FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 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: 26,269,680 shares
outstanding as of May 22, 1997.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets - March 31, 1997
(Unaudited) and
December 31, 1996
Condensed Consolidated Statements of
Income (Three Month
Period - Unaudited) - March 31, 1997 and 1996
Condensed Consolidated Statements of
Cash Flows (Three Month
Period - Unaudited) - March 31, 1997 and 1996
Notes to Condensed Consolidated Financial Statements
ARNOLD INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1997 1996
ASSETS
Current Assets
Cash and Cash Equivalents 21,737,918 19,704,303
Marketable Securities 26,617,818 21,917,940
Accounts Receivable, Net 34,350,467 30,648,955
Deferred Income Taxes 7,812,709 7,649,269
Prepaid Expenses and Supplies 3,892,469 3,764,475
Total Current Assets 94,411,381 83,684,942
Property and Equipment, at Cost 329,321,123 322,812,162
Less: Accumulated Depreciation 128,228,089 123,198,243
Total Property and Equipment 201,093,034 199,613,919
Other Assets
Goodwill, Net 8,770,311 8,862,555
Investments in Limited Partnerships 10,015,797 10,144,793
Other 666,065 806,213
Total Other Assets 19,452,173 19,813,561
TOTAL ASSETS 314,956,588 303,112,422
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes Payable 16,222,367 16,222,367
Accounts Payable 13,311,150 9,332,066
Income Taxes 3,422,308 456,332
Estimated Liability for Claims 7,738,499 6,451,931
Accrued Expenses - Other 12,438,049 11,313,407
Total Current Liabilities 53,132,373 43,776,103
Long-Term Liabilities
Estimated Liability for Claims 13,689,000 13,689,000
Deferred Income Taxes 30,886,816 31,095,222
Notes Payable 2,209,496 3,873,696
Other 1,575,507 1,531,707
Total Long-Term Liabilities 48,360,819 50,189,625
Stockholders' Equity
Common Stock 29,942,628 29,942,628
Paid-In Capital 252,463 209,000
Retained Earnings 192,310,590 187,922,593
Treasury Stock, at Cost (9,042,285) (8,927,527)
Total Stockholders' Equity 213,463,396 209,146,694
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 314,956,588 303,112,422
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)
Three Months Ended
March 31,
1997 1996
Operating Revenues 90,539,222 82,391,790
Operating Expenses 78,991,269 74,158,231
Operating Income 11,547,953 8,233,559
Interest Expense (331,258) (322,524)
Other Income (Deductions) 215,321 (213,983)
Income Before Income Taxes 11,432,016 7,697,052
Income Taxes 4,110,860 2,654,247
Net Income 7,321,156 5,042,805
Weighted Average Shares Outstanding (Note) 26,668,089 26,650,185
Net Income per Common Share (Note) .27 .19
Dividends per Common Share .11 .11
NOTE: Common share equivalents (stock options) 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 previous-
ly 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)
Three Months Ended
March 31,
1997 1996
Operating Activities
Net Income 7,321,156 5,042,805
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 7,167,020 6,871,903
Provision for Deferred Taxes (371,846) 147,359
Other (196,773) (217,548)
Changes in Operating Assets and Liabilities:
(Increase) in Accounts Receivable (3,701,512) (1,299,814)
(Increase) in Prepaid Expenses and
Supplies (127,994) (167,892)
Increase in Accounts Payable
and Accrued Expenses 9,356,270 6,281,278
Other 43,800 36,300
Net Cash Provided by Operating
Activities 19,490,121 16,694,391
Investing Activities
Proceeds from Sale of Investment
Securities 1,340,827 96,576
Purchase of Investment Securities (6,070,094) (2,908,570)
Proceeds from Disposition of Property and
Equipment 1,748,386 1,609,584
Purchase of Property and Equipment (9,949,016) (5,607,755)
Capital Contributions to Limited
Partnerships (1,664,200) (505,271)
Other 142,045 18,834
Net Cash Used In Investing
Activities (14,452,052) (7,296,602)
Financing Activities
Cash Dividends Paid (2,933,159) (2,931,475)
Purchase of Treasury Stock (140,250) -0-
Other 68,955 36,575
Net Cash Used In Financing
Activities (3,004,454) (2,894,900)
Increase (Decrease) in Cash and Cash
Equivalents 2,033,615 6,502,889
Cash and Cash Equivalents at Beginning
of Year 19,704,303 5,769,772
Cash and Cash Equivalents at End of Period 21,737,918 12,272,661
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest 331,257 347,930
Income Taxes 1,514,966 288,358
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 1: 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.
The results of operations for the three-month period ending
March 31, 1997 and 1996 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 first quarter of 1997 were
$90,539,222, an increase of $8,147,432 or 10% over Operating
Revenues for 1996's first quarter. For the same periods, Operat-
ing Expenses increased $4,833,038 or 6.5%; Income before Income
Taxes increased $3,734,964, an increase of 49%, and Net Income
increased $2,278,351, or 45% to $7,321,156. Earnings Per Share
increased to $.27 for the first quarter of 1997 from $.19 for the
first quarter of 1996, a 42% increase.
The Company's revenue figures for the first quarter of 1997
as compared to the first quarter of 1996 are higher due primarily
to increased business volume at New Penn Motor Express, Inc.
("New Penn"), which experienced a 17% increase in revenue. Revenue
figures for the Arnold Transportation Services companies, LebArnold,
Inc. ("Lebarnold"), SilverEagle Transport, Inc. ("SilverEagle") and
D.W. Freight, Inc. ("Dalworth") increased less significantly, by
some 3%.
Set forth below is a schedule of the Unaudited Operating
Revenues, Expenses and Operating Income of the LTL and TL
companies:
(Dollars in Thousands)
First Quarter Ended March 31,
1997 1996
Amount % Amount %
NEW PENN MOTOR EXPRESS
AND RELATED COMPANIES (LTL)
Operating Revenues 48,475 100.0 41,503 100.0
Operating Expenses 38,974 80.4 34,586 83.3
Operating Income 9,501 19.6 6,917 16.7
(Dollars in Thousands)
First Quarter Ended March 31,
1997 1996
Amount % Amount %
ARNOLD TRANSPORTATION COMPANIES (TL)
Operating Revenues 42,064 100.0 40,888 100.0
Operating Expenses 40,017 95.1 39,572 96.8
Operating Income 2,047 4.9 1,316 3.2
The Company's working capital at the end of the first
quarter of 1997 was $41,279,008, which is an increase of
$1,370,169 or 3% from the end of the 1996 fiscal year. Factors
contributing to the increase in working capital were the Com-
pany's profitable first quarter.
The Company's investment in Property and Equipment (Less
Accumulated Depreciation) as of the end of the first quarter of
1997 stood at $201,093,034. This figure represents an increase
from December 31, 1996, of $1,479,115 or 1%, and reflects the
Company's ongoing capital expansion program. Funding for the
Company's capital expansion program will be accomplished through
the use of cash generated from current operating and investment
activities, supplemented when necessary by short or long-term
financing.
Results for the first quarter of 1997 were positively
impacted by factors that included mild winter weather in the
northeastern United States and a robust national economy. In
1997, the winter weather in New England and the Middle Atlantic
states was remarkably mild. New Penn was able to improve its
operating ratio from the 83.3 for the first quarter of 1996 to
80.4 for the first quarter of 1997, while also enjoying substan-
tially higher revenue. New Penn anticipates acquiring $6 million
of new equipment in 1997. Terminal expansion is slated for
Cranbury and Cinnaminson, New Jersey, and in Rochester, Albany,
Syracuse and Buffalo, New York. The Arnold Transportation
trucking operations have made progress in combining the truckload
divisions to create a core carrier. The truckload divisions are
expected to improve in efficiency and marketing as a result of
combining operations. The Arnold Logistics Division of Arnold
Transportation enjoyed an improved first quarter of 1997. The
warehouse in Fort Worth, Texas, is now operating profitably.
Company management remains focused on improving operating
efficiencies while at the same time seeking growth opportunities
by, among other things, offering expanded trucking and ware-
housing related services to meet the needs of existing and
prospective customers. Management will continue to seek oppor-
tunities for profitable expansion of the Company.
At the Annual Meeting, held May 7, 1997, stockholders
re-elected Kenneth F. Leedy, Heath L. Allen and Carlton E.
Hughes to serve as members of the Board of Directors, each for
a two-year term. The Company also announced that the Board of
Directors declared the regular quarterly dividend of eleven cents
per share, payable June 4, 1997, to stockholders of record on
May 21, 1997.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) NONE APPLICABLE
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: May 23, 1997 By /s/ Heath L. Allen
Heath L. Allen, Secretary
Date: May 23, 1997 /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 THREE MONTHS ENDED MARCH 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 21,737,918
<SECURITIES> 26,617,818
<RECEIVABLES> 36,452,583
<ALLOWANCES> 2,065,694
<INVENTORY> 0
<CURRENT-ASSETS> 94,411,381
<PP&E> 329,321,123
<DEPRECIATION> 128,228,089
<TOTAL-ASSETS> 314,956,588
<CURRENT-LIABILITIES> 53,132,373
<BONDS> 0
0
0
<COMMON> 29,942,628
<OTHER-SE> 183,520,768
<TOTAL-LIABILITY-AND-EQUITY> 314,956,588
<SALES> 0
<TOTAL-REVENUES> 90,539,222
<CGS> 0
<TOTAL-COSTS> 78,991,269
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 303,245
<INTEREST-EXPENSE> 331,258
<INCOME-PRETAX> 11,432,016
<INCOME-TAX> 4,110,860
<INCOME-CONTINUING> 7,321,156
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,321,156
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
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