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 2, 2001
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 2, 2001, 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 2003;
(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 19, 2001, 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 2000 is enclosed herewith.
By Order of the Board of Directors,
HEATH L. ALLEN
Secretary
Lebanon, Pennsylvania
March 29, 2001
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.
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 2, 2001
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 2, 2001, 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 29, 2001.
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 2000, 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 19, 2001, 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 19, 2001, there were 24,748,366 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.
SECURITY OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of March 19, 2001 (unless
otherwise noted), with regard to persons with beneficial ownership of five
percent (5%) or more of Arnold Industries' outstanding stock:
Name and Address of Beneficially Percent of
Title of Class Beneficial Owner Owned Class*
Common Stock Edward H. Arnold
Lebanon, PA 4,345,189 (1) 16.44%
*Class includes all issued and outstanding shares and all unexercised stock
options
_________________________
(1) The shares shown include 175,000 non-qualified stock options held by Mr.
Arnold.
The following table sets forth certain information as of March 19, 2001, 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:
Name and Address of Beneficially Percent of
Title of Class Beneficial Owner Owned Class*
Common Stock E.H. Arnold 4,345,189 (1) 16.44%
Common Stock Kenneth F. Leedy 414,585 (2) 1.57%
Common Stock Heath L. Allen 277,920 (3) 1.05%
Common Stock Ronald E. Walborn 412,962 (4) 1.56%
Common Stock Arthur L. Peterson 6,300 **
Common Stock John B. Warden III 10,000 (5) **
Common Stock Donald G. Johnson 90,992 (6) **
Common Stock Directors and Officers as
a Group (7 in number) 5,557,948 (7) 21.03%
*Class includes all issued and outstanding shares and all unexercised stock
options
**less than 1.0%
_________________________
(1) See Note (1) of the immediately preceding table.
(2) The shares shown include 216,400 shares covered by incentive and non-
qualified stock option(s).
(3) 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.
(4) The shares shown include 90,000 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.
(5) 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.
(6) The shares shown include 85,000 shares covered by incentive stock options.
(7) 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.
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 2003 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 2002 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 Kenneth F. Leedy, Heath L.
Allen, and John B. Warden III, as directors to hold office until the 2003 Annual
Meeting of Shareholders and until their successors are duly elected and
qualified. Each nominee is presently a director and, except for Mr. Warden, was
elected to his present term of office by the stockholders. Mr. Warden was
appointed by the Board to fill the unexpired term of Carlton E. Hughes on
August 31, 1999. 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 2000, met on four separate occasions.
TO BE ELECTED FOR A TWO-YEAR TERM
HEATH L. ALLEN: 73, 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: 59, 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: 42, 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).
TO CONTINUE IN OFFICE
EDWARD H. ARNOLD: 61, 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: 64, Director since 1972
President and Treasurer of Walborn Shambach Associates (Accountants); CFO (1997
to present) and 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: 74, 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).
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
2000.
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 2000. 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 2000,
directors who were not also officers of the Company were compensated at $10,000
per year and a fee of $1,000 for each meeting of the Board of Directors
attended, together with the expenses of attendance. For the year 2001 and
subsequent years, directors who are not officers of the Company will be paid
$10,000 per year and the 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: 61,
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: 59,
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: 46,
Senior Vice President (1998 to present) of Arnold Industries, Inc.
HEATH L. ALLEN: 73,
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: 64,
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, 2000, to or for the chief executive officer and each of the
executive officers of the Company whose cash compensation exceeded $100,000:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
Awards
Other All other
Name and annual compen-
principal position Year Salary ($) Bonus ($) compen- Restricted sation <FN1>
sation(s) stock Options/
awards($) SARs(#)
EDWARD H. ARNOLD 2000 187,200 500,000 - - - 16,590
President and Chairman 1999 187,200 500,000 - - - 15,570
of the Board 1998 187,200 500,000 - - - 15,780
KENNETH F. LEEDY 2000 166,400 400,000 - - - 16,590
President 1999 166,400 400,000 - - - 15,570
New Penn Motor Express 1998 166,400 400,000 - - - 15,780
Inc.
DONALD G. JOHNSON 2000 116,200 85,109 - - - 16,590
Senior Vice President 1999 112,240 75,151 - - 10,000 15,570
1998 108,890 71,276 - - 6,000 15,780
<FN1> 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.
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, 2000, options
for 1,092,300 shares were outstanding to approximately 335 employees under
the 1997 Stock Option Plan. Options for 585,800 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 granted 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 exercised by several of the Company's executive officers
in fiscal year 2000. The tables on the next page show information regarding
stock options held by the Company's executive officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Number of Value of
unexercised unexercised
Options/SARs in-the-money
Shares Value realized at FY-End (#) Options/SARs
Name acquired on ($) exercisable/ at FY-End ($)
exercise (#) unexercisable exercisable/
<FN1> unexercisable
EDWARD H. ARNOLD - - 175,000/0 0/0
KENNETH F. LEEDY 4,800 44,700 204,432/11,968 1,000,138/38,896
HEATH L. ALLEN 18,400 108,100 90,000/0 436,825/0
RONALD E. WALBORN 18,400 169,050 84,862/5,138 406,960/29,865
DONALD G. JOHNSON 1,600 9,100 27,874/57,126 101,828/316,929
<FN1> Adjusted for stock splits.
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 69 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 $161,192 for
2000.
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 55
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: Allied Holdings, Inc.; American Freightways Corporation;
Arkansas Best Corporation; Arnold Industries, Inc.; Boyd Bros. Transport,
Inc.; Cannon Express Inc. CL A; CD&L, Inc.; CNF Transportation, Inc.;
Consolidated Freight Corporation; Covenant Transport CL A; Forward Air
Corporation; Frozen Food Express Industries; Gasel Transport; Heartland
Express, Inc.; J.B. Hunt Transport Services; Kenan Transport Company; Knight
Transportation; Landair Corporation; Landstar System, Inc.; M.S. Carriers,
Inc.; Marten Transport, Ltd.; Matlack Systems, Inc.; Morgan Group, Inc.;
Motor Cargo Industries; Old Dominion Freight Line; OTR Express, Inc.; PAM
Transportation Services; Patriot Transportation; 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; US1 Industries, Inc.; US Trucking,
Inc.; 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.
GRAPH AND POINT DATA
5-YEAR CUMULATIVE TOTAL RETURN AMONG ARNOLD INDUSTRIES, INC.,
NASDAQ MARKET INDEX AND SIC CODE INDEX
-----------------------FISCAL YEAR ENDING---------------
COMPANY 1995 1996 1997 1998 1999 2000
ARNOLD IND INC 100.00 94.02 104.85 100.95 90.81 119.99
TRUCKING, EXCEPT LOCAL 100.00 94.46 136.50 131.32 126.89 135.15
NASDAQ MARKET INDEX 100.00 125.27 153.00 214.39 378.12 237.66
ASSUMES $100 INVESTED ON DEC. 31, 1995
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2000
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 2000 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 69 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 2000, 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 2000'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
moderate net earnings increases in 2000 as compared to 1999, the Committee
believes that Mr. Arnold's compensation package for 2000 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 2000. New Penn and Arnold Logistics are performing to
management's expectations; Arnold Transportation's performance improved
during the year, but not to management's expectations. Accordingly, Mr.
Arnold's total compensation package was unchanged from the 1999 compensation
amount.
The Compensation Committee
Arthur L. Peterson
John B. Warden III
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, an
officer and director of the Company, is a partner, received legal fees of
approximately $286,495 for services performed in 2000 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 2001 for legal
services to be performed.
The firm of Walborn Shambach Associates, of which Ronald E. Walborn, an
officer and director of the Company, is President and Treasurer, received
fees for management and other accounting services of approximately $622,616
for services performed in 2000 for the Company and its subsidiaries. It is
anticipated that the Company and its subsidiaries will make payments to
Walborn Shambach Associates through 2001 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 ten fiscal years.
PricewaterhouseCoopers received fees for services rendered to the Company
during the year ended December 31, 2000, in the following amounts:
- - Audit Fees: $116,000 was received for audit of the Company's
consolidated year-end financial statements and for review of the Company's
fiscal quarterly statements.
- - Financial Information Systems Design and Implementation: None.
- - All Other Fees: $119,550 was received for tax services and $20,920 for
employee benefit plan audit services.
The Company's Audit Committee has considered the compatibility of the non-
audit services described above with maintaining the auditor's independence
without exception. The Audit Committee has received an Independence Standards
Board (ISB) Standard No. 1 (Communications with Audit Committees) letter from
PricewaterhouseCoopers and have discussed with the auditors their
independence.
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 2001 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.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
The 2002 Annual Meeting of Shareholders will be held on or about May 1, 2002.
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, 2001, 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 subjects 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 29, 2001
REVOCABLE PROXY
ARNOLD INDUSTRIES, INC.
X PLEASE MARK VOTES AS IN THIS EXAMPLE
ANNUAL MEETING OF SHAREHOLDERS
May 2, 2001
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders of Arnold Industries, Inc., to be held on Wednesday,
May 2, 2001, 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 2001 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: _____ _____ _____
Kenneth F. Leedy, Heath L. Allen, John B. Warden III
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.
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
SUPPLEMENT TO PROXY STATEMENT
OF ARNOLD INDUSTRIES, INC.
DATED MARCH 29, 2001
Audit Committee Report
The Audit Committee is comprised of two independent directors
as defined by NASD and one director who is not independent. The
Board of Directors appointed one director to the Committee who is
not independent after determining that such appointment would be in
the best interests of the Company and its shareholders because of
the non-independent director's detailed knowledge of the operations
of the Company. The Audit Committee operates under a written
charter adopted by the Board of Directors (Exhibit A below).
Management is responsible for Arnold Industries' internal
financial controls and the financial reporting process. The
independent accountants are responsible for performing an
independent audit of Arnold Industries' consolidated financial
statements in accordance with generally accepted auditing standards
and for issuing a report thereon. Our Committee's responsibility is
to oversee and monitor these activities on behalf of the Board of
Directors.
The Audit Committee met and held discussions with management
and the independent accountants. Management represented to us that
the Company's consolidated financial statements for the year ended
December 31, 2000, were prepared in accordance with generally
accepted accounting principles. We discussed the consolidated
financial statements with both management and the independent
accountants. We also discussed with the independent accountants the
matters required to be discussed by Statement on Auditing Standards
No. 61.
We received from the independent accountants the written
disclosures required by Independent Standards Board Standard No. 1
and discussed with the independent accountants that firm's
independence.
Based on the foregoing, we have recommended to the Board of
Directors that the audited financial statements be included in the
Company's annual report on Form 10-K for the year ended December 31,
2000, to be filed with the Securities and Exchange Commission.
By the Audit Committee:
John B. Warden (Chairman)
Arthur L. Peterson
Heath L. Allen (Not Independent)
Exhibit A
CHARTER OF THE AUDIT COMMITTEE
OF ARNOLD INDUSTRIES, INC.
Purpose
The primary purpose of the Audit Committee (the "Committee") is
to assist the Board of Directors (the "Board") in fulfilling its
responsibility to oversee management's conduct of the Company's
financial reporting process. The Committee will review the
financial reports and other financial information provided by the
Company to any governmental or regulatory body, to the public or to
other recipients thereof; the Company's systems of internal
accounting and financial controls; and the annual independent audit
of the Company's financial statements.
In discharging its oversight role, the Committee is empowered
to investigate any matter brought to its attention with full access
to all books, records, facilities and personnel of the Company and
the power to retain outside counsel, auditors or other experts for
this purpose. The Board and the Committee are in place to represent
the Company's shareholders; accordingly, the outside auditor is
ultimately accountable to the Board and the Committee.
The Committee shall review the adequacy of this Charter on an
annual basis.
Membership
The Committee shall be comprised of not less than three members of
the Board, and the Committee's composition will meet as promptly as
possible the requirements of the Audit Committee Policy of the NASD.
Accordingly, at least three of the members will be directors:
A. Who have no relationship with the Company that may interfere
with the exercise of their independence from management of the
Company, except in exceptional and limited circumstances where
the Board determines that it is in the best interests of the
Company and its shareholders to appoint no more than one
non-independent director to serve on the Committee and the
Board discloses its reasons for the determination in the
Company's next annual proxy statement; and
B. Who are financially literate or who become financially literate
within a reasonable period of time after appointment to the
Committee. In addition, at least one member of the Committee
will have accounting or related financial management expertise.
Key Responsibilities
The Committee's job is one of oversight. It recognizes that
the Company's management is responsible for preparing the Company's
financial statements and that the outside auditors are responsible
for auditing those financial statements. Additionally, the Committee
recognizes that the Company's financial managers, as well as its
outside auditors, have more time and knowledge available to them and
enjoy more detailed financial information relative to the Company
than do Committee members; consequently, in carrying out its
oversight responsibilities, the Committee is not providing any
expert or special assurance as to the Company's financial statements
nor any professional certification as to the outside auditor's work.
The following functions shall be the common recurring
activities of the Committee in carrying out its oversight function.
These functions are set forth as a guide with the understanding that
the Committee may diverge from this guide as appropriate given the
circumstances.
A. The Committee shall review with management and the outside
auditors the audited financial statements to be included in the
Company's Annual Report on Form 10-K (or the Annual Report to
Shareholders if distributed prior to the filing of Form 10-K),
and review and consider with the outside auditors the matters
required to be discussed by Statement of Auditing Standards
("SAS") No. 61.
B. As a whole, or through the Committee chair, the Committee shall
review with the outside auditors the Company's interim
financial results to be included in the Company's quarterly
reports to be filed with Securities and Exchange Commission and
the matters required to be discussed by SAS No. 61; this review
will occur prior to the Company's quarterly filing of the Form
10-Q.
C. The Committee shall discuss with management and the outside
auditors the quality and adequacy of the Company's internal
controls.
D. The Committee shall:
1. request from the outside auditors annually a formal
written statement delineating all relationships between
the auditor and the Company consistent with Independence
Standards Board Standard Number 1;
2. discuss with the outside auditors any such disclosed
relationships and their impact on the outside auditor's
independence; and
3. recommend as appropriate that the Board take appropriate
action to oversee the independence of the outside auditor.
E. The Committee, subject to any action that may be taken by the
full Board, shall have the ultimate authority and
responsibility to select (or to nominate for shareholder
approval), evaluate and, where appropriate, replace the outside
auditor.
The Committee has approved this Charter, and has submitted it
to the Board for the Board's concurrence.