ARNOLD INDUSTRIES, INC.
AND SUBSIDIARIES
625 SOUTH FIFTH AVENUE
P. O. BOX 210
LEBANON, PENNSYLVANIA 17042-0210
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, MAY 3, 2000
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 3, 2000, at 10:00 o'clock a.m., prevailing time, for the following
purposes:
(1) To elect three (3) directors to serve until the Annual Meeting of
Shareholders in 2002;
(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 24, 2000,
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 1999 is enclosed herewith.
By Order of the Board of Directors,
HEATH L. ALLEN
Secretary
Lebanon, Pennsylvania
March 30, 2000
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.
<PAGE>
ARNOLD INDUSTRIES, INC.
625 South Fifth Avenue
P.O. Box 210
Lebanon, Pennsylvania 17042-0210
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 3, 2000
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 3, 2000, at 10:00 a.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 31, 2000.
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 1999, 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 24, 2000,
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 24, 2000, there were 24,581,626
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.
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS, OFFICERS AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of March 6, 2000
(unless otherwise noted), with regard to persons with beneficial ownership of
five percent (5%) or more of Arnold Industries' outstanding stock:
<TABLE>
<CAPTION>
Title of Name and Address of Beneficially Percent of
Class Beneficial Owner Owned Class
<S> <C> <C> <C>
Common Stock Edward H. Arnold
Lebanon, PA 4,331,846 <FN1> 17.15%
Common Stock FMR Corp.
Boston, MA 1,494,200 <FN2> 6.07%
<FN>
<FN1> The shares shown include 175,000 non-qualified stock options held by Mr.
Arnold.
<FN2> Based on information supplied pursuant to Form 13G for the year ended
12/31/99, management is advised that Edward C. Johnson 3rd and Abigail P.
Johnson, husband and wife, and other Johnson family members may be deemed,
under the Investment Company Act of 1940, to form a controlling group with
respect to FMR Corp. Neither FMR Corp. nor Edward C. Johnson 3rd, Chairman of
FMR Corp., has the sole power to vote or direct the voting of the shares
beneficially owned by FMR Corp. Said power resides with the Board of Trustees
of various investment funds controlled by FMR Corp., and FMR Corp. carries out
the voting of the shares pursuant to written guidelines provided by the funds'
Boards of Trustees.
</FN>
</TABLE>
The following table sets forth certain information as of March 1, 2000,
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:
<TABLE>
<CAPTION>
Amount Percent
Title of Name and Address Beneficially of
Class of Beneficial Owner Owned Class
<S> <C> <C> <C>
Common Stock E.H. Arnold 4,331,846 <FN1> 17.15%
Common Stock Kenneth F. Leedy 417,100 <FN2> 1.65%
Common Stock Heath L. Allen 281,070 <FN3> 1.11%
Common Stock Ronald E. Walborn 420,840 <FN4> 1.67%
Common Stock Arthur L. Peterson 6,300 *
Common Stock John B. Warden III 10,000 <FN5> *
Common Stock Donald G. Johnson 94,992 <FN6> *
Common Stock Directors and
Officers as a Group
(7 in number) 5,562,148 <FN7> 22.02%
* less than 1.0%
<FN>
<FN1> See Note (1) of the immediately preceding table.
<FN2> The shares shown include 221,200 shares covered by incentive and
non-qualified stock option(s).
<FN3> The shares shown include 90,000 shares covered by incentive and
non-qualified stock option(s) and 109,870 shares held jointly by Mr. Allen and
his spouse.
<FN4> The shares shown include 108,400 shares covered by incentive and
non-qualified stock option(s) and 6,140 shares held for Mr. Walborn's
segregated account of Walborn Shambach Associates Profit Sharing Trust.
<FN5> The shares shown include 4,000 shares covered by non-qualified stock
option(s), and 4,000 shares held in various trusts of which Mr. Warden is both
a trustee and a partial beneficiary.
<FN6> The shares shown include 85,000 shares covered by incentive stock
options.
<FN7> 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.
</FN>
</TABLE>
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 2002 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 2001 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
2002 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 1999, met on six separate occasions.
TO BE ELECTED FOR A TWO-YEAR TERM
EDWARD H. ARNOLD: 60, Director since 1969
President and Chairman of the Board (1982 to present) of Arnold Industries;
President (1974 to 1997) and Treasurer (1974 to 1982) of New Penn.
RONALD E. WALBORN: 63, Director since 1972
President and Treasurer of Walborn Shambach Associates (Accountants); CFO
(1997 to present); Treasurer (1982 to present) of Arnold Industries; Treasurer
(1982 to 1997) and Assistant Treasurer (1980 to 1982) of New Penn; Secretary
and Treasurer of Arnold Transportation Services, Inc. (1997 to present).
ARTHUR L. PETERSON: 73, Director since 1988
Scott Professor of Leadership Studies, Rocky Mountain College, Billings,
Montana (1998 to present); President of Center for the Study of the
Presidency, New York, New York (1997 to 1998); Executive Director of the
Florida Association of Colleges and Universities (1994 to 1997); 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: 72, Director since 1972
Partner of Keefer Wood Allen & Rahal, LLP (Attorneys); Secretary (1982 to
present) of Arnold Industries; Secretary (1972 to present) of New Penn.
KENNETH F. LEEDY: 58, Director since 1980
Executive Vice President (1986 to 1996) and Vice President- Operations (1982
to 1986) of Arnold Industries; President (1996 to present), Executive Vice
President (1983 to 1996) and Vice President-Operations (1975 to 1983) of New
Penn.
JOHN B. WARDEN III: 41, Director since 1999
President of Warden Asphalt Company (1988 to present); Board Chairman and CEO
of Erie Enterprises, Inc. (1997 to present); Financial Analyst with Duke Power
Company (1983 to 1985).
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 Arthur L. Peterson (who is
Chairman), and Heath L. Allen and John B. Warden III. The Audit Committee met
once in 1999.
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 Arthur L. Peterson and John B. Warden III. The Compensation
Committee met one time in 1999. 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 CFO, Treasurer and Director for the Company, have been
receiving a flat fee of $10,000 for their officer and director services.
During 1999 and prior years, Directors who were not also officers of the
Company were compensated at $5,000 per year and a fee of $500 for each meeting
of the Board of Directors attended, together with the expenses of attendance.
For the year 2000 and subsequent years, directors who are not officers of the
Company will be paid $10,000 per year and a fee of $1,000 for each meeting,
together with 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 arrangements 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: 60,
President and Chairman of the Board (1982 to present) of Arnold Industries;
President (1974 to 1998) and Treasurer (1974 to 1982) of New Penn.
KENNETH F. LEEDY: 58,
Executive Vice President (1986 to 1996) and Vice President-Operations (1982 to
1986) of Arnold Industries; President (1996 to present), Executive Vice
President (1983 to 1996) and Vice President-Operations (1975 to 1983) of New
Penn.
DONALD G. JOHNSON: 45,
Senior Vice President (1998 to present) of Arnold Industries, Inc.
HEATH L. ALLEN: 72,
Partner of Keefer Wood Allen & Rahal, LLP (Attorneys); Secretary (1982 to
present) of Arnold Industries; Secretary (1972 to present) of New Penn.
RONALD E. WALBORN: 63,
President and Treasurer of Walborn Shambach Associates (Accountants); CFO
(1998 to present); Treasurer (1982 to present) of Arnold Industries; Treasurer
(1982 to 1998) and Assistant Treasurer (1980 to 1982) of New Penn.; Secretary
and Treasurer of Arnold Transportation Services, Inc. (1998 to present).
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, 1999, to or for the chief executive officer and each of the
executive officers of the Company whose cash compensation exceeded $100,000:
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
Other Awards All other
annual Restricted compensa-
Name and compen- Stock Options/ tion <FN>
Principal Position Year Salary ($) Bonus($) sation(s) Awards SARs (#)
<S> <C> <C> <C> <C> <C> <C> <C>
EDWARD H. ARNOLD 1999 187,200 500,000 - - - 15,570
President and Chairman 1998 187,200 500,000 - - - 15,780
of the Board 1997 190,804 500,000 - - 175,000 15,930
KENNETH F. LEEDY 1999 166,400 400,000 - - - 15,570
Executive Vice President 1998 166,400 400,000 - - - 15,780
1997 169,600 400,000 - - 100,000 15,930
DONALD G. JOHNSON 1999 112,240 75,151 - - 10,000 15,570
Senior Vice President 1998 108,890 71,276 - - 6,000 15,780
1997 108,091 82,341 - - 25,000 15,930
<FN> 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.
</TABLE>
Stock Options. The Arnold Industries, Inc. 1997 Stock Option Plan (the
"1997 Plan"), is designed to promote continuity of management and to increase
incentive for those primarily responsible for the Company's long-range
financial success. The aggregate number of shares for which options may be
granted under the 1997 Plan is 2,000,000. As of December 31, 1999, options for
1,108,200 shares were outstanding to approximately 335 employees under the
1997 Stock Option Plan. Options for 688,300 shares remain outstanding under
the 1987 Stock Option Plan and are held by approximately 115 employees and/or
consultants.
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. Both incentive stock options and nonqualified stock
options must be granted at no less than the fair market value of the stock on
the date under the 1997 Plan. 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.
Stock options were granted to and exercised by several of the Company's
executive officers in fiscal year 1999. The tables on the next page show
information regarding stock options held by the Company's executive officers.
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Value of
unexercised unexercised
Shares Value Options/SARs in-the-money
Name acquired on realized at FY-End (#) Options/SARs
exercise (#) ($) exercisable/ at FY-End ($)
unexercisable exercisable/
<FN> unexercisable
<S> <C> <C> <C> <C>
EDWARD H. ARNOLD - - 175,000/0 -
KENNETH F. LEEDY 30,000 146,250 202,454/18,746 321,359/0
HEATH L. ALLEN - - 100,444/7,956 236,799/17,901
RONALD E. WALBORN - - 95,057/13,343 224,678/30,022
DONALD G. JOHNSON 1,600 11,000 22,302/65,298 14,834/116,986
<FN> Adjusted for stock splits.
</TABLE>
<PAGE>
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 71 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 $116,909 for 1999.
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 5 non-directors; category
(3) covers 2 other individuals; and categories (4) through (6) cover 57
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; Arkansas Best Corporation; Arnold Industries, Inc.;
Boyd Bros. Transport, Inc.; Cannon Express Inc. CL A; CNF Transportation,
Inc.; Consol Delivery & Logistics; Consolidated Freight Corporation; Covenant
Transport CL A; Forward Air Corporation; Frozen Food Express Industries; FRP
Properties, Inc.; Heartland Express, Inc.; Intrenet, Inc.; J.B. Hunt Transport
Services; Kenan Transport Company; KLLM Transport Services, Inc.; Knight
Transportation; Landair Corporation; Landstar System, Inc.; Lynch Corporation;
M.S. Carriers, Inc.; Marten Transport, Ltd.; Matlack Systems, Inc.; Morgan
Group, Inc. CL A; Motor Cargo Industries; Old Dominion Freight Line; OTR
Express, Inc.; PAM Transportation Services; Roadway Express, Inc.; Simon
Transport Services CLA; Smithway Motor Xpress A; Swift Transportation Co.;
Trailer Bridge, Inc.; Transfinancial Holdings, Inc.; Transport Corporation of
America; U.S. Xpress Enterprises CL A; USA Truck, Inc.; USFreightways
Corporation; Vitran Corporation; Werner Enterprises, Inc.; and Yellow
Corporation. Cumulative returns for the Company and both indices were
calculated assuming dividend reinvestment.
<TABLE>
<CAPTION>
GRAPH AND POINT DATA
5-YEAR CUMULATIVE TOTAL RETURN AMONG ARNOLD INDUSTRIES, INC.,
NASDAQ MARKET INDEX AND SIC CODE INDEX
------------------------FISCAL YEAR ENDING-------------
COMPANY 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
ARNOLD IND INC 100.00 85.80 80.67 89.96 86.61 77.92
TRUCKING, EXCEPT LOCAL 100.00 84.78 80.08 115.71 111.33 107.57
NASDAQ MARKET INDEX 100.00 129.71 161.18 186.16 278.08 490.46
<FN> ASSUMES $100 INVESTED ON JAN. 1, 1994
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1999
</TABLE>
<PAGE>
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 Arthur L. Peterson and John B.
Warden III, 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 1999 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 1997 Stock
Option Plan. The Company also maintains a supplemental retirement plan for
some 71 key employees (including its executive officers) to augment its
profit-sharing/retirement plan, generally available to all eligible
employees. Information on the Company's 1987 and 1997 Stock Option Plans can
be found on page 6 of the proxy statement. Further information on the
supplemental retirement plan and its benefits to the existing officers is
found on page 7 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 1999, the Company
utilized annual salary, annual cash bonus awards and 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 1999's determinations.
Application of the foregoing criteria to Edward H. Arnold, the Company's
chief executive officer, supports placing Mr. Arnold's total compensation
package in the median range of compensation in comparison to amounts paid to
his counterparts in the trucking industry. Because the Company generated net
earnings increases in 1999 as compared to 1998, the Committee believes that
Mr. Arnold's compensation package for 1999 appropriately remained steady in
relation to the prior year's total compensation. 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 in 1999. New Penn and Arnold Logistics are performing to
management's expectations, Arnold Transportation's performance did not improve
during the year, but has been positioned to improve its performance in 2000
and beyond. Accordingly, Mr. Arnold's total compensation package was
unchanged from the 1998 compensation amount.
The Compensation Committee
Arthur L. Peterson
John B. Warden III
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Dr. Peterson and Mr. Warden 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, LLP, of which Heath L. Allen, a
director of the Company, is a partner, received legal fees of approximately
$295,923 for services performed in 1999 for the Company and its subsidiaries.
It is anticipated that the Company and its subsidiaries will make payments to
Keefer Wood Allen & Rahal, LLP, through 2000 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 $499,463 for
services performed in 1999 for the Company and its subsidiaries. It is
anticipated that the Company and its subsidiaries will make payments to
Walborn Shambach Associates through 2000 for management and accounting
services to be performed.
INDEPENDENT ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP 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 nine fiscal years.
A representative of PricewaterhouseCoopers LLP 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 PricewaterhouseCoopers LLP to
serve as independent auditor for its 2000 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.
<PAGE>
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
The 2001 Annual Meeting of Shareholders will be held on or about May 2,
2001. 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 210, Lebanon, PA,
17042-0210, Attn: Corporate Secretary, not later than December 31, 2000, 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.
FORWARD-LOOKING STATEMENTS - RISK FACTORS
The nature of the Company's operations subject it to changing economic,
competitive, regulatory and technological conditions, risks and
uncertainties. In accordance with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company provides the following
cautionary remarks regarding important factors which, among others, could
cause future results to differ materially from the forward-looking statements,
expectations and assumptions expressed or implied herein. Those include
statements about our management confidence and strategies for performance;
expectations for new and existing technologies and opportunities; and
expectations for market segment and industry growth.
These factors include, but are not limited to: (1) changes in the
business environment in which the Company operates, including licensing
restrictions, interest rates and capital costs; (2) changes in governmental
laws and regulations, including taxes; (3) market and competitive changes,
including market demand and acceptance for new services and technologies; and
(4) other risk factors listed from time to time in the Company's SEC reports.
The Company does not intend to update this information and disclaims any legal
liability to the contrary.
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 30, 2000
<PAGE>
REVOCABLE PROXY
ARNOLD INDUSTRIES, INC.
X PLEASE MARK VOTES
AS IN THIS EXAMPLE
ANNUAL MEETING OF SHAREHOLDERS
May 3, 2000
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders of Arnold Industries, Inc., to be held on Wednesday,
May 3, 2000, at 10:00 a.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 2000 Annual Meeting of Shareholders or
at any adjournment or adjournments thereof, on any business that may properly
come before such meeting, including taking action on Items 1 and 2 set forth
in the next column.
With- For All
1. Election of Directors For hold Except
of the Company: _____ _____ _____
Edward H. Arnold, Ronald E. Walborn, 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 of For Against Abstain
their discretion in such _____ _____ _____
other business as may come
before the meeting or any
adjournments 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.
<PAGE>
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
