ARNOLD INDUSTRIES, INC.
AND SUBSIDIARIES
625 SOUTH FIFTH AVENUE
P. O. BOX 630
LEBANON, PENNSYLVANIA 17042-0630
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, MAY 1, 1996
TO THE SHAREHOLDERS:
The Annual Meeting of the Shareholders of Arnold Industries,
Inc. (herein called the "Company" or "Arnold Industries") will be
held at the Lebanon Country Club, 3375 West Oak Street, Lebanon,
Pennsylvania, on Wednesday, May 1, 1996, at 4:00 o'clock p.m.,
prevailing time, for the following purposes:
(1) To elect three (3) directors to serve until the Annual
Meeting of Shareholders in 1998; and
(2) To transact such other business as may properly come
before the meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on
March 22, 1996, as the record date for determination of
shareholders entitled to notice of and to vote at the Annual
Meeting. Accordingly, only shareholders of record at the close
of business on that date will be entitled to vote at the meeting.
Management of the Company extends a cordial invitation to all
shareholders to attend the meeting.
The Annual Report of the Company for 1995 is enclosed
herewith.
By Order of the Board of Directors,
HEATH L. ALLEN
Secretary
Lebanon, Pennsylvania
March 22, 1996
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE FILL IN,
DATE, SIGN AND RETURN YOUR PROXY PROMPTLY IN THE POSTAGE-PAID,
PRE-ADDRESSED ENVELOPE ENCLOSED FOR THAT PURPOSE. IF YOU ATTEND
THE MEETING IN PERSON, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN
PERSON.
ARNOLD INDUSTRIES, INC.
625 South Fifth Avenue
Lebanon, Pennsylvania 17042-0630
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 1, 1996
GENERAL
This proxy statement is furnished in connection with the
solicitation by the Board of Directors of Registrant, Arnold
Industries, Inc. (herein called the "Company" or "Arnold
Industries") of proxies for use at the Annual Meeting of
Shareholders to be held on Wednesday, May 1, 1996, at 4:00 p.m.
prevailing time, at the Lebanon Country Club, 3375 West Oak
Street, Lebanon, Pennsylvania, and at any adjournment or
adjournments thereof. This proxy statement and the accompanying
form of proxy are being mailed to shareholders on or about
March 29, 1996.
A form of proxy is enclosed for use at the Annual Meeting.
When the enclosed form of proxy is signed, dated and returned,
the shares represented thereby will be voted in accordance with
the instructions specified thereon. If no instructions are
given, the shares will be voted for the election of the nominees
for directors named below and, in the discretion of the proxies,
upon such other matters as may properly come before the Annual
Meeting. Any shareholder executing a form of proxy may revoke
that proxy at any time before it is voted at the meeting.
The entire cost of soliciting proxies will be borne by the
Company, including postage, printing and handling.
The Company's Annual Report for 1995, including financial
statements, accompanies this meeting notice, proxy statement and
form of proxy.
VOTING SECURITIES AND RECORD DATE
The Board of Directors has fixed the close of business on
March 22, 1996, as the record date for the determination of the
shareholders entitled to notice of, and to vote at, the Annual
Meeting of Shareholders or any adjournment or adjournments
thereof. Shareholders as of that date will receive the Notice of
Annual Meeting of Shareholders, the Proxy Statement, and the
Annual Report of the Company. As of March 22, 1996, there were
26,652,774 shares of Common Stock issued and outstanding and
entitled to notice of, and to vote at, the Annual Meeting of
Shareholders. There are no other classes of stock outstanding.
Each share of Common Stock is entitled to one vote on each matter
properly submitted to the shareholders for action at the Annual
Meeting. Shareholders have cumulative voting rights with respect
to the election of directors. That is, every shareholder
entitled to vote shall have the right to multiply the number of
shares which the shareholder is entitled to vote by the total
number of directors to be elected and to cast the total number of
such votes for one candidate or distribute them among any two or
more candidates.
VOTE REQUIRED
The presence, in person or by properly executed proxy, of
the holders of a majority of the outstanding shares of stock
entitled to vote at the meeting is necessary to constitute a
quorum. The Company will treat shares of voting stock
represented by a properly signed, dated and returned proxy as
present at the meeting for purposes of determining a quorum,
without regard to whether the proxy is marked as casting a vote
or abstaining. Likewise, the Company will treat shares of voting
stock represented by "broker non-votes" (i.e., shares of voting
stock held in record name by brokers or nominees as to which
(i) instructions have not been received from the beneficial
owners or persons entitled to vote, (ii) the broker or nominee
does not have discretionary voting power, and (iii) the
recordholder has indicated on the proxy card or otherwise
notified the Company that it does not have authority to vote such
shares on that matter) as present for purposes of determining a
quorum.
The nominees for the Board of Directors receiving a
plurality of the votes cast will be elected as Directors.
Abstentions and broker non-votes do not have the effect of
negative votes in respect to the foregoing matters.
SECURITY OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN
BENEFICIAL OWNERS
The following table sets forth certain information as of
February 18, 1996 (unless otherwise noted), with regard to
persons with beneficial ownership of five percent (5%) or more of
Arnold Industries' outstanding stock:
Amount Percent
Name and Address of Beneficially of
Title of Class Beneficial Owner Owned Class
Common Stock Edward H. Arnold
Lebanon, PA............ 5,992,096 (1) 22.5%
Common Stock Daniel R. Efroymson
Moriah Fund, Inc.
Real Silk Investments, Inc.
Indianapolis, IN....... 1,749,560 (2) 6.6%
_________________________
(1) The shares shown include 82,100 shares held by Mr. Arnold's
spouse, the beneficial ownership of which is disclaimed by
Mr. Arnold. Mr. Arnold exercises sole dispositive and
voting power over the remainder of the shares shown in the
table above.
(2) Based on information supplied pursuant to Form 13G for the
year ended 12/31/95, management is advised that Moriah Fund,
Inc., Real Silk Investments and Daniel R. Efroymson exercise
sole dispositive and voting power over 979,400, 600,000 and
36,130 shares, respectively, and that Daniel R. Efroymson
exercises shared voting and dispositive power over 134,376
shares.
The following table sets forth certain information as of
February 18, 1996, with respect to the beneficial ownership of
the outstanding common stock of Arnold Industries by the persons
named therein who are board nominees or directors who will
continue in office, named executive officers and all directors
and executive officers as a group as reported by each person:
Amount Percent
Name and Address of Beneficially of
Title of Class Beneficial Owner Owned Class
Common Stock Edward H. Arnold....... 5,992,096 (1) 22.5%
Common Stock Kenneth F. Leedy....... 333,600 (2) 1.2%
Common Stock Heath L. Allen......... 254,920 (3) *
Common Stock Ronald E. Walborn...... 285,640 (4) 1.1%
Common Stock Arthur L. Peterson..... 6,300 *
Common Stock Carlton E. Hughes...... 12,000 (5) *
Common Stock Paul L. Shiffler....... 11,000 (6) *
Common Stock Directors and Officers
as a Group (7 in
number).............. 6,895,556 (7) 25.5%
* less than 1.0%
_________________________
(1) See Note (1) of the immediately preceding table.
(2) The shares shown include 168,600 shares covered by incentive
and non-qualified stock option(s).
(3) The shares shown include 88,400 shares covered by incentive
and non-qualified stock option(s) and 120,000 shares held
jointly by Mr. Allen and his spouse.
(4) The shares shown include 88,400 shares covered by incentive
and non-qualified stock option(s) and shares held for
Mr. Walborn's segregated accounts by the Walborn Shambach
Associates Profit Sharing Trust and Janney Montgomery Scott,
Inc.
(5) The shares shown include 10,000 shares covered by non-
qualified stock option(s).
(6) The shares shown are comprised of 11,000 shares covered by
incentive stock options(s).
(7) The totals include the named individuals who exercise sole
voting and dispositive power over the shares shown unless
otherwise indicated. See also Notes (1) through (6) above.
DIRECTORS
The Board of Directors is the ultimate governing body of the
Company. As such, it has the responsibility for establishing
broad corporate policies and objectives and for the overall
performance of the Company. Management is accountable to the
Board of Directors for the satisfactory conduct of the Company's
day-to-day business. Members of the Board are kept informed of
the Company's principal activities and plans by various reports
and documents sent to them each month, as well as by operating
and financial reports and analyses.
The Bylaws of the Company provide that the Board of
Directors shall consist of not less than three (3) nor more than
seven (7) members, and that the directors shall be divided into
two classes as nearly equal in number as possible. The term of
office of each class of directors is two years, and the term of
office of the two classes overlap. Pursuant to the Company's
Bylaws, the Board of Directors has fixed its size at six (6). At
the Annual Meeting, three (3) directors are to be elected to hold
office until the 1998 Annual Meeting of Shareholders. After the
election of three (3) directors at the meeting, the Company will
have six (6) directors, including three (3) directors whose
present terms extend until the 1997 Annual Meeting of
Shareholders.
In the absence of instructions to the contrary, proxies
received pursuant to this solicitation will be voted for the
election of Edward H. Arnold, Ronald E. Walborn and Arthur L.
Peterson as directors to hold office until the 1998 Annual
Meeting of Shareholders and until their successors are duly
elected and qualified. Each nominee is presently a director and
was elected to his present term of office by the stockholders.
There are no arrangements or understandings between any director
and any other person pursuant to which he was selected as a
director.
If anyone other than the nominees named below should be
nominated for election as a director, the proxies may be voted
cumulatively in accordance with the judgment of the persons named
therein, so as to elect as directors as many of the nominees
listed below as possible. In the event that any nominee declines
or is unable to serve as a director (which is not anticipated),
the persons named in the accompanying form of proxy shall have
full discretion and authority to vote or refrain from voting for
such substitute nominee, if any, as may be designated by the
Board of Directors.
Set forth below is information regarding the nominees and
the directors who will continue in office on the Company's Board.
Such information includes their names and ages, the principal
occupation or employment of each such person during the past five
years, including all positions and offices with the Company, and
directorships held by such persons in other public companies, if
any. Also shown is the year during which each incumbent began
continuous service as a director of Arnold Industries, Inc.
and/or its predecessor, New Penn Motor Express, Inc. (herein
called "New Penn"). On April 1, 1982, each person who was then a
director of New Penn also became a director of the Company as a
result of the plan of reorganization and merger approved by New
Penn's shareholders on March 24, 1982, pursuant to which New Penn
became a wholly-owned subsidiary of the Company.
The Board of Directors of the Company meets on a regularly
scheduled basis and, during 1995, met on six separate occasions.
To be Elected for a Two-Year Term
EDWARD H. ARNOLD: 56, Director since 1969
President and Chairman of the Board (1982 to present) of
Arnold Industries; President (1974 to present) and Treasurer
(1974 to 1982) of New Penn. Mr. Arnold is also a director
of Hamburger Hamlet Restaurants, Inc.
RONALD E. WALBORN: 59, Director since 1972
President and Treasurer of Walborn Shambach Associates
(Accountants); Treasurer (1982 to present) of Arnold
Industries; Treasurer (1982 to present) and Assistant
Treasurer (1980 to 1982) of New Penn.
ARTHUR L. PETERSON: 69, Director since 1988
Executive Director of the Florida Association of Colleges
and Universities; Director of the Academy of Senior
Professionals, Eckerd College, St. Petersburg, Florida (1987
to 1994); President of Lebanon Valley College, Annville,
Pennsylvania (1983 to 1987).
To Continue in Office
HEATH L. ALLEN: 68, Director since 1972
Partner of Keefer, Wood, Allen & Rahal (Attorneys);
Secretary (1982 to present) of Arnold Industries; Secretary
(1972 to present) of New Penn. Mr. Allen is also a director
of Nuclear Support Services, Inc.
KENNETH F. LEEDY: 54, Director since 1980
Executive Vice President (1986 to present) and Vice
President-Operations (1982 to 1986) of Arnold Industries;
Executive Vice President (1983 to present) and Vice
President-Operations (1975 to 1983) of New Penn.
CARLTON E. HUGHES: 64, Director since 1988
Chairman of Stewart-Amos Steel, Inc.; President and
Treasurer of Stewart-Amos Equipment Co. until 1993. Mr.
Hughes is also a director of CoreStates Financial Corp. and
IREX Corp.
The Board of Directors has established an Audit Committee.
The functions of the Audit Committee are to recommend the
engagement of the Company's independent auditors and to review
with them the plan and scope of their audit for each year, the
status of their audit during the year, the results of such audit
when completed, and their fees for services performed. The
Committee will also review with the Company's accountants the
plan, scope and results of their operations and discuss with each
group independently of the other any recommendations or matters
which either considers to be of significance. The present
members of the Audit Committee are Carlton E. Hughes (who is
Chairman), Arthur L. Peterson and Heath L. Allen. The Audit
Committee met once in 1995.
The Board has established a Compensation Committee. The
primary function of the Compensation Committee is to review and
to make recommendations on executive officer compensation. The
present members of the Compensation Committee are Carlton E.
Hughes and Arthur L. Peterson. The Compensation Committee met
one time in 1995. The Board does not have a standing Nominating
Committee.
Heath L. Allen who serves as Secretary and Director, and
Ronald E. Walborn who serves as Treasurer and Director for the
Company each received a flat fee of $10,000 for their services in
1995. Directors who are not also officers of the Company are
paid $5,000 per year and a fee of $500 for each meeting of the
Board of Directors attended, together with the expenses of
attendance.
EXECUTIVE OFFICERS
Executive officers are appointed by the Board of Directors
and serve at the pleasure of the Board. There are no arrange-
ments or understandings between any executive officer and any
other person pursuant to which the executive officers are
selected. Set forth below is information on the executive
officers of the Company, including age and principal occupation
or employment during the past five years and all positions with
the Company.
EDWARD H. ARNOLD: 56,
President and Chairman of the Board (1982 to present) of
Arnold Industries; President (1974 to present) and Treasurer
(1974 to 1982) of New Penn.
KENNETH F. LEEDY: 54,
Executive Vice President (1986 to present) and Vice
President-Operations (1982 to 1986) of Arnold Industries;
Executive Vice President (1983 to present) and Vice
President-Operations (1975 to 1983) of New Penn.
PAUL L. SHIFFLER: 42,
Chief Financial Officer (May 1992 to present) of Arnold
Industries, Inc.; Chief Financial Officer of Jones Truck
Lines, Inc. (May 1988 to October 1991).
HEATH L. ALLEN: 68,
Partner of Keefer, Wood, Allen & Rahal (Attorneys);
Secretary (1982 to present) of Arnold Industries; Secretary
(1972 to present) of New Penn.
RONALD E. WALBORN: 59,
President and Treasurer of Walborn Shambach Associates
(Accountants); Treasurer (1982 to present) of Arnold
Industries; Treasurer (1982 to present) and Assistant
Treasurer (1980 to 1982) of New Penn.
EXECUTIVE COMPENSATION AND OTHER BENEFITS
The following table sets forth information concerning
compensation paid or accrued by the Company and its subsidiaries
during the fiscal year ended December 31, 1995, to or for the
chief executive officer and each of the executive officers of the
Company whose cash compensation exceeded $100,000:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Other Awards All other
Name and principal Year Salary ($) Bonus ($) annual Restricted Options/ compensa-
position compen- stock SARs (#) tion <F2>
tions(s) awards ($) <F1>
<S> <C> <C> <C> <C> <C> <C> <C>
EDWARD H. ARNOLD 1995 187,200 433,000 - - - 14,940
President & Chairman 1994 166,653 633,000 - - - 14,970
of the Board 1993 147,628 733,000 - - - 25,421
KENNETH F. LEEDY 1995 166,400 253,000 - - - 14,940
Executive Vice 1994 146,204 353,000 - - - 14,970
President 1993 127,504 453,000 - - 36,400 25,421
PAUL L. SHIFFLER 1995 94,010 36,144 - - - 3,909
Chief Financial 1994 88,400 44,426 - - 2,000 3,849
Officer 1993 76,956 22,500 - - 5,000 3,317
<FN>
<F1>
(1) Adjusted for 11/22/93 two-for-one stock split.
<F2>
(2) Represents amounts credited to the accounts of the named
individuals pursuant to their respective profit-sharing
or retirement plan. The amounts accrued under these
plans are based on fair market value of the assets of the
trust as determined by the Trustee on December 31 of the
respective years for which the information is supplied.
</FN>
</TABLE>
Stock Options. At the 1987 Annual Meeting, the shareholders
approved the Arnold Industries, Inc. 1987 Stock Option Plan (the
"1987 Plan"), which is designed to promote continuity of
management and to increase incentive for those primarily
responsible for the Company's long-range financial success.
The 1987 Plan is administered by the Board of Directors,
which may extend rights to selected employees or consultants to
purchase shares of common stock in the Company at stated option
prices. The aggregate number of shares for which options may be
granted under the 1987 Plan is presently 1,625,000. As of Decem-
ber 31, 1995, options for 1,056,680 shares were outstanding to
approximately 120 employees and/or consultants. The 1987 Plan
will terminate on March 31, 1997, although outstanding options at
that time will not be canceled by such termination.
The options may be incentive stock options, which qualify
for certain tax benefits (relating primarily to the deferral of
gain recognition until the underlying stock is sold and the
treatment of same as a capital gain as opposed to ordinary
income), or nonqualified options, which do not qualify as
incentive stock options. Incentive stock options must be granted
at not less than the fair market value of the stock on the date
granted, and nonqualified stock options must be granted at not
less than one-half of the fair market value of the stock on the
date granted. The Company may take a deduction for gain realized
by its employee upon the exercise of a nonqualified option.
Generally this is not so in the case of an incentive stock
option. Options generally are non-transferable, conditioned upon
continued employment with the Company and expire within 10 years
of grant or upon stated occurrences. Other option terms may vary
depending upon provisions of the specific option agreement. On
June 28, 1991, and on July 13, 1995, the Company filed S-8
Registration Statements for Company stock subject to the 1987
Plan. The closing market price of Company common stock as of
March 19, 1996 was 16.
There were no stock options granted to or exercised by the
Company's executive officers in fiscal year 1995. The tables
below show information regarding stock options held by the
Company's executive officers.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL
YEAR AND FY-END OPTION/SAR VALUES
Number of Value of
unexercised unexercised
Options/SARs in-the-money
Shares Value at FY-End (#) Options/SARs
acquired on realized exercisable/ at FY-End ($)
Name exercise (#) ($) unexercisable exercisable/
<F1> unexercisable
<S> <C> <C> <C> <C>
EDWARD H. ARNOLD - - - -
KENNETH F. LEEDY - - 86,342/82,258 702,206/245,411
PAUL L. SHIFFLER - - 0/11,000 0/27,425 <F2>
HEATH L. ALLEN - - 88,400/0 695,000/0
RONALD E. WALBORN - - 88,400/0 695,000/0
<FN>
<F1>
(1) Adjusted for stock splits.
<F2>
(2) Value does not include out-of-the-money option for 2,000 shares
exercisable at $18.50 per share.
</FN>
</TABLE>
Supplemental Retirement Plan. In 1980, in order to
recognize past effort and to encourage future effort, New Penn
implemented a supplemental retirement plan. This plan provides
to 59 individuals certain retirement, disability and death
benefits, which are available only if the individual is working
for Arnold Industries or one of its subsidiaries at retirement,
disability or death. Retirement benefits would commence five
years after retirement, but not before age 65, and are
conditioned on an absence of competitive employment for two years
after retirement. Retirement benefits are payable monthly for
ten years. Monthly disability and pre-retirement death benefits
are one-half of retirement benefits, but are payable for twenty
years. The Company is responsible for the full cost of the plan,
with no contributions from the participants. The net pension
cost for this plan was $139,932 for 1995.
The monthly retirement benefits involve six different
categories: (1) $1,666.67, (2) $1,250.00, (3) $1,041.67,
(4) $833.33, (5) $625.00 and (6) $416.67. Category (1) covers
Messrs. Arnold and Leedy and 3 non-directors; category (2)
includes Messrs. Allen and Walborn and 9 non-directors;
category (3) covers 3 other individuals; and categories (4)
through (6) cover 40 individuals. The Board of Directors may
from time to time add additional individuals to the plan, and may
change the categories of participants to increase benefits.
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in
the Company's cumulative total shareholder return on its common
stock with: (i) the cumulative total return of a broad market
index (i.e. NASDAQ MARKET INDEX) and (ii) the cumulative total
return of a published industry or line-of-business index weighted
for market capitalization (i.e., the SIC CODE 4213 INDUSTRY GROUP
- - TRUCKING, EXCEPT LOCAL). This group is composed of the
following entities: Aasche Transport Service; Allied Holdings,
Inc.; American Freightways Corporation; Ampace Corporation;
Anuhco, Inc.; Arkansas Best Corporation; Arnold Industries, Inc.;
Arrow Transportation Company; Boyd Bros. Transport, Inc.;
Builders Transport, Inc.; Caliber Systems, Inc.; Cannon Express
CL B; Cannon Express, Inc. CL A; Celadon Group, Inc.;
Consolidated Freightways; Country Wide Transport; Covenant
Transport CL A; Frozen Food Express Industries; FRP Properties,
Inc.; Heartland Express, Inc.; J.B. Hunt Transportation Services,
Inc.; Intrenet, Inc.; Kenan Transport Company; KLLM Transport
Services, Inc.; Knight Transportation; Landstar Systems, Inc.;
Lynch Corporation; M.S. Carriers, Inc.; Mark VII, Inc.; Marten
Transport, Ltd.; Matlack Systems, Inc.; Morgan Group, Inc. CL A;
MTL, Inc.; Old Dominion Freight Line; OTR Express, Inc.; PAM
Transportation Services; Polar Express Corporation; PST Vans,
Inc.; Simon Transport Services CL A; Swift Transportation Co.;
TNT Freightways Corporation; Transport Corporation of America;
U.S. 1 Industries, Inc.; U.S. Xpress Enterprises CL A; USA Truck,
Inc.; Vitran Corporation; Werner Enterprises, Inc.; and Yellow
Corporation. Cumulative returns for the Company and both indices
were calculated assuming dividend reinvestment.
GRAPH AND POINT DATA
5-YEAR CUMULATIVE TOTAL RETURN AMONG ARNOLD INDUSTRIES, INC.
NASDAQ MARKET INDEX AND SIC CODE INDEX
----------------------FISCAL YEAR ENDING-----------------
COMPANY 1990 1991 1992 1993 1994 1995
ARNOLD IND INC 100 165.56 196.93 251.88 253.90 217.85
INDUSTRY INDEX 100 150.41 183.92 208.33 200.30 169.80
BROAD MARKET 100 128.38 129.64 155.50 163.26 211.77
ASSUMES $100 INVESTED ON JAN. 1, 1991
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1995
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee's primary function is to review
and to make recommendations to the Board on executive officer
compensation. The present members of the Compensation Committee
are Carlton E. Hughes and Arthur L. Peterson, both of whom are
non-employee "independent" directors of the Company. The
Compensation Committee has reviewed the Company's policies on
executive officer compensation and the compensation paid to the
Company's executive officers for fiscal year 1995 and reports as
set forth below.
The Company's executive compensation policy is to provide
competitive levels of total compensation in order to attract,
motivate and retain skilled executive personnel, to recognize and
reward individual initiative and achievements and to promote
above average corporate performance. The Company also endorses
the proposition that stock ownership in the Company by its
employees and executive personnel and stock-based compensation
arrangements are extremely beneficial in aligning the interests
of its employees and management with its shareholders in
maximizing Company value.
The basic methods by which the Company compensates its
executive officers and implements the aforementioned policy are
those of annual salary, annual cash bonus and stock option grants
made pursuant to the Company's 1987 Stock Option Plan. The
Company also maintains a supplemental retirement plan for some 59
key employees (including its executive officers) to augment its
profit-sharing/retirement plan, generally available to all
eligible employees. Information on the Company's stock option
plan can be found on page 5 of the proxy statement. Further
information on the supplemental retirement plan and its benefits
to the existing officers is found on page 6 of the statement.
The Company has not yet adopted a policy with respect to the
$1,000,000 limitation on deductibility of executive compensation
under Section 162(m) of the Internal Revenue Code of 1986, as
amended.
The Committee believes that the base salaries of the
Company's principal executive officers are in the median range
for the trucking industry. The Company utilizes cash bonus and
stock option elements to reward superior performance. The
Company considers the desires of the executive and the needs of
the Company in determining the overall compensation package and
the executive's stock and option holdings in adjusting the
mixture between the cash bonus and stock option elements on a
yearly basis. In 1995, the Company utilized annual salary and
annual cash bonus awards but did not utilize stock options.
The Company looks to both quantitative and qualitative
factors in determining the job performance of all of its
employees, including executive officers. The primary
quantitative criteria applied to its executive officers are
Company return on shareholder investment, net earnings, revenue
and cost trends. Internal quantitative criteria such as
adherence to, or improvement on, operating budgets or Company
specific goals, including revenue and earnings targets and cost
or claims reduction projects are also considered, when
applicable. Qualitative factors such as the ability to motivate
others, to adapt and accomplish new tasks and to assist in both
short and long range strategic planning for the Company, as well
as the officer's internal performance history, are also
considered in arriving at appropriate overall compensation
levels. The Company has not established a specific mathematic
weighting or formula for application of these principles. These
criteria are applied on a subjective basis from year to year and
were given roughly equal weight in 1995's determinations.
Application of the foregoing criteria to Edward H. Arnold,
the Company's chief executive officer, continues to support
placing Mr. Arnold's total compensation package for 1995 at the
high end of his counterparts in the trucking industry. In terms
of qualitative factors, Mr. Arnold continues his leadership role
in strategic planning and remains an exceptional motivating force
among the Company's executive officers and personnel, emphasizing
a commitment to continuous improvement in customer service and
cost efficiency.
In quantitative terms, the Company again achieved new highs
in annual revenues and earnings in 1995 and remained a stand-out
performer among its trucking counterparts in return on
shareholder investment. However, due in part to intense
competition and price-cutting throughout the trucking industry in
1995 and to slowing economic conditions in the Northeast, the
Company did not reach its own internal revenue and earnings
targets this year. Accordingly, Mr. Arnold's total compensation
package, while reflecting the Company's above average performance
in 1995, was nonetheless reduced from 1993 and 1994 levels.
Insofar as Mr. Arnold has foregone participation in the Company's
stock option program due to his already substantial holdings of
Company stock, his 1995 compensation package utilizes only salary
and cash bonus components.
The Compensation Committee
Carlton E. Hughes
Arthur L. Peterson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Hughes and Mr. Peterson are independent directors of the
Company. They are not, and have not been, officers or employees
of the Company or any of its subsidiaries.
CERTAIN TRANSACTIONS
The firm of Keefer, Wood, Allen & Rahal, of which Heath L.
Allen, a director of the Company, is a partner, received legal
fees of approximately $274,000 for services performed in 1995 for
the Company and its subsidiaries. It is anticipated that the
Company and its subsidiaries will make payments to Keefer, Wood,
Allen & Rahal through 1996 for legal services to be performed.
The firm of Walborn Shambach Associates, of which Ronald E.
Walborn, a director of the Company, is President and Treasurer,
received fees for management and other accounting services of
approximately $459,000 for services performed in 1995 for the
Company and its subsidiaries. It is anticipated that the Company
and its subsidiaries will make payments to Walborn Shambach
Associates through 1996 for management and accounting services to
be performed.
INDEPENDENT ACCOUNTANTS
The firm of Coopers & Lybrand L.L.P. has served as
independent certified public accountants to audit the books,
records and accounts of the Company and its subsidiaries since
1991, the Company's last five fiscal years.
A representative of Coopers & Lybrand L.L.P. will be present
at the Annual Meeting, will be afforded an opportunity to make a
statement if he or she desires to do so and will be available to
respond to appropriate questions.
The Company presently intends to utilize Coopers & Lybrand
L.L.P. to serve as independent auditor for its 1996 fiscal year
but has opted not to submit ratification of same to a vote of
shareholders so as to maintain Board discretion in this matter.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
The 1997 Annual Meeting of Shareholders will be held on or
about May 7, 1997. Proposals of shareholders intended to be
presented for action at that meeting must be submitted in writing
and received by the Company at its corporate headquarters,
625 South Fifth Avenue, P. O. Box 630, Lebanon, PA, 17042-0630,
Attn: Corporate Secretary, not later than December 22, 1996, in
order to be considered for inclusion in the Company's proxy
statement and form of proxy relating to that meeting, in
accordance with regulations governing the solicitation of
proxies. It is suggested that a shareholder making a proposal
submit the proposal by Certified Mail - Return Receipt Requested.
The Bylaws provide that nominations of candidates for
election to the Board at an annual meeting, other than those made
by or on behalf of existing management, must be made in writing
and delivered or mailed to the Corporate Secretary not less than
fifteen (15) nor more than fifty (50) days prior to that annual
meeting.
OTHER MATTERS
The Board of Directors does not intend to bring any matters
before the Annual Meeting other than those specifically set forth
in the notice of the Annual Meeting and knows of no matters to be
brought before the meeting by others. If any other matters
properly come before the meeting, it is the intention of the
persons named in the enclosed proxy, or their substitutes, to
vote said proxy in accordance with their best judgment on such
matters.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE AVAILABLE AT
THE ANNUAL MEETING. ANY SHAREHOLDER, UPON WRITTEN REQUEST TO THE
CORPORATE SECRETARY, MAY OBTAIN A COPY OF THE COMPANY'S 10-K
WITHOUT CHARGE.
By Order of the Board of Directors,
HEATH L. ALLEN
Secretary
Lebanon, Pennsylvania
March 22, 1996
APPENDIX
REVOCABLE PROXY
ARNOLD INDUSTRIES, INC.
X PLEASE MARK VOTES
AS IN THIS EXAMPLE
ANNUAL MEETING OF SHAREHOLDERS
MAY 1, 1996
The undersigned hereby acknowledges receipt of the Notice of
Annual Meeting of Shareholders of Arnold Industries, Inc., to be
held on Wednesday, May 1, 1996, at 4:00 p.m., at the Lebanon
Country Club, 3375 West Oak Street, Lebanon, Pennsylvania, and
the proxy statement for said meeting attached thereto, and hereby
appoints Kenneth F. Leedy or Heath L. Allen, or either of them,
proxies to vote and act at the 1996 Annual Meeting of Shareholders
or at any adjournment or adjournments thereof, on any business
that may properly come before such meeting, including:
With- For All
1. Election of Directors For hold Except
of the Company: _____ _____ _____
Edward H. Arnold, Ronald E. Walborn and Arthur L. Peterson
INSTRUCTION: To withhold authority to vote for any nominee, mark
"For All Except" and write that nominee's name in the space
provided below.
________________________________________________________________
2. With respect to the use For Against Abstain
of their discretion in _____ _____ _____
such other business as
may come before the
meeting or any adjourn-
ments thereof.
The stock covered by this proxy will be voted in accordance with
specifications made. IF NO SPECIFICATION IS MADE, THE PROXIES
ARE APPOINTED WITH AUTHORITY TO VOTE FOR THE ELECTION OF DIRECTORS
AND IN FAVOR OF PROPOSAL 2.
Please sign your proxy exactly as your name appears on the
certificate. When signing as attorney, executor, administrator,
trustee or guardian, give full title as such. If owner is a
corporation, sign full corporate name by a duly authorized officer.
If two or more persons are named as owners, both or all should
sign.
Please be sure to sign and date Date
this Proxy in the box below. _______________
THIS PROXY IS SOLICITED ON BEHALF
OF THE REGISTRANT'S BOARD OF DIRECTORS.
__________________________________________________________
Shareholder sign above Co-holder (if any) sign above
