FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1996.
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File No. 0-10894
ARNOLD INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2200465
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
625 South Fifth Avenue, Lebanon, Pennsylvania
(Address of principal executive offices)
17042
(Zip Code)
(717) 274-2521
(Registrant's telephone number, including area code)
No Change
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Common Stock, par value $1.00 per share: 29,942,628 shares
outstanding as of November 11, 1996.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets - September 30, 1996
(Unaudited) and December 31, 1995
Condensed Consolidated Statements of
Income (Three and Nine Month
Periods - Unaudited) - September 30, 1996 and
1995
Condensed Consolidated Statements of
Cash Flows (Nine Month
Periods - Unaudited) - September 30, 1996 and
1995
Notes to Condensed Consolidated Financial Statements
ARNOLD INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
1996 1995
ASSETS
Current Assets
Cash and Cash Equivalents 15,206,812 5,769,772
Marketable Securities 18,818,393 8,503,995
Accounts Receivable, Net 34,257,237 31,344,382
Deferred Income Taxes 4,995,380 4,408,898
Prepaid Expenses and Supplies 4,462,277 4,666,710
Refundable Income Taxes 1,526,515 1,418,300
Total Current Assets 79,266,614 56,112,057
Property and Equipment 316,981,585 304,961,299
Less: Accumulated Depreciation 118,129,341 105,138,829
Total Property and Equipment 198,852,244 199,822,470
Other Assets
Goodwill 8,954,798 9,231,529
Investments in Limited Partnerships 10,273,838 10,677,567
Other 824,145 1,032,940
Total Other Assets 20,052,781 20,942,036
TOTAL ASSETS 298,171,639 276,876,563
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes Payable 16,692,749 16,692,749
Accounts Payable 11,492,726 7,316,348
Estimated Liability for Claims 13,365,318 6,280,942
Accrued Expenses - Other 12,299,977 9,602,991
Total Current Liabilities 53,850,770 39,893,030
Long-Term Liabilities
Estimated Liability for Claims 3,424,596 9,169,106
Deferred Income Taxes 29,044,839 25,995,320
Notes Payable 4,391,358 5,048,581
Other 1,500,662 1,401,762
Total Long-Term Liabilities 38,361,455 41,614,769
Stockholders' Equity
Common Stock 29,942,628 29,942,628
Paid-In Capital 170,400 135,260
Retained Earnings 184,790,195 174,260,390
Treasury Stock - At Cost (8,943,809) (8,969,514)
Total Stockholders' Equity 205,959,414 195,368,764
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 298,171,639 276,876,563
THE ACCOMPANYING NOTES, HERE AND FOLLOWING, ARE AN INTEGRAL PART OF THESE
CONDENSED FINANCIAL STATEMENTS.
ARNOLD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Nine months Ended Three Months Ended
September 30, September 30,
1996 1995 1996 1995
Operating Revenues 263,945,347 248,697,282 91,442,677 81,897,502
Operating Expenses 233,306,958 210,390,980 80,504,984 70,661,625
Operating Income 30,638,389 38,306,302 10,937,693 11,235,877
Interest Expense (931,207) (1,354,666) (300,563) (449,297)
Other Income 254,965 1,095,268 475,936 325,914
Income Before Income Taxes 29,962,147 38,046,904 11,113,066 11,112,494
Income Taxes 10,636,746 13,941,990 3,984,743 4,039,969
Net Income 19,325,401 24,104,914 7,128,323 7,072,525
Weighted Average Shares
Outstanding (1) 26,653,706 26,633,465 26,656,553 26,636,454
Income per Common Share (1) .73 .91 .27 .27
Dividends per Common Share .33 .33 .11 .11
(1) Common share equivalents are not included since the effect of their
inclusion is not material.
THE ACCOMPANYING NOTES, HERE AND FOLLOWING, ARE AN INTEGRAL PART OF THESE
CONDENSED FINANCIAL STATEMENTS.
ARNOLD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months Ended
September 30,
1996 1995
Operating Activities
Net Income 19,325,401 24,104,914
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 21,065,960 18,613,307
Provision for Deferred Taxes 2,463,037 5,517,424
Other (250,284) (1,833,270)
Changes in Operating Assets and Liabilities:
(Increase) in Accounts Receivable (2,912,855) (1,555,256)
(Increase) Decrease in Prepaid
Expenses and Supplies 204,433 (1,116,170)
Increase (Decrease) in Accounts Payable
and Accrued Expenses 8,105,015 (3,406,807)
Other 98,900 91,550
Net Cash Provided by Operating Activities 48,099,607 40,415,692
Investing Activities
Proceeds from Sale of Investment Securities 2,483,302 8,639,341
Purchase of Investment Securities (12,774,162) (761,303)
Proceeds from Disposition of Property and Equipment 3,678,625 6,487,742
Purchase of Property and Equipment (22,687,390) (40,944,774)
Capital Contributions to Limited Partnerships -0- (1,866,245)
Acquisition of Primary Assets of
T.W. Owens & Sons, Inc. -0- (11,120,700)
Other 29,032 (55,482)
Net Cash Used In Investing Activities (29,270,593) (39,621,421)
Financing Activities
Cash Dividends Paid (8,795,596) (8,789,083)
Principal Payments on Long-term Debt (657,223) -0-
Other 60,845 34,886
Net Cash Used In Financing Activities (9,391,974) (8,754,197)
Increase (Decrease) in Cash and Cash Equivalents 9,437,040 (7,959,926)
Cash and Cash Equivalents at Beginning of Year 5,769,772 23,554,745
Cash and Cash Equivalents at End of Period 15,206,812 15,594,819
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest 953,561 1,362,014
Income Taxes 8,330,379 11,870,551
THE ACCOMPANYING NOTES, HERE AND FOLLOWING, ARE AN INTEGRAL PART OF THESE
CONDENSED FINANCIAL STATEMENTS.
ARNOLD INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note I: Basis of Presentation
The financial information included herein is unaudited;
however, such information reflects all adjustments (consisting
solely of normal adjustments) which are, in the opinion of
management, necessary for a fair statement of results for the
interim period. This financial information should be read in
conjunction with the Financial Statements, Notes and information
included in the Company's latest annual report on Form 10-K and
any intervening reports.
The results of operations for the three and nine-month
periods ending September 30, 1996, and 1995 are not necessarily
indicative of the results to be expected for the full year.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Operating Revenues for the third quarter of 1996 were
$91,442,677, an increase of $9,545,175 or 11.7% over Operating
Revenues for 1995's third quarter. For the same period, Oper-
ating Expenses increased $9,843,359, or 13.9%; Income before
Income Taxes increased $572, a negligible change; and Net Income
increased $55,798, or .8%. Earnings Per Share for the third
quarter of 1996 remained unchanged from the comparable quarter in
1995 at $.27 per share.
As indicated above, the Company's revenues for the third
quarter of 1996 were substantially ahead of revenues generated
during the comparable period in 1995. A $5,881,976 increase in
third quarter revenues at the Company's subsidiary New Penn Motor
Express, Inc. ("New Penn") was matched by a revenue increase of
$3,663,199 at the SilverEagle/Arnold subsidiaries, namely,
LebArnold, Inc. ("LebArnold"), SilverEagle Transport, Inc.
("SilverEagle") and D.W. Freight, Inc. ("DW"). The revenue gains
are attributable primarily to increased volume at all of the
subsidiaries, except DW where revenues remained relatively
static. Nevertheless, Operating Income on a consolidated basis
declined in real terms because Operating Expenses increased more
than Operating Revenues. Individually, Operating Income of New
Penn increased during the third quarter in comparison to the same
period in 1995, whereas operating income of SilverEagle, DW and
LebArnold declined during the period. The decline in Operating
Income at the SilverEagle, LebArnold and DW subsidiaries reflects
the on-going price competition experienced in all areas of the
trucking industry.
The Company's combined Operating Revenues for the nine
months ended September 30, 1996 were $263,945,347, an increase
of $15,248,065, or 6.1% over the comparable nine-month period
in 1995. For the same period, Operating Expenses increased
$22,915,978, or 10.9%; Income Before Income Taxes decreased
$8,084,757, a decrease of 21.2%; and Net Income decreased
$4,779,513, or 19.8%. Earnings Per Share decreased from $.91
to $.73, or 19.8% for the respective nine-month periods. The
decline in the Company's results of operations during the
first nine months of 1996 is not necessarily indicative of any
particular trend within the Company, other than the competitive
pressures to which all motor carriers are subject.
Set forth below is a schedule of the Unaudited Operating
Revenues, Expenses and Operating Income of the LTL and TL com-
panies for the third quarters of 1996 and 1995 and for the nine
(9) month periods ended September 30, 1996, and September 30,
1995:
(Dollars in Thousands)
Third Quarter Ended September 30,
1996 1995
Amount % Amount %
NEW PENN MOTOR EXPRESS
AND RELATED COMPANIES (LTL)
Operating Revenues 47,220 100.0 41,337 100.0
Operating Expenses 38,255 81.0 33,407 80.8
Operating Income 8,965 19.0 7,930 19.2
ARNOLD TRANSPORTATION COMPANIES (TL)
Operating Revenues 44,223 100.0 40,560 100.0
Operating Expenses 42,250 95.5 37,254 91.8
Operating Income 1,973 4.5 3,306 8.2
(Dollars in Thousands)
Nine Months Ended September 30,
1996 1995
Amount % Amount %
NEW PENN MOTOR EXPRESS
AND RELATED COMPANIES (LTL)
Operating Revenues 134,207 100.0 126,680 100.0
Operating Expenses 109,626 81.7 100,728 79.5
Operating Income 24,581 18.3 25,952 20.5
ARNOLD TRANSPORTATION COMPANIES (TL)
Operating Revenues 129,738 100.0 122,017 100.0
Operating Expenses 123,681 95.3 109,663 89.9
Operating Income 6,057 4.7 12,354 10.1
The Company's working capital at the end of the third quarter
of 1996 was $25,415,844. This represents an increase of $3,319,635
or 15% from the working capital at the end of the previous quarter
in 1996. The increase in working capital reflects the Company's
desire to husband assets to fund an ongoing capital expansion program.
The Company's investment in Property and Equipment (Less
Accumulated Depreciation) as of the end of the third quarter of
1996 stood at $198,852,244. This figure represents an increase
from December 31, 1995 of $501,552, or .3% and reflects the
ongoing results of the Company's capital expansion program.
Future funding for the Company's capital expansion program will
likely be accomplished through the use of cash generated from
current operating and investment activities, supplemented, when
necessary, by short or long-term financing. Management con-
tinues to seek opportunities for profitable expansion of the
Company.
On October 31, 1996, the Company announced its quarterly
cash dividend of $.11 per share.
During the third quarter of 1996, the Company also announced
that it entered into a preliminary letter of intent for the
acquisition of Motor Cargo Industries, Inc., the holding company
of Motor Cargo, a Salt Lake City, Utah, less-than-truckload
carrier (hereinafter "Motor Cargo"). Since the announcement, the
Company has undertaken, and continues to undertake, an extensive
due diligence investigation of Motor Cargo. Due to circumstances
encountered during the due diligence process, the anticipated
closing date for the acquisition has been delayed until early in
the first quarter of 1997.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27 - Financial Data Schedule
(b) 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.
ARNOLD INDUSTRIES, INC.
(Registrant)
Date: November 14, 1996 By /s/ Heath L. Allen
Heath L. Allen, Secretary
Date: November 14, 1996 /s/ Ronald E. Walborn
Ronald E. Walborn, Treasurer