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, 1998.
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: 25,993,682 shares outstanding
as of May 8, 1998.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets - March 31, 1998
(Unaudited) and
December 31, 1997
Condensed Consolidated Statements of
Income (Three Month
Period - Unaudited) - March 31, 1998 and 1997
Condensed Consolidated Statements of
Cash Flows (Three Month
Period - Unaudited) - March 31, 1998 and 1997
Notes to Condensed Consolidated Financial Statements
ARNOLD INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1998 1997
ASSETS
Current Assets
Cash and Cash Equivalents 29,613,268 26,504,782
Marketable Securities 8,227,492 9,786,175
Accounts Receivable, Net 44,634,373 40 426,025
Deferred Income Taxes 9,866,714 10,498,070
Prepaid Expenses and Supplies 5,934,545 4,462,413
Refundable Income Taxes 0 577,498
Total Current Assets 98,276,392 92,254,963
Property and Equipment, at Cost 349,746,678 346,003,319
Less: Accumulated Depreciation 144,620,362 140,441,244
Total Property and Equipment 205,126,316 205,562,075
Other Assets
Goodwill, Net 8,410,865 8,493,581
Investments in Limited Partnerships 9,502,245 9,616,237
Other 1,138,856 1,113,560
Total Other Assets 19,051,966 19,223,378
TOTAL ASSETS 322,454,674 317,040,416
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes Payable 16,280,126 16,280,126
Accounts Payable 9,277,187 10,155,475
Income Taxes 2,457,243 0
Estimated Liability for Claims 5,334,406 6,452,754
Accrued Expenses - Other 15,454,732 13,445,250
Total Current Liabilities 48,803,694 46,333,605
Long-Term Liabilities
Estimated Liability for Claims 13,733,000 13,733,000
Deferred Income Taxes 35,420,695 35,683,538
Notes Payable 856,929 2,383,449
Other 1,691,468 1,653,868
Total Long-Term Liabilities 51,702,092 53,453,855
Stockholders' Equity
Common Stock 29,942,628 29,942,628
Paid-In Capital 619,216 481,849
Retained Earnings 212,984,213 208,617,019
Treasury Stock, at Cost (21,597,169) (21,788,540)
Total Stockholders' Equity 221,948,888 217,252,956
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 322,454,674 317,040,416
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,
1998 1997
Operating Revenues 96,001,963 90,539,222
Operating Expenses 84,469,936 78,991,269
Operating Income 11,532,027 11,547,953
Interest Expense (283,539) (331,258)
Other Income (Deductions) 113,296 215,321
Income Before Income Taxes 11,361,784 11,432,016
Income Taxes 4,135,387 4,110,860
Net Income 7,226,397 7,321,156
Other Comprehensive Income, Net of Tax 0 0
Net Income 7,226,397 7,321,156
Net Income per Common Share:
Basic .28 .27
Diluted .28 .27
Average Common Shares Outstanding:
Basic 25,957,797 26,668,089
Diluted 26,182,014 26,848,273
Dividends per Common Share .11 .11
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,
1998 1997
Operating Activities
Net Income 7,226,397 7,321,156
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 7,677,922 7,167,020
Provision for Deferred Taxes 368,513 (371,846)
Other (191,138) (196,773)
Changes in Operating Assets and
Liabilities:
(Increase) in Accounts Receivable (4,208,348) (3,701,512)
(Increase) in Prepaid Expenses
and Supplies (1,472,132) (127,994)
Increase in Accounts Payable
and Accrued Expenses 3,047,587 9,356,270
Other 37,600 43,800
Net Cash Provided by Operating
Activities 12,486,401 19,490,121
Investing Activities
Proceeds from Sale of Investment Securities 2,064,472 1,340,827
Purchase of Investment Securities (507,941) (6,070,094)
Proceeds from Disposition of Property
and Equipment 1,205,192 1,748,386
Purchase of Property and Equipment (8,059,157) (9,949,016)
Capital Contributions to Limited
Partnerships (1,526,520) (1,664,200)
Other (23,496) 142,045
Net Cash Used In Investing
Activities (6,847,450) (14,452,052)
Financing Activities
Cash Dividends Paid (2,859,203) (2,933,159)
Purchase of Treasury Stock 0 (140,250)
Other 328,738 68,955
Net Cash Used In Financing
Activities (2,530,465) (3,004,454)
Increase in Cash and Cash Equivalents 3,108,486 2,033,615
Cash and Cash Equivalents at Beginning
of Year 26,504,782 19,704,303
Cash and Cash Equivalents at End of Period 29,613,268 21,737,918
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest 283,538 331,257
Income Taxes 766,856 1,514,966
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,
1998 and 1997 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 1998 were $96,001,963, an
increase of $5,462,741 or 6% over Operating Revenues for 1997's first
quarter. For the same periods, Operating Expenses increased $5,478,667 or
6.9%; Income before Income Taxes decreased $70,232, a decrease of .6%, and Net
Income decreased $94,759, or 1.3% to $7,226,397. Earnings Per Share increased
to $.28 for the first quarter of 1998 from $.27 for the first quarter of 1997,
a 3.7% increase.
The Company's revenue figures for the first quarter of 1998 as compared
to the first quarter of 1997 are higher due primarily to increased business
volume at Arnold Transportation Services, Inc. ("Arnold Transportation"),
which experienced an 11% increase in revenue. Revenue figures for New Penn
Motor Express, Inc. ("New Penn") increased less significantly, by some 1.6%.
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,
1998 1997
Amount % Amount %
NEW PENN MOTOR EXPRESS
AND RELATED COMPANIES (LTL)
Operating Revenues 49,263 100.0 48,475 100.0
Operating Expenses 39,107 79.4 38,974 80.4
Operating Income 10,156 20.6 9,501 19.6
(Dollars in Thousands)
First Quarter Ended March 31,
1998 1997
Amount % Amount %
ARNOLD TRANSPORTATION
SERVICES (TL)
Operating Revenues 46,739 100.0 42,064 100.0
Operating Expenses 45,363 97.1 40,017 95.1
Operating Income 1,376 2.9 2,047 4.9
The Company's working capital at the end of the first quarter of 1998 was
$49,472,698, which is an increase of $3,551,340 or 7.7% from the end of the
1997 fiscal year. Factors contributing to the increase in working capital
were the Company's profitable first quarter.
The Company's investment in Property and Equipment (Less Accumulated
Depreciation) as of the end of the first quarter of 1998 stood at
$205,126,316. This figure represents a slight decrease from December 31,
1997, of $435,759. Funding for the Company's ongoing capital expansion
program is being 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 1998 were positively impacted by factors
that included mild winter weather in the northeastern United States and a
robust national economy. In 1998, 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 80.4 for the first quarter of 1997 to 79.4 for the
first quarter of 1998, while also enjoying higher revenue. During 1998, New
Penn anticipates acquiring $8 million of new equipment and expending $14
million for new real estate and improvements to existing properties. Terminal
expansion is continuing in Cranbury and Cinnaminson, New Jersey, in Rochester,
Albany, Syracuse and Buffalo, New York, and in Billerica, Massachusetts.
Arnold Transportation is making substantial progress in combining the
previous truckload divisions into a core carrier. The truckload operations
are expected to improve in efficiency and marketing as a result of the
combined operations. During 1998, Arnold Transportation's capital
expenditures will approximate $16 million for new equipment and $8 million
for real estate. The Arnold Logistics Division of Arnold Transportation
enjoyed an improved first quarter of 1998. The warehouse in Fort Worth,
Texas, continues to operate 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 warehousing related services to meet the needs
of existing and prospective customers. Management will continue to seek
opportunities for profitable expansion of the Company.
At the Annual Meeting, held May 6, 1998, stockholders re-elected
Edward H. Arnold, Ronald E. Walborn and Arthur L. Peterson 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, 1998, to stockholders of record
on May 21, 1998.
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 15, 1998 By /s/ Heath L. Allen
Heath L. Allen, Secretary
Date: May 15, 1998 By /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, 1998, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 29,613,268
<SECURITIES> 8,227,492
<RECEIVABLES> 46,169,264
<ALLOWANCES> 1,668,749
<INVENTORY> 0
<CURRENT-ASSETS> 98,276,392
<PP&E> 349,746,678
<DEPRECIATION> 144,620,362
<TOTAL-ASSETS> 322,454,674
<CURRENT-LIABILITIES> 48,803,694
<BONDS> 0
0
0
<COMMON> 29,942,628
<OTHER-SE> 192,006,260
<TOTAL-LIABILITY-AND-EQUITY> 322,454,674
<SALES> 0
<TOTAL-REVENUES> 96,001,963
<CGS> 0
<TOTAL-COSTS> 84,469,936
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 287,250
<INTEREST-EXPENSE> 283,539
<INCOME-PRETAX> 11,361,784
<INCOME-TAX> 4,135,387
<INCOME-CONTINUING> 7,226,397
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,226,397
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
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