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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from ____________ to ________________
Commission File No. 0-21922
ARROW TRANSPORTATION CO.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Oregon 93-1103182
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10145 N. Portland Road, Portland, Oregon 97203
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (503) 286-3661
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 ( )
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at June 30, 1996
- -------------------------- ----------------------------
Common stock, no par value 4,161,141 Shares
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ARROW TRANSPORTATION CO. AND SUBSIDIARY
Form 10-Q -- For the Quarter Ended June 30, 1996
INDEX
Part I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
a) Consolidated Balance Sheets -- June 30, 1996 and
December 31, 1995 3
b) Consolidated Statements of Operations -- Three and
Six Months Ended June 30, 1996 and June 30, 1995 4
c) Consolidated Statements of Shareholders' Equity --
December 31, 1995 and June 30, 1996 5
d) Consolidated Statements of Cash Flows -- Six Months
Ended June 30, 1996 and June 30, 1995 6
e) Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
ARROW TRANSPORTATION CO. AND SUBSIDIARY
Consolidated Balance Sheets
(Amounts in thousands)
June 30,
1996 December 31,
ASSETS (Unaudited) 1995
----------- ------------
Cash $ 31 $ 33
Accounts receivable, net 3,612 2,976
Notes and other receivables 57 69
Repair parts and supplies 579 585
Prepaid expenses and deposits 517 736
Prepaid tires 471 630
Assets held for sale 369 785
Deferred income taxes 367 367
------- -------
Total current assets 6,003 6,181
Property and equipment, net 13,080 14,218
Assets held for sale 80 317
Other assets 113 131
------- -------
TOTAL ASSETS $19,276 $20,847
------- -------
------- -------
Accounts payable $ 1,772 $ 1,350
Accrued expenses 1,555 1,684
Current portion of long-term debt
and capital leases 3,011 3,338
------- -------
Total current liabilities 6,338 6,372
Line of credit 2,596 1,825
Long-term debt 4,447 4,959
Obligations under capital leases 3,590 4,480
Insurance reserves, claims and contingencies 25 25
Deferred income taxes 174 627
------- -------
TOTAL LIABILITIES 17,170 18,288
------- -------
Shareholders' equity:
Preferred stock - $5.00 par value:
authorized 500,000 shares; issued
and outstanding 50,000 shares 250 -
Common stock - no par value: authorized
10,000,000 shares; issued and outstanding
4,161,141 shares in 1996 and
4,140,859 shares in 1995 4,887 4,868
Accumulated deficit (3,031) (2,309)
------- -------
TOTAL SHAREHOLDERS' EQUITY 2,106 2,559
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $19,276 $20,847
------- -------
------- -------
See notes to consolidated financial statements.
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ARROW TRANSPORTATION CO. AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
(Amounts in thousands, except per share data)
For the Three For the Six
Months Ended Months Ended
------------------ -------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
------- ------- -------- -------
OPERATING REVENUES $7,419 $8,414 $14,158 $16,326
------- ------- -------- -------
OPERATING EXPENSES
Compensation 4,173 4,265 8,140 8,574
Supplies and maintenance 831 1,011 1,647 1,990
Fuel and fuel taxes 692 642 1,293 1,252
Depreciation and amortization 616 701 1,229 1,391
Taxes and licenses 274 338 527 682
Insurance and claims 285 224 489 398
Selling and administration 379 359 683 776
Rent and purchased transportation 344 375 606 675
Communication and utilities 123 165 267 284
Gain on sale of revenue equipment - (20) - (20)
------- ------- -------- -------
Total operating expenses 7,717 8,060 14,881 16,002
------- ------- -------- -------
OPERATING INCOME (LOSS) (298) 354 (723) 324
------- ------- -------- -------
OTHER (INCOME) EXPENSE:
Interest expense 280 326 582 614
Other (income) expense (33) (37) (130) (48)
------- ------- -------- -------
Total other expense 247 289 452 566
------- ------- -------- -------
INCOME (LOSS) BEFORE INCOME TAXES (545) 65 (1,175) (242)
------- ------- -------- -------
INCOME TAX EXPENSE (BENEFIT) (210) 26 (453) (97)
------- ------- -------- -------
NET INCOME (LOSS) $ (335) $ 39 $ (722) $ (145)
------- ------- -------- -------
------- ------- -------- -------
NET INCOME (LOSS) PER COMMON
AND EQUIVALENT SHARE $ (0.08) $ .01 $ (0.17) $ (.03)
------- ------- -------- -------
------- ------- -------- -------
SHARES USED IN PER
SHARE CALCULATION 4,161 4,185 4,154 4,181
------- ------- -------- -------
------- ------- -------- -------
See notes to consolidated financial statements.
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ARROW TRANSPORTATION CO. AND SUBSIDIARY
Consolidated Statement of Shareholders' Equity
(Unaudited)
(Amounts in thousands)
Total
Preferred Stock Common Stock Accumulated Shareholders'
Shares Amount Shares Amount Deficit Equity
------ ------ ------ ------ ------- ------
Balance, December 31, 1995 - - 4,141 $4,868 $(2,309) $2,559
Net loss (722) (722)
Issuance of Preferred Stock 50 $ 250 250
Issuance of stock for
Employee Stock
Purchase Plan - - 20 19 - 19
------ ------ ------ ------ ------- ------
Balance, June 30, 1996 50 $ 250 4,161 $4,887 $(3,031) $2,106
------ ------ ------ ------ ------- ------
See notes to consolidated financial statements.
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ARROW TRANSPORTATION CO. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
Six Months Ended
----------------------------
June 30, June 30,
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995
-------- --------
Net loss $ (722) $ (145)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,246 1,399
Deferred income taxes (453) (97)
Gain on sale of property and equipment - (33)
Changes in operating assets and liabilities:
Receivables (624) 694
Repair parts and supplies 6 100
Prepaid expenses and deposits 219 245
Prepaid tires 159 14
Accounts payable and accrued expenses 21 (542)
Insurance reserves and claims - (20)
Other (32) -
-------- --------
Net cash provided by (used in)
operating activities (180) 1,615
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (68) (446)
Proceeds from sale of assets
held for sale and equipment 662 -
-------- --------
Net cash provided by (used in)
investing activities 594 (446)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in bank overdrafts 273 (127)
Net borrowing on line of credit 771 603
Proceeds from issuance of long-term debt - 596
Repayments:
Notes payable to bank - (995)
Long-term debt (696) (553)
Capital lease obligations (1,033) (749)
Issuance of preferred stock 250 -
Issuance of common stock 19 58
-------- --------
Net cash used in
financing activities (416) (1,167)
-------- --------
NET INCREASE (DECREASE) IN CASH (2) 2
CASH AT BEGINNING OF PERIOD 33 $ 32
-------- --------
CASH AT END OF PERIOD $ 31 $ 34
-------- --------
-------- --------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
-Increase in capital lease obligations
and acquisition of equipment - $ 691
-Increase in debt obligations
and acquisition of equipment - 637
-Increase in notes receivable upon
sale of land (cost of land was $187) - 200
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
-Cash paid during the six months
for interest $ 520 $ 635
See notes to consolidated financial statements.
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ARROW TRANSPORTATION CO. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
(1) FINANCIAL STATEMENTS:
The results of operations for the interim periods shown in this
report are not necessarily indicative of results to be expected
for the fiscal year. The accompanying unaudited consolidated
financial statements reflect in the opinion of management all
adjustments considered necessary for a fair presentation as of
June 30, 1996.
(2) PROPERTY AND EQUIPMENT:
As part of the Company's profit improvement plan, the Company
removed from its fleet and placed for sale 43 power units. These
power units were reclassified to current assets as Assets held
for sale at December 31, 1995. As of June 30, 1996 the Company
had 6 units remaining to be sold.
(3) CREDIT ARRANGEMENT:
In November 1995 the Company refinanced its combined credit
arrangement with another lender. The new arrangement provides
for a $4,000,000 line of credit at an interest rate of 1.5% over
the lender's reference rate (8.25% at June 30, 1996). Maximum
borrowing under the line is limited to the lesser of $4,000,000
or 85% of eligible accounts receivable which were $2,918,000 at
June 30, 1996. The line of credit matures in November 1997.
The combined credit arrangement includes a $2,000,000 revolving
to term loan facility to allow for the purchase of new and used
revenue equipment on a revolving basis, converting to term loans.
Any outstanding balance on this facility after six months from
the initial funding will be converted to a term note with a
maturity of three years from the date of conversion. Borrowings
under the revolving to term loan will bear interest at 1.5% over
the lender's reference rate. There was no balance outstanding
under the revolving to term loan facility at June 30, 1996.
The combined credit arrangement includes various restrictive
covenants including, a prohibition on dividends and minimum
adjusted net worth. At June 30, 1996, the Company was in
compliance with all of the debt covenants relating to this credit
arrangement.
(4) SHAREHOLDERS' EQUITY
In May 1996, the Company issued 50,000 unregistered
shares of Class A convertible preferred stock with a par value
of $5.00 per share under a Preferred Stock Purchase and Option
Agreement ( "the Agreement" ). The Agreement includes an option
to purchase an additional 50,000 shares of Class A
convertible preferred stock at an exercise price of $5.00 per
share. The option expires on June 30, 2001. Each share of
preferred stock is convertible at any time at the option of the
holder, into ten shares of the Company's common stock. The
preferred stock bears a 7% annual dividend, payable each May at
the Company's option either in cash or in additional shares of
preferred stock. The preferred stock will be entitled to vote on an
as-converted basis and to preference on any liquidation of the Company.
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(5) CONTINGENCIES, CLAIMS AND INSURANCE RESERVES:
The Company is party to four actual or pending proceedings, the
materiality of which the Company is presently unable to assess:
(a) The Washington Department of Ecology ("Ecology") has served
an administrative enforcement order on the Company and 16 other
companies associated with the Yakima Railroad Area ("YRRA") in
Yakima, Washington. Ecology alleges in the order that all 17 of
the companies have some connection with the presence of the
chemical Perchloroethylene ("PCE") in the ground water underlying
the YRRA. The Company used carbon filtration to treat wash water
from its trucks.
The spent carbon was taken by an independent transporter to the
Cameron Yakima facility located within the YRRA. This
transporter directly contracted with the Cameron-Yakima recycling
facility. Ecology claims that Cameron-Yakima is a source of PCE
contamination, along with other facilities located within the
YRRA. The principal parties with respect to the enforcement
order are Ecology, the Company and the 16 other companies that
were served with the order. There are many other parties, not
named on the order, who used Cameron-Yakima and are potentially
liable for contamination at the site. The order directs the
respondent parties to develop and implement a remedial
investigation/feasibility study ("RI/FS") of the YRRA to identify
the nature and extent of PCE contamination in the ground water.
The order further directs the respondents to provide bottled
drinking water to certain households within the YRRA, if PCE is
detected in sampled domestic tap water. It is possible that,
upon completion of the RI/FS, Ecology could order the Company and
other parties to take further action, including remediation. A
number of the parties have tentatively agreed to settle Ecology's
claims on a basis that is not acceptable to the Company. If the
settlement is completed, and the Company is unable to reach separate
settlement, the Company may be potentially liable for remediation
costs that are not recovered from the settling parties and for
contribution. Because of the preliminary status of this investigation,
the Company is unable to determine or quantify in any meaningful
way its potential liability, and therefore, cannot determine whether
it will have a material effect on the Company's financial
condition, results of operations, or cash flows.
(b) The Company was added as a defendant to a case entitled
DEPARTMENT OF LABOR & INDUSTRIES VS. PUGET SOUND TRUCKLINES, ET
AL., in King County, Washington Superior Court, that alleges the
Company, among others, has violated the overtime pay provisions
of Washington state law. Puget Sound Truck Lines reached an out
of court settlement with the Department of Labor and Industries.
The case is now titled REX W. ALLEN ET AL VS. ARROW
TRANSPORTATION COMPANY. The action, as to the Company, now
involves 30 current and former Company employees, as eight
plaintiffs recently reached a settlement with the Company. The
remaining plaintiffs seek unspecified overtime pay, interest and
attorney's fees.
The plaintiff recently indicated that it intended to amend its
claim against the Company to include the Company's payment
practices since 1991. If permitted and proven, this expansion
would have the effect of increasing the Company's potential
liability to the plaintiffs, and might affect the Company's
employment practices in the State of Washington. The Company is
unable at this time, however, to determine what effect, if
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any, this litigation will have on the Company's financial condition,
results of operations, or cash flows.
(c) The Washington Department of Natural Resources filed an
action against the Company and several other parties in November
1995. It seeks to recover cleanup costs totaling $389,000 from
Arrow and the other parties, who all at various times leased a
site in Seattle which was later acquired by the Department.
Arrow leased a portion of the site for five years. Settlement
discussions are under way but have not been concluded. In light
of the uncertainties inherent in this kind of action, the company
is unable to determine at this time whether the action will have
a material effect on the company's financial condition, results
of operations, or cash flows.
(d) An action was filed against the Company on May 7, 1996, by
Sal N. Cincotta in the United States District Court for the
District of Oregon alleging breach of contract and unpaid wages.
Mr. Cincotta was previously employed by the Company as its
President and Chief Executive Officer, and was a director of the
Company prior to his resignation on May 3, 1996. In his
complaint, Mr. Cincotta seeks damages in an unspecified amount in
excess of $50,000. Because of the recent nature of this action,
the Company cannot determine whether costs of defense or the
probable result of this litigation will have a material effect on
the Company's financial condition, results of operations, or cash
flows.
The Company is a defendant in various claims and other legal
proceedings arising in the ordinary course of business. While
resolution of these matters cannot be predicted with certainty,
management believes that the ultimate outcome of such litigation
will not have a materially adverse effect on the Company's
financial position, results of operations or cash flows. In
addition to legal contingencies, management estimates the
Company's liability for property, freight and workers'
compensation claims based upon prior claim experience and records
such liabilities in its financial statements.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The Company made significant changes during the first half of
1996 and implemented a profit improvement plan. The profit
improvement plan, which was implemented during the first half of
1996, included management changes, corporate downsizing, terminal
closures, fleet downsizing, strict spending controls, a
refocussed marketing effort and the installation of an integrated
total quality management ("TQM") program. The plan was
structured to improve customer satisfaction and to achieve
improvement in the Company's operations. The implementation of
the profit improvement plan has been well received by the
Company's associates and customers.
Although customer reaction to the changes at Arrow have been
positive, this does not, however, translate into new and
increased business volume or improvements in operating costs
immediately. The rebuilding process will take time. The Company
has taken steps to reduce operating costs, but it's leverage
position requires business volume to improve as well before
profitability will return. During the first half of 1996
business volume was below the levels we would have liked to seen.
During the first half of 1996 business volume was impacted by
severe winter weather conditions, industry overcapacity due to
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sluggish freight demand and sharply higher fuel prices,
especially on the west coast, our primary market.
These factors lead to a loss in the first half of 1996.
Competition in our industry remains intense, with experts not
predicting material improvement in freight demand to materialize
during 1996. Arrow's focus in 1996 will continue to be on its
core western market where the Company believes it has a
competitive edge.
RESULTS OF OPERATIONS
Revenue for the quarter and six months ended June 30, 1996
decreased 11.8% and 13.3%, respectively, compared to the same
periods in 1995. The decrease in revenue for both the quarter
and six month period is primarily due to continued sluggish
freight demand and volume lost from terminal closures. The
decrease in revenue for the six months ended June 30, 1996 also
reflects the impact of severe winter weather conditions on
results for the first quarter of 1996. During the fourth quarter
of 1995 and the first quarter of 1996, the Company closed
terminal facilities in Baton Rouge, Louisiana; Chattanooga,
Tennessee; and Tulsa, Oklahoma. In July 1996, the Company closed
its terminal in Port Neches, Texas.
Shipments totaling 7,760 and 14,811 for the quarter and six
months ended June 30, 1996, respectively, represent decreases of
12.7% and 14.8% compared to the same periods in 1995. Average
miles per shipment increased to 446 and 445 for the quarter and
six months ended June 30, 1996, respectively, from 433 and 418
for the same periods in 1995. The increased miles per shipment
reflects the increased number of higher mileage shipments
associated with business generated in Texas. Revenue per mile
decreased to $2.10 for the quarter and six months ended June 30,
1996, compared to $2.16 and $2.21 for the same periods in 1995 as
a result of continued pricing pressure caused by weak levels of
freight demand and intense competition.
Operating expenses, as a percentage of revenue ("operating
ratio"), increased to 104.0% and 105.1% for the quarter and six
months ended June 30, 1996, respectively, compared to 95.8% and
98.0% for the same periods in 1995. Lower revenue levels, higher
operating costs associated with severe winter weather, higher
fuel prices and a continued low level of capacity utilization in
1996 were the principal reasons for the increase in the Company's
operating ratio.
Compensation expense increased as a percentage of revenue when
compared to the same periods in 1995. The increase was primarily
attributable to increases in union wage rates and costs
associated with union benefit plans.
Fuel and fuel tax expense increased as a percentage of revenue
when compared to the same periods in 1995. The increase was
primarily attributable to sharply higher fuel prices, especially
on the west coast, the Company's primary market.
Depreciation and amortization as well as taxes and license
expense has decreased in 1996 compared to the same periods in
1995. The decreases were associated primarily with the Company's
fleet downsizing program.
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Insurance and claims expense increased as a percentage of revenue
when compared to the same periods in 1995. The increase was
primarily attributable to higher liability insurance premiums.
Selling and administrative expenses increased slightly for the
second quarter of 1996 when compared to the same period in 1995,
but have decreased for the comparable six month periods. The
overall decrease primarily reflects nonrecurring 1995 costs
associated with the opening of new terminals, offset by costs
associated with the implementation of the Company's integrated
TQM program in 1996.
The estimated effective income tax rate was approximately 38% for
both the second quarter and six month period ending June 30,
1996, compared to a rate of approximately 40% for the same
periods in 1995. The Company reported a net loss of $335,000 or
$.08 per share for the second quarter of 1996, and a net loss of
$722,000 or $.17 per share for the six months ended June 30,
1996. The Company reported net income of $39,000 or $.01 per
share for the second quarter of 1995, and a net loss of $145,000
or $.03 per share for the six months ended June 30, 1995. The
factors that lead to the net losses for 1996 were the low level
of business volume and capacity utilization, higher operating
costs associated with this past winter's severe weather, and
higher fuel costs.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $180,000 for the six
months ended June 30, 1996. Net cash provided by investing
activities of $594,000 for the six months ended June 30, 1996
represented proceeds of $662,000 from the sale of assets held for
sale and equipment, offset by $68,000 of capital expenditures.
As part of the Company's profit improvement plan the Company
embarked on a fleet downsizing program in January 1996 with a
goal of selling 43 power units. The Company sold 37 power units
during the six months ended June 30, 1996.
In order to finance its operations and fund capital expenditures,
the Company has obtained loans from its principal lender and
loans, capital and operating leases from equipment manufacturers
and other asset based lenders/lessors for its revenue equipment.
The equipment loans/leases, which are of shorter duration (four
to five years for tractors, five to seven years for trailers)
than the economic useful lives of the equipment, result in
maturities that tend to create working capital deficits. At June
30, 1996, the Company had a working capital deficiency of
approximately $335,000. The recent losses by the Company have
increased its working capital deficit. The Company will continue
to obtain loans/leases with shorter maturities than the economic
useful lives of the financed equipment. This method of financing
can be expected to produce working capital deficits in the
future.
In November 1995 the Company refinanced its combined credit
arrangement with another lender. The new arrangement provides
for a $4,000,000 line of credit at an interest rate of 1.5% over
the lender's reference rate (8.25% at June 30, 1996). Maximum
borrowing under the line is limited to the lesser of $4,000,000
or 85% of eligible accounts receivable
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which were $2,918,000 at June 30, 1996. The line of credit matures in
November 1997.
The combined credit arrangement includes a $2,000,000 revolving
to term loan facility to allow for the purchase of new and used
revenue equipment on a revolving basis, converting to term loans.
Any outstanding balance on this facility after six months from
the initial funding will be converted to a term note with a
maturity of three years from the date of conversion. Borrowings
under the revolving to term loan will bear interest at 1.5% over
the lender's reference rate. There was no balance outstanding
under the revolving to term loan on facility at June 30, 1996.
The combined credit arrangement includes various restrictive
covenants including, a prohibition on dividends and minimum
adjusted net worth. At June 30, 1996, the Company was in
compliance with all of the debt covenants relating to this credit
arrangement.
Given the losses the Company experienced in 1995, the Company,
during the first quarter of 1996, implemented a downsizing and
restructuring plan aimed at reducing costs, improving operating
efficiency, profitability and cash flow. In the opinion of
management, provided the plan is successful and the Company's
results of operation improve, funds expected to be generated from
future operations, proceeds from its credit arrangements and the
Company's ability to rely upon secured borrowing/leases should
provide adequate liquidity.
To date in 1996, the profit improvement plan has yet to restore
the Company to a positive cash flow position. In the event the
Company's profit improvement plan is not successful and its
results of operations fail to demonstrate improvement, (due to
unanticipated expenses, delays, problems, difficulties or
otherwise) available cash and credit facilities may not prove to
be sufficient to fund operations. The Company would then be
required to seek additional debt or equity financing. Although
the Company obtained an additional $250,000 in capital during the
second quarter and is currently in the process of actively
seeking additional equity financing, other than the Company's
current credit arrangements, the Company has no current
arrangements with respect to other sources of additional
financing at this time. There can be no assurance that
additional financing, if required, will be available to the
Company on commercially reasonable terms, or at all.
SEASONALITY
Seasonality causes variations in the operations of the Company as
well as industry-wide. Demand for the Company's services is
generally highest during the summer and fall months.
Historically, expenses are greater as a percentage of revenues in
the winter months as operating efficiency is lower because of
lower utilization rates and weather related costs. The severe
winter weather during the first quarter of 1996 had an adverse
impact on the Company's results.
INFLATION
The effect of inflation on the Company has not been significant
during the last two years. However, an extended period of
inflation could be expected to have an impact on the Company's
earnings by causing interest rates, fuel and other operating
costs to increase.
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Unless freight rates could be increased on a timely basis, operating
results would be adversely affected. During the first quarter of 1996,
fuel prices increased significantly. Negotiations with customers and
market conditions did not allow the Company to institute a fuel
surcharge until May 1, 1996.
DEREGULATION
The Company has historically derived significant revenue from
intrastate shipments in the states of Oregon and Washington
pursuant to operating authorities granted, and tariff rates
approved, by the regulatory bodies in those states. Effective
January 1, 1995, the authority of those states to regulate entry
into those markets and the rates charged for such intrastate
shipments were terminated by federal statute. This termination
has resulted in increased competition and downward pressure on
rates charged by the Company in these markets.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings: Information regarding legal
proceedings is included in Note 5
paragraphs (a) thru (d) to the
financial statements on page 8 and
incorporated herein by reference.
Item 2. Changes in Securities Information regarding changes in
securities is included in Note 4 to
the financial statements on page 7
and incorporated herein by
reference.
Item 3. Defaults Upon Senior Securities NONE
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of shareholders on June 18, 1996 the
shareholders elected five directors, each for terms expiring at the
1997 Annual Meeting. Votes cast in relation to this matter are
summarized as follows:
AGAINST OR ABSTENTIONS AND
NAME FOR WITHHELD BROKER NON-VOTES
- --------------------- --------- ---------- -----------------
William R. Blosser 2,708,282 715,617 -0-
James N. Cutler, Jr. 2,706,204 717,695 -0-
Robert H. Cutler 2,703,204 720,695 -0-
Jerry A. Parsons 2,708,282 715,617 -0-
Thomas D. Taylor 2,706,762 717,137 -0-
The shareholders approved a proposal to amend the Arrow
Transportation Co. Employee Stock Purchase Plan to increase the
number of shares of common stock available for issuance under the
plan from 100,000 to 200,000. Votes cast in relation to this
matter are summarized as follows:
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Against or Abstentions and
For Withheld Broker Non-Votes
- --------- ---------- -----------------
2,650,594 766,105 7,200
The shareholders also ratified the appointment of Deloitte &
Touche LLP to serve as independent auditors to the Company for
the Year 1996. Votes cast in relation to this matter are
summarized as follows:
Against or Abstentions and
For Withheld Broker Non-Votes
- --------- ---------- -----------------
2,713,652 710,047 200
Item 5. Other Information NONE
Item 6. Exhibits and Reports on Form 8-K 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.
ARROW TRANSPORTATION CO.
(Registrant)
Dated: August 13, 1996 By: /s/ William J. Stanners, Jr.
- ---------------------- ---------------------------------
William J. Stanners, Jr.
Vice President and Chief Financial Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND IN
THE COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 31
<SECURITIES> 0
<RECEIVABLES> 3,707
<ALLOWANCES> 95
<INVENTORY> 579
<CURRENT-ASSETS> 6,003
<PP&E> 21,769
<DEPRECIATION> 8,689
<TOTAL-ASSETS> 19,276
<CURRENT-LIABILITIES> 6,338
<BONDS> 0
0
250
<COMMON> 4,887
<OTHER-SE> (3,031)
<TOTAL-LIABILITY-AND-EQUITY> 19,276
<SALES> 0
<TOTAL-REVENUES> 14,158
<CGS> 0
<TOTAL-COSTS> 14,881
<OTHER-EXPENSES> (130)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 582
<INCOME-PRETAX> (1,175)
<INCOME-TAX> (453)
<INCOME-CONTINUING> (722)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (722)
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> 0.00
</TABLE>
