lease maturities and future minimum rental
commitments:

PAYMENTS DUE BY PERIOD
------------------------------------------------------------
($ thousands)
LESS THAN 1-3 4-5 AFTER
CONTRACTUAL OBLIGATIONS TOTAL 1 YEAR YEARS YEARS 5 YEARS
-------- --------- -------- ------- -------

Long-term debt $111,780 $ 133 $110,293 $ 330 $1,024
Capital lease obligations 699 195 438 66 --
Minimum rental commitments under
operating leases, net of subleases 42,494 10,610 14,827 10,514 6,543
Unconditional purchase obligations -- -- -- -- --
Other long-term debt obligations -- -- -- -- --
-------- ------- -------- ------- ------
Total contractual cash obligations $154,973 $10,938 $125,558 $10,910 $7,567
======== ======= ======== ======= ======

The Company has guaranteed approximately $0.4 million that relates to a debt
owed by The Complete Logistics Company ("CLC"), to the owner of a company CLC
acquired in 1995. CLC was a wholly owned subsidiary of the Company until 1997,
when CLC was sold. The Company's exposure to this guarantee declines by
approximately $60,000 per year.

The following table sets forth the Company's historical capital expenditures for
the periods indicated below. Proceeds from the sale of property and equipment
have not been netted against the capital expenditures:

YEAR ENDED DECEMBER 31
2002 2001 2000
------- ------- -------
($ thousands)

CAPITAL EXPENDITURES (GROSS)
ABF Freight System, Inc. $46,823 $62,332 $71,337
Clipper 94 3,582 4,346
G.I. Trucking Company (see Note Q) -- 4,537 11,693
Treadco, Inc. (see Note P) -- -- 3,916
Other (primarily information technology) 11,396 4,219 2,293
------- ------- -------
Total consolidated capital expenditures (gross) $58,313 $74,670 $93,585
======= ======= =======

The amounts presented in the table include land purchases financed with notes
payable of $1.7 million and data processing equipment purchases financed with
capital leases of $0.9 million in 2002. No notes payable or capital lease
obligations were incurred in the years ended December 31, 2001 or 2000.

One of ABF's major competitors, Consolidated Freightways Corporation ("CF"),
filed for bankruptcy protection and ceased operations in early September 2002.
In 2002, ABF budgeted approximately $20.0 million for certain CF terminal
facilities on which it was considering bidding through the bankruptcy process.
ABF was not successful in obtaining any of the properties sold in auctions.
However, ABF continues to be interested in a few of the remaining, unsold CF
facilities throughout the United States which ABF anticipates having a market
value of approximately $2.0 to $3.0 million, although it is not certain.

In 2003, the Company forecasts total spending of approximately $70.0 million for
capital expenditures, net of proceeds from equipment and real estate sales. Of
the $70.0 million, ABF is budgeted for approximately $57.0 million, primarily
for revenue equipment and facilities, and Clipper is budgeted for approximately
$5.0 million, primarily for revenue equipment.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued

The Company increased its letter of credit commitments by $42.8 million during
2002. This increase is due primarily to the Company's shift from surety bond
coverage for workers' compensation self-insurance in certain states to letters
of credit which were more favorably priced.

The Company's non-union pension plan assets have been adversely impacted by
recent stock market declines. In addition, non-union pension plan obligations
have been adversely impacted by declining interest rates, which increases the
present value of the plan obligations. During 2002, the Company made $15.7
million in tax-deductible contributions to its non-union pension plans, and it
is anticipated that the Company may make additional contributions during 2003,
although the Company is not certain of the amounts at this time.

The Company has two principal sources of available liquidity, which are its
operating cash and the $48.6 million it has available under its revolving Credit
Agreement at December 31, 2002. The Company has generated between $60.0 million
and $130.0 million of operating cash annually for the years 2000 through 2002.
The Company expects cash from operations and its available revolver to continue
to be principal sources of cash to finance its annual debt maturities; lease
commitments; letter of credit commitments; pension contributions; fund its 2003
capital expenditures, which includes a commitment to purchase $30.6 million of
revenue equipment; and to fund quarterly dividends and stock repurchases
announced on January 23, 2003 (see Note S).

The Company has the right to sell its 19% ownership in Wingfoot to Goodyear at
any time after April 30, 2003 and before April 30, 2004. If the Company
exercises its put right, the Company could be in receipt of approximately $67.0
to $68.0 million in cash which represents the "Put Price" of $71.3 million, net
of estimated taxes. If the Company is in receipt of these cash proceeds, net of
taxes, it could consider paying down debt with the net proceeds, which could
substantially reduce the Company's outstanding debt. However, as previously
discussed, the Company has substantial cash needs for capital expenditures,
Common Stock dividends and stock repurchases (see Note S), as well as other cash
needs. If the Company pays its debt down below $110.0 million, it will no longer
have an effective cash flow hedge on its interest rate swap, which would require
all or a portion of the swap's value to be recorded in the Company's income
statement during 2003.

The Company has not historically entered into financial instruments for trading
purposes, nor has the Company historically engaged in hedging fuel prices. No
such instruments were outstanding during 2002 or 2001. The Company has no
investments, loans or any other relationships with special-purpose entities or
financial partnerships and has no outstanding loans with officers of the
Company.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued

OPERATING SEGMENT DATA

The following table sets forth, for the periods indicated, a summary of the
Company's operating expenses by segment as a percentage of revenue for the
applicable segment. Note L to the Consolidated Financial Statements contains
additional information regarding the Company's operating segments:

YEAR ENDED DECEMBER 31
2002 2001 2000
------ ------ ------

OPERATING EXPENSES AND COSTS

ABF FREIGHT SYSTEM, INC.
Salaries and wages ................. 66.2% 65.6% 62.4%
Supplies and expenses .............. 12.3 13.0 12.6
Operating taxes and licenses ....... 3.2 3.2 3.0
Insurance .......................... 1.9 1.4 1.6
Communications and utilities ....... 1.1 1.2 1.1
Depreciation and amortization ...... 3.3 3.1 2.6
Rents and purchased transportation . 6.4 6.1 6.8
Other .............................. 0.2 0.2 0.2
------ ------ ------
94.6% 93.8% 90.3%
====== ====== ======

CLIPPER
Cost of services ................... 85.9% 87.3% 85.5%
Selling, administrative and general 13.2 12.3 13.3
------ ------ ------
99.1% 99.6% 98.8%
====== ====== ======

G.I. TRUCKING COMPANY (see Note Q)
Salaries and wages ................. -- 51.8% 47.0%
Supplies and expenses .............. -- 9.7 9.4
Operating taxes and licenses ....... -- 2.4 2.1
Insurance .......................... -- 2.4 2.5
Communications and utilities ....... -- 1.4 1.3
Depreciation and amortization ...... -- 3.4 3.0
Rents and purchased transportation . -- 26.4 30.0
Other .............................. -- 2.5 2.3
(Gain) on sale of equipment ........ -- (0.1) --
------ ------ ------
-- 99.9% 97.6%
====== ====== ======

TREADCO, INC. (see Note P)
Cost of sales ...................... -- -- 66.6%
Selling, administrative and general -- -- 30.4
------ ------ ------
-- -- 97.0%
====== ====== ======

OPERATING INCOME

ABF Freight System, Inc. ............... 5.4% 6.2% 9.7%
Clipper ................................ 0.9 0.4 1.2
G.I. Trucking Company (see Note Q) ..... -- 0.1 2.4
Treadco, Inc. (see Note P) ............. -- -- 3.0

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued

RESULTS OF OPERATIONS

2002 COMPARED TO 2001

Consolidated revenues for 2002 were $1,422.3 million compared to $1,526.2
million for 2001, representing a decrease of 6.8%. On August 1, 2001, the
Company sold the stock of G.I. Trucking (see Note Q). The Company's results for
2001 included seven months of operations for G.I. Trucking. The decline in
revenues in 2002 resulted from the sale of G.I. Trucking and decreases in
revenues for ABF and Clipper as a result of a decline in the U.S. economy
beginning in mid-2000. This economic decline was further accelerated by the
September 11 terrorist attacks on the World Trade Center and on the Pentagon and
continued to negatively impact the Company during the first eight months of
2002. These decreases were offset, in part, by an increase in ABF revenue as a
result of a major competitor, Consolidated Freightways ("CF"), filing for
bankruptcy protection and ceasing operations in early September 2002. The
Company's revenues increased 13.1% to $381.6 million in the fourth quarter of
2002, from $337.5 million in the fourth quarter of 2001.

Operating income for 2002 decreased to $68.2 million from $75.9 million during
2001. This decrease in operating income is due primarily to a decline in
operating income for ABF, which relates primarily to the decline in the U.S.
economy. However, operating income for the fourth quarter 2002 increased to
$26.2 million from $14.8 million in the fourth quarter of 2001, primarily as a
result of additional business gained by ABF from the CF closure.

Income before the cumulative effect of change in accounting principle for 2002
was $40.8 million, or $1.60 per diluted common share, compared to $41.4 million,
or $1.66 per diluted common share, for 2001. The decrease reflects primarily the
decrease in 2002 operating income from 2001, discussed above, offset in part by
a $5.2 million, or $0.12 per diluted common share, settlement with the IRS (see
Note E) and $3.5 million, or $0.08 per diluted common share, in net gains on the
sales of ABF non-operating terminal facilities. In addition, 2002 had lower
interest expense from lower average debt levels and no goodwill amortization, in
accordance with the Company's adoption of Statement of Financial Accounting
Standards No. 142 ("FAS 142"), Goodwill and Other Intangible Assets. During the
first quarter of 2002, the Company recognized a non-cash impairment loss on its
Clipper goodwill of $23.9 million, net of taxes, or ($0.94) per diluted common
share, as the cumulative effect of a change in accounting principle as required
by FAS 142 (see Note C). The Company's 2001 income before cumulative effect of
change in accounting principle included a pre-tax gain of $4.6 million, or $0.11
per diluted common share, from the sale of G.I. Trucking.

The Company's net income, including the impact of the accounting change, for
2002 was $16.8 million, or $0.66 per diluted common share, compared to net
income of $41.4 million, or $1.66 per diluted common share, for 2001.

Tonnage levels during the first eight months of 2002 continued to be impacted by
a decline in the U.S. economy, as previously discussed. During this time period,
ABF's less-than-truckload ("LTL") pounds per day were 6.9% below the same
eight-month period in 2001. During the four-month period from September through
December 2002, following CF's closure, ABF's LTL pounds per day were 6.2% above
the same four-month period in 2001. Comparing the first eight months of 2002 to
the last four months of 2002, ABF experienced an increase in tonnage trends of
13.1%.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued

admitted assets of $8.8 billion and liabilities of $9.9 billion, or a negative
surplus position of $1.1 billion, as of March 31, 2001. As of December 31, 2002,
the Company estimates its workers' compensation claims insured by Reliance to be
approximately $5.5 million. The Company has been in contact with and has
received either written or verbal confirmation from a number of state guaranty
funds that they will accept excess claims, representing a total of approximately
$3.7 million of the $5.5 million, which leaves the Company with a net exposure
amount of $1.8 million. The Company increased its estimated reserve for exposure
to Reliance from $0.5 million to $1.4 million during the third quarter of 2002
based upon the following factors: (1) No new Reliance financial information has
been made available by the Pennsylvania Insurance Department since the March 31,
2001 financial statements were made available on October 3, 2001; (2) A
September 9, 2002 court order extended the deadline for which the liquidator
will receive Reliance claims to December 31, 2003, which could increase
Reliance's liability exposure.

The Company anticipates receiving, from guaranty funds or through orderly
liquidation, partial reimbursement for future claims payments; however, the
process could take several years.

ABF FREIGHT SYSTEM, INC.

Effective August 1, 2002 and 2001, ABF implemented general rate increases to
cover known and expected cost increases. Typically, the increases were 5.8% and
4.9%, respectively, although the amounts can vary by lane and shipment
characteristic.

Revenues for 2002 were $1,277.1 million compared to $1,282.3 million during
2001. ABF generated operating income of $68.8 million for 2002 compared to $79.4
million during 2001.

ABF's decline in revenue for 2002, compared to 2001, is due to a decrease in LTL
tonnage and fuel surcharges. ABF's LTL tonnage decreased 2.8% for 2002, compared
to 2001. ABF's total tonnage, which also includes truckload tonnage, declined
4.2% for 2002 from 2001. ABF's performance for 2002 was affected by less
available freight due to decreased business levels at customer facilities,
primarily as a result of a decline in the U.S. economy impacting ABF through the
first eight months of 2002. As previously discussed, ABF's business levels
during the last four months of 2002 were positively impacted by the CF closure.
ABF experienced an increase in tonnage trends of 13.1% when the last four months
of 2002 are compared to the first eight months of 2002.

ABF's LTL billed revenue per hundredweight, excluding fuel surcharges, increased
4.3% to $21.91 for 2002 compared to $21.00 for 2001. The pricing environment
remained relatively firm during the first eight months of 2002, when compared to
that in previous economic downturns. Since the closure of CF, the pricing
environment has strengthened in stability as reflected by the 2002 fourth
quarter LTL billed revenue per hundredweight, excluding fuel surcharge, increase
of 5.9% to $22.56 from $21.30 in the fourth quarter of 2001.

ABF implemented a fuel surcharge on July 7, 1999, based on the increase in
diesel fuel prices compared to an index price. The fuel surcharge in effect
during 2002 averaged 2.0% of revenue. The fuel surcharge in effect during 2001
averaged 2.7% of revenue.

ABF's fourth quarter 2002 operating ratio was 92.2% compared to 94.5% for the
same period in 2001, reflecting improved tonnage levels and a more stable
pricing environment, both primarily as a result of CF's closure.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued

ABF's full year operating ratio increased to 94.6% for 2002 from 93.8% during
2001, primarily as a result of tonnage declines as discussed above and increases
in insurance costs and changes in certain other operating expense categories as
follows:

Salaries and wages expense for 2002 increased 0.6% as a percent of revenue
compared to the same period in 2001. The increase results from the annual
general International Brotherhood of Teamsters ("IBT") contractual base wage and
pension cost increases of 1.8% and 4.9% on April 1, 2002 and the August 1, 2002
increase of 12.9% for health and welfare costs as well as the fact that a
portion of salaries and wages are fixed in nature and increase as a percent of
revenue with decreases in revenue levels. In addition, workers' compensation
costs increased, as a result of an increase in severe claims and an increase in
the Company's self-insurance retention level, from $0.3 million per claim to
$1.0 million per claim, as well as a $0.9 million increase in reserves
associated with ABF's exposure to the liquidation of Reliance Insurance Company
(see Note R), when 2002 is compared to 2001. These increases were offset, in
part, by revenue yield improvements.

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
new agreement is April 1, 2003.

Supplies and expenses decreased 0.7% as a percent of revenue for 2002 compared
to 2001, due primarily to a decline in fuel costs, excluding taxes, which on an
average price-per-gallon basis, declined to $0.79 for 2002 from $0.87 for 2001.

Insurance expense increased 0.5% as a percent of revenue for 2002, compared to
2001, due primarily to increased insurance premium costs for third-party
casualty claims, in part because of the effect on the insurance markets of the
September 11 terrorist attacks.

Rents and purchased transportation increased 0.3% as a percent of revenue for
2002, compared to 2001, due primarily to an increase in rail utilization to
14.4% of total miles for 2002, compared to 13.5% in 2001.

As previously mentioned, ABF's general rate increase on August 1, 2002 was put
in place to cover known and expected cost increases for the next twelve months.
Typically, the increase was 5.8%, although the amount can vary by lane and
shipment characteristic. ABF's ability to retain this rate increase is dependent
on the pricing environment, which remained relatively firm during the first
eight months of 2002 and strengthened in stability during the last four months
of 2002, after CF's closure. ABF could be impacted by fluctuating fuel prices in
the future. Although fuel prices have remained stable during 2002, there can be
no assurances that they will continue to do so. ABF's fuel surcharges on revenue
are intended to offset any fuel cost increases. ABF's total insurance costs are
dependent on the insurance markets which have been adversely impacted by the
events of September 11 and a declining stock market. For 2002, insurance
premiums represented 36.4% of ABF's total insurance costs. The Company
anticipates ABF's insurance costs for 2003 to be consistent with 2002, assuming
similar claims experience and considering cost differences that occur because of
changes in business levels. However, for 2003, the Company has increased its
third-party casualty claims self-insurance retention layer from $500,000 to $1.0
million per claim. During 2002, ABF experienced increases in its non-union
pension costs of 77.2% to $4.8 million in 2002 from $2.7 million in 2001. These
costs represent approximately 0.4% and 0.2% of ABF's revenue for 2002 and 2001,
respectively. The Company anticipates ABF's non-union pension expense will
increase in 2003 to approximately $9.0 million from $4.8 million in 2002,
reflecting a declining stock market and long-term interest rates. As previously
discussed, ABF's results

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued

of operations in 2003 will be impacted by the wage and benefit increases
associated with the tentative new labor agreement with the IBT, which includes
an effective date of April 1, 2003.

The Company's management expects ABF's business levels to continue to improve
through the first eight months of 2003, as compared to the same period in 2002,
as a result of additional business gained due to the CF closure. However, at
this time, we have not seen any improvement in the overall U.S. economy.

CLIPPER

Effective July 29, 2002 and August 13, 2001, Clipper implemented general rate
increases of 5.9% and 4.9%, respectively, for LTL shipments. Revenues for 2002
decreased to $118.9 million from $127.3 million during 2001.

LTL shipments decreased 1.3% for 2002, compared to 2001. LTL shipment declines
reflect Clipper's movement away from unprofitable LTL business and lower
business levels, resulting from the decline in the U.S. economy. LTL revenue per
shipment decreased 3.3% for 2002, compared to 2001. LTL revenue per shipment
declines reflect primarily, an increase in smaller shipments and a decrease in
fuel surcharge revenue.

Intermodal shipments decreased 14.3% for 2002, compared to 2001. The number of
intermodal shipments decreased, primarily due to lower shipment volumes from
existing customers. Intermodal revenue per shipment increased slightly, 0.4%,
for 2002, compared to 2001.

Shipments for Clipper Controlled Logistics, Clipper's temperature-controlled
division, increased 10.0% for 2002, compared to 2001. Clipper Controlled
Logistics' revenue per shipment decreased slightly, 0.7%, for 2002, compared to
2001.

Despite the overall decline in revenue, Clipper's operating ratio improved
slightly to 99.1% for 2002, from 99.6% during 2001. Clipper's operating ratio
was positively impacted by the elimination of unprofitable accounts, higher
utilization of rail in line-haul movements and cost-efficient handling of
customer shipments in service lanes between major cities. Clipper's rail
utilization for 2002 was 63.6% of total miles, compared to 57.1% for 2001. For
Clipper, rail costs per mile are generally less expensive than over-the-road
costs per mile.

Clipper is continuing to solicit additional shipments in its traditional
metro-to-metro lanes. These shipments will provide a better match with Clipper's
core operations and have historically been more profitable.

G.I. TRUCKING COMPANY

On August 1, 2001, the Company sold the stock of G.I. Trucking to a company
formed by the senior executives of G.I. Trucking and Estes Express Lines
("Estes") (see Note Q). The Company retained ownership of three California
terminal facilities and has agreed to lease them for an aggregate amount of $1.6
million per year to G.I. Trucking for a period of up to four years. G.I.
Trucking has an option at any time during the four-year lease term to purchase
these terminals for $19.5 million. The facilities have a net book value of
approximately $5.9 million. If the terminal facilities are sold to G.I.
Trucking, the Company will recognize a pre-tax gain of approximately $13.6
million in the period they are sold. The Company's revenue and operating income
included seven months of operations for G.I. Trucking for 2001. Revenues and
operating income for G.I. Trucking for the seven months ended December 31, 2001
were $95.5 million and $0.1 million, respectively.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued

INVESTMENT IN WINGFOOT

The Company has the right, at any time after April 30, 2003 and before April 30,
2004, to sell its interest in Wingfoot to Goodyear for a cash "Put Price" and
Goodyear has the right, at any time after April 30, 2003 until October 31, 2004,
to purchase the Company's entire interest, for cash, at a "Call Price" equal to
the "Put Price" plus $5.0 million. The joint venture agreement contained
indemnity provisions which allowed either Goodyear or the Company to file a
claim if amounts paid for certain liabilities exceeded the closing balance sheet
aggregate amounts by $500,000. During 2002, Goodyear made an indemnity claim
against the Company. As a result, in the fourth quarter of 2002, Goodyear and
the Company agreed to a joint venture contract amendment reducing the "Put
Price" by $2.1 million and increasing Goodyear's liability exposure by $2.1
million. The amended "Put Price" is $71.3 million rather than the previously
disclosed amount of $73.4 million. As provided in the agreement between Goodyear
and Treadco, the Company will not share in the profits or losses of Wingfoot
during the term of the "Put." If the Company does not exercise its right to sell
its 19% interest in Wingfoot, the Company will account for its share of
Wingfoot's profits or losses beginning May 1, 2004, as provided in the Wingfoot
Operating Agreement. If the Company "puts" its interest to Goodyear, the Company
will record a pre-tax gain of approximately $12.0 million when the "Put"
transaction is closed. If Goodyear "calls" the Company's interest in Wingfoot,
the Company will record a pre-tax gain of approximately $17.0 million when the
"Call" transaction is closed.

INTEREST

Interest expense was $8.1 million for 2002, compared to $12.6 million for 2001.
The decline resulted from lower average debt levels when 2002 is compared to
2001.

INCOME TAXES

The difference between the effective tax rate for 2002 and the federal statutory
rate resulted from state income taxes and nondeductible expenses.

In March 1999, the Tenth Circuit Court of Appeals ruled against an appealing
taxpayer regarding the timing of the deductibility of contributions to
multiemployer pension plans. The Internal Revenue Service ("IRS") had previously
raised the same issue with respect to the Company. There were certain factual
differences between those present in the Tenth Circuit case and those relating
specifically to the Company. The Company was involved in the administrative
appeals process with the IRS regarding those factual differences beginning in
1997. During 2001, the Company paid approximately $33.0 million which
represented a substantial portion of the tax and interest that would be due if
the multiemployer pension issue was decided adversely to the Company, and which
was accounted for in prior years as a part of the Company's net deferred tax
liability and accrued expenses. In August 2002, the Company reached a settlement
with the IRS of the multiemployer pension issue and all other outstanding issues
relating to the Company's federal income tax returns for the years 1990 through
1994. The settlement resulted in a liability for tax and interest which was less
than the liability the Company had estimated if the IRS prevailed on all issues.
As a result of the settlement, the Company reduced its reserves for interest by
approximately $5.2 million to reflect the reduction in the Company's liability
for future cash payments of interest. The effect of this change resulted in an
increase in the Company's net income per diluted common share of $0.12.

At December 31, 2002, the Company had deferred tax assets of $49.3 million, net
of a valuation allowance of $2.7 million, and deferred tax liabilities of $46.5
million. The Company believes that the benefits of the deferred tax assets of
$49.3 million will be realized through the reduction of future taxable income.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued

Management has considered appropriate factors in assessing the probability of
realizing these deferred tax assets. These factors include deferred tax
liabilities of $46.5 million and the presence of significant taxable income in
2002 and 2001. The valuation allowance has been provided for the benefit of net
operating loss carryovers in certain states with relatively short carryover
periods and other limitations and for the excess tax basis in the investment in
Wingfoot.

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

OTHER LONG-TERM ASSETS AND OTHER LONG-TERM LIABILITIES

Other long-term assets increased $23.3 million and other long-term liabilities
increased $19.8 million from December 31, 2001 to December 31, 2002, due
primarily to a reclassification between supplemental pension benefit plan assets
and liabilities. The net effect of this reclassification on the Company's
financial position was zero. In addition, the Company made $15.7 million in
tax-deductible contributions to its non-union defined benefit pension plans
during 2002, which were offset in part by $5.3 million in pension expense.

STOCKHOLDERS' EQUITY

During 2002, the Company recorded, through other comprehensive income in
stockholder's equity, a minimum liability of $5.8 million associated with its
unfunded supplemental pension benefit plan. The minimum liability resulted from
an increase in accumulated benefit obligations ("ABO") which was caused, in
part, by a decline in the interest rate used to determine the obligation, which
is the same as the discount rate assumption used in the actuarial valuation of
the Company's non-union pension plans.

CURRENT DEFERRED INCOME TAX ASSETS AND LONG-TERM DEFERRED INCOME TAX LIABILITIES

Net deferred income taxes decreased $12.3 million from a net deferred income tax
liability of $9.5 million at December 31, 2001 to a net deferred income tax
asset of $2.8 million at December 31, 2002, due primarily to an increase in
deferred tax assets of $13.6 million, associated with the write-off of the tax
deductible goodwill of Clipper (see Note C).

2001 COMPARED TO 2000

Consolidated revenues from continuing operations of the Company in 2001 were
$1,526.2 million compared to $1,839.6 million in 2000, representing a decrease
of 17.0%, due primarily to decreases in revenues for Treadco and G.I. Trucking.
G.I. Trucking was sold on August 1, 2001 (see Note Q) and on October 31, 2000,
substantially all of the assets and liabilities of Treadco were contributed to
Wingfoot (see Note P). In addition, there were declines in revenues for ABF and
Clipper for 2001 compared to 2000, as a result of a decline in the U.S. economy
beginning in mid-2000. This economic decline was further accelerated by the
September 11 terrorist attacks on the World Trade Center and on the Pentagon.
Operating income decreased 45.8% to $75.9 million in 2001 from $140.2 million in
2000. The decrease in operating income is due primarily to a decline in
operating income for ABF, which relates primarily to the previously discussed
revenue declines. Income from continuing operations for 2001 was $41.4 million,
or $1.66 per diluted common share, compared to $76.2 million, or $3.17 per
diluted common share, for 2000. The decrease in income from continuing
operations reflects primarily the decrease in operating income offset, in part,
by a pre-tax gain of $4.6 million from the sale of G.I. Trucking, lower interest
expense from lower average debt levels and a tax benefit of $1.9 million
resulting from the resolution of certain tax contingencies arising in prior
years. Income from continuing

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued

operations for 2000 includes a fair value net gain on the Treadco/Wingfoot
transaction (see Note P) of $5.0 million.

The Company's 2001 results included seven months of operations for G.I. Trucking
(see Note Q). The Company's 2000 results included ten months of operations for
Treadco (see Note P) and a full twelve months of operations for G.I. Trucking.

The Company's defined benefit pension plans experienced returns on assets that
were below the 9.0% to 10.0% return on assets assumed for calculating its
pension expense under FAS 87. As a result of this and other factors relating to
normal plan cost fluctuations, the Company's net periodic pension cost increased
to an expense of $3.8 million from a credit of $2.5 million in 2000.

ABF FREIGHT SYSTEM, INC.

Effective August 1, 2001 and August 14, 2000, ABF implemented general rate
increases of 4.9% and 5.7%, respectively, in part to cover known and expected
cost increases.

Revenues for 2001 declined 7.0% to $1,282.3 million from $1,379.3 million in
2000. ABF generated operating income for 2001 of $79.4 million compared to
$133.8 million in 2000.

ABF's decline in revenue is due to a decrease in LTL tonnage and fuel
surcharges, which was partially offset by an increase in revenue per
hundredweight. ABF's LTL tonnage decreased 9.3% in 2001, compared to 2000. ABF's
performance for 2001 was affected by less available freight, due to decreased
business levels at customer facilities, primarily as a result of a decline in
the U.S. economy. The decrease in tonnage was offset, in part, by an increase in
LTL billed revenue per hundredweight, excluding fuel surcharge of 3.1% to $21.00
in 2001 compared to $20.37 in 2000, as the pricing environment remained
relatively firm.

ABF implemented a fuel surcharge on July 7, 1999, based on the increase in
diesel fuel prices compared to an index price. The fuel surcharge in effect
during 2001 averaged 2.7% of revenue. The fuel surcharge in effect during 2000
averaged 3.4% of revenue.

ABF's operating ratio increased to 93.8% for 2001 from 90.3% in 2000, primarily
as a result of tonnage declines and changes in certain operating expense
categories as follows:

Salaries and wages expense for 2001 increased 3.2% as a percent of revenue
compared to 2000. The increase results from the annual general IBT contractual
wage and benefit rate increase on April 1, 2001 of approximately 3.0%, as well
as an increase in wages and benefits costs for road drivers, resulting from
ABF's decision to utilize additional road drivers and company-owned equipment to
move freight in certain poor service rail lanes rather than rail. In addition,
portions of such costs are primarily fixed in nature and increase as a percent
of revenue with decreases in revenue levels.

Supplies and expenses increased 0.4% as a percent of revenue for 2001, compared
to 2000. Equipment repair costs have increased due to ABF's older trailer fleet.
This increase was offset by a decline in fuel costs, excluding taxes, that on a
price-per-gallon basis declined to $0.87 for 2001 from $0.95 in 2000.

Depreciation and amortization expense increased 0.5% as a percent of revenue for
2001, compared to 2000, due primarily to the purchase of 500 road tractors
during 2001. The road tractors purchased were to replace older tractors in the
fleet that have been transferred to city use, including some that were under
operating

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued

leases in the first quarter of 2000. In addition, portions of such costs are
primarily fixed in nature and increase as a percent of revenue with decreases in
revenue levels.

Rents and purchased transportation expense decreased 0.7% as a percent of
revenue for 2001, compared to 2000. This is due primarily to a decline in rail
utilization to 13.5% of total miles for 2001, compared to 15.6% in 2000, as the
Company is utilizing more company-owned equipment and road drivers for certain
line-haul moves, as previously discussed. In addition, rents and purchased
transportation costs decreased due to the disposal of some tractors under
operating leases, as previously mentioned.

CLIPPER

Effective August 13, 2001 and August 1, 2000, Clipper implemented general rate
increases of 4.9% and 5.9%, respectively, for LTL shipments. Revenues for
Clipper decreased 2.3% to $127.3 million in 2001 from $130.2 million in 2000.

LTL revenue per shipment increased 5.5% for 2001, compared to 2000. LTL
shipments declined 18.5% for 2001, compared to 2000. LTL shipment declines
reflect Clipper's movement away from unprofitable LTL business and lower
business levels, resulting from the decline in the U.S. economy, including the
impact of the September 11 terrorist attacks. In addition, the LTL division
suffered from changes in the shipping pattern of a large customer, which reduced
the LTL shipments handled by Clipper.

Intermodal revenue per shipment increased only 0.8% for 2001, when compared to
2000, due to increased competition for business, resulting from unused capacity
in the over-the-road truckload industry, which impacted the intermodal pricing
environment. The number of intermodal shipments increased 14.8% for 2001,
compared to 2000, due primarily to increased shipment volumes from existing
customers.

Clipper's operating ratio increased to 99.6% for 2001, from 98.8% in 2000.
Clipper's operating ratio increased as a result of several factors. Clipper's
LTL division experienced steep shipment declines during 2001, as discussed
above. In addition, a change in the mix of shipments handled by the LTL division
contributed to a decline in rail utilization, which increased line-haul costs.
Clipper's rail utilization was 57.1% of total miles for 2001, compared to 63.8%
in 2000. For Clipper, rail costs per mile are generally less expensive than
over-the-road costs per mile. Finally, Clipper's Controlled Logistics division
experienced increased trailer maintenance costs on its older 45-foot
refrigerated trailers.

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
Express Lines ("Estes") (see Note Q). The Company recognized a pre-tax gain on
the sale of $4.6 million in the third quarter of 2001. Cash proceeds from the
sale, net of costs and income taxes, of approximately $33.0 million were used to
pay down the Company's outstanding debt. The Company's revenue and operating
income includes seven months of operations for G.I. Trucking for 2001. Revenues
for G.I. Trucking for 2001 were $95.5 million, compared to $161.9 million in
2000. Operating income was $0.1 million for 2001, compared to $3.9 million in
2000 (see Note L).

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued

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). The transaction closed on October 31, 2000. Effective October 31, 2000,
Treadco contributed substantially all of its assets and liabilities to Wingfoot
in a non-taxable transaction in exchange for a 19% ownership in Wingfoot. For
the year ended December 31, 2000, tire operations included the operations of
Treadco for the ten months ended October 31, 2000 only. Revenue and operating
income for Treadco for the ten months ended October 31, 2000 were $158.3 million
and $4.7 million, respectively (see Note L). There were no operations for
Treadco during 2001.

In the last half of the 1990's, changes were occurring in the traditional
relationship between tire retreaders and raw materials franchisors and new tire
suppliers in Treadco's truck tire retreading and new tire sales business. As a
result of these changes, in the first quarter of 1998, the Company began
evaluating its then 46% investment in Treadco. This evaluation resulted in the
Company's January 1999 proposal to Treadco's Board of Directors for the Company
to acquire all outstanding Treadco common stock. The Company believed this would
lower costs associated with Treadco being a small public company, lower state
income tax costs and other tax benefits available to the Company if Treadco were
a wholly owned subsidiary, and maximize its flexibility in managing Treadco in
this changing environment. As these changes continued to evolve throughout 1999
and 2000, the Company concluded that an alliance of Treadco with one of the
major new tire manufacturers, who were expanding their presence in the retread
industry, provided Treadco the best opportunity at long-term survival and
maximized its current value to the Company. In September 2000, the Company
entered into its agreement with Goodyear, which created Wingfoot and gave the
Company the right to "put" its interest to Goodyear. See further discussion in
the Company's management's discussion comparison of 2002 to 2001.

INTEREST

Interest expense was $12.6 million for 2001 compared to $16.7 million for 2000.
The decline resulted from lower average debt levels when 2001 is compared to
2000.

INCOME TAXES

The difference between the effective tax rate for 2001 and the federal statutory
rate resulted from state income taxes, amortization of nondeductible goodwill
and other nondeductible expenses, as well as the impact of the $1.9 million tax
benefit resulting from the resolution of certain tax contingencies arising in
prior years (see Note E).

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued

SEASONALITY

ABF is affected by seasonal fluctuations, which affects its 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. Clipper's operations are similar to operations at ABF with revenues
being weaker in the first quarter and stronger during the months of June through
October.

ENVIRONMENTAL MATTERS

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 Environmental Protection Agency
("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 has 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.

FORWARD-LOOKING STATEMENTS

Statements contained in the Management's Discussion and Analysis section of this
report that are not based on historical facts are "forward-looking statements."
Terms such as "estimate," "forecast," "expect," "predict," "plan," "anticipate,"
"believe," "intend," "should," "would," "scheduled," and similar expressions and
the negatives of such terms are intended to identify forward-looking statements.
Such statements are by their nature subject to uncertainties and risks,
including, but not limited to, union relations; availability and cost of
capital; shifts in market demand; weather conditions; the performance and needs
of industries served by Arkansas Best's subsidiaries; actual future costs of
operating expenses such as fuel and related taxes; self-insurance claims and
employee wages and benefits; actual costs of continuing investments in
technology; the timing and amount of capital expenditures; competitive
initiatives and pricing pressures; general economic conditions; and other
financial, operational and legal risks and uncertainties detailed from time to
time in the Company's Securities and Exchange Commission ("SEC") public filings.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE INSTRUMENTS

The Company has historically been subject to market risk on all or a part of its
borrowings under bank credit lines which have variable interest rates. In
February 1998, the Company entered into an interest rate swap effective April 1,
1998. The swap agreement is a contract to exchange variable interest rate
payments for fixed rate payments over the life of the instrument. The notional
amount is used to measure interest to be paid or received and does not represent
the exposure to credit loss. The purpose of the swap is to limit the Company's
exposure to increases in interest rates on the notional amount of bank
borrowings over the term of the swap. The fixed interest rate under the swap is
5.845% plus the Credit Agreement margin (0.825% and 0.575% at December 31, 2002
and 2001, respectively). This instrument is recorded on the balance sheet of the
Company in other liabilities (see Note B). Details regarding the swap, as of
December 31, 2002, are as follows:

NOTIONAL RATE RATE FAIR
AMOUNT MATURITY PAID RECEIVED VALUE (2)(3)
-------- -------- ---- -------- ------------

$110.0 million April 1, 2005 5.845% Plus Credit Agreement LIBOR rate (1) ($9.9) million
Margin (0.825%) Plus Credit Agreement
Margin (0.825%)

(1) LIBOR rate is determined two London Banking Days prior to the first day of
every month and continues up to and including the maturity date.

(2) The fair value is an amount estimated by Societe Generale ("process
agent") that the Company would have paid at December 31, 2002 to terminate
the agreement.

(3) The swap value changed from ($5.4) million at December 31, 2001. The fair
value is impacted by changes in rates of similarly termed Treasury
instruments.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used by the Company in estimating its
fair value disclosures for all financial instruments, except for the interest
rate swap agreement disclosed above and capitalized leases:

CASH AND CASH EQUIVALENTS. The carrying amount reported in the balance sheets
for cash and cash equivalents approximates its fair value.

LONG- AND SHORT-TERM DEBT. The carrying amount of the Company's borrowings under
its Revolving Credit Agreement approximates its fair value, since the interest
rate under this agreement is variable. The fair value of the Company's other
long-term debt was estimated using current market rates.

The carrying amounts and fair value of the Company's financial instruments at
December 31 are as follows:

2002 2001
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------ ----- ------ -----
($ thousands)

Cash and cash equivalents .... $ 39,644 $ 39,644 $ 14,860 $ 14,860
Short-term debt .............. $ 133 $ 127 $ 24 $ 24
Long-term debt ............... $111,647 $111,610 $114,917 $114,498

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - continued

Borrowings under the Company's Credit Agreement in excess of $110.0 million are
subject to market risk. During 2002, outstanding debt obligations under the
Credit Agreement periodically exceeded $110.0 million. The Company's highest
borrowings during 2002 reached $126.1 million, and the average borrowings during
the year were $111.3 million. A 100-basis-point change in interest rates on
Credit Agreement borrowings above $110.0 million would change annual interest
cost by $100,000 per $10.0 million of borrowings.

The Company is subject to market risk for increases in diesel fuel prices;
however, this risk is mitigated by fuel surcharges which are included in the
revenues of ABF and Clipper based on increases in diesel fuel prices compared to
relevant indexes.

The Company does not have a formal foreign currency risk management policy. The
Company's foreign operations are not significant to the Company's total revenues
or assets. Revenue from non-U.S. operations amounted to approximately 1.0% of
total revenues for 2002. Accordingly, foreign currency exchange rate
fluctuations have never had a significant impact on the Company, and they are
not expected to in the foreseeable future.

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Stockholders and Board of Directors
Arkansas Best Corporation

We have audited the accompanying consolidated balance sheets of Arkansas Best
Corporation and subsidiaries as of December 31, 2002 and 2001, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 2002. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Arkansas Best Corporation and subsidiaries at December 31, 2002 and 2001, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 2002, in conformity with
accounting principles generally accepted in the United States.

As discussed in Note C to the financial statements, in 2002, the Company changed
its method of accounting for goodwill.

Ernst & Young LLP

Little Rock, Arkansas
January 20, 2003,
except for Note S, as to which the date is January 23, 2003

ARKANSAS BEST CORPORATION
CONSOLIDATED BALANCE SHEETS

DECEMBER 31
2002 2001
-------- --------
($ thousands)

ASSETS

CURRENT ASSETS
Cash and cash equivalents .......................... $ 39,644 $ 14,860
Accounts receivable, less allowances
(2002 - $2,942; 2001 - $3,483) ................... 130,769 116,430
Prepaid expenses ................................... 7,787 6,803
Deferred income taxes .............................. 26,443 22,193
Federal and state income taxes prepaid ............. -- 2,647
Other .............................................. 3,729 4,027
-------- --------
TOTAL CURRENT ASSETS ............................ 208,372 166,960

PROPERTY, PLANT AND EQUIPMENT
Land and structures ................................ 223,107 214,856
Revenue equipment .................................. 343,100 334,622
Service, office and other equipment ................ 91,054 79,268
Leasehold improvements ............................. 12,983 12,359
-------- --------
670,244 641,105
Less allowances for depreciation and amortization .. 330,841 306,928
-------- --------
339,403 334,177

INVESTMENT IN WINGFOOT ................................ 59,341 59,341

OTHER ASSETS .......................................... 82,242 58,949

ASSETS HELD FOR SALE .................................. 3,203 2,402

GOODWILL, less accumulated amortization
(2002 - $32,037; 2001 - $44,469) ................... 63,811 101,324
-------- --------

$756,372 $723,153
======== ========

ARKANSAS BEST CORPORATION
CONSOLIDATED BALANCE SHEETS

DECEMBER 31
2002 2001
--------- ---------
($ thousands)

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Bank overdraft and drafts payable ............................. $ 7,808 $ 6,515
Accounts payable .............................................. 58,442 50,366
Federal and state income taxes ................................ 5,442 --
Accrued expenses .............................................. 123,294 121,423
Current portion of long-term debt ............................. 328 14,834
--------- ---------
TOTAL CURRENT LIABILITIES .................................. 195,314 193,138

LONG-TERM DEBT, less current portion ............................. 112,151 115,003

FAIR VALUE OF INTEREST RATE SWAP ................................. 9,853 5,383

OTHER LIABILITIES ................................................ 59,938 40,097

DEFERRED INCOME TAXES ............................................ 23,656 31,736

FUTURE MINIMUM RENTAL COMMITMENTS, NET
(2002 - $42,494; 2001 - $46,124) ............................. -- --

OTHER COMMITMENTS AND CONTINGENCIES .............................. -- --

STOCKHOLDERS' EQUITY
Common stock, $.01 par value, authorized 70,000,000 shares;
issued 2002: 24,972,086 shares; 2001: 24,542,163 shares .. 250 245
Additional paid-in capital .................................... 211,567 204,463
Retained earnings ............................................. 154,455 137,635
Treasury stock, at cost, 2002 and 2001: 59,782 shares ......... (955) (955)
Accumulated other comprehensive loss .......................... (9,857) (3,592)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY ................................. 355,460 337,796
--------- ---------

$ 756,372 $ 723,153
========= =========

The accompanying notes are an integral part of the consolidated financial
statements.

ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF INCOME

YEAR ENDED DECEMBER 31
2002 2001 2000
----------- ----------- -----------
($ thousands, except per share data)

OPERATING REVENUES
Transportation operations ........................................... $ 1,422,297 $ 1,526,206 $ 1,683,212
Tire operations ..................................................... -- -- 156,355
----------- ----------- -----------
1,422,297 1,526,206 1,839,567
----------- ----------- -----------

OPERATING EXPENSES AND COSTS
Transportation operations ........................................... 1,354,076 1,450,272 1,546,847
Tire operations ..................................................... -- -- 152,568
----------- ----------- -----------
1,354,076 1,450,272 1,699,415
----------- ----------- -----------

OPERATING INCOME ....................................................... 68,221 75,934 140,152

OTHER INCOME (EXPENSE)
Net gains on sales of property and other ............................ 3,524 918 2,608
Gain on sale of G.I. Trucking Company ............................... -- 4,642 --
Fair value net gain - Wingfoot ...................................... -- -- 5,011
IRS interest settlement ............................................. 5,221 -- --
Interest expense .................................................... (8,097) (12,636) (16,687)
Other, net .......................................................... (238) (2,139) (1,961)
----------- ----------- -----------
410 (9,215) (11,029)
----------- ----------- -----------

INCOME BEFORE INCOME TAXES ............................................. 68,631 66,719 129,123

FEDERAL AND STATE INCOME TAXES
Current ............................................................. 19,464 25,367 42,851
Deferred ............................................................ 8,412 (52) 10,117
----------- ----------- -----------
27,876 25,315 52,968
----------- ----------- -----------

INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE ....................................... 40,755 41,404 76,155
----------- ----------- -----------

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE, NET OF TAX BENEFITS OF $13,580 ............................ (23,935) -- --
----------- ----------- -----------

NET INCOME ............................................................. 16,820 41,404 76,155
Preferred stock dividends ........................................... -- 2,487 4,122
----------- ----------- -----------

NET INCOME FOR COMMON STOCKHOLDERS ..................................... $ 16,820 $ 38,917 $ 72,033
=========== =========== ===========

NET INCOME (LOSS) PER COMMON SHARE
BASIC:
Income before cumulative effect of change in accounting principle ... $ 1.65 $ 1.79 $ 3.62
Cumulative effect of change in accounting principle, net of tax ..... (0.97) -- --
----------- ----------- -----------
NET INCOME PER SHARE (BASIC) ........................................... $ 0.68 $ 1.79 $ 3.62
=========== =========== ===========
DILUTED:
Income before cumulative effect of change in accounting principle ... $ 1.60 $ 1.66 $ 3.17
Cumulative effect of change in accounting principle, net of tax ..... (0.94) -- --
----------- ----------- -----------
NET INCOME PER SHARE (DILUTED) ......................................... $ 0.66 $ 1.66 $ 3.17
=========== =========== ===========

CASH DIVIDENDS PAID PER COMMON SHARE ................................... $ -- $ -- $ --
=========== =========== ===========

The accompanying notes are an integral part of the consolidated financial
statements.

ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

PREFERRED STOCK COMMON STOCK
----------------- -----------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
(thousands)

BALANCES AT JANUARY 1, 2000 .................... 1,495 $ 15 19,752 $197

Net income ................................... -- --

Total comprehensive income .................

Issuance of common stock ..................... -- 467 5
Tax effect of stock options exercised ........ -- --
Purchase of preferred stock .................. (105) (1) --
Purchase of treasury stock ................... -- --
Dividends paid on preferred stock ............ -- --
------ ---- ------ ----

BALANCES AT DECEMBER 31, 2000 .................. 1,390 14 20,219 202

Net income ................................... -- --
Fair value of interest rate swap,
net of tax benefits of $2,094 (a) ......... -- --
Foreign currency translation,
net of tax benefits of $193 (b) ............ -- --

Total comprehensive income ...............

Issuance of common stock ..................... -- 811 8
Tax effect of stock options exercised ........ -- --
Purchase of preferred stock .................. (7) -- --
Conversion of preferred stock
to common .................................. (1,383) (14) 3,512 35
Dividends paid on preferred stock ............ -- --
Fair value of G.I. Trucking and Treadco
officer stock options and other ............ -- --
------ ---- ------ ----

BALANCES AT DECEMBER 31, 2001 .................. -- -- 24,542 245

Net income ................................... -- --
Change in fair value of interest rate swap,
net of tax benefits of $1,739 (a) .......... -- --
Change in foreign currency translation,
net of tax benefits of $4 (b) ............. -- --
Minimum pension liability,
net of tax benefits of $2,245 (c) .......... -- --
Total comprehensive income ...............
Issuance of common stock ..................... -- 430 5
Tax effect of stock options exercised ........ -- --
Change in fair value of Treadco
officer stock options ...................... -- --
------ ---- ------ ----

BALANCES AT DECEMBER 31, 2002 .................. -- $ -- 24,972 $250
====== ==== ====== ====

ACCUMULATED
ADDITIONAL OTHER
PAID-IN RETAINED COMPREHENSIVE TREASURY TOTAL
CAPITAL EARNINGS LOSS STOCK EQUITY
------- -------- ---- ----- ------
(thousands)

BALANCES AT JANUARY 1, 2000 .................... $ 194,155 $ 26,685 $ -- $ -- $ 221,052

Net income ................................... -- 76,155 -- -- 76,155
---------
Total comprehensive income ................. 76,155
---------
Issuance of common stock ..................... 3,829 -- -- -- 3,834
Tax effect of stock options exercised ........ 150 -- -- -- 150
Purchase of preferred stock .................. (3,923) -- -- -- (3,924)
Purchase of treasury stock ................... -- -- -- (955) (955)
Dividends paid on preferred stock ............ -- (4,122) -- -- (4,122)
--------- --------- ------- ----- ---------

BALANCES AT DECEMBER 31, 2000 .................. 194,211 98,718 -- (955) 292,190

Net income ................................... -- 41,404 -- -- 41,404
Fair value of interest rate swap,
net of tax benefits of $2,094 (a) ......... -- -- (3,289) -- (3,289)
Foreign currency translation,
net of tax benefits of $193 (b) ............ -- -- (303) -- (303)
---------
Total comprehensive income ............... 37,812
---------
Issuance of common stock ..................... 7,638 -- -- -- 7,646
Tax effect of stock options exercised ........ 1,510 -- -- -- 1,510
Purchase of preferred stock .................. (414) -- -- -- (414)
Conversion of preferred stock
to common .................................. (21) -- -- -- --
Dividends paid on preferred stock ............ -- (2,487) -- -- (2,487)
Fair value of G.I. Trucking and Treadco
officer stock options and other ............ 1,539 -- -- -- 1,539
--------- --------- ------- ----- ---------

BALANCES AT DECEMBER 31, 2001 .................. 204,463 137,635 (3,592) (955) 337,796

Net income ................................... -- 16,820 -- -- 16,820
Change in fair value of interest rate swap,
net of tax benefits of $1,739 (a) .......... -- -- (2,731) -- (2,731)
Change in foreign currency translation,
net of tax benefits of $4 (b) ............. 4 -- (6) -- (2)
Minimum pension liability,
net of tax benefits of $2,245 (c) .......... -- -- (3,528) -- (3,528)
---------
Total comprehensive income ............... 10,559
---------
Issuance of common stock ..................... 3,908 -- -- -- 3,913
Tax effect of stock options exercised ........ 3,224 -- -- -- 3,224
Change in fair value of Treadco
officer stock options ...................... (32) -- -- -- (32)
--------- --------- ------- ----- ---------

BALANCES AT DECEMBER 31, 2002 .................. $ 211,567 $ 154,455 $(9,857) $(955) $ 355,460
========= ========= ======= ===== =========

The accompanying notes are an integral part of the consolidated financial
statements.

(a) The accumulated loss from the fair value of the interest rate swap in
accumulated other comprehensive loss is $3.3 million, net of tax benefits
of $2.1 million at December 31, 2001 and $6.0 million, net of tax benefits
of $3.8 million at December 31, 2002.

(b) The accumulated loss from the foreign currency translation in accumulated
other comprehensive loss is $0.3 million, net of tax benefits of $0.2
million at both December 31, 2001 and 2002.

(c) The minimum pension liability included in accumulated other comprehensive
loss at December 31, 2002 is $3.5 million, net of tax benefits of $2.2
million (see Note K).

ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31
2002 2001 2000
-------- -------- ---------
($ thousands)

OPERATING ACTIVITIES
Net income .................................................... $ 16,820 $ 41,404 $ 76,155
Adjustments to reconcile net income
to net cash provided by operating activities:
Change in accounting principle, net of tax ................. 23,935 -- --
Depreciation and amortization .............................. 49,219 50,315 52,186
Amortization of goodwill ................................... -- 4,053 4,051
Amortization of deferred financing costs ................... 275 180 217
Provision for losses on accounts receivable ................ 1,593 2,966 3,797
Provision for deferred income taxes ........................ 8,412 (52) 10,117
Gain on sales of assets and other .......................... (3,430) (2,322) (3,250)
Gain on sale of G.I. Trucking Company ...................... -- (4,642) --
Fair value net gain - Wingfoot ............................. -- -- (5,011)
Changes in operating assets and liabilities,
net of sales and exchanges:
Receivables ............................................. (15,914) 35,236 (12,568)
Prepaid expenses ........................................ (982) (136) (929)
Other assets ............................................ (12,631) (10,892) (8,023)
Accounts payable, bank drafts payable, taxes payable,
accrued expenses and other liabilities ................ 21,371 (51,263) 10,996
-------- -------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES ........................ 88,668 64,847 127,738
-------- -------- ---------

INVESTING ACTIVITIES
Purchases of property, plant and equipment,
less capitalized leases and notes payable ................... (55,668) (74,670) (93,585)
Proceeds from asset sales ..................................... 11,874 10,132 9,784
Proceeds from the sale of G.I. Trucking Company ............... -- 40,455 --
Capitalization of internally developed software and other ..... (4,381) (2,817) (3,499)
-------- -------- ---------
NET CASH USED BY INVESTING ACTIVITIES ............................ (48,175) (26,900) (87,300)
-------- -------- ---------

FINANCING ACTIVITIES
Borrowings under revolving credit facilities .................. 61,200 92,800 110,000
Payments under revolving credit facilities .................... (61,200) (92,800) (101,300)
Payments on long-term debt .................................... (15,191) (23,234) (16,359)
Retirement of bonds ........................................... (4,983) (23,174) (4,781)
Purchase of preferred stock ................................... -- (414) (3,924)
Dividends paid on preferred stock ............................. -- (2,487) (4,122)
Net increase (decrease) in bank overdraft ..................... 1,379 (18,165) 9,441
Other, net .................................................... 3,086 7,645 3,030
-------- -------- ---------
NET CASH USED BY FINANCING ACTIVITIES ............................ (15,709) (59,829) (8,015)
-------- -------- ---------

NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS .............................................. 24,784 (21,882) 32,423
Cash and cash equivalents at beginning of period .............. 14,860 36,742 4,319
-------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ....................... $ 39,644 $ 14,860 $ 36,742
======== ======== =========

The accompanying notes are an integral part of the consolidated financial
statements.

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS

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). 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).

Approximately 77% of ABF's employees are covered under a five-year collective
bargaining agreement, which began on April 1, 1998, 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 new agreement is April 1, 2003.

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). 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).

NOTE B - ACCOUNTING POLICIES

CONSOLIDATION: The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany accounts and
transactions are eliminated in consolidation.

CASH AND CASH EQUIVALENTS: Short-term investments that have a maturity of ninety
days or less when purchased are considered cash equivalents.

CONCENTRATION OF CREDIT RISK: The Company's services are provided primarily to
customers throughout the United States and Canada. ABF, the Company's largest
subsidiary, which represented approximately 90.0% of the Company's annual
revenues for 2002, had no single customer representing more than 3.0% of its
revenues during 2002 and no single customer representing more than 3.0% of its
accounts receivable balance during 2002. The Company performs ongoing credit
evaluations of its customers and generally does not require collateral. The
Company provides an allowance for doubtful accounts based upon historical trends
and factors surrounding the credit risk of specific customers. Historically,
credit losses have been within management's expectations.

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

ALLOWANCES: The Company maintains allowances for doubtful accounts, revenue
adjustments and deferred tax assets. The Company's allowance for doubtful
accounts represents an estimate of potential accounts receivable write-offs
associated with recognized revenue based on historical trends and factors
surrounding the credit risk of specific customers. The Company writes off
accounts receivable when it has determined it appropriate to turn them over to a
collection agency. Receivables written off are charged against the allowance.
The Company's allowance for revenue adjustments represents an estimate of
potential revenue adjustments associated with recognized revenue based upon
historical trends. The Company's valuation allowance against deferred tax assets
is established by evaluating whether the benefits of its deferred tax assets
will be realized through the reduction of future taxable income.

IMPAIRMENT ASSESSMENT OF LONG-LIVED ASSETS: On January 1, 2002, the Company
adopted Statement of Financial Accounting Standards No. 144 ("FAS 144"),
Accounting for the Impairment and Disposal of Long-Lived Assets. The Company
reviews its long-lived assets, including property, plant, equipment and
capitalized software, that are held and used in its motor carrier operations and
intermodal operations businesses for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable, as required by FAS 144. If such an event or change in circumstances
is present, the Company will estimate the undiscounted future cash flows, less
the future cash outflows necessary to obtain those inflows, expected to result
from the use of the asset and its eventual disposition. If the sum of the
undiscounted future cash flows is less than the carrying amount of the related
assets, the Company will recognize an impairment loss or review its depreciation
policies as may be appropriate. No such events or circumstances were present,
indicating the Company's long-lived assets would not be recoverable at December
31, 2002. The Company considers a long-lived asset as abandoned when it ceases
to be used. The Company records impairment losses resulting from such
abandonment in operating income. During 2002, ABF abandoned $0.1 million of
capitalized software, which it ceased to use. Assets to be disposed of are
reclassified as assets held for sale at the lower of their carrying amount or
fair value less costs to sell.

Assets held for sale represent primarily ABF's non-operating freight terminals
and older revenue equipment that is no longer in service. Assets held for sale
are carried at the lower of their carrying value or fair value less costs to
sell. Write-downs to fair value less costs to sell are reported below the
operating income line in gains or losses on sales of property, in the case of
real property, or above the operating income line as gains or losses on sales of
equipment, in the case of revenue or other equipment. Assets held for sale are
expected to be disposed of by selling the properties or assets to a third party
within the next 12 to 24 months.

Total assets held for sale at December 31, 2001 were $2.4 million. During 2002,
additional assets of $3.5 million were identified and reclassified to assets
held for sale. Non-operating terminals and revenue equipment carried at $2.7
million were sold for a gain of $3.7 million, of which $3.5 million related to
real estate and was reported below the operating line and $0.2 million was
related to equipment and reported in operating income. During 2002, the Company
recorded a $0.2 million loss from a write-down related to real estate, which was
reported below the operating line.

PROPERTY, PLANT AND EQUIPMENT INCLUDING REPAIRS AND MAINTENANCE: Purchases of
property, plant and equipment are recorded at cost. For financial reporting
purposes, such property is depreciated principally by the straight-line method,
using the following lives: structures - 15 to 20 years; revenue equipment - 3 to
12 years; other equipment - 3 to 10 years; and leasehold improvements - 4 to 20
years. For tax reporting purposes, accelerated depreciation or cost recovery
methods are used. Gains and losses on asset sales are reflected in the year of
disposal. Unless fair value can be determined, trade-in allowances in excess of
the book value of revenue equipment traded are accounted for by adjusting the
cost of assets acquired. Tires purchased with revenue equipment are capitalized
as a part of the cost of such equipment, with replacement tires being expensed
when placed in service. Repair and maintenance costs associated with property,
plant and equipment

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

are expensed as incurred if the costs do not extend the useful life of the
asset. If such costs do extend the useful life of the asset, the costs are
capitalized and depreciated over the appropriate useful life.

COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE, INCLUDING WEBSITE
DEVELOPMENT COSTS: The Company accounts for internally developed software in
accordance with Statement of Position No. 98-1 ("SOP 98-1"), Accounting for
Costs of Computer Software Developed for or Obtained for Internal Use. As a
result, the Company capitalizes qualifying computer software costs incurred
during the "application development stage." For financial reporting purposes,
capitalized software costs are amortized by the straight-line method over 24 to
60 months. The amount of costs capitalized within any period is dependent on the
nature of software development activities and projects in each period. In March
2000, the Emerging Issues Task Force ("EITF") issued EITF Issue No. 00-2 ("EITF
00-2"), Accounting for Website Development Costs. EITF 00-2 did not change the
Company's practices, described above, with respect to website development costs.

GOODWILL: On January 1, 2002, the Company adopted Statement of Financial
Accounting Standards No. 142 ("FAS 142"), Goodwill and Other Intangible Assets.
Under the provisions of FAS 142, goodwill is no longer amortized but reviewed
annually for impairment. At December 31, 2002, the Company's assets included
goodwill from a 1988 leveraged buyout ("LBO") transaction of $63.8 million
related to ABF. As prescribed by FAS 142, the Company uses the fair value method
in determining recoverable goodwill. The fair value method uses a combination of
valuation methods, including EBITDA and net income multiples and the present
value of discounted cash flows (see Note C regarding the Company's transitional
impairment testing of ABF and Clipper goodwill, which resulted in the write-off
of the Clipper goodwill during the first quarter of 2002). The Company performed
the annual impairment testing on its ABF goodwill based upon operations and fair
value at January 1, 2003 and found there to be no impairment.

INCOME TAXES: Deferred income taxes are accounted for under the liability
method. Deferred income taxes relate principally to asset and liability basis
differences arising from the 1988 LBO and from a 1995 acquisition, as well as to
the timing of the depreciation and cost recovery deductions previously described
and to temporary differences in the recognition of certain revenues and expenses
of carrier operations.

REVENUE RECOGNITION: Motor carrier revenue is recognized based on relative
transit time in each reporting period with expenses recognized as incurred. In
accordance with the Securities and Exchange Commission's ("SEC") Staff
Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial
Statements, in the fourth quarter of 2000, the Company changed Clipper's revenue
recognition method from a method of recognizing revenue when freight was
received from the shipper with the accrual of the estimated direct costs to
complete the delivery of freight in transit, to a method where Clipper's revenue
is recognized based on relative transit time in each reporting period with
expenses recognized as incurred. This method conforms Clipper's revenue
recognition method to the Company's motor carrier revenue recognition method
prescribed by Emerging Issues Task Force Issue No. 91-9 ("EITF 91-9"), Revenue
and Expense Recognition for Freight Services in Process. The change was a change
in accounting principle under Accounting Principles Board Opinion No. 20 ("APB
20"). The impact of the change was immaterial. Treadco tire operations revenue
was recognized generally at the point when goods or services were provided to
the customers (see Note P).

EARNINGS (LOSS) PER SHARE: The calculation of earnings (loss) per share is based
on the weighted-average number of common (basic earnings per share) or common
equivalent shares outstanding (diluted earnings per share) during the applicable
period. The dilutive effect of Common Stock equivalents is excluded from basic
earnings per share and included in the calculation of diluted earnings per
share. The calculation of basic earnings per share reduces income available to
common stockholders by Preferred Stock dividends paid or accrued during the
period (see Note H).

STOCK-BASED COMPENSATION: At December 31, 2002, the Company had three stock
option plans, which are described more fully in Note H. The 2002 plan allows for
the granting of stock options as well as two types of

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

stock appreciation rights ("SAR's") which are payable in shares or cash.
Employer SAR's allow the Company to decide, when an option is exercised, to
treat the exercise as an SAR. Employee SAR's allow the optionee to decide, when
exercising an option, to treat it as an SAR. During 2002, the Company granted
7,500 Employer SAR's in conjunction with a stock option grant of 7,500 shares to
a member of the Board of Directors. Employer SAR's may be exercised at the
Company's discretion. At December 31, 2002, no employees had stock appreciation
rights which were outstanding. The Company accounts for stock options under the
"intrinsic value method" and the recognition and measurement principles of
Accounting Principles Board Opinion No. 25 ("APB 25"), Accounting for Stock
Issued to Employees and related interpretations, including Financial Accounting
Standards Board Interpretation No. 44 ("FIN 44"), Accounting for Certain
Transactions Involving Stock Compensation. During the fourth quarter of 2002,
the Company adopted the disclosure provisions of Statement of Financial
Accounting Standards No. 148 ("FAS 148"), Accounting for Stock-Based
Compensation - Transition and Disclosure. No stock-based employee compensation
expense is reflected in net income, as all options granted under the Company's
plans had an exercise price equal to the market value of the underlying Common
Stock on the date of grant.

The Company has elected to use the APB 25 intrinsic value method because the
alternative fair value accounting provided for under Statement of Financial
Accounting Standards No. 123 ("FAS 123"), Accounting for Stock-Based
Compensation requires the use of theoretical option valuation models, such as
the Black-Scholes model, that were not developed for use in valuing employee
stock options. The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of employee stock options.

For companies accounting for their stock-based compensation under the APB 25
intrinsic value method, pro forma information regarding net income and earnings
per share is required and is determined as if the Company had accounted for its
employee stock options under the fair value method of FAS 123. The fair value
for these options is estimated at the date of grant, using a Black-Scholes
option pricing model with the following weighted-average assumptions for 2002,
2001 and 2000, respectively: risk-free interest rates of 4.0%, 5.4% and 5.2%;
dividend yields of .01%, .01% and .01%; volatility factors of the expected
market price of the Company's Common Stock of .56, .57 and .46; and a
weighted-average expected life of the option of 9.5 years. For purposes of pro
forma disclosures, the estimated fair value of the options is amortized to
expense over the options' vesting period.

The following table illustrates the effect on net income and earnings per share
if the Company had applied the fair value recognition under FAS 123 and FAS 148
to stock-based employee compensation (in thousands except for earnings-per-share
information):

DECEMBER 31
2002 2001 2000
------- ------- -------

Net income - as reported ................................ $16,820 $41,404 $76,155
Less total stock option expense determined under fair
value-based methods for all awards, net of tax ........ (2,188) (1,831) (825)
------- ------- -------

Net income - pro forma .................................. $14,632 $39,573 $75,330
======= ======= =======

Net income per share - as reported (basic) .............. $ 0.68 $ 1.79 $ 3.62
======= ======= =======

Net income per share - as reported (diluted) ............ $ 0.66 $ 1.66 $ 3.17
======= ======= =======

Net income per share - pro forma (basic) ................ $ 0.59 $ 1.70 $ 3.58
======= ======= =======

Net income per share - pro forma (diluted) .............. $ 0.59 $ 1.59 $ 3.13
======= ======= =======

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

CLAIMS LIABILITIES: The Company is self-insured up to certain limits for
workers' compensation, certain third-party casualty claims and cargo loss and
damage claims. Above these limits, the Company has purchased insurance coverage,
which management considers to be adequate. The Company records an estimate of
its liability for self-insured workers' compensation and third-party casualty
claims which includes the incurred claim amount plus an estimate of future claim
development calculated by applying the Company's historical claims development
factors to its incurred claims amounts. The Company's liability also includes an
estimate of incurred, but not reported, claims. Netted against this liability
are amounts the Company expects to recover from insurance carriers and insurance
pool arrangements. The Company records an estimate of its potential self-insured
cargo loss and damage claims by estimating the amount of potential claims based
on the Company's historical trends and certain event-specific information. The
Company's claims liabilities have not been discounted.

INSURANCE-RELATED ASSESSMENTS: The Company accounts for insurance-related
assessments in accordance with Statement of Position No. 97-3 ("SOP 97-3"),
Accounting by Insurance and Other Enterprises for Insurance-Related Assessments.
At December 31, 2002 and 2001, the Company has recorded estimated liabilities of
$0.6 million incurred for state guaranty fund assessments and other
insurance-related assessments. Management has estimated the amounts incurred,
using the best available information about premiums and guaranty assessments by
state. These amounts are expected to be paid within a period not to exceed one
year. The liabilities recorded have not been discounted.

ENVIRONMENTAL MATTERS: The Company expenses environmental expenditures related
to existing conditions resulting from past or current operations and from which
no current or future benefit is discernible. Expenditures which extend the life
of the related property or mitigate or prevent future environmental
contamination are capitalized. The Company determines its liability on a
site-by-site basis with actual testing at some sites, and records a liability at
the time when it is probable and can be reasonably estimated. The estimated
liability is not discounted or reduced for possible recoveries from insurance
carriers or other third parties (see Note J).

DERIVATIVE FINANCIAL INSTRUMENTS: The Company has, from time to time, entered
into interest rate swap agreements (see Notes F and M) and interest rate cap
agreements designated to modify the interest characteristic of outstanding debt
or limit exposure to increasing interest rates in accordance with its interest
rate risk management policy. The differential to be paid or received as interest
rates change is accrued and recognized as an adjustment of interest expense
related to the debt (the accrual method of accounting). The related amount
payable or receivable from counter-parties is included in other current
liabilities or current assets. In connection with the Company's adoption of
Statement of Financial Accounting Standards No. 133 ("FAS 133"), Accounting for
Derivative Financial Instruments and Hedging Activities, the Company is required
to recognize all derivatives on its balance sheet at fair value. Derivatives
that are not hedges will be adjusted to fair value through income. If a
derivative is a hedge, depending on the nature of the hedge, changes in the fair
value of the derivative will either be offset against the change in fair value
of the hedged asset, liability or firm commitment through earnings, or
recognized in other comprehensive income until the hedged item is recognized in
earnings. Hedge ineffectiveness associated with interest rate swap agreements
will be reported by the Company in interest expense.

The Company accounts for its derivative financial instruments in accordance with
FAS 133. In February 1998, the Company entered into an interest rate swap
agreement with an effective date of April 1, 1998 and a termination date of
April 1, 2005 on a notional amount of $110.0 million. The Company's interest
rate strategy is to hedge its variable 30-day LIBOR-based interest rate for a
fixed interest rate of 5.845% (plus the Credit Agreement margin which was 0.825%
and 0.575% at December 31, 2002 and 2001, respectively) on $110.0 million of
Credit Agreement borrowings for the term of the interest rate swap to protect
the Company from

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

potential interest rate increases. The Company has designated its benchmark
variable 30-day LIBOR-based interest rate on $110.0 million of borrowings under
the Company's Credit Agreement as a hedged item under a cash flow hedge. If the
Company had terminated the interest rate swap on December 31, 2002, it would
have had to pay an estimated $9.9 million. The Company recorded liabilities of
$9.9 million and $5.4 million, respectively, on its balance sheet in accordance
with FAS 133, at December 31, 2002 and 2001, with changes in value included in
other comprehensive income, net of income tax benefits.

The Company reported no gain or loss during 2002 or 2001 as a result of hedge
ineffectiveness, other derivative instruments' gain or loss or the
discontinuance of a cash flow hedge. Future changes in the swap arrangement
(including termination of the swap agreement), swap notional amount, hedged
portion or forecasted Credit Agreement borrowings below $110.0 million may
result in a reclassification of any gain or loss reported in other comprehensive
income, into earnings, as interest expense.

COSTS OF START-UP ACTIVITIES: The Company expenses certain costs associated with
start-up activities as they are incurred.

COMPREHENSIVE INCOME: The Company reports the classification components of other
comprehensive income by their nature in the financial statements and displays
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the consolidated statements of
stockholders' equity. Other comprehensive income refers to revenues, expenses,
gains and losses that are included in comprehensive income but excluded from net
income. At December 31, 2002 and 2001, other comprehensive income consists of
changes in the fair value of the Company's interest rate swap, net of tax
benefits (see Note M), changes in foreign currency translation adjustments, net
of tax benefits and a minimum pension liability related to the Company's
supplemental pension benefit plan, net of tax benefits (see Note K).

SEGMENT INFORMATION: The Company uses the "management approach" for determining
appropriate segment information to disclose. The management approach is based on
the way management organizes the segments within the Company for making
operating decisions and assessing performance.

INVESTMENT IN WINGFOOT: The Company's investment in Wingfoot represents a 19%
interest in Wingfoot Commercial Tire Systems, LLC (see Note P). The transaction,
which created Wingfoot, was accounted for at fair value, as prescribed by
Emerging Issues Task Force Issue No. 00-5 ("EITF 00-5"), Determining Whether a
Nonmonetary Transaction is an Exchange of Similar Productive Assets. The
Company's investment is accounted for under the equity method, similar to a
partnership investment. However, the Company does not share in the profits or
losses of Wingfoot during the term of the Company's "Put" option, based upon the
terms of the operating agreement.

USE OF ESTIMATES: The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.

RECLASSIFICATIONS: Certain reclassifications have been made to the prior year
financial statements to conform to the current year's presentation.

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE C - GOODWILL

On January 1, 2002, the Company adopted FAS 142. Under the provisions of FAS
142, the Company's goodwill intangible asset is no longer amortized but reviewed
annually for impairment. At December 31, 2002, the Company's assets included
goodwill of $63.8 million from an LBO transaction related to ABF. At December
31, 2001, the Company's assets included goodwill of $101.3 million of which
$63.8 million related to ABF, as previously described, and $37.5 million related
to the 1994 acquisition of Clipper.

The Company performed the required transitional impairment testing on its
goodwill during the first quarter of 2002 based on January 1, 2002 values. The
Company performed both the first and second phases of the transitional
impairment testing on its Clipper goodwill and found the entire $37.5 million
balance to be impaired. As a result, the Company recognized a non-cash
impairment loss of $23.9 million, net of tax benefits of $13.6 million, as the
cumulative effect of a change in accounting principle as provided in FAS 142.
This impairment loss results from the change in method of determining
recoverable goodwill from using undiscounted cash flows, as prescribed by
Statement of Financial Accounting Standards No. 121 ("FAS 121"), Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, to
the fair value method, as prescribed by FAS 142, determined by using a
combination of valuation methods, including EBITDA and net income multiples and
the present value of discounted cash flows. The Company performed the first
phase of impairment testing on its $63.8 million of LBO goodwill, which was
based on ABF's operations and fair value at January 1, 2002. There was no
indication of impairment with respect to this goodwill.

A comparison of the Company's net income and earnings per share for the years
ended December 31, 2001 and 2000 shown on an adjusted basis, excluding goodwill
amortization, to the Company's actual income before the cumulative effect
change, net income (loss), and earnings per share for the year ended December
31, 2002 is as follows:

YEAR ENDED DECEMBER 31
2002 2001 2000
---------- ---------- ----------
($ thousands, except per share data)

NET INCOME (LOSS)
Income before cumulative effect of change in accounting principle ... $ 40,755 $ 41,404 $ 76,155
Cumulative effect of change in accounting principle, net of tax ..... (23,935) -- --
---------- ---------- ----------
Reported net income ................................................. 16,820 41,404 76,155
Add back goodwill amortization, net of tax .......................... -- 3,411 3,409
---------- ---------- ----------
Adjusted net income ................................................. $ 16,820 $ 44,815 $ 79,564
========== ========== ==========

NET INCOME (LOSS) PER COMMON SHARE BASIC:
Income before cumulative effect of change in accounting principle ... $ 1.65 $ 1.79 $ 3.62
Cumulative effect of change in accounting principle, net of tax ..... (0.97) -- --
---------- ---------- ----------
Reported net income per common share ................................ 0.68 1.79 3.62
Goodwill amortization, net of tax ................................... -- 0.16 0.17
---------- ---------- ----------
Adjusted net income per common share ................................ $ 0.68 $ 1.95 $ 3.79
========== ========== ==========

NET INCOME (LOSS) PER COMMON SHARE DILUTED:
Income before cumulative effect of change in accounting principle ... $ 1.60 $ 1.66 $ 3.17
Cumulative effect of change in accounting principle, net of tax ..... (0.94) -- --
---------- ---------- ----------
Reported net income per common share ................................ 0.66 1.66 3.17
Goodwill amortization, net of tax ................................... -- 0.14 0.14
---------- ---------- ----------
Adjusted net income per common share ................................ $ 0.66 $ 1.80 $ 3.31
========== ========== ==========

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE D - RECENT ACCOUNTING PRONOUNCEMENTS

In July 2002, the FASB issued Statement of Financial Accounting Standards No.
146 ("FAS 146"), Accounting for Costs Associated with Exit or Disposal
Activities. FAS 146 addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies Emerging Issues Task
Force Issue No. 94-3 ("EITF 94-3"), Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (Including Certain
Costs Incurred in a Restructuring). This Statement requires that a liability for
a cost associated with an exit or disposal activity be recognized when the
liability is incurred rather than at the date of a commitment to an exit or
disposal plan. The Statement is effective for the Company in 2003. The impact on
the Company's financial statements and related disclosures is not expected to be
material.

NOTE E - FEDERAL AND STATE INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows:

DECEMBER 31
2002 2001
-------- --------
($ thousands)

Deferred tax liabilities:
Amortization, depreciation and basis differences
for property, plant and equipment and other long-lived assets ... $ 34,413 $ 39,434
Revenue recognition ................................................ 4,271 4,453
Prepaid expenses ................................................... 1,854 4,489
Other .............................................................. 5,934 6,146
-------- --------
Total deferred tax liabilities ................................... 46,472 54,522

Deferred tax assets:
Accrued expenses ................................................... $ 38,787 $ 35,952
Fair value of interest rate swap ................................... 3,897 2,093
Postretirement benefits other than pensions ........................ 1,889 1,439
State net operating loss carryovers ................................ 2,196 2,175
Basis difference in investment in Wingfoot ......................... 1,130 1,112
Other .............................................................. 4,088 5,600
-------- --------
Total deferred tax assets ........................................ 51,987 48,371
Valuation allowance for deferred tax assets ...................... (2,728) (3,392)
-------- --------
Net deferred tax assets .......................................... 49,259 44,979
-------- --------
Net deferred tax assets (liabilities) ................................. $ 2,787 $ (9,543)
======== ========

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

Significant components of the provision for income taxes are as follows:

YEAR ENDED DECEMBER 31
2002 2001 2000
-------- -------- --------
($ thousands)

Current:
Federal ............................ $ 17,675 $ 23,297 $ 37,439
State .............................. 1,789 2,070 5,412
-------- -------- --------
Total current ................... 19,464 25,367 42,851
-------- -------- --------

Deferred:
Federal ............................ 5,266 (2,274) 7,302
State .............................. 3,146 2,222 2,815
-------- -------- --------
Total deferred .................. 8,412 (52) 10,117
-------- -------- --------
Total income tax expense .............. $ 27,876 $ 25,315 $ 52,968
======== ======== ========

A reconciliation between the effective income tax rate, as computed on income
before income taxes, and the statutory federal income tax rate is presented in
the following table:

YEAR ENDED DECEMBER 31
2002 2001 2000
-------- -------- --------
($ thousands)

Income tax at the
statutory federal rate of 35% ........ $ 24,021 $ 23,352 $ 45,193
Federal income tax effects of:
State income taxes ................. (1,727) (1,502) (2,879)
Nondeductible goodwill ............. -- 841 841
Other nondeductible expenses ....... 790 623 1,704
Resolution of tax contingencies .... -- (1,943) --
Other .............................. (143) (348) (118)
-------- -------- --------
Federal income taxes .................. 22,941 21,023 44,741
State income taxes .................... 4,935 4,292 8,227
-------- -------- --------
Total income tax expense .............. $ 27,876 $ 25,315 $ 52,968
======== ======== ========
Effective tax rate .................... 40.6% 37.9% 41.0%
======== ======== ========

Income taxes of $18.6 million were paid in 2002, $39.9 million were paid in 2001
and $48.7 million were paid in 2000. 2001 includes $11.9 million in payments to
the IRS related to the multiemployer pension issues that are discussed below.
Income tax refunds amounted to $12.0 million in 2002, $7.6 million in 2001 and
$2.9 million in 2000.

The tax benefit associated with stock options exercised amounted to $1.5 million
for 2001 and $0.2 million for 2000. The benefit reflected in the 2002 financial
statements is $3.2 million; however, this amount could increase as additional
information becomes available to the Company regarding stock sales by employees
during 2002. Tax benefits of stock options are not reflected in net income;
rather, the benefits are credited to additional paid-in capital.

As of December 31, 2002, the Company had state net operating loss carryovers of
approximately $26.0 million. State net operating loss carryovers expire
generally in five to fifteen years.

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

For financial reporting purposes, the Company had a valuation allowance of
approximately $0.8 million for state net operating loss carryovers and $0.8
million for state tax benefits of tax deductible goodwill for which realization
is uncertain. In addition, the Company had a valuation allowance of
approximately $1.1 million related to the excess tax basis in its investment in
Wingfoot (see Note P). During 2002, the net change in the valuation allowance
was a $0.7 million decrease, which related to an increase of approximately $0.8
million in the valuation allowance for state tax benefits for deductible
goodwill, a decrease of approximately $1.2 million resulting from the settlement
of federal income tax returns for the years 1990 through 1994, and a decrease of
approximately $0.3 million in the valuation allowance for state net operating
loss carryovers.

During 2001, certain issues relating to the utilization of net operating losses
and credits arising in prior years were resolved, resulting in a non-recurring
tax benefit of approximately $1.9 million.

The Company's federal tax returns for 1995 and 1996 and the returns of an
acquired company for 1994 and 1995 have been examined by the IRS, and the
Company is involved in the administrative appeals process with the IRS.
Resolution of the issues before the IRS is not expected to result in any
significant additional liabilities to the Company.

NOTE F - LONG-TERM DEBT AND CREDIT AGREEMENTS

DECEMBER 31
2002 2001
-------- --------
($ thousands)

Revolving credit agreement (1) ....................... $110,000 $110,000
Subordinated debentures (2) .......................... -- 4,811
Capitalized lease obligations (3) .................... 699 14,896
Other ................................................ 1,780 130
-------- --------
112,479 129,837
Less current portion ................................. 328 14,834
-------- --------
$112,151 $115,003
======== ========

(1) On May 15, 2002, the Company entered into a new three-year $225.0 million
Credit Agreement ("Credit Agreement") with Wells Fargo Bank Texas,
National Association, as Administrative Agent and Lead Arranger; and Fleet
National Bank and Suntrust Bank as Co-Syndication Agents; and

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

Wachovia Bank, National Association, as Documentation Agent. The new
Credit Agreement replaces the Company's five-year $250.0 million credit
agreement dated as of June 12, 1998 with Wells Fargo Bank Texas, National
Association, as Administrative Agent; and with Bank of America National
Trust and Savings Association; and Wells Fargo Bank Texas, National
Association, as Co-Documentation Agents, which was terminated on May 15,
2002. The Credit Agreement provides for up to $225.0 million of revolving
credit loans (including a $100.0 million sublimit for letters of credit)
and extends into 2005. The Company's Credit Agreement allows the Company
to request extensions of the maturity date for a period not to exceed two
years, subject to participating bank approval. The Company's Credit
Agreement also allows the Company to request an increase in the amount of
revolving credit loans as long as the total revolving credit loans do not
exceed $275.0 million, subject to the approval of participating banks.

At December 31, 2002, there were $110.0 million of Revolver Advances and
approximately $66.4 million of outstanding letters of credit. At December
31, 2001, there were $110.0 million of Revolver Advances and approximately
$23.6 million in outstanding letters of credit. The increase in
outstanding letters of credit from December 31, 2001 to December 31, 2002
related primarily to a shift by the Company from surety bond coverage for
workers' compensation self-insurance in certain states to letters of
credit, which were more favorably priced. Outstanding revolving credit
advances may not exceed a borrowing base calculated using the Company's
equipment, real estate and eligible receivables. The borrowing base was
$341.7 million at December 31, 2002, which would allow borrowings up to
the $225.0 million limit specified by the Credit Agreement. The amount
available for borrowing under the Credit Agreement at December 31, 2002
was $48.6 million.

The Credit Agreement contains various covenants, which limit, among other
things, indebtedness, distributions, including dividends, and dispositions
of assets and require the Company to meet certain quarterly financial
ratio tests. As of December 31, 2002, the Company was in compliance with
the covenants. Interest rates under the agreement are at variable rates as
defined by the Credit Agreement.

The Company's Credit Agreement contains a pricing grid that determines its
LIBOR margin, facility fees and letter of credit fees. The pricing grid is
based on the Company's senior debt rating agency ratings. A change in the
Company's senior debt ratings could potentially impact its Credit
Agreement pricing. In addition, if the Company's senior debt ratings fall
below investment grade, the Company's Credit Agreement provides for limits
on additional permitted indebtedness without lender approval, acquisition
expenditures and capital expenditures. The Company is currently rated BBB
by Standard & Poor's Rating Service ("S&P") and Baa3 by Moody's Investors
Service, Inc. On October 21, 2002, S&P revised its outlook on the Company
from stable to positive, citing, "...the trucking company's robust
operating performance in a difficult environment." The Company has no
downward rating triggers that would accelerate the maturity of its debt.

The Company's facility fee on the credit facility amount of $225.0 million
is 0.175%. At December 31, 2002, the effective average interest rate,
including the facility fee and after considering the Company's fixed
interest rate swap (see Note M), on Credit Agreement borrowings was 6.8%.

(2) On January 24, 2002, the Company called for redemption the remaining $5.0
million of WorldWay Corporation 6 1/4% Convertible Subordinated
Debentures. The redemption date of the debentures was February 25, 2002,
and the redemption price was the par value of each debenture plus accrued
and unpaid interest to, but not including, the redemption date. The
redemption resulted in a loss to the Company of $0.2 million. Bonds with a
par value of $24.9 million were purchased in 2001 for approximately $23.2
million. Bonds with a par value of $5.0 million were purchased for
approximately

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

$4.5 million in 2000. The 2001 and 2000 bond retirements resulted in gains
of $0.8 million and $0.4 million, respectively (included in other income).

(3) Capitalized lease obligations include approximately $0.7 million relative
to leases of computer equipment with a weighted-average interest rate of
approximately 7.7%. The net book value of the related assets was
approximately $0.7 million at December 31, 2002.

Annual maturities on long-term debt, excluding capitalized lease obligations, in
2003 through 2007 aggregate approximately $0.1 million; $0.1 million; $110.2
million; $0.2 million; and $0.2 million, respectively.

Interest paid was $8.2 million in 2002, $32.3 million in 2001 and $13.8 million
in 2000. Interest paid during 2001 includes $21.2 million in IRS interest
payments (see Note E). Interest capitalized totaled $0.4 million in 2002, $0.3
million in 2001 and $0.2 million in 2000.

In February 1998, the Company entered into an interest rate swap effective April
1, 1998 on a notional amount of $110.0 million. The purpose of the swap was to
limit the Company's exposure to increases in interest rates on $110.0 million of
bank borrowings over the seven-year term of the swap. The fixed interest rate
under the swap is 5.845% plus the Credit Agreement margin (0.825% and 0.575% at
December 31, 2002 and 2001, respectively) (see Note M).

NOTE G - ACCRUED EXPENSES

DECEMBER 31
2002 2001
-------- --------
($ thousands)

Accrued salaries, wages and incentive plans ...................... $ 20,791 $ 19,719
Accrued vacation pay ............................................. 33,149 31,933
Accrued interest ................................................. 589 1,584
Taxes other than income .......................................... 7,364 7,006
Loss, injury, damage and workers' compensation claims reserves ... 56,553 56,804
Other ............................................................ 4,848 4,377
-------- --------
$123,294 $121,423
======== ========

NOTE H - STOCKHOLDERS' EQUITY

PREFERRED STOCK. In February 1993, the Company completed a public offering of
1,495,000 shares of Preferred Stock at $50 per share. The Preferred Stock was
convertible at the option of the holder into Common Stock at the rate of 2.5397
shares of Common Stock for each share of Preferred Stock. Annual dividends were
$2.875 and were cumulative. The Preferred Stock was exchangeable, in whole or in
part, at the option of the Company on any dividend payment date beginning
February 15, 1995 for the Company's 5 3/4% Convertible Subordinated Debentures
due February 15, 2018, at a rate of $50 principal amount of debentures for each
share of Preferred Stock. The Preferred Stock was redeemable at any time, in
whole or in part, at the Company's option, initially at a redemption price of
$52.0125 per share and thereafter at redemption prices declining to $50 per
share on or after February 15, 2003, plus unpaid dividends to the redemption
date. Holders of Preferred Stock had no

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

voting rights unless dividends were in arrears six quarters or more, at which
time they had the right to elect two directors of the Company until all
dividends had been paid.

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. On August 13, 2001, the Company announced the call for redemption
of its $2.875 Series A Cumulative Convertible Exchangeable Preferred Stock
("ABFSP"). 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. Preferred Stock
dividends of $2.5 million and $4.1 million were paid during 2001 and 2000. There
were no Preferred Stock dividends paid during 2002.

TREASURY STOCK. At December 31, 2002 and 2001, the Company had 59,782 shares of
treasury stock with a cost basis of $1.0 million. The shares were purchased at
various times throughout 2000, as employees tendered shares they had held for
six months or more as payments for the exercise price of stock options, as
allowed by the Company's stock option plans.

STOCK OPTIONS AND STOCK APPRECIATION RIGHTS. At December 31, 2002, the Company
maintained three stock option plans: the 1992 Stock Option Plan, the 2000
Non-Qualified Stock Option Plan and the 2002 Stock Option Plan, which provided
for the granting of options to directors and key employees of the Company. The
1992 Stock Option Plan expired on December 31, 2001, and therefore, no new
options can be granted under this plan. The 2000 Non-Qualified Stock Option Plan
provided 1.0 million shares of Common Stock for the granting of options. The
2002 Stock Option Plan allows for the granting of 1.0 million options as well as
two types of stock appreciation rights ("SAR's") which are payable in shares or
cash. Employer SAR's allow the Company to decide, when an option is exercised,
to treat the exercise as an SAR. Employee SAR's allow the optionee to decide,
when exercising an option, to treat it as an SAR. During 2002, the Company
granted 7,500 Employer SAR's in conjunction with a stock option grant of 7,500
shares to a member of the Board of Directors. Employer SAR's may be exercised at
the Company's discretion. As of December 31, 2002, no employees had SAR's which
were outstanding. All options or SAR's granted are exercisable starting 12
months after the grant date, with 20% of the shares or rights covered, thereby
becoming exercisable at that time and with an additional 20% of the option
shares or SAR's becoming exercisable on each successive anniversary date, with
full vesting occurring on the fifth anniversary date. The options or SAR's are
granted for a term of 10 years.

As more fully described in the Company's accounting policies (see Note B), the
Company has elected to follow APB 25 and related interpretations in accounting
for its employee stock options. Under APB 25, no stock-based employee
compensation expense is reflected in net income, as all options granted under
the plans had an exercise price equal to the market value of the underlying
Common Stock on the date of grant.

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

The following table is a summary of the Company's stock option activity and
related information for the years ended December 31:

2002 2001 2000
-------------------------- -------------------------- -------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
------- -------------- ------- -------------- ------- --------------

Outstanding - beginning of year ....... 2,201,214 $15.78 2,235,731 $ 9.84 2,054,700 $ 8.28
Granted ............................... 7,500 23.53 819,201 25.71 691,398 13.62
Exercised ............................. (430,599) 9.13 (826,718) 9.66 (466,804) 8.91
Forfeited ............................. (10,000) 14.11 (27,000) 17.48 (43,563) 6.50
---------- ------ ---------- ------ ---------- ------
Outstanding - end of year ............. 1,768,115 $17.44 2,201,214 $15.78 2,235,731 $ 9.84
========== ====== ========== ====== ========== ======

Exercisable - end of year ............. 684,411 $13.34 690,856 $ 8.55 1,052,554 $ 8.34
========== ====== ========== ====== ========== ======

Estimated weighted-average fair
value per share of options granted
to employees during the year (1) ... $ 7.43 $10.31 $ 8.67
====== ====== ======

(1) Considers the option exercise price, historical volatility, risk-free
interest rate, weighted-average life of the options and dividend yields,
under the Black-Scholes method.

The following table summarizes information concerning currently outstanding and
exercisable options:

WEIGHTED-
NUMBER AVERAGE WEIGHTED- WEIGHTED-
OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
RANGE OF AS OF CONTRACTUAL EXERCISE AS OF EXERCISE
EXERCISE PRICES DECEMBER 31, 2002 LIFE PRICE DECEMBER 31, 2002 PRICE
--------------- ----------------- ---- ----- ----------------- -----

$4 - $6 90,179 4.2 $ 5.12 90,179 $ 5.12
$6 - $8 266,900 4.9 7.26 178,700 7.08
$8 - $10 34,500 3.5 8.52 29,700 8.54
$10 - $12 33,000 5.0 10.51 25,500 10.49
$12 - $14 534,268 6.9 13.50 184,867 13.36
$14 - $16 24,000 7.3 14.99 9,600 14.99
$22 - $24 7,500 9.3 23.53 -- --
$24 - $26 473,732 7.7 24.38 103,464 24.38
$26 - $28 20,000 8.0 26.81 4,000 26.81
$28 - $30 284,036 8.9 28.05 58,401 28.05
--------- --- ------ ------- ------
1,768,115 6.9 $17.44 684,411 $13.34
========= === ====== ======= ======

STOCKHOLDERS' RIGHTS PLAN. Each issued and outstanding share of Common Stock has
associated with it one Common Stock right to purchase a share of Common Stock
from the Company at an exercise price of $80 per right. The rights are not
currently exercisable, but could become exercisable if certain events occur,
including the acquisition of 15% or more of the outstanding Common Stock of the
Company. Under certain conditions, the rights will entitle holders, other than
an acquirer in a non-permitted transaction, to purchase shares of Common Stock
with a market value of two times the exercise price of the right. The rights
will expire in 2011 unless extended.

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE I - LEASES AND COMMITMENTS

Rental expense amounted to approximately $13.0 million in 2002, $13.8 million in
2001, and $17.3 million in 2000.

The future minimum rental commitments, net of future minimum rentals to be
received under noncancellable subleases, as of December 31, 2002 for all
noncancellable operating leases are as follows:

EQUIPMENT
AND
PERIOD TOTAL TERMINALS OTHER
- ------ ----- --------- -----
($ thousands)

2003 .................................... $10,610 $10,329 $281
2004 .................................... 8,045 7,990 55
2005 .................................... 6,782 6,727 55
2006 .................................... 5,846 5,819 27
2007 .................................... 4,668 4,660 8
Thereafter .............................. 6,543 6,543 --
------- ------- ----
$42,494 $42,068 $426
======= ======= ====

Certain of the leases are renewable for substantially the same rentals for
varying periods. Future minimum rentals to be received under noncancellable
subleases totaled approximately $1.1 million at December 31, 2002.

The future minimum payments under capitalized leases at December 31, 2002
consisted of the following ($ thousands):

2003 ...................................................... $242
2004 ...................................................... 242
2005 ...................................................... 242
2006 ...................................................... 64
2007 ...................................................... 4
----
Total minimum lease payments .............................. 794
Amounts representing interest ............................. 95
----
Present value of net minimum leases
included in long-term debt (see Note F) ................. $699
====

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

Assets held under capitalized leases are included in property, plant and
equipment as follows:

DECEMBER 31
2002 2001
------- -------
($ thousands)

Revenue equipment ...................................... $ -- $34,587
Other equipment ........................................ 1,013 583
------- -------
1,013 35,170
Less accumulated amortization .......................... 334 20,573
------- -------
$ 679 $14,597
======= =======

Capital lease obligations of $0.9 million were incurred for the year ended
December 31, 2002. No capital lease obligations were incurred in the years ended
December 31, 2001 and 2000. Capital lease amortization is included in
depreciation expense.

Commitments to purchase revenue equipment, which are cancellable by the Company
if certain conditions are met, aggregated approximately $30.6 million at
December 31, 2002.

NOTE J - LEGAL PROCEEDINGS AND ENVIRONMENTAL MATTERS AND OTHER EVENTS

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 liability insurance against certain
risks arising out of the normal course of its business, subject to certain
self-insured retention limits.

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE K - PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

The Company and its subsidiaries have noncontributory defined benefit pension
plans covering substantially all noncontractual employees. Benefits are
generally based on years of service and employee compensation. Contributions are
made based upon at least the minimum amounts required to be funded under
provisions of the Employee Retirement Income Security Act of 1974, with the
maximum contributions not to exceed the maximum amount deductible under the
Internal Revenue Code. The plans' assets are held in trust funds and are
primarily invested in equity and fixed income securities. At December 31, 2002,
the plans' assets are invested as follows: 54.3% in equity securities and 45.7%
in fixed income securities. Additionally, the Company participates in several
multiemployer plans that provide defined benefits to the Company's union
employees. In the event of insolvency or reorganization, plan terminations or
withdrawal by the Company from the multiemployer plans, the Company may be
liable for a portion of the multiemployer plans' unfunded vested benefits, the
amount of which, if any, has not been determined, but which would be material.

The Company also has unfunded supplemental pension benefit plans for the purpose
of supplementing benefits under the Company's defined benefit plans. The plans
will pay sums in addition to amounts payable under the defined benefit plans to
eligible participants. Participation in the plans is limited to employees of the
Company who are participants in the Company's defined benefit plans and who are
designated as participants in the plans by the Company's Board of Directors. The
plans provide that upon a participant's termination, the participant may elect
either a lump-sum payment or a deferral of receipt of the benefit. The
supplemental pension benefit plans include a provision that benefits accrued
under the plans will be paid in the form of a lump sum following a
change-in-control of the Company.

The Company also sponsors an insured postretirement health benefit plan that
provides supplemental medical benefits, life insurance, accident and vision care
to certain full-time officers of the Company and certain subsidiaries. The plan
is generally noncontributory, with the Company paying the premiums.

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

The following is a summary of the changes in benefit obligations and plan assets
for the defined benefit plans, the supplemental pension benefit plans and the
postretirement health benefit plans:

YEAR ENDED DECEMBER 31
------------------------------------------------------------------------------
SUPPLEMENTAL POSTRETIREMENT
PENSION BENEFITS PENSION PLANS HEALTH BENEFITS
2002 2001 2002 2001 2002 2001
--------- --------- -------- -------- -------- -------
($ thousands)

CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year ......... $ 131,351 $ 158,349 $ 26,176 $ 27,956 $ 9,016 $ 6,703
Service cost .................................... 6,389 7,448 769 753 115 86
Interest cost ................................... 9,249 11,217 1,658 1,595 860 622
Sale of G.I. Trucking Company (see Note Q) ...... -- (46,214) -- -- -- --
Actuarial (gain) loss and other ................. 5,583 14,013 2,740 (4,128) 7,759 2,228
Benefits and expenses paid ...................... (10,965) (13,462) (2,617) -- (770) (623)
--------- --------- -------- -------- -------- -------
Benefit obligation at end of year ............... 141,607 131,351 28,726 26,176 16,980 9,016
--------- --------- -------- -------- -------- -------

CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year .. 132,416 192,287 -- -- -- --
Actual return on plan assets and other .......... (9,791) (1,476) -- -- -- --
Employer contributions .......................... 15,747 225 2,617 -- 770 623
Sale of G.I. Trucking Company (see Note Q) ...... -- (45,158) -- -- -- --
Benefits and expenses paid ...................... (10,965) (13,462) (2,617) -- (770) (623)
--------- --------- -------- -------- -------- -------
Fair value of plan assets at end of year ........ 127,407 132,416 -- -- -- --
--------- --------- -------- -------- -------- -------

Funded status ................................... (14,200) 1,065 (28,726) (26,176) (16,980) (9,016)
Unrecognized net actuarial loss ................. 49,772 28,050 7,608 5,128 10,559 3,396
Unrecognized prior service cost (credit) ........ (6,529) (7,009) 10,754 12,632 300 432
Sale of G.I. Trucking Company (see Note Q) ...... -- (3,956) -- -- -- --
Additional minimum pension liability ............ -- -- (5,773) -- -- --
Unrecognized net transition obligation (asset)
and other ..................................... (26) (34) (1,510) (1,765) 1,339 1,473
--------- --------- -------- -------- -------- -------
Prepaid (accrued) benefit cost .................. $ 29,017 $ 18,116 $(17,647) $(10,181) $ (4,782) $(3,715)
========= ========= ======== ======== ======== =======

At December 31, 2002, the pension asset is reflected in the accompanying
financial statements as a noncurrent asset of $29.0 million, included in other
assets. At December 31, 2001, the net pension asset is reflected in the
accompanying financial statements as a noncurrent asset of $18.4 million,
included in other assets, and a current liability of $0.3 million, included in
accrued expenses. The increase in the pension asset balance is due primarily to
$15.7 million in tax-deductible contributions made during 2002, offset in part
by $5.3 million in pension expense recorded for the year ended December 31,
2002.

The above table calculates funded status utilizing pension benefit obligations
at December 31, 2002, which include assumed future increases in compensation and
years of service. The Company's pension plan accumulated benefit obligation at
December 31, 2002 was $120.6 million, which was lower than the fair value of the
plan assets of $127.4 million. Accumulated benefit obligations assume no future
increases in compensation or years of service.

At December 31, 2002, the pension plans' assets included 205,428 shares of the
Company's Common Stock, which had a fair market value of $5.3 million. There
were no dividends paid on the Company's Common Stock during 2002 or 2001.

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

At December 31, 2002, the net supplemental pension benefit plan liability is
reflected in the accompanying financial statements as a noncurrent asset of
$10.8 million, included in other assets, and a noncurrent liability of $28.4
million, included in other liabilities. At December 31, 2001, the net
supplemental benefit plan liability is reflected in the accompanying financial
statements as a noncurrent liability of $10.2 million, included in other
liabilities. During 2002, the Company recorded, through other comprehensive
income in stockholder's equity, a minimum liability of $5.8 million associated
with the supplemental pension benefit plan. The minimum liability resulted from
an increase in accumulated benefit obligations ("ABO"), which was caused, in
part, by a decline in interest rates, which increased the plan ABO.

Assumptions used in determining net periodic benefit cost for the defined
benefit plans, the supplemental pension benefit plans and the postretirement
health benefit plans were:

YEAR ENDED DECEMBER 31
-------------------------------------------------------------------------------------
SUPPLEMENTAL POSTRETIREMENT
PENSION BENEFITS PENSION PLANS HEALTH BENEFITS
------------------------------ --------------------- ----------------------
2002 2001 2000 2002 2001 2000 2002 2001 2000
---- ---- ---- ---- ---- ---- ---- ---- ----

WEIGHTED-AVERAGE ASSUMPTIONS
Discount rate .................... 6.9% 7.55% 7.65% 6.9% 7.55% 7.65% 6.9% 7.55% 7.65%
Expected return on plan assets ... 9.0% 9.0 - 10.0% 9.0 - 10.0% -- -- -- -- -- --
Rate of compensation increase .... 4.0% 3.0 - 4.0% 3.0 - 4.0% 5.0% 4.0% 4.0% -- -- --

Due to a decline in long-term investment grade bond rates, the discount rate was
decreased from 7.55% in 2001 to 6.9% in 2002.

The Company has reduced the non-union pension plans' expected rate of return on
plan assets from 9.0% in 2002 to 7.9% for 2003. This reflects the historical
performance of the Company's pension plan investments.

The weighted-average annual assumed rate of increase in the per capita cost of
covered benefits (in health care cost trend) is 12.0% for 2003 and is assumed to
decrease gradually to 4.5% in 2010.

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

The following is a summary of the components of net periodic benefit cost
(expense) for the defined benefit plans, the supplemental pension benefit plans
and the postretirement health benefit plans:

YEAR ENDED DECEMBER 31
--------------------------------------------------------------------------------------------
SUPPLEMENTAL POSTRETIREMENT
PENSION BENEFITS PENSION PLANS HEALTH BENEFITS
-------------------------------- ----------------------------- -----------------------
2002 2001 2000 2002 2001 2000 2002 2001 2000
-------- -------- -------- ------- ------- ------- ------ ------ -----
($ thousands)

COMPONENTS OF NET
PERIODIC BENEFIT COST
Service cost ............. $ 6,389 $ 7,448 $ 7,729 $ 769 $ 753 $ 715 $ 115 $ 86 $ 56
Interest cost ............ 9,249 11,217 11,998 1,658 1,595 1,500 860 622 489
Expected return
on plan assets ......... (11,530) (15,232) (19,217) -- -- -- -- -- --
Transition (asset)
obligation
recognition ............ (8) (8) (6) (256) (256) (256) 135 135 135
Special termination
benefit ............... -- 100 -- -- -- -- -- -- --
Amortization of
prior service cost
(credit) ............... (922) (884) (895) 1,560 1,600 1,600 131 131 131
Recognized net
actuarial loss (gain)
and other .............. 2,145 1,150 (2,079) 578 784 951 596 209 (23)
-------- -------- -------- ------- ------- ------- ------ ------ -----
Net periodic
benefit cost ........... 5,323 3,791 (2,470) 4,309 4,476 4,510 1,837 1,183 788
Multiemployer plans ...... 75,062 74,131 75,821 -- -- -- -- -- --
-------- -------- -------- ------- ------- ------- ------ ------ -----
$ 80,385 $ 77,922 $ 73,351 $ 4,309 $ 4,476 $ 4,510 $1,837 $1,183 $ 788
======== ======== ======== ======= ======= ======= ====== ====== =====

The health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one-percentage-point change in assumed
health care cost trend rates would have the following effects for the year ended
December 31, 2002:

1% 1%
INCREASE DECREASE
-------- --------
($ thousands)

Effect on total of service and interest cost components ... 130 (108)
Effect on postretirement benefit obligation ............... 2,267 (1,902)

The Company has deferred compensation agreements with certain executives for
which liabilities aggregating $4.5 million and $4.0 million as of December 31,
2002 and 2001, respectively, have been recorded as other liabilities in the
accompanying consolidated financial statements. The deferred compensation
agreements include a provision that immediately vests all benefits and, at the
executive's election, provides for a lump-sum payment upon a change-in-control
of the Company.

An additional benefit plan provides certain death and retirement benefits for
certain officers and directors of an acquired company and its former
subsidiaries. The Company has liabilities of $2.1 million and $2.3 million at
December 31, 2002 and 2001, respectively, for future costs under this plan,
reflected as other liabilities in the accompanying consolidated financial
statements.

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

The Company has various defined contribution plans that cover substantially all
of its employees. The plans permit participants to defer a portion of their
salary up to a maximum of 50% as provided in Section 401(k) of the Internal
Revenue Code. The Company matches a portion of participant contributions up to a
specified compensation limit ranging from 0% to 6% in 2002. The plans also allow
for discretionary Company contributions determined annually. The Company's
expense for the defined contribution retirement plans totaled $3.6 million for
2002, $5.0 million for 2001 and $4.0 million for 2000.

In addition, the Company's union employees and union retirees are provided
health care and other benefits through defined benefit multiemployer plans
administered and funded based on the applicable labor agreement. The Company's
obligation is determined based on the applicable labor agreement and does not
extend directly to employees or retirees. The cost of such benefits cannot be
readily separated between retirees and active employees. The aggregate
contribution to the multiemployer health and welfare benefit plans totaled
approximately $79.7 million, $78.8 million, and $73.6 million for the years
ended December 31, 2002, 2001 and 2000, respectively.

The Company has a performance award program available to the officers of ABC.
Units awarded will be initially valued at the closing price per share of the
Company's Common Stock on the date awarded. The vesting provisions and the
return-on-equity target will be set upon award. No awards have been granted
under this program.

The Company maintains a Voluntary Savings Plan ("VSP"). The VSP is a
nonqualified deferred compensation plan for certain executives of the Company
and certain subsidiaries. Eligible employees are allowed to defer receipt of a
portion of their regular compensation, incentive compensation and other bonuses
by making an election before the compensation is payable. In addition, the
Company credits participants' accounts with matching contributions and rates of
return based on investment indexes selected by the participants. Salary
deferrals, Company match and investment earnings are considered part of the
general assets of the Company until paid. As of December 31, 2002, the Company
has recorded liabilities of $16.8 million in other liabilities and assets of
$16.8 million in other assets associated with the plan. As of December 31, 2001,
the Company had recorded liabilities of $16.5 million in other liabilities and
assets of $16.5 million in other assets.

NOTE L - OPERATING SEGMENT DATA

The Company used the "management approach" to determine its reportable operating
segments, as well as to determine the basis of reporting the operating segment
information. The management approach focuses on financial information that the
Company's management uses to make decisions about operating matters. Management
uses operating revenues, operating expense categories, operating ratios,
operating income and key operating statistics to evaluate performance and
allocate resources to the Company's operating segments.

During the periods being reported on, the Company operated in four defined
reportable operating segments: (1) ABF; (2) Clipper; (3) G.I. Trucking (which
was sold on August 1, 2001) (see Note Q); and (4) Treadco (which was contributed
to Wingfoot on October 31, 2000) (see Note P). A discussion of the services from
which each reportable segment derives its revenues is as follows:

ABF is headquartered in Fort Smith, Arkansas, and is one of North America's
largest less-than-truckload ("LTL") motor carriers, providing direct service to
over 98.6% of the cities in the United States having a population of 25,000 or
more. ABF offers national and regional transportation of general commodities
through standard, expedited and guaranteed LTL services.

Clipper is headquartered in Lemont, Illinois. Clipper offers domestic intermodal
freight services, utilizing transportation movement over the road and on the
rail.

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

The Company's other business activities and operating segments that are not
reportable include FleetNet America, LLC, a third-party, vehicle maintenance
company; Arkansas Best Corporation, the parent holding company; and Transport
Realty, Inc., a real estate subsidiary of the Company, as well as other
subsidiaries.

The Company eliminates intercompany transactions in consolidation. However, the
information used by the Company's management with respect to its reportable
segments is before intersegment eliminations of revenues and expenses.
Intersegment revenues and expenses are not significant.

Further classifications of operations or revenues by geographic location beyond
the descriptions provided above is impractical and is, therefore, not provided.
The Company's foreign operations are not significant.

The following tables reflect reportable operating segment information for the
Company, as well as a reconciliation of reportable segment information to the
Company's consolidated operating revenues, operating expenses and operating
income:

YEAR ENDED DECEMBER 31
2002 2001 2000
---------- ---------- ----------
($ thousands)

OPERATING REVENUES
ABF Freight System, Inc. ................... $1,277,117 $1,282,315 $1,379,280
Clipper .................................... 118,949 127,278 130,242
G.I. Trucking Company (see Note Q) ......... -- 95,477 161,897
Treadco, Inc. (see Note P) ................. -- -- 158,269
Other revenues and eliminations ............ 26,231 21,136 9,879
---------- ---------- ----------
Total consolidated operating revenues ... $1,422,297 $1,526,206 $1,839,567
========== ========== ==========

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

YEAR ENDED DECEMBER 31
2002 2001 2000
----------- ----------- -----------
($ thousands)

OPERATING EXPENSES AND COSTS

ABF FREIGHT SYSTEM, INC.
Salaries and wages ................................ $ 845,562 $ 841,106 $ 860,447
Supplies and expenses ............................. 157,058 167,072 173,749
Operating taxes and licenses ...................... 40,233 40,426 41,004
Insurance ......................................... 24,606 17,342 22,515
Communications and utilities ...................... 13,874 15,081 14,950
Depreciation and amortization ..................... 41,510 39,848 35,947
Rents and purchased transportation ................ 82,080 77,690 93,856
Other ............................................. 3,576 5,036 3,538
(Gain) on sale of equipment ....................... (206) (641) (568)
----------- ----------- -----------
1,208,293 1,202,960 1,245,438
----------- ----------- -----------

CLIPPER
Cost of services .................................. 102,152 111,131 111,302
Selling, administrative and general ............... 15,620 15,651 17,322
(Gain) loss on sale of equipment .................. 54 43 (3)
----------- ----------- -----------
117,826 126,825 128,621

----------- ----------- -----------

G.I. TRUCKING COMPANY (see Note Q)
Salaries and wages ................................ -- 49,496 76,024
Supplies and expenses ............................. -- 9,252 15,154
Operating taxes and licenses ...................... -- 2,255 3,419
Insurance ......................................... -- 2,312 3,982
Communications and utilities ...................... -- 1,348 2,091
Depreciation and amortization ..................... -- 3,275 4,833
Rents and purchased transportation ................ -- 25,212 48,627
Other ............................................. -- 2,302 3,907
(Gain) on sale of equipment ....................... -- (48) (55)
----------- ----------- -----------
-- 95,404 157,982
----------- ----------- -----------

TREADCO, INC. (see Note P)
Cost of sales ..................................... -- -- 105,379
Selling, administrative and general ............... -- -- 48,219
----------- ----------- -----------
-- -- 153,598
----------- ----------- -----------

Other expenses and eliminations ...................... 27,957 25,083 13,776
----------- ----------- -----------

Total consolidated operating expenses and costs ... $ 1,354,076 $ 1,450,272 $ 1,699,415
=========== =========== ===========

OPERATING INCOME
ABF Freight System, Inc. .......................... $ 68,824 $ 79,355 $ 133,842
Clipper ........................................... 1,123 453 1,621
G.I. Trucking Company (see Note Q) ................ -- 73 3,915
Treadco, Inc. (see Note P) ........................ -- -- 4,671
Other loss and eliminations ....................... (1,726) (3,947) (3,897)
----------- ----------- -----------
Total consolidated operating income ............ $ 68,221 $ 75,934 $ 140,152
=========== =========== ===========

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

The following tables provide asset, capital expenditure and depreciation and
amortization information by reportable operating segment for the Company, as
well as reconciliations of reportable segment information to the Company's
consolidated assets, capital expenditures and depreciation and amortization at
December 31, 2002. Subsequent to the recognition of the impairment loss on the
Company's Clipper goodwill, the Company reclassified the remainder of the LBO
goodwill from the "other" segment to ABF (see Note C).

YEAR ENDED DECEMBER 31
2002 2001 2000
-------- -------- --------
($ thousands)

IDENTIFIABLE ASSETS
ABF Freight System, Inc. ...................................... $487,752 $441,644 $505,147
Clipper ....................................................... 24,819 46,618 47,863
G.I. Trucking Company (see Note Q) ............................ -- -- 57,845
Treadco, Inc. (see Note P) .................................... -- -- --
Investment in Wingfoot (see Note P) ........................... 59,341 59,341 59,341
Other and eliminations ........................................ 184,460 175,550 126,928
-------- -------- --------
Total consolidated identifiable assets ..................... $756,372 $723,153 $797,124
======== ======== ========

CAPITAL EXPENDITURES (GROSS)
ABF Freight System, Inc. ...................................... $ 46,823 $ 62,332 $ 71,337
Clipper ....................................................... 94 3,582 4,346
G.I. Trucking Company (see Note Q) ............................ -- 4,537 11,693
Treadco, Inc. (see Note P) .................................... -- -- 3,916
Other (primarily information technology) ...................... 11,396 4,219 2,293
-------- -------- --------
Total consolidated capital expenditures (gross) ............ $ 58,313 $ 74,670 $ 93,585
======== ======== ========

DEPRECIATION AND AMORTIZATION EXPENSE
ABF Freight System, Inc. ...................................... $ 41,510 $ 41,334 $ 37,746
Clipper ....................................................... 1,757 2,451 1,995
G.I. Trucking Company (see Note Q) ............................ -- 3,185 4,781
Treadco, Inc. (see Note P) .................................... -- -- 5,255
Other ......................................................... 6,227 7,578 6,677
-------- -------- --------
Total consolidated depreciation and amortization expense ... $ 49,494 $ 54,548 $ 56,454
======== ======== ========

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE M - FINANCIAL INSTRUMENTS

INTEREST RATE INSTRUMENTS

borrowings over the term of the swap. The fixed interest rate under the swap is
5.845% plus the Credit Agreement margin (0.825% and 0.575% at December 31, 2002
and 2001, respectively). This instrument is recorded on the balance sheet of the
Company in other liabilities (see Note B). Details regarding the swap, as of
December 31, 2002, are as follows:

NOTIONAL RATE RATE FAIR
AMOUNT MATURITY PAID RECEIVED VALUE (2)(3)
------- -------- ---- -------- ------------

$110.0 million April 1, 2005 5.845% Plus Credit Agreement LIBOR rate (1) ($9.9) million
Margin (0.825%) Plus Credit Agreement
Margin (0.825%)

(1) LIBOR rate is determined two London Banking Days prior to the first day of
every month and continues up to and including the maturity date.

(2) The fair value is an amount estimated by Societe Generale ("process
agent") that the Company would have paid at December 31, 2002 to terminate
the agreement.

(3) The swap value changed from ($5.4) million at December 31, 2001. The fair
value is impacted by changes in rates of similarly termed Treasury
instruments.

FAIR VALUE OF FINANCIAL INSTRUMENTS

CASH AND CASH EQUIVALENTS. The carrying amount reported in the balance sheets
for cash and cash equivalents approximates its fair value.

The carrying amounts and fair value of the Company's financial instruments at
December 31 are as follows:

2002 2001
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------ ----- ------ -----
($ thousands)

Cash and cash equivalents .... $ 39,644 $ 39,644 $ 14,860 $ 14,860
Short-term debt .............. $ 133 $ 127 $ 24 $ 24
Long-term debt ............... $111,647 $111,610 $114,917 $114,498

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE N - EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per
share:

YEAR ENDED DECEMBER 31
2002 2001 2000
------------ ------------ ------------
($ thousands, except per share data)

NUMERATOR:
Numerator for basic earnings per share -
Income before cumulative effect of change
in accounting principle ........................ $ 40,755 $ 41,404 $ 76,155
Cumulative effect of change in accounting
principle, net of tax .......................... (23,935) -- --
Preferred stock dividends ...................... -- (2,487) (4,122)
------------ ------------ ------------
Net income available to common stockholders ....... 16,820 38,917 72,033
Effect of dilutive securities ..................... -- 2,487 4,122
------------ ------------ ------------

Numerator for diluted earnings per share -
Net income available to common stockholders .... $ 16,820 $ 41,404 $ 76,155
============ ============ ============

DENOMINATOR:
Denominator for basic earnings per share -
weighted-average shares ......................... 24,746,051 21,802,258 19,881,875

Effect of dilutive securities:
Conversion of preferred stock ................... -- 2,354,157 3,530,183
Employee stock options .......................... 604,632 805,464 625,162
------------ ------------ ------------

Denominator for diluted earnings per share -
adjusted weighted-average
shares and assumed conversions .................. 25,350,683 24,961,879 24,037,220
============ ============ ============

NET INCOME (LOSS) PER COMMON SHARE
BASIC:
Income before cumulative effect of change
in accounting principle ......................... $ 1.65 $ 1.79 $ 3.62
Cumulative effect of change in accounting
principle, net of tax ........................... (0.97) -- --
------------ ------------ ------------
NET INCOME PER SHARE ................................. $ 0.68 $ 1.79 $ 3.62
============ ============ ============

DILUTED:
Income before cumulative effect of change
in accounting principle ......................... $ 1.60 $ 1.66 $ 3.17
Cumulative effect of change in accounting
principle, net of tax ........................... (0.94) -- --
------------ ------------ ------------
NET INCOME PER SHARE ................................. $ 0.66 $ 1.66 $ 3.17
============ ============ ============

CASH DIVIDENDS PAID PER COMMON SHARE ................. $ -- $ -- $ --
============ ============ ============

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE O - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The tables below present unaudited quarterly financial information for 2002 and
2001:

2002
THREE MONTHS ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
------------ ------------ ------------ ------------
($ thousands, except per share data)

Operating revenues ............................. $ 320,198 $ 345,137 $ 375,397 $ 381,565
Operating expenses and costs ................... 315,380 331,880 351,450 355,366
------------ ------------ ----------- ------------
Operating income ............................... 4,818 13,257 23,947 26,199
Other income (expense) - net ................... (2,352) (2,213) 7,221 (2,245)
Income taxes ................................... 1,016 4,550 12,821 9,489
------------ ------------ ----------- ------------
Income before cumulative effect of change
in accounting principle ...................... 1,450 6,494 18,347 14,465
Cumulative effect of change in accounting
principle, net of tax benefits of $13,580 .... (23,935) -- -- --
------------ ------------ ----------- ------------
Net income (loss) .............................. $ (22,485) $ 6,494 $ 18,347 $ 14,465
============ ============ =========== ============

Net income (loss) per common share, basic:
Income before cumulative effect
of change in accounting principle ......... $ 0.06 $ 0.26 $ 0.74 $ 0.58
Cumulative effect of change in accounting
principle, net of tax ..................... (0.97) -- -- --
------------ ------------ ----------- ------------
Net income (loss) per share .................... $ (0.91) $ 0.26 $ 0.74 $ 0.58
------------ ------------ ----------- ------------
Average shares outstanding (basic) ............. 24,584,022 24,760,978 24,783,674 24,850,147
============ ============ =========== ============

Net income (loss) per common share, diluted:
Income before cumulative effect of
change in accounting principle ............ $ 0.06 $ 0.26 $ 0.73 $ 0.57
Cumulative effect of change in accounting
principle, net of tax ..................... (0.95) -- -- --
------------ ------------ ----------- ------------
Net income per share ........................... $ (0.89) $ 0.26 $ 0.73 $ 0.57
------------ ------------ ----------- ------------
Average shares outstanding (diluted) ........... 25,334,995 25,311,665 25,296,694 25,462,838
============ ============ =========== ============

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

2001
THREE MONTHS ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
------------ ------------ ------------ ------------
($ thousands, except per share data)

Operating revenues ............................. $ 400,576 $ 406,577 $ 381,554 $ 337,499
Operating expenses and costs ................... 380,512 386,680 360,347 322,733
------------ ------------ ----------- ------------
Operating income ............................... 20,064 19,897 21,207 14,766
Other income (expense) - net ................... (4,564) (3,125) 812 (2,338)
Income taxes ................................... 6,421 6,939 8,999 2,956
------------ ------------ ----------- ------------
Income before cumulative effect of
change in accounting principle ............... 9,079 9,833 13,020 9,472
Cumulative effect of change in accounting
principle, net of tax ........................ -- -- -- --
------------ ------------ ----------- ------------
Net income ..................................... $ 9,079 $ 9,833 $ 13,020 $ 9,472
============ ============ =========== ============

Net income per common share, basic: (1)
Income before cumulative effect of
change in accounting principle ............ $ 0.40 $ 0.43 $ 0.57 $ 0.39
Cumulative effect of change in accounting
principle, net of tax ..................... -- -- -- --
------------ ------------ ----------- ------------
Net income per share (basic) ................... $ 0.40 $ 0.43 $ 0.57 $ 0.39
------------ ------------ ----------- ------------
Average shares outstanding (basic) ............. 20,349,674 20,454,699 21,947,611 24,457,048
============ ============ =========== ============

Net income per common share, diluted: (2)
Income before cumulative effect of
change in accounting principle ............ $ 0.37 $ 0.40 $ 0.52 $ 0.38
Cumulative effect of change in accounting
principle, net of tax ..................... -- -- -- --
------------ ------------ ----------- ------------
Net income per share (diluted) ................. $ 0.37 $ 0.40 $ 0.52 $ 0.38
------------ ------------ ----------- ------------
Average shares outstanding (diluted) ........... 24,693,788 24,834,232 25,141,502 25,178,175
============ ============ =========== ============

(1) Gives consideration to Preferred Stock dividends of $1.0 million per
quarter for the first and second quarters of 2001 and $0.5 million for the
third quarter of 2001.

(2) For the first and second quarters of 2001, conversion of Preferred Stock
into Common is assumed. For the third quarter of 2001, conversion of
Preferred Stock into Common is assumed for the period prior to the
September 14 Preferred Stock redemption date.

NOTE P - CONTRIBUTION OF TREADCO'S ASSETS AND LIABILITIES TO WINGFOOT

On September 13, 2000, Treadco entered into an agreement with Goodyear to form a
new limited liability company called Wingfoot Commercial Tire Systems, LLC. The
transaction closed on October 31, 2000. Effective October 31, 2000, Treadco
contributed substantially all of its assets and liabilities to Wingfoot in a
non-taxable transaction in exchange for a 19% ownership in Wingfoot. Goodyear
contributed substantially all of the assets and liabilities of its Commercial
Tire and Service Centers and Brad Ragan Tire Centers to Wingfoot in exchange for
an 81% interest in Wingfoot. The final ownership percentages for Treadco and
Goodyear were based upon the terms of the agreement. The assets and liabilities
contributed by Treadco to Wingfoot were $86.8 million and $37.9 million,
respectively.

Under the agreement, the Company has the right, at any time after April 30, 2003
and before April 30, 2004, to sell its interest in Wingfoot to Goodyear for a
cash "Put Price" and Goodyear has the right, at any time after April 30, 2003
until October 31, 2004, to purchase the Company's entire interest, for cash, at
a "Call Price" equal to the "Put Price" plus $5.0 million. The joint venture
agreement contained indemnity provisions which allowed either Goodyear or the
Company to file a claim if amounts paid for certain liabilities exceeded the
closing balance sheet aggregate amounts by $500,000. During 2002, Goodyear made
an indemnity claim against the Company. As a result, in the fourth quarter of
2002, Goodyear and the Company agreed to a joint

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

venture contract amendment reducing the "Put Price" by $2.1 million and
increasing Goodyear's liability exposure by $2.1 million. The amended "Put
Price" is $71.3 million rather than the previously disclosed amount of $73.4
million.

The Company accounts for its investment in Wingfoot under the equity method and
the provisions of the Wingfoot Operating Agreement. As provided in the
agreement, during the term of the "Put," the Company does not share in the
profits or losses of Wingfoot. In the event the Company does not elect to sell
its interest in Wingfoot to Goodyear nor Goodyear elects to purchase the
Company's interest, then the parties' respective rights and obligations relating
to Wingfoot will continue to be governed by the Wingfoot Operating Agreement,
including accounting for Wingfoot profit and loss allocations at the respective
19% and 81% ownership percentages beginning May 1, 2004.

The transaction was accounted for using fair value accounting, as prescribed by
EITF 00-5, which resulted in 81% of the fair value gain being recognized in the
fourth quarter of 2000. The fair value of 19% of Wingfoot was $62.0 million
determined by using the discounted "Put Price," which represented the fair value
of Treadco's net assets at the October 31, 2000 closing date. The Company's
carrying value of Treadco's net assets at the closing date was $49.0 million.
The gain on the transaction was $13.0 million of which 81% was recognized in the
fourth quarter of 2000, or $10.5 million. This gain was reduced by costs of the
transaction of $5.5 million, which included investment banking fees, legal and
accounting fees, transaction bonuses and the acceleration of certain benefits
for the former Treadco officers, for a fair value net gain recognized of $5.0
million. The Company's investment in Wingfoot at December 31, 2002 and 2001 was
$59.3 million.

NOTE Q - SALE OF 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
Express Lines ("Estes"). G.I. Trucking and Estes have been partners in
ExpressLINK(R), a North American transportation partnership since 1996. The
Company recognized a pre-tax gain on the sale of $4.6 million in the third
quarter of 2001.

The Company retained ownership of three California terminal facilities and has
agreed to lease them for an aggregate amount of $1.6 million per year to G.I.
Trucking for a period of up to four years. G.I. Trucking has an option at any
time during the four-year lease term to purchase these terminals for $19.5
million. The terminals may be purchased in aggregate or individually. The
facilities have a net book value of approximately $5.9 million. If the terminal
facilities are sold to G.I. Trucking, the Company will recognize a pre-tax gain
of approximately $13.6 million in the period they are sold. Cash proceeds from
the sale of G.I. Trucking, net of costs and income taxes, of approximately $33.0
million were used to pay down the Company's outstanding debt.

ARKANSAS BEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE R - RELIANCE INSURANCE COMPANY INSOLVENCY

Reliance Insurance Company ("Reliance") insured the Company's workers'
compensation claims in excess of $300,000 ("excess claims") for the period from
1993 through 1999. According to an Official Statement by the Pennsylvania
Insurance Department on October 3, 2001, Reliance was determined to be
insolvent, with total admitted assets of $8.8 billion and liabilities of $9.9
billion, or a negative surplus position of $1.1 billion, as of March 31, 2001.
As of December 31, 2002, the Company estimates its workers' compensation claims
insured by Reliance to be approximately $5.5 million. The Company has been in
contact with and has received either written or verbal confirmation from a
number of state guaranty funds that they will accept excess claims, representing
a total of approximately $3.7 million of the $5.5 million, which leaves the
Company with a net exposure amount of $1.8 million. The Company increased its
estimated reserve for exposure to Reliance from $0.5 million to $1.4 million
during the third quarter of 2002 based upon the following factors: (1) No new
Reliance financial information has been made available by the Pennsylvania
Insurance Department since the March 31, 2001 financial statements were made
available on October 3, 2001; (2) A September 9, 2002 court order extended the
deadline for which the liquidator will receive Reliance claims to December 31,
2003, which could increase Reliance's liability exposure.

The Company anticipates receiving, from guaranty funds or through orderly
liquidation, partial reimbursement for future claims payments; however, the
process could take several years.

NOTE S - SUBSEQUENT EVENT

On January 23, 2003, the Company announced that it had declared a quarterly cash
dividend of eight cents per share to holders of record of its Common Stock on
February 5, 2003, payable on February 19, 2003. The Company also announced a
program to repurchase, in the open market or in privately negotiated
transactions, up to a maximum of $25.0 million of the Company's Common Stock.
The repurchases may be made either from the Company's cash reserves or from
other available sources.