1
EXHIBIT (b)(2)
ARKANSAS BEST CORP.
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BOARD PRESENTATION
December 10, 1998
MORGAN STANLEY DEAN WITTER
MORGAN STANLEY
2
ARKANSAS BEST CORP.
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PRESENTATION OUTLINE
1) HISTORICAL OVERVIEW
o TREADCO PRICE / VOLUME GRAPH SINCE IPO
o RECENT EQUITY ANALYST COMMENTARY
o CURRENT VALUATION BASED UPON 1999 PLAN
2) STRATEGIC ALTERNATIVES
3) CONSIDERATIONS
4) PROCESS ALTERNATIVES
5) ECONOMIC ANALYSIS
MORGAN STANLEY
3
ARKANSAS BEST CORP.
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CURRENT TREADCO SITUATION
o DEPRESSED FINANCIAL RESULTS
o BUSINESS IN TRANSITION
o ILLIQUID STOCK DUE TO FLOAT AND SMALL CAPITALIZATION
o LIMITED INVESTOR AND ANALYST FOLLOWING
o ATTRACTIVE STRATEGIC VALUE
MORGAN STANLEY
4
ARKANSAS BEST CORP.
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TREADCO PRICE PERFORMANCE SINCE ITS IPO
[CHART]
8/10/93
TRED announces
acquisition of Trans-World
Tire Corporation
7/20/95
2Q operating
margine suffers over
3% drop compared to
previous 2Q
8/23/95
TRED announces
change in Bandag
relationship
10/2/95
TRED announces
supplier agreement
with Oliver
10/20/95
3 TRED officers
leave Company to
work for Bandag
10/30/95
TRED wins court
order against
Bandag
2/8/96
TRED confirms complete
conversion to Oliver
10/29/98
TRED suspends
regular dividend
MORGAN STANLEY
5
ARKANSAS BEST CORP.
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ANALYSIS OF TREADCO SHAREHOLDINGS
TOTAL ASSETS
UNDER CURRENT CUMULATIVE
INSTITUTION EQUITY ORIENTATION MANAGEMENT CHANGE HOLDINGS % TSO % TSO
Arkansas Best Corporation n/a n/a 0 2,497,200 49.2% 49.2%
Shapiro Capital Management Co., Inc Growth 0.1 (9,100) 1,153,225 22.7% 72.0%
Dimensional Fund Advisors, Inc Index, Value 13.2 0 309,192 6.1% 78.1%
Franklin Resources, Inc Growth, Incom 86.9 10,000 303,000 6.0% 84.0%
Royce & Associates, Inc Value 2.0 0 67,100 1.3% 85.4%
Barclays Global Investors, N.A. Growth, Value, Index, Quant n/a (2,000) 59,666 1.2% 86.5%
Kennedy Capital Management, Inc Growth, Value 1.7 (57,285) 57,115 1.1% 87.7%
Investment Counselors of Maryland Value 4.3 0 40,000 0.8% 88.5%
Clover Capital Management, Inc. Value 1.8 25,000 25,000 0.5% 88.9%
Mellon Bank, N.A. Index, Value 25.4 0 16,100 0.3% 89.3%
Williams Jones & Associates, Inc n/a n/a 0 10,000 0.2% 89.5%
Northern Trust Quantitative Advisors Growth, Value 23.5 3,400 8,300 0.2% 89.6%
Dresdner RCM Global Investors (UK) n/a 2.7 0 4,500 0.1% 89.7%
Boston Advisors, Inc. Growth 0.4 0 1,200 0.0% 89.7%
Donaldson Lufkin & Jeanette, Inc. n/a n/a 0 400 0.0% 89.7%
First United Trust Company, N.A. Income n/a 0 200 0.0% 89.8%
The Frost National Bank n/a n/a 0 100 0.0% 89.8%
Societe Generale Asset Mgmt (US) Value n/a (195,000) 0 0.0% 89.8%
Top 18 Holders (224,985) 4,552,298 89.8%
Remaining 0 Holdings 0 0 0.0%
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Total Holder Holdings (224,985) 4,552,298 89.8%
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Other Holdings 519,702 10.2%
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Total Shares Outstanding 5,072,000 100.0%
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REPORT
INSTITUTION EQUITY ORIENTATION DATE
Arkansas Best Corporation n/a 9/11/98
Shapiro Capital Management Co., Inc Growth 9/30/98
Dimensional Fund Advisors, Inc Index, Value 6/30/98
Franklin Resources, Inc Growth, Incom 9/30/98
Royce & Associates, Inc Value 9/30/98
Barclays Global Investors, N.A. Growth, Value, Index, Quant 9/30/98
Kennedy Capital Management, Inc Growth, Value 9/30/98
Investment Counselors of Maryland Value 9/30/98
Clover Capital Management, Inc. Value 9/30/98
Mellon Bank, N.A. Index, Value 9/30/98
Williams Jones & Associates, Inc n/a 9/30/98
Northern Trust Quantitative Advisors Growth, Value 12/31/97
Dresdner RCM Global Investors (UK) n/a 9/30/98
Boston Advisors, Inc. Growth 6/30/98
Donaldson Lufkin & Jeanette, Inc. n/a 9/30/98
First United Trust Company, N.A. Income 9/30/98
The Frost National Bank n/a 6/30/98
Societe Generale Asset Mgmt (US) Value 9/30/98
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Summary of Latest 13F Reports
3 Holders increased holdings, of which 1 were new investors or first time filers
4 Holders decreased holdings, of which 1 eliminated their positions
11 Holders held their positions
Index funds representing 8.5% of Total Holder Shares Outstanding
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MORGAN STANLEY
6
ARKANSAS BEST CORP.
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RECENT EQUITY ANALYST PERCEPTION OF TREADCO
"Although company results are showing signs of improvement, expenses remain high
and near term results should continue to be weak. Considering the difficult
environment and the current valuation levels, we reiterate our neutral rating."
-- Stephen Girsky, MSDW
"Falling rubber prices continue to favor new tire purchases over recapped tires,
which has a direct negative impact on Treadco. Furthermore, Treadco switched to
another rubber supplier in 1996, which adversely impacted the subsidiary's
margines."
-- James Valentine, MSDW
"Arkansas Best Corp's intentions regarding its 46% ownership stake in Treadco,
are unknown. We believe that the values of both Companies would increase were
the Companies to separate. Moreover, TRED does not have the appropriate capital
structure to grow, nor is ABFS in a position to support rapid growth at
Treadco."
"We believe Treadco has far greater earnings power than the Company is currently
generating. Similarly Treadco is a large player in an industry where
consolidation makes economic sense. However, if Arkansas Best retains its
ownership stake in Treadco, Treadco's ability to fund rapid growth will be
constrained. Additionally, the limited float and uncertainty surrounding the
future of the large block of shares will likely result in the stock continuing
to trade at a discount."
-- Scott Alaniz, Stephens Inc.
MORGAN STANLEY
7
ARKANSAS BEST CORP.
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TREADCO CURRENT VALUATION
AGGREGATE VALUE/
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P/E EBIT EBITDA
STOCK EQUITY AGGREGATE PRICE/ -------------- --------------- ----------------
PRICE VALUE(1) VALUE(2) BOOK(3) 1998 1999 1998 1999 1998 1999
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BUSINESS PLAN ESTIMATES(4) $ 0.9 $3.9 $ 2.2 $ 6.5 $ 5.6 $ 10.5
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$ 5.00 $25.4 $43.8 0.4x 29.4x 6.4x 19.7x 6.8x 7.9x 4.2x
7.00 35.5 54.0 0.4x 29.4x 6.4x 19.7x 6.8x 7.9x 4.2x
9.00 45.7 64.1 0.4x 29.4x 6.4x 19.7x 6.8x 7.9x 4.2x
11.00 55.8 74.3 0.4x 29.4x 6.4x 19.7x 6.8x 7.9x 4.2x
13.00 65.9 84.4 0.4x 29.4x 6.4x 19.7x 6.8x 7.9x 4.2x
Notes (1) Assumes 5,072,255 shares outstanding.
(2) Aggregate Value equals equity value plus short-term debt plus
long-term debt.
(3) Total Stockholders' Equity was $59.73MM as of
9/30/98.
(4) Source Treadco business plan
MORGAN STANLEY
8
ARKANSAS BEST CORP.
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STRATEGIC ALTERNATIVES
1) Status Quo
2) ABC initiated immediate sale of 100% of Treadco
3) ABC repurchase of remaining Treadco interest with potential strategic sale
in the future
MORGAN STANLEY
9
ARKANSAS BEST CORP.
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VALUATION CONSIDERATIONS
o Structural mechanisms to maximize ABC's pre-tax and after-tax value
o ABC specific tax considerations
o Impact of Bandag settlement
o Revenue and earnings momentum of business
o Potential strategic buyers
o Current and future estimated strategic value
o Cost savings associated with 100% owned Treadco
o Ability to recapitalize Treadco's balance sheet
o Long-term strategic fit with ABC
MORGAN STANLEY
10
ARKANSAS BEST CORP.
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POTENTIAL BUYERS
o Goodyear
o Bandag
o Michelin
o Oliver
o BF Goodrich
MORGAN STANLEY
11
ARKANSAS BEST CORP.
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PROCESS ALTERNATIVES
SCENARIO 1: REPURCHASE OF PUBLIC SHARES
o Potentially approach other significant shareholders to ascertain price
objectives and willingness to sell
o Negotiations with Treadco's outside directors (independent committee)
and external financial and legal advisors
o Announcement of an agreement with Treadco's independent committee
o Commencement of tender offer and merger process
o Estimated timeline: 12-16 weeks
MORGAN STANLEY
12
ARKANSAS BEST CORP.
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PROCESS ALTERNATIVES
(continued)
SCENARIO 2: 100% IMMEDIATE SALE OF TREADCO
o Prioritize potential buyers
o Information discussions with one or more potential buyers
o Potential preparation of offering memorandum and distribution to
potential bidders
o Negotiations and receipt of definitive offer
o Approval by Treadco's outside committee and ABC's Board
o Tender offer and merger process
o Estimated timeline: 12-16 weeks
MORGAN STANLEY
13
ARKANSAS BEST CORP.
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IMMEDIATE SALE OF TREADCO
Value of ABC's holding @ $9(1) $22.47
ABC Current Tax Basis 0.0
Expense in sale, etc. (1.0)
Income Taxes(2) (7.3)
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Current After-Tax Proceeds $14.17
Notes: (1) $2,497,000 shares currently owned by ABC
(2) 34% tax rate
MORGAN STANLEY
14
ARKANSAS BEST CORP.
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REPURCHASE TREADCO
ABC
TOTAL ABC INCREMENTAL AFTER-TAX INCREMENTAL
EVENTUAL TREADCO INVESTMENT AFTER-TAX COST OF CARRY ABC ABC AFTER-TAX
SALE EQUITY IN REMAINING COST OF ON INCREMENTAL TAX AFTER-TAX PROCEEDS OVER
PRICE VALUE(1) TRED SHARES(2) DISPOSITION(3) INVESTMENT BENEFIT PROCEEDS IMMEDIATE SALE
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$ 5.00 $25.4 $ (23.2) $ (1.22) $ (0.92) $ 13.48 $ 13.52 $(.07)
6.00 30.4 (23.2) (1.22) (0.92) 11.75 16.87 2.7
7.00 35.5 (23.2) (1.22) (0.92) 10.03 20.22 6.0
8.00 40.6 (23.2) (1.22) (0.92) 8.30 23.57 9.4
9.00 45.6 (23.2) (1.22) (0.92) 6.58 26.91 12.7
10.00 50.7 (23.2) (1.22) (0.92) 4.86 30.26 16.3
11.00 55.8 (23.2) (1.22) (0.92) 3.13 33.61 19.4
Notes (1) Assumes 5,072,255 shares outstanding.
(2) Purchase of 2,575,000 shares at $9.00 per share.
(3) Assumes $2.0MM of expenses and 39% tax rate.
(4) Assumes 6.5% interest rate and 39% tax rate.
(5) Assumes $65MM tax basis and 34% tax rate.
MORGAN STANLEY
15
ARKANSAS BEST CORP.
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OTHER POTENTIAL ECONOMIC BENEFITS
o Bandag settlement
o Potential dividend to ABC through recapitalization
o Ongoing Treadco free cash flow subsequent to repurchase
o Elimination of costs associated with being independently owned
MORGAN STANLEY