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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 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 number 1-10105
MATLACK SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0310173
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Rollins Plaza, Wilmington, Delaware 19803
(Address of principal executive offices) (Zip Code)
(302) 426-2700
(Registrant's telephone number, including area code)
(Former name of registrant)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 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 _____
The number of shares of the registrant's common stock outstanding as
of December 31, 1996 was 8,758,846.
FORM 10-Q Page 2 of 6
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the quarter ended December 31, 1996 are not
necessarily indicative of the results that may be expected for the year
ended September 30, 1997. These statements should be read in conjunction
with the financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended September 30, 1996.
MATLACK SYSTEMS, INC.
CONSOLIDATED STATEMENT OF EARNINGS
($000 Omitted Except for Per Share Amounts)
Quarter Ended
December 31,
1996 1995
Revenues $54,557 $55,562
Operating expenses 46,595 46,820
Depreciation 3,212 2,935
Selling and administrative expenses 4,357 4,540
Other (income) expense (14) 8
54,150 55,093
Operating earnings 407 1,259
Interest expense 740 790
Earnings (loss) before income taxes (benefit) (333) 469
Income taxes (benefit) (61) 195
Net earnings (loss) $ (272) $ 274
Earnings (loss) per share $ (.03) $ .03
Average common shares and equivalents
outstanding (000) 8,798 8,883
Dividends paid per share None None
FORM 10-Q Page 3 of 6
MATLACK SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET
($000 Omitted)
December 31, September 30,
ASSETS 1996 1996
Current assets
Cash $ 1,548 $ 3,019
Accounts receivable, net of allowance for
doubtful accounts: December-$418;
September-$414 25,570 24,282
Inventory of tires, parts and supplies 5,581 5,439
Other current assets 5,101 2,907
Refundable income taxes 605 1,114
Deferred income taxes 1,822 1,885
Total current assets 40,227 38,646
Property and equipment, at cost, net of
accumulated depreciation of:
December-$126,169; September-$125,858 91,950 89,267
Other assets 201 214
Total assets $132,378 $128,127
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 8,469 $ 10,047
Accrued liabilities 9,666 10,174
Current maturities of long-term debt 7,349 6,213
Total current liabilities 25,484 26,434
Long-term debt 35,300 29,878
Insurance reserves 1,794 1,716
Other liabilities 2,139 2,023
Deferred income taxes 12,313 12,400
Commitments and contingent liabilities
See Part II Legal Proceedings
Shareholders' equity:
Preferred stock, $1 par value,
1,000,000 shares authorized; issued and
outstanding - None
Common stock, $1 par value,
24,000,000 shares authorized;
issued and outstanding:
December-8,758,846 and
September-8,762,116 8,759 8,762
Capital in excess of par value 10,500 10,553
Retained earnings 36,089 36,361
Total shareholders' equity 55,348 55,676
Total liabilities and
shareholders' equity $132,378 $128,127
FORM 10-Q Page 4 of 6
MATLACK SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
($000 Omitted)
Quarter Ended
December 31,
1996 1995
Cash flows from operating activities:
Net earnings (loss) $ (272) $ 274
Adjustments to reconcile net earnings (loss)
to net cash (used in) provided by operating
activities:
Depreciation and amortization 3,218 2,935
Changes in assets and liabilities:
Accounts receivable (1,288) 1,011
Inventories and other assets (2,323) (1,231)
Accounts payable and accrued liabilities (2,086) (1,318)
Current and deferred income taxes 485 30
Other, net 180 (180)
Net cash (used in) provided by operating activities (2,086) 1,521
Cash flows from investing activities:
Purchase of property and equipment (6,178) (1,786)
Proceeds from sale of equipment 291 25
Net cash used in investing activities (5,887) (1,761)
Cash flows from financing activities:
Proceeds of long-term debt 15,300 6,250
Repayment of long-term debt (8,742) (6,479)
Exercise of stock options 20 9
Common stock acquired and retired (76) -
Net cash provided by (used in) financing activities 6,502 (220)
Net decrease in cash (1,471) (460)
Cash beginning of period 3,019 2,845
Cash end of period $ 1,548 $ 2,385
Supplemental information:
Interest paid $ 827 $ 768
Income taxes (recovered) paid $ (546) $ 165
FORM 10-Q Page 5 of 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations: Quarter Ended December 31, 1996 vs. Quarter Ended
December 31, 1995
Competitive industry pricing and continued excess capacity negatively
affected revenues. As a result, revenues for the quarter ended December
31, 1996 decreased by $1,005,000 (1.8%). The lower revenues reflected a
5.4% decrease in the number of bulk trucking loads carried. Increases in
the Company's ancillary business revenues were not sufficient to offset the
revenue decline from the domestic bulk trucking business.
Operating expenses decreased by $225,000 (.5%) reflecting the decrease
in revenues. Increased fuel costs due to higher fuel prices and higher
maintenance expenses offset some of the volume-related expense reductions.
Operating expenses as a percentage of revenues increased to 85.4% in 1996
from 84.3% in 1995.
Depreciation expense increased by $277,000 (9.4%) due to the increased
level of expenditures for property and equipment when compared with the
first quarter of fiscal 1996.
Selling and administrative expenses decreased by $183,000 (.4%)
reflecting the lower level of business. Selling and administrative
expenses were 8.0% of revenues in 1996 and 8.2% in 1995.
Interest expense decreased $50,000 (6.3%) due to a decrease in the
average interest rate on borrowings compared with the prior year.
The effective rate of income tax benefit for the first quarter of
fiscal year 1996 was 18.3%. The low effective rate of benefit was caused
by the impact that non-deductible expenses had upon the tax computations.
The effective income tax rate for the first quarter of fiscal year 1995 was
41.6%.
The net loss for the quarter was $272,000 or $.03 per share compared
with net earnings of $274,000 or $.03 per share in the prior year. The
decrease in earnings resulted principally from the lower revenues.
Liquidity and Capital Resources
During the first three months of fiscal 1997, the Company financed its
capital expenditures with equipment term loans and increased borrowings
under its revolving credit agreement. The level of capital spending during
the first quarter, which amounted to $6,178,000, represented nearly one-
half of the Company's planned capital spending for fiscal 1997. At
December 31, 1996, a total of $1,500,000 was available to the Company under
its $30,000,000 revolving credit facility.
Otherwise, there were no material changes in the Company's financial
condition and its liquidity and capital resources since September 30, 1996.
For further details, see pages 3 and 4 of the Company's 1996 Annual Report
to Shareholders on Form 10-K for the year ended September 30, 1996.
FORM 10-Q Page 6 of 6
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are various claims and legal actions pending against the
Company. In the opinion of management, based on the advice of counsel, the
outcome of such claims and litigation will not have a material adverse
effect upon the Company's financial position or results of operations.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
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.
DATE: January 24, 1997 MATLACK SYSTEMS, INC.
(Registrant)
/s/ G. J. Trippitelli
G. J. Trippitelli
President and Chief Executive Officer
/s/ P. J. Bagley
Patrick J. Bagley
Vice President-Finance and Treasurer
Chief Financial Officer
Chief Accounting Officer