ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - continued
Cash Flow and Short-Term Investments: Components of cash and cash equivalents
and short-term investments are as follows:

                                                             June 30      December 31
                                                              2008            2007
                                                                  ($ thousands)
 Cash and cash equivalents, primarily money market funds   $ 205,900      $    93,805
 Short-term investments:
 Certificates of deposit                                      19,225                -
 Auction rate debt and preferred equity securities                 -           79,373

 Total                                                     $ 225,125      $   173,178

During the first quarter of 2008, the Company transitioned out of its short-term investments in auction rate debt and preferred equity securities and into money market funds, which are classified as cash equivalents, resulting in the sale of $78.6 million of short-term investments with no realized gains or losses. During the second quarter of 2008, the Company purchased FDIC-insured certificates of deposit with maturities ranging from ninety-one days to one year. During the six months ended June 30, 2008, cash provided from operations of $58.9 million and proceeds from asset sales of $12.8 million were used to purchase revenue equipment (tractors and trailers used primarily in ABF's operations) and other property and equipment totaling $16.1 million and pay dividends on Common Stock of $7.7 million.
During the six months ended June 30, 2007, cash provided from operations of $56.6 million, proceeds from asset sales of $5.2 million and proceeds from the net sales of short-term investments of $5.3 million were used to purchase revenue equipment and other property and equipment totaling $49.8 million, make payments on long-term debt of $1.3 million, purchase 125,000 shares of the Company's Common Stock for $4.9 million and pay dividends on Common Stock of $7.6 million.
Credit Agreement: The Company has a revolving credit agreement (the "Credit Agreement") with a syndicate of 10 financial institutions. The Credit Agreement, which has a maturity date of May 4, 2012, provides for up to $325.0 million of revolving credit loans (including a $150.0 million sublimit for letters of credit). The Company's borrowing capacity under its revolving Credit Agreement is presented below:

                                                June 30      December 31
                                                 2008            2007
                                                     ($ thousands)
              Revolving credit limit          $ 325,000      $   325,000
              Outstanding revolver advances           -                -
              Letters of credit                 (51,793 )        (53,557 )

              Borrowing capacity              $ 273,207      $   271,443

The Credit Agreement allows the Company to request extensions of the maturity date for a period not to exceed two years, subject to approval of a majority of the participating financial institutions. The Credit Agreement also allows the Company to request an increase in the amount of revolving credit loans of up to $200.0 million to an aggregate amount of $525.0 million, to the extent commitments are received from participating lenders.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - continued
Interest rates under the agreement are at variable rates as defined by the Credit Agreement. The Credit Agreement contains a pricing grid, based on the Company's senior debt ratings, that determines its Eurodollar margin, facility fees, utilization fees and letter of credit fees. The Credit Agreement requires the payment of a utilization fee if the borrowings under the Credit Agreement exceed 50% of the facility amount.
The Company has a senior unsecured debt rating of BBB+ with a stable outlook by Standard & Poor's Rating Service and a senior unsecured debt rating of Baa2 with a stable outlook by Moody's Investors Service, Inc. The Credit Agreement contains various customary covenants which limit, among other things, indebtedness and dispositions of assets and which require the Company to maintain compliance with certain quarterly financial ratios. As of June 30, 2008, the Company was in compliance with the covenants.
Contractual Obligations: The following table provides the aggregate annual contractual obligations of the Company including capital and operating lease obligations, purchase obligations and near-term estimated benefit plan distributions as of June 30, 2008:

                                                                     Payments Due by Period
                                                                         ($ thousands)
                                                         Less Than            1-3               3-5            More Than
Contractual Obligations                  Total             1 Year            Years             Years            5 Years

Capital lease obligations              $  1,773          $    236          $    339          $   377          $     821
Operating lease obligations (1)          43,557            12,486            17,012            8,775              5,284
Purchase obligations (2)                 35,998            35,998
Voluntary savings plan
distributions (3)                         1,302             1,302
Postretirement health
distributions (4)                           725               725
Deferred salary distributions
(5)                                       1,137             1,137
Supplemental pension
distributions (6)                         2,418             2,418

Total                                  $ 86,910          $ 54,302          $ 17,351          $ 9,152          $   6,105

(1) While the Company owns the majority of its larger terminals and distribution centers, certain facilities and equipment are leased. As of June 30, 2008, the Company had future minimum rental commitments, net of noncancelable subleases, totaling $42.3 million for terminal facilities and $1.3 million for other equipment. The future minimum rental commitments are presented exclusive of executory costs such as insurance, maintenance and taxes. In addition, the Company has provided lease guarantees through March 2012 totaling $0.9 million related to Clipper, a former subsidiary of the Company.

(2) Purchase obligations relating to revenue equipment, other equipment and property are cancelable if certain conditions are met. These commitments are included in the Company's 2008 annual net capital expenditure plan, which is estimated to be approximately $60 million to $70 million.

(3) Represents elective distributions anticipated within the next twelve months under the Voluntary Savings Plan, a nonqualified deferred compensation plan. Future distributions are subject to change for retirement, death or disability of current employees. As a result, estimates of distributions beyond one year cannot be made with a reasonable level of accuracy and are not presented.

(4) Represents distributions projected over the next twelve months related to postretirement health benefits. Future distributions are subject to change based upon increases and other changes in premiums and medical costs and continuation of the plan for current participants. As a result, estimates of distributions beyond one year

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - continued
are not
presented.
Postretirement
health plan
liabilities
accrued in the
accompanying
consolidated
balance sheet
totaled
$19.7 million
as of June 30,
2008.

(5) Represents deferred salary agreement distributions projected over the next twelve months. Future distributions are subject to change based upon assumptions for projected salaries and retirements, deaths, disability or early retirement of current employees. As a result, estimates of distributions beyond one year cannot be made with a reasonable level of accuracy and are not presented. Deferred salary liabilities accrued in the accompanying consolidated balance sheet totaled $8.2 million as of June 30, 2008.

(6) Represents distributions anticipated within the next twelve months under an unfunded supplemental pension benefit plan. The amounts and dates of distributions in future periods are dependent upon actual retirement dates of eligible officers and other events and factors, including assumptions involved in distribution calculations such as the discount rate, years of service and future salary changes. As a result, estimates of distributions beyond one year cannot be made with a reasonable level of accuracy and are not presented. Supplemental pension benefit plan liabilities accrued in the accompanying consolidated balance sheet totaled $21.4 million as of June 30, 2008.

The Company does not have required minimum contributions to its qualified nonunion pension plan in 2008, but made a voluntary tax-deductible contribution of $5.0 million in April 2008. The Pension Protection Act of 2006 did not have a material impact on the future required contributions to the Company's nonunion defined benefit pension plan.
ABF contributes to multiemployer health, welfare and pension plans based generally on the time worked by its contractual employees, as specified in the collective bargaining agreement and other supporting supplemental agreements (see Note G to the Company's consolidated financial statements).
Other Liquidity Information: Management believes cash generated by operations, cash and cash equivalents, short-term investments, and amounts available under the existing Credit Agreement will be sufficient for the foreseeable future to finance the Company's lease commitments; letter of credit commitments; quarterly dividends; stock repurchases; nonunion benefit plan contributions; unfunded supplemental pension benefits; capital expenditures; health, welfare and pension contributions under collective bargaining agreements; and other expenditures. The Company expects to continue to pay quarterly dividends in the foreseeable future, although there can be no assurances in this regard since future dividends are dependent upon future earnings, capital requirements, the Company's financial condition and other factors.
Financial Instruments: The Company has not historically entered into financial instruments for speculative purposes, nor has the Company historically engaged in hedging fuel prices. No such instruments were outstanding during the six months ended June 30, 2008 or in 2007.
Off-Balance-Sheet Arrangements: The Company's off-balance-sheet arrangements include future minimum rental commitments, net of noncancelable subleases, of $42.3 million under operating lease agreements. The Company has no investments, loans or any other known contractual arrangements with affiliated special-purpose entities, variable interest entities or financial partnerships.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - continued
Results of Operations
Executive Overview
Arkansas Best Corporation is a holding company engaged through its subsidiaries primarily in motor carrier transportation operations. The principal subsidiary of the Company is ABF Freight System, Inc. ("ABF") which represented 95.9% of consolidated revenues for the six months ended June 30, 2008.
On an ongoing basis, ABF's ability to operate profitably and generate cash is impacted by tonnage (gross weight hauled), which influences operating leverage as tonnage levels vary; the pricing environment; customer account mix; and the ability to manage costs effectively, primarily in the area of salaries, wages and benefits ("labor").
During the three and six months ended June 30, 2008, ABF's revenues increased 6.1% and 5.4%, respectively, on a per-day basis compared to the same periods in 2007. The increase in revenues primarily reflects an increase in revenue per hundredweight influenced by higher fuel surcharge. Tonnage per day for the three and six months ended June 30, 2008 was relatively consistent with the same periods in 2007.
ABF's second quarter 2008 operating ratio increased to 94.7% from 93.2% in the second quarter of 2007. During the six months ended June 30, 2008, ABF's operating ratio was 95.8%, which was consistent with the operating ratio during the same period in 2007. The ABF operating ratio is more fully discussed below in the ABF section of Management's Discussion and Analysis.
ABF's ability to maintain or grow existing tonnage levels is impacted by the state of the residential and commercial construction, manufacturing and retail sectors of the North American economy, as well as a number of other competitive factors that are more fully described in the General Development of Business and Risk Factors sections of the Company's 2007 Annual Report on Form 10-K. ABF has experienced significant fluctuations in year-over-year tonnage levels in recent years. Through the first nine months of 2007, tonnage per day declined 6.2% below the same period in 2006. Although business levels remain depressed, quarterly year-over-year tonnage trends have improved since the third quarter of 2007. Compared to the same prior year periods, ABF's total tonnage per day decreased during the fourth quarter of 2007 and the first quarter of 2008 by 1.5% and 0.5%, respectively. During the three months ended June 30, 2008, ABF's total tonnage per day increased by 0.2%. For the month of July 2008, average daily total tonnage for ABF declined approximately 2% compared to the same period last year.
The industry pricing environment is another key to ABF's operating performance. The pricing environment influences ABF's ability to obtain compensatory margins and price increases on customer accounts. ABF's pricing is typically measured by billed revenue per hundredweight. This measure is affected by profile factors such as average shipment size, average length of haul, freight density and customer and geographic mix. For many years, consistent profile characteristics made billed revenue per hundredweight changes a reasonable, although approximate, measure of price change. In the last few years, it has become more difficult to quantify with sufficient accuracy the impact of changes in profile characteristics in order to estimate true price changes. ABF focuses on individual account profitability and rarely considers revenue per hundredweight in its customer account or market evaluations. For ABF, total company profitability must be considered together with measures of billed revenue per hundredweight changes. The pricing environment generally becomes more competitive during periods of lower tonnage levels. During the three and six months ended June 30, 2008, the pricing environment was competitive. Total billed revenue per hundredweight increased 6.0% and 5.5%, respectively, during the three and six months ended June 30, 2008 versus the same periods in 2007 primarily due to fuel surcharges resulting from higher fuel-related costs. ABF also experienced freight profile changes during the six

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - continued
months ended June 30, 2008 that impacted the reported revenue per hundredweight, as further discussed in the ABF section. Excluding freight profile changes and the increase in fuel surcharges, pricing on ABF's traditional less-than-truckload business declined slightly in the second quarter of 2008. Management expects the pricing environment in 2008 to remain competitive, although there can be no assurances in this regard.
The transportation industry is dependent upon the availability of adequate fuel supplies. The Company has not experienced a lack of available fuel but could be adversely impacted if a fuel shortage were to develop. ABF charges a fuel surcharge based on changes in diesel fuel prices compared to a national index. The ABF fuel surcharge rate in effect is available on the ABF Web site at abf.com. Although revenues from fuel surcharges generally more than offset increases in direct diesel fuel costs, other operating costs have been, and may continue to be, impacted by fluctuating fuel prices. The total impact of higher energy prices on other nonfuel-related expenses is difficult to ascertain. ABF cannot predict, with reasonable certainty, future fuel price fluctuations, the impact of higher energy prices on other cost elements, recoverability of higher fuel costs through fuel surcharges, and the effect of fuel surcharges on ABF's overall rate structure or the total price that ABF will receive from its customers. During periods of changing diesel fuel prices, the fuel surcharge and associated direct diesel fuel costs also vary by different degrees. Depending upon the rates of these changes and the impact on costs in other fuel- and energy-related areas, operating margins could be impacted. ABF experienced significantly higher fuel prices in the first six months of 2008 compared to the same period in 2007, and as a result, ABF's cost increases in fuel and other energy-related areas outpaced increases in revenue, including fuel surcharge, which negatively impacted margins. Whether fuel prices fluctuate or remain constant, ABF's operating income may be adversely affected if competitive pressures limit its ability to recover fuel surcharges. Through the first six months of 2008, the fuel surcharge mechanism continued to have strong market acceptance among ABF customers, although certain nonstandard arrangements have limited the amount of fuel surcharge recovered. Lower fuel surcharge levels may over time improve ABF's ability to increase other elements of margin although there can be no assurances in this regard. While the fuel surcharge is one of several components in ABF's overall rate structure, the actual rate paid by customers is governed by market forces based on value provided to the customer. Labor costs are impacted by ABF's contractual obligations under its labor agreement primarily with the International Brotherhood of Teamsters ("IBT"). The five-year collective bargaining agreement, which became effective April 1, 2008, provides for compounded annual contractual wage and benefit increases of approximately 3.8%, subject to wage rate cost-of-living adjustments. ABF's ability to effectively manage labor costs, which amounted to approximately 59% of ABF's revenues for the six months ended June 30, 2008, has a direct impact on its operating performance. Shipments per dock, street and yard ("DSY") hour and total pounds per mile are measures ABF uses to assess effectiveness of labor costs. Shipments per DSY hour is used to measure effectiveness in ABF's local operations, although total pounds per DSY hour is also a relevant measure when the average shipment size is changing. Total pounds per mile is used by ABF to measure the effectiveness of its linehaul operations, although this metric is influenced by other factors, including freight density, loading efficiency, average length of haul and the degree to which rail service is used. ABF is generally effective in managing its labor costs to business levels. Labor costs include retirement and health care benefits for ABF's contractual employees that are provided by a number of multiemployer plans (see Note G to the accompanying consolidated financial statements).
In addition to the traditional long-haul operating model, ABF has implemented a regional network to facilitate its customers' next-day and second-day delivery needs. ABF's regional network covers the eastern two-thirds of the United States. Further operational changes, which are expected to be implemented during the third quarter of 2008, should reduce transit times in the regional network as well as in certain of ABF's long-haul lanes. These changes are facilitated by ABF's new labor contract, which became effective April 1, 2008. Anticipated

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - continued
expansion of the regional network to the Western region of the United States, which may be implemented in late 2008 or early 2009, and the operational changes in the eastern two-thirds of the United States could impact the annual cost of operating this program.
The Company ended the second quarter 2008 with $225.1 million of cash, cash equivalents and short-term investments, $658.1 million in stockholders' equity and no borrowings under its revolving Credit Agreement. Because of the Company's financial position at June 30, 2008, the Company should continue to be in a position to pursue various initiatives.