FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1996.
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File No. 0-10894
ARNOLD INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2200465
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
625 South Fifth Avenue, Lebanon, Pennsylvania
(Address of principal executive offices)
17042
(Zip Code)
(717) 274-2521
(Registrant's telephone number, including area code)
No Change
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Common Stock, par value $1.00 per share: 29,942,628 shares
outstanding as of August 8, 1996.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets - June 30, 1996 and
(Unaudited) December 31, 1995
Condensed Consolidated Statements of - June 30, 1996
Income (Three and Six Month and 1995
Periods - Unaudited)
Condensed Consolidated Statements of - June 30, 1996
Cash Flows (Six Month and 1995
Periods - Unaudited)
Notes to Condensed Consolidated Financial Statements
ARNOLD INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1996 1995
ASSETS
Current Assets
Cash and Cash Equivalents 10,997,872 5,769,772
Marketable Securities 15,195,758 8,503,995
Accounts Receivable, Net 34,323,873 31,344,382
Deferred Income Taxes 4,892,762 4,408,898
Prepaid Expenses and Supplies 4,495,604 4,666,710
Refundable Income Taxes -0- 1,418,300
Total Current Assets 69,905,869 56,112,057
Property and Equipment 311,935,408 304,961,299
Less: Accumulated Depreciation 113,584,716 105,138,829
Total Property and Equipment 198,350,692 199,822,470
Other Assets
Goodwill 9,047,042 9,231,529
Investments in Limited Partnerships 10,402,615 10,677,567
Other 877,076 1,032,940
Total Other Assets 20,326,733 20,942,036
TOTAL ASSETS 288,583,294 276,876,563
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes Payable 16,692,749 16,692,749
Accounts Payable 8,760,523 7,316,348
Income Taxes 36,670 -0-
Estimated Liability for Claims 10,739,501 6,280,942
Accrued Expenses - Other 11,580,217 9,602,991
Total Current Liabilities 47,809,660 39,893,030
Long-Term Liabilities
Estimated Liability for Claims 6,068,579 9,169,106
Deferred Income Taxes 27,174,855 25,995,320
Notes Payable 4,307,334 5,048,581
Other 1,469,362 1,401,762
Total Long-Term Liabilities 39,020,130 41,614,769
Stockholders' Equity
Common Stock 29,942,628 29,942,628
Paid-In Capital 164,470 135,260
Retained Earnings 180,594,055 174,260,390
Treasury Stock - At Cost (8,947,649) (8,969,514)
Total Stockholders' Equity 201,753,504 195,368,764
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY 288,583,294 276,876,563
THE ACCOMPANYING NOTES, HERE AND FOLLOWING, ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ARNOLD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
1996 1995 1996 1995
Operating Revenues 172,502,670 166,799,780 90,110,880 83,382,915
Operating Expenses 152,801,974 139,729,355 78,643,743 69,730,377
Operating Income 19,700,696 27,070,425 11,467,137 13,652,538
Interest Expense (630,644) (905,369) (308,120) (466,622)
Other Income (Deductions) (220,971) 769,354 (6,988) 321,358
Income Before Income Taxes 18,849,081 26,934,410 11,152,029 13,507,274
Income Taxes 6,652,003 9,902,021 3,997,756 4,983,816
Net Income 12,197,078 17,032,389 7,154,273 8,523,458
Weighted Average Shares
Outstanding (Note) 26,652,266 26,631,946 26,654,348 26,633,801
Net Income per Common
Share (Note) .46 .64 .27 .32
Dividends per Common Share .22 .22 .11 .11
NOTE: Common share equivalents are not included since the effect of their
inclusion is not material.
THE ACCOMPANYING NOTES, HERE AND FOLLOWING, ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ARNOLD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1996 1995
Operating Activities
Net Income 12,197,078 17,032,389
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 13,953,156 12,233,898
Provision for Deferred Taxes 695,671 3,315,068
Other (223,601) (1,637,572)
Changes in Operating Assets and Liabilities:
(Increase) in Accounts Receivable (2,979,491) (2,469,239)
(Increase) Decrease in Prepaid Expenses
and Supplies 171,106 (2,003,400)
Increase (Decrease) in Accounts Payable
and Accrued Expenses 6,234,403 (1,285,349)
Other 67,600 70,200
Net Cash Provided by Operating Activities 30,115,922 25,255,995
Investing Activities
Proceeds from Sale of Investment Securities 1,338,914 8,512,738
Purchase of Investment Securities (8,048,724) (615,610)
Proceeds from Disposition of Property and Equipment 2,140,775 5,827,232
Purchase of Property and Equipment (13,789,409) (36,331,494)
Capital Contributions to Limited Partnerships -0- (1,866,245)
Acquisition of Primary Assets of T.W.Owens & Sons, Inc. -0- (11,120,700)
Other 24,206 (58,413)
Net Cash Used In Investing Activities (18,334,238) (35,652,492)
Financing Activities
Cash Dividends Paid (5,863,412) (5,859,073)
Principal Payments on Long-term Debt (741,247) -0-
Other 51,075 34,886
Net Cash Used In Financing Activities (6,553,584) (5,824,187)
Increase (Decrease) in Cash and Cash Equivalents 5,228,100 (16,220,684)
Cash and Cash Equivalents at Beginning of Year 5,769,772 23,554,745
Cash and Cash Equivalents at End of Period 10,997,872 7,334,061
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest 652,922 913,533
Income Taxes 4,503,015 9,305,488
THE ACCOMPANYING NOTES, HERE AND FOLLOWING, ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ARNOLD INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note I: Basis of Presentation
The financial information included herein is unaudited;
however, such information reflects all adjustments (consisting
solely of normal adjustments) which are, in the opinion of
management, necessary for a fair statement of results for the
interim period. This financial information should be read in
conjunction with the Financial Statements and Notes thereto
included in the Company's latest annual report on Form 10-K and
any intervening reports.
The results of operations for the three and six-month
periods ending June 30, 1996, and 1995 are not necessarily
indicative of the results to be expected for the full year.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Operating Revenues for the second quarter of 1996 were
$90,110,880, an increase of $6,727,965 or 8.1% from Operating
Revenues for 1995's second quarter. For the same period, Operat-
ing Expenses increased $8,913,366 or 12.8%; Income Before Income
Taxes decreased $2,355,245, a decrease of 17.4%; and Net Income
decreased $1,369,185 or 16.1%. Earnings Per Share decreased from
$.32 to $.27 for the respective quarters.
Operating Revenues for the six months ended June 30, 1996
were $172,502,670, an increase of $5,702,890 or 3.4% over the
comparable period in 1995. For the same period, Operating
Expenses increased $13,072,619 or 9.4%; Income Before Taxes
decreased $8,085,329, a decrease of 30%; and Net Income decreased
$4,835,311 or 28.4%. Earnings Per Share decreased from $.64 to
$.46 for the respective six-month periods.
The second quarter of 1996 produced greater revenues for the
Company than the second quarter of 1995, but those revenues were
less profitable to the Company than in prior quarters due to
increased costs and greater competitive pressures. Overcapacity
continues to exist in the trucking industry, and overcapacity
leads to strong competition and price-cutting.
In late May and in June of 1996, the traffic of New Penn
Motor Express, Inc. ("New Penn"), the Company's less-than-truck-
load carrier, increased, and its operating revenues for the
second quarter were greater than those of the second quarter of
1995. Operating income for the second quarter came reasonably
close to 1995's operating income for the same quarter.
Revenues among the Arnold Transportation Services group,
which consists of three regional truckload carriers, also con-
tinued to grow. Lebarnold, Inc. ("Lebarnold"), SilverEagle
Transport, Inc. ("SilverEagle") and D.W. Freight, Inc. ("DW")
together produced a revenue increase of approximately $4 Million
when compared to their 1995 second quarter performance. This
revenue increase resulted primarily from increased volume at each
of these subsidiaries. Nevertheless, the operating ratios of the
truckload divisions deteriorated during the quarter. A substan-
tial portion of the increased operating expenses incurred by the
truckload carriers involved higher costs for fuel and insurance.
Although all of the Company's operating subsidiaries con-
tinue to experience fierce price competition from other carriers
in the trucking industry, Company management remains focused on
improving operating efficiencies. At the same time, management
continues to seek growth opportunities by offering expanded
trucking and warehousing related services to meet the needs of
existing and prospective customers. Company management will
continue to seek opportunities for profitable expansion of the
Company through acquisitions and value-added services.
Set forth below is a schedule of the Unaudited Operating
Revenues, Expenses and Operating Income of the LTL and TL
companies for the second quarters of 1996 and 1995 and for the
six (6) month periods ended June 30, 1996, and June 30, 1995:
(Dollars in Thousands)
Second Quarter Ended June 30,
1996 1995
Amount % Amount %
NEW PENN MOTOR EXPRESS
AND RELATED COMPANIES (LTL)
Operating Revenues 45,484 100.0 42,562 100.0
Operating Expenses 36,785 80.9 33,608 79.0
Operating Income 8,699 19.1 8,954 21.0
(Dollars in Thousands)
Second Quarter Ended June 30,
1996 1995
Amount % Amount %
ARNOLD TRANSPORTATION
SERVICES (TL)
Operating Revenues 44,627 100.0 40,821 100.0
Operating Expenses 41,859 93.8 36,122 88.5
Operating Income 2,768 6.2 4,699 11.5
(Dollars in Thousands)
Six Months Ended June 30,
1996 1995
Amount % Amount %
NEW PENN MOTOR EXPRESS
AND RELATED COMPANIES (LTL)
Operating Revenues 86,987 100.0 85,343 100.0
Operating Expenses 71,371 82.0 67,321 78.9
Operating Income 15,616 18.0 18,022 21.1
(Dollars in Thousands)
Six Months Ended June 30,
1996 1995
Amount % Amount %
ARNOLD TRANSPORTATION
SERVICES (TL)
Operating Revenues 85,516 100.0 81,457 100.0
Operating Expenses 81,431 95.2 72,409 88.9
Operating Income 4,085 4.8 9,048 11.1
The Company's working capital at the end of the second quar-
ter of 1996 was $22,096,209, which is an increase of $2,284,221
or 11.5% from the end of the first quarter of 1996.
The Company's investment in Property and Equipment (Less
Accumulated Depreciation) as of the end of the second quarter of
1996 stood at $198,350,692. This figure represents an increase
from March 31, 1996, of $812,296 or 0.4%. The increase reflects
the Company's ongoing capital expansion program. Funding for the
Company's continuing capital expansion program will be accom-
plished through the use of cash generated from current operating
and investment activities, supplemented, when necessary, by short
or long-term debt financing.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
On May 1, 1996, the Company held its Annual Meeting of
Stockholders. The following individuals were elected to serve as
Directors for a new two-year term:
Name For Withheld
Edward H. Arnold 24,656,975 32,757
Ronald E. Walborn 24,672,790 32,422
Arthur L. Peterson 24,672,687 32,525
Kenneth F. Leedy, Heath L. Allen and Carlton E. Hughes
continue in their present two-year terms as Directors.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27 - Financial Data Schedule
(b) NONE
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
ARNOLD INDUSTRIES, INC.
(Registrant)
Date: August 13, 1996 By /s/ Heath L. Allen
Heath L. Allen, Secretary
Date: August 13, 1996 /s/ Ronald E. Walborn
Ronald E. Walborn, Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN ARNOLD INDUSTRIES, INC.'S FORM 10-Q
FOR THE SIX MONTHS ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 10,997,872
<SECURITIES> 15,195,758
<RECEIVABLES> 35,918,582
<ALLOWANCES> 1,834,139
<INVENTORY> 0
<CURRENT-ASSETS> 69,905,869
<PP&E> 311,935,408
<DEPRECIATION> 113,584,716
<TOTAL-ASSETS> 288,583,294
<CURRENT-LIABILITIES> 47,809,660
<BONDS> 0
0
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<COMMON> 29,942,628
<OTHER-SE> 171,810,876
<TOTAL-LIABILITY-AND-EQUITY> 288,583,294
<SALES> 0
<TOTAL-REVENUES> 172,502,670
<CGS> 0
<TOTAL-COSTS> 152,801,974
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 684,624
<INTEREST-EXPENSE> 630,644
<INCOME-PRETAX> 18,849,081
<INCOME-TAX> 6,652,003
<INCOME-CONTINUING> 12,197,078
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 12,197,078
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
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