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, 1997.
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File No. 0-10894
ARNOLD INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2200465
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
625 South Fifth Avenue, Lebanon, Pennsylvania
(Address of principal executive offices)
17042
(Zip Code)
(717) 274-2521
(Registrant's telephone number, including area code)
No Change
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Common Stock, par value $1.00 per share: 25,884,126 shares outstanding
(excluding treasury shares) as of November 10, 1997.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets - September 30, 1997
(Unaudited) and December 31, 1996
Condensed Consolidated Statements of
Income (Three and Nine Month
Periods - Unaudited) - September 30, 1997 and
1996
Condensed Consolidated Statements of
Cash Flows (Nine Month
Periods - Unaudited) - September 30, 1997 and
1996
Notes to Condensed Consolidated Financial Statements
ARNOLD INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
1997 1996
ASSETS
Current Assets
Cash and Cash Equivalents 30,131,747 19,704,303
Marketable Securities 9,436,789 21,917,940
Accounts Receivable, Net 40,954,130 30,648,955
Deferred Income Taxes 5,965,078 7,649,269
Prepaid Expenses and Supplies 4,225,090 3,764,475
Refundable Income Taxes 417,642 -0-
Total Current Assets 91,130,476 83,684,942
Property and Equipment 338,316,841 322,812,162
Less: Accumulated Depreciation 136,673,101 123,198,243
Total Property and Equipmen 201,643,740 199,613,919
Other Assets
Goodwill 8,585,825 8,862,555
Investments in Limited Partnerships 9,745,082 10,144,793
Other 997,733 806,213
Total Other Assets 19,328,640 19,813,561
TOTAL ASSETS 312,102,856 303,112,422
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes Payable 16,222,367 16,222,367
Accounts Payable 14,739,327 9,332,066
Income Taxes -0- 456,332
Estimated Liability for Claims 6,163,724 6,451,931
Accrued Expenses - Other 13,226,699 11,313,407
Total Current Liabilities 50,352,117 43,776,103
Long-Term Liabilities
Estimated Liability for Claims 13,689,000 13,689,000
Deferred Income Taxes 30,604,271 31,095,222
Notes Payable 2,363,971 3,873,696
Other 1,639,357 1,531,707
Total Long-Term Liabilities 48,296,599 50,189,625
Stockholders' Equity
Common Stock 29,942,628 29,942,628
Paid-In Capital 299,898 209,000
Retained Earnings 205,133,373 187,922,593
Treasury Stock - At Cost (21,921,759) (8,927,527)
Total Stockholders' Equity 213,454,140 209,146,694
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 312,102,856 303,112,422
The accompanying notes, herein following, are an integral part
of these consolidated financial statements.
ARNOLD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Nine months Ended Three Months Ended
September 30, September 30,
1997 1996 1997 1996
Operating Revenues 287,054,643 263,945,347 99,174,677 91,442,677
Operating Expenses 246,168,884 233,306,958 84,887,852 80,504,984
Operating Income 40,885,759 30,638,389 14,286,825 10,937,693
Interest Expense (975,794) (931,207) (324,595) (300,563)
Other Income 972,178 254,965 427,850 475,936
Income Before
Income Taxes 40,882,143 29,962,147 14,390,080 11,113,066
Income Taxes 15,002,844 10,636,746 5,342,186 3,984,743
Net Income 25,879,299 19,325,401 9,047,894 7,128,323
Weighted Average Shares
Outstanding (Note) 26,267,854 26,653,706 25,866,908 26,656,553
Income per Common
Share (Note) .99 .73 .35 .27
Dividends per Common Share .33 .33 .11 .11
NOTE: Common share equivalents are not included since the effect of their
inclusion is not material.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 "Earnings Per
Share" (SFAS 128). SFAS 128 establishes standards for computing
and presenting earnings per share and applies to entities with
publicly held common stock or potential common stock. SFAS 128
simplifies the standards for computing earnings per share previously
found in APB Opinion No. 15, "Earnings Per Share," by replacing the
presentation of primary earnings per share with a presentation of
basic earnings per share. It also requires dual presentation of
basic and diluted earnings per share on the face of the income
statement for all entities with complex capital structures.
SFAS 128 is effective for financial statements issued for periods
ending after December 15, 1997. The effect of SFAS 128 on the
Company's earnings per share has not been determined.
The accompanying notes, herein following, are an integral part
of these consolidated financial statements.
ARNOLD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months Ended
September 30,
1997 1996
Operating Activities
Net Income 25,879,299 19,325,401
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 22,004,132 21,065,960
Provision for Deferred Taxes 1,193,241 2,463,037
Other (333,238) (250,284)
Changes in Operating Assets and Liabilities:
(Increase) in Accounts Receivable (10,305,175) (2,912,855)
(Increase) Decrease in Prepaid
Expenses and Supplies (460,615) 204,433
Increase in Accounts Payable
and Accrued Expenses 6,158,372 8,105,015
Other 107,650 98,900
Net Cash Provided by Operating
Activities 44,243,666 48,099,607
Investing Activities
Proceeds from Sale of Investment Securities 18,953,056 2,483,302
Purchase of Investment Securities (6,497,462) (12,774,162)
Proceeds from Disposition of Property and
Equipment 3,039,309 3,678,625
Purchase of Property and Equipment (26,080,372) (22,687,390)
Capital Contributions to Limited Partnerships (1,586,963) (657,223)
Other (149,174) 29,032
Net Cash Used In Investing Activities (12,321,606) (29,927,816)
Financing Activities
Cash Dividends Paid (8,668,521) (8,795,596)
Purchase of Treasury Stock (13,064,377) -0-
Other 238,282 60,845
Net Cash Used In Financing Activities (21,494,616) (8,734,751)
Increase in Cash and Cash Equivalents 10,427,444 9,437,040
Cash and Cash Equivalents at Beginning of Year 19,704,303 5,769,772
Cash and Cash Equivalents at End of Period 30,131,747 15,206,812
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest 972,498 953,561
Income Taxes 14,619,874 8,330,379
The accompanying notes, herein following, are an integral part
of these consolidated 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, 1997, and 1996 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 on a consolidated basis for the third quarter of 1997
were $99,174,677, an increase of $7,732,000 or 8.5% over Operating Revenues
for 1996's third quarter. For the same period, Operating Expenses increased
$4,382,868, or 5.4%; Income before Income Taxes increased $3,277,014, an
increase of 29.5%; and Net Income increased $1,919,571, or 26.9%. Earnings
Per Share for the third quarter of 1997 increased as compared to the third
quarter of 1996 from $.27 per share to $.35 per share, an increase of 29.6%.
As indicated above, the Company's revenues for the third quarter of 1997
were substantially ahead of revenues generated during the comparable period
in 1996. An increase of $6.3 million in third quarter revenues at the
Company's subsidiary New Penn Motor Express, Inc. ("New Penn") was matched
by a revenue increase of over $1.4 million at the Arnold Transportation
subsidiaries, namely, Arnold Transportation Services, Inc. ("ATS")
(formerly LebArnold, Inc.), 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
declined by 26%.
Operating Income on a consolidated basis also increased during the
third quarter of 1997 relative to the comparable period of 1996 in that
mostly profitable Operating Revenues were added to the top line, resulting
in increased profit to the bottom line. Individually, Operating Income
of New Penn and ATS increased during the third quarter in comparison to
the same period in 1996, whereas operating income of SilverEagle and DW
declined during the period. The decline in Operating Income at SilverEagle
and DW reflects the on-going price competition experienced throughout the
truckload industry.
The Company's combined Operating Revenues for the nine months ended
September 30, 1997 were $287,054,643, an increase of $23,109,296, or 8.8%
over the comparable nine-month period in 1996. For the same period,
Operating Expenses increased $12,861,926, or 5.5%; Income Before Income
Taxes increased $10,919,996, an increase of 36.4%; and Net Income increased
$6,553,898, or 33.9%. Earnings Per Share increased from $.73 to $.99, or
35.6% for the respective nine-month periods. The increase in the Company's
results of operations during the first nine months of 1997 is not necessarily
indicative of an overall upward trend within the Company, but nevertheless
is significant in light of 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 companies for the third
quarters of 1997 and 1996 and for the nine (9) month periods ended
September 30, 1997, and September 30, 1996:
(Dollars in Thousands)
Third Quarter Ended September 30,
1997 1996
Amount % Amount %
NEW PENN MOTOR EXPRESS
AND RELATED COMPANIES (LTL)
Operating Revenues 53,506 100.0 47,220 100.0
Operating Expenses 40,788 76.2 38,255 81.0
Operating Income 12,718 23.8 8,965 19.0
ARNOLD TRANSPORTATION
SERVICES (TL)
Operating Revenues 45,669 100.0 44,223 100.0
Operating Expenses 44,100 96.6 42,250 95.5
Operating Income 1,569 3.4 1,973 4.5
(Dollars in Thousands)
Nine Months Ended September 30,
1997 1996
Amount % Amount %
NEW PENN MOTOR EXPRESS
AND RELATED COMPANIES (LTL)
Operating Revenues 153,816 100.0 134,207 100.0
Operating Expenses 120,010 78.0 109,626 81.7
Operating Income 33,806 22.0 24,581 18.3
ARNOLD TRANSPORTATION
SERVICES (TL)
Operating Revenues 133,238 100.0 129,738 100.0
Operating Expenses 126,158 94.7 123,681 95.3
Operating Income 7,080 5.3 6,057 4.7
The Company's working capital at the end of the third quarter of 1997
was $40,778,359. This represents an increase of $3,890,310 or 10.5% from
the working capital at the end of the previous quarter in 1997. 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 1997 stood at
$201,643,740. This figure represents an increase from December 31, 1996 of
$2,029,821, or 1.0% 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 continues to
seek opportunities for profitable expansion of the Company.
On November 4, 1997, the Company announced its quarterly cash dividend
of $.11 per share.
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, 1997 By /s/ Heath L. Allen
Heath L. Allen, Secretary
Date: November 14, 1997 /s/ Ronald E. Walborn
Ronald E. Walborn, Treasurer