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, 1997.
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: 25,875,040 shares
outstanding (which excludes treasury shares) as of August 6,
1997.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets - June 30, 1997 and
(Unaudited) December 31, 1996
Condensed Consolidated Statements of - June 30, 1997
Income (Three and Six Month and 1996
Periods - Unaudited)
Condensed Consolidated Statements of - June 30, 1997
Cash Flows (Six Month and 1996
Periods - Unaudited)
Notes to Condensed Consolidated Financial Statements
ARNOLD INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1997 1996
ASSETS
Current Assets
Cash and Cash Equivalents 29,032,204 19,704,303
Marketable Securities 12,685,061 21,917,940
Accounts Receivable, Net 36,467,637 30,648,955
Deferred Income Taxes 7,801,066 7,649,269
Prepaid Expenses and Supplies 4,519,718 3,764,475
Total Current Assets 90,505,686 83,684,942
Property and Equipment 332,809,292 322,812,162
Less: Accumulated Depreciation 132,612,485 123,198,243
Total Property and Equipment 200,196,807 199,613,919
Other Assets
Goodwill, Net 8,678,068 8,862,555
Investments in Limited Partnerships 9,883,198 10,144,793
Other 819,649 806,213
Total Other Assets 19,380,915 19,813,561
TOTAL ASSETS 310,083,408 303,112,422
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes Payable 16,222,367 16,222,367
Accounts Payable 12,583,499 9,332,066
Income Taxes 1,112,781 456,332
Estimated Liability for Claims 9,350,034 6,451,931
Accrued Expenses - Other 14,348,956 11,313,407
Total Current Liabilities 53,617,637 43,776,103
Long-Term Liabilities
Estimated Liability for Claims 13,689,000 13,689,000
Deferred Income Taxes 30,845,778 31,095,222
Notes Payable 2,286,733 3,873,696
Other 1,604,307 1,531,707
Total Long-Term Liabilities 48,425,818 50,189,625
Stockholders' Equity
Common Stock 29,942,628 29,942,628
Paid-In Capital 262,363 209,000
Retained Earnings 198,931,160 187,922,593
Treasury Stock - At Cost (21,096,198) (8,927,527)
Total Stockholders' Equity 208,039,953 209,146,694
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY 310,083,408 303,112,422
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,
1997 1996 1997 1996
Operating Revenues 187,879,966 172,502,670 97,340,744 90,110,880
Operating Expenses 161,281,032 152,801,974 82,289,763 78,643,743
Operating Income 26,598,934 19,700,696 15,050,981 11,467,137
Interest Expense (651,199) (630,644) (319,941) (308,120)
Other Income
(Deductions) 544,328 (220,971) 329,007 (6,988)
Income Before Income
Taxes 26,492,063 18,849,081 15,060,047 11,152,029
Income Taxes 9,660,658 6,652,003 5,549,798 3,997,756
Net Income 16,831,405 12,197,078 9,510,249 7,154,273
Weighted Average Shares
Outstanding (Note) 26,471,650 26,652,266 26,277,369 26,654,348
Net Income per Common
Share (Note) .64 .46 .37 .27
Dividends per Common
Share .22 .22 .11 .11
NOTE: Common share equivalents are not included since the effect of
their inclusion is not material.
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128
"Earnings Per share" (SFAS 128). SFAS 128 establishes standards
for computing and presenting earnings per share and applies to
entities with publicly held common stock or potential common
stock. SFAS 128 simplifies the standards for computing earnings
per share previously found in APB Opinion No. 15, "Earnings Per
Share," by replacing the presentation of primary earnings per
share with a presentation of basic earnings per share. It also
requires dual presentation of basic and diluted earnings per
share on the face of the income statement for all entities with
complex capital structures.
SFAS 128 is effective for financial statements issued for periods
ending after December 15, 1997. The effect of SFAS 128 on the
Company's earnings per share has not been determined.
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,
1997 1996
Operating Activities
Net Income 16,831,405 12,197,078
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 15,030,499 13,953,156
Provision for Deferred Taxes (401,240) 695,671
Other (511,188) (223,601)
Changes in Operating Assets and
Liabilities:
(Increase) in Accounts Receivable (5,818,682) (2,979,491)
(Increase) Decrease in Prepaid Expenses
and Supplies (755,243) 171,106
Increase in Accounts Payable and
Accrued Expenses 9,841,534 6,234,403
Other 72,600 67,600
Net Cash Provided by Operating
Activities 34,289,685 30,115,922
Investing Activities
Proceeds from Sale of Investment Securities 15,688,938 1,338,914
Purchase of Investment Securities (6,484,011) (8,048,724)
Proceeds from Disposition of Property and
Equipment 2,348,872 2,140,775
Purchase of Property and Equipment (17,006,510) (13,789,409)
Capital Contributions to Limited Partnerships (1,586,963) (741,247)
Other 16,036 24,206
Net Cash Used In Investing Activities (7,023,638) (19,075,485)
Financing Activities
Cash Dividends Paid (5,822,839) (5,863,412)
Purchase of Treasury Stock (12,199,922) -0-
Other 84,615 51,075
Net Cash Used In Financing Activities (17,938,146) (5,812,337)
Increase in Cash and Cash Equivalents 9,327,901 5,228,100
Cash and Cash Equivalents at Beginning of Year 19,704,303 5,769,772
Cash and Cash Equivalents at End of Period 29,032,204 10,997,872
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest 647,933 652,922
Income Taxes 9,411,125 4,503,015
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, 1997, and June 30, 1996, are not neces-
sarily 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 1997 were
$97,340,744, an increase of $7,229,864 or 8% from Operating Reve-
nues for 1996's second quarter. For the same period, Operating
Expenses increased $3,646,020 or 4.6%; Income Before Income Taxes
increased $3,908,018, an increase of 35%; and Net Income in-
creased $2,355,976 or 33%. Earnings Per Share increased from
$.27 to $.37 for the respective quarters.
Operating Revenues for the six months ended June 30, 1997,
were $187,879,966, an increase of $15,377,296 or 8.9% over the
comparable period in 1996. For the same period, Operating
Expenses increased $8,479,058 or 5.5%; Income Before Taxes
increased $7,642,982, an increase of 40.5%; and Net Income in-
creased $4,634,327 or 38%. Earnings Per Share increased from
$.46 to $.64 for the respective six-month periods.
The traffic of New Penn Motor Express, Inc. ("New Penn"),
the Company's less-than-truckload carrier, increased during the
second quarter of 1997, and its operating revenues for the
quarter were greater than those of the second quarter of 1996.
Operating income for the second quarter substantially exceeded
1996's operating income for the same period.
Revenues among the Arnold Transportation Services group,
which consists of three regional truckload carriers, also con-
tinued to grow. Arnold Transportation Services, Inc. ("ATS"),
SilverEagle Transport, Inc. ("SilverEagle") and D.W. Freight,
Inc. ("DW") together produced a revenue increase of approximately
$880,000 when compared to their 1996 second quarter performance.
This revenue increase resulted primarily from additional freight
as opposed to higher rates. The three regional truckload carri-
ers are being consolidated; the consolidation process should be
completed in 1997.
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 1997 and 1996 and for the
six (6) month periods ended June 30, 1997, and June 30, 1996:
(Dollars in Thousands)
Second Quarter Ended June 30,
1997 1996
Amount % Amount %
NEW PENN MOTOR EXPRESS
AND RELATED COMPANIES (LTL)
Operating Revenues 51,834 100.0 45,484 100.0
Operating Expenses 40,248 77.6 36,785 80.9
Operating Income 11,586 22.4 8,699 19.1
ARNOLD TRANSPORTATION SERVICES (TL)
Operating Revenues 45,507 100.0 44,627 100.0
Operating Expenses 42,042 92.4 41,859 93.8
Operating Income 3,465 7.6 2,768 6.2
(Dollars in Thousands)
Six Months Ended June 30,
1997 1996
Amount % Amount %
NEW PENN MOTOR EXPRESS
AND RELATED COMPANIES (LTL)
Operating Revenues 100,309 100.0 86,987 100.0
Operating Expenses 79,222 79.0 71,371 82.0
Operating Income 21,087 21.0 15,616 18.0
ARNOLD TRANSPORTATION SERVICES (TL)
Operating Revenues 87,571 100.0 85,516 100.0
Operating Expenses 82,059 93.7 81,431 95.2
Operating Income 5,512 6.3 4,085 4.8
The Company's working capital at the end of the second quar-
ter of 1997 was $36,888,049, which is a decrease of $4,390,959 or
10.6% from the end of the first quarter of 1997.
The Company's investment in Property and Equipment (Less
Accumulated Depreciation) as of the end of the second quarter of
1997 stood at $200,196,807. This figure represents an increase
from December 31, 1996, of $582,888 or .3%. The increase re-
flects the Company's ongoing capital expansion program. Funding
for the Company's continuing capital expansion program will be
accomplished through the use of cash generated from current
operating and investment activities, supplemented, when neces-
sary, by short or long-term debt financing.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
On May 7, 1997, 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
Heath L. Allen 23,931,205 162,352
Kenneth F. Leedy 23,936,481 157,076
Carlton E. Hughes 23,937,291 156,266
Edward H. Arnold, Ronald E. Walborn and Arthur L. Peterson
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 14, 1997 Heath L. Allen, Secretary
Date: August 14, 1997 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, 1997, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 29,032,204
<SECURITIES> 12,685,061
<RECEIVABLES> 38,746,842
<ALLOWANCES> 2,415,817
<INVENTORY> 0
<CURRENT-ASSETS> 90,505,686
<PP&E> 332,809,292
<DEPRECIATION> 132,612,485
<TOTAL-ASSETS> 310,083,408
<CURRENT-LIABILITIES> 53,617,637
<BONDS> 0
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<COMMON> 29,942,628
<OTHER-SE> 178,097,325
<TOTAL-LIABILITY-AND-EQUITY> 310,083,408
<SALES> 0
<TOTAL-REVENUES> 187,879,966
<CGS> 0
<TOTAL-COSTS> 161,281,032
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<LOSS-PROVISION> 630,386
<INTEREST-EXPENSE> 651,199
<INCOME-PRETAX> 26,492,063
<INCOME-TAX> 9,660,658
<INCOME-CONTINUING> 16,831,405
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<EPS-PRIMARY> .64
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