Page 1 of 7
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 March 31, 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 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 March 31, 1997 was 8,758,846.
FORM 10-Q Page 2 of 7
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 and six months ended March 31, 1997 are
not necessarily indicative of the results that may be expected for the year
ending 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 Six Months Ended
March 31, March 31,
1997 1996 1997 1996
Revenues $56,538 $57,666 $111,095 $113,228
Operating expenses 47,895 48,161 94,490 94,981
Depreciation 3,286 2,978 6,498 5,913
Selling and administrative
expenses 4,142 4,617 8,499 9,157
Other (income) expense (30) (6) (44) 2
55,293 55,750 109,443 110,053
Operating earnings 1,245 1,916 1,652 3,175
Interest expense 814 752 1,554 1,542
Earnings before income taxes 431 1,164 98 1,633
Income taxes 108 535 47 730
Net earnings $ 323 $ 629 $ 51 $ 903
Earnings per share $ .04 $ .07 $ .01 $ .10
Average common shares and
equivalents outstanding (000) 8,811 8,880
Dividends paid per share None None None None
FORM 10-Q Page 3 of 7
MATLACK SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET
($000 Omitted)
March 31, September 30,
ASSETS 1997 1996
Current assets
Cash $ 2,631 $ 3,019
Accounts receivable, net of allowance for
doubtful accounts: March-$221;
September-$414 26,908 24,282
Inventories 5,630 5,439
Other current assets 4,032 2,907
Refundable income taxes 454 1,114
Deferred income taxes 1,135 1,885
Total current assets 40,790 38,646
Property and equipment, at cost, net of
accumulated depreciation of:
March-$125,028; September-$125,858 91,340 89,267
Other assets 243 214
Total assets $132,373 $128,127
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 9,680 $ 10,047
Accrued liabilities 8,298 10,174
Current maturities of long-term debt 7,303 6,213
Total current liabilities 25,281 26,434
Long-term debt 34,491 29,878
Insurance reserves 3,006 1,716
Other liabilities 2,477 2,023
Deferred income taxes 11,448 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:
March-8,758,846 and
September-8,762,116 8,759 8,762
Additional paid-in capital 10,499 10,553
Retained earnings 36,412 36,361
Total shareholders' equity 55,670 55,676
Total liabilities and
shareholders' equity $132,373 $128,127
FORM 10-Q Page 4 of 7
MATLACK SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
($000 Omitted)
Six Months Ended
March 31,
1997 1996
Cash flows from operating activities:
Net earnings $ 51 $ 903
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 6,509 5,913
Changes in assets and liabilities:
Accounts receivable (2,626) (839)
Inventories and other assets (1,346) (477)
Accounts payable and accrued liabilities (2,244) (202)
Current and deferred income taxes 458 188
Other, net 1,700 (351)
Net cash provided by operating activities 2,502 5,135
Cash flows from investing activities:
Purchase of property and equipment (9,310) (3,352)
Proceeds from sale of equipment 772 46
Net cash used in investing activities (8,538) (3,306)
Cash flows from financing activities:
Proceeds of long-term debt 27,400 18,125
Repayment of long-term debt (21,696) (18,832)
Exercise of stock options 20 9
Common stock acquired and retired (76) -
Net cash provided by (used in) financing activities 5,648 (698)
Net (decrease) increase in cash (388) 1,131
Cash beginning of period 3,019 2,845
Cash end of period $ 2,631 $ 3,976
Supplemental information:
Interest paid $ 1,417 $ 1,370
Income taxes (recovered) paid $ (411) $ 542
FORM 10-Q Page 5 of 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations: Six Months Ended March 31, 1997 vs. Six Months
Ended March 31, 1996
Revenues for the first six months ended March 31, 1997 decreased by
$2,133,000 (1.9%) from $113,228,000 to $111,095,000. The number of loads
carried decreased 5.2% while average miles per load increased 3.7%.
Revenues from the Company's non-bulk trucking subsidiaries increased and
now represent more than 20% of revenues.
Operating expenses decreased by $491,000 (.5%) reflecting the decrease
in loads carried. Higher fuel prices caused an increase in fuel costs of
$1,029,000 compared with the same six months of last fiscal year. This
increase was offset in large part by decreased terminal expenses of
$980,000 with the remainder of the operating expense decrease resulting
from the lower level of business and cost containment efforts. Operating
expenses as a percentage of revenues increased to 85.1% in 1997 from 83.9%
in 1996.
Depreciation expense increased by $585,000 (9.9%) principally due to the
capital expenditures made in fiscal 1996 and the first quarter of fiscal
1997.
Selling and administrative expenses decreased by $658,000 (7.2%) mainly
due to the lower level of business and the Company's continued efforts to
control costs. Selling and administrative expenses were 7.7% of revenues
in 1997 and 8.1% in 1996.
Interest expense for the six months ended March 31, 1997 was essentially
the same as last fiscal year.
The effective income tax rates for the six months ended March 31, 1997
and 1996 were 48.0% and 44.7%, respectively. Non-deductible expenses and
lower earnings caused the increase in the effective tax rate for fiscal
1997.
Net earnings decreased to $51,000 or $.01 per share from $903,000 or $.10
per share in the prior year. The decrease in earnings resulted principally
from lower revenues and higher depreciation expense.
Results of Operations: Quarter Ended March 31, 1997 vs. Quarter Ended
March 31, 1996
Revenues for the quarter ended March 31, 1997 were $56,538,000 compared
with $57,666,000 reported in the second quarter last year. The decrease of
$1,128,000 (2.0%) was primarily attributable to a 1.8% decrease in revenue
per mile. The number of loads carried decreased by 5.1% but was offset by
a 4.4% increase in the average miles per load. Non-bulk trucking revenues
continue to increase and were more than 20% of total revenues for the
quarter ended March 31, 1997.
Operating expenses decreased by $266,000 (.6%) reflecting the decrease
in loads carried. Operating expenses as a percentage of revenues increased
to 84.7% in 1997 from 83.5% in 1996.
Capital expenditures made in fiscal 1996 and the first quarter of fiscal
1997 resulted in increased depreciation expense of $308,000 (10.3%) for the
quarter ended March 31, 1997.
FORM 10-Q Page 6 of 7
Selling and administrative expenses decreased by $475,000 (10.3%) mainly
due to the lower level of business. Selling and administrative expenses
were 7.3% of revenues in 1997 and 8.0% in 1996.
Interest expense increased $62,000 (8.2%) primarily caused by a higher
level of borrowings during the current fiscal year compared with last year.
Higher cash flow from operations enabled the Company to reduce indebtedness
by $855,000 between December 31, 1996 and March 31, 1997.
The effective income tax rates for the quarters ended March 31, 1997 and
1996 were 25.1% and 46.0%, respectively. The low level of income tax
benefit recorded in the first fiscal quarter reduced the effective tax rate
for the second fiscal quarter of 1997.
Net earnings decreased to $323,000 or $.04 per share from $629,000 or
$.07 per share in the prior year. The decrease in earnings resulted
principally from the lower revenues and higher depreciation expense.
Liquidity and Capital Resources
During the first six months of fiscal 1997, the Company financed its net
capital additions of $8,538,000 through the use of new long-term debt of
$5,704,000, net cash provided by operating activities of $2,502,000 and
available cash. At March 31, 1997, a total of $2,274,000 was available to
the Company under its $30,000,000 revolving credit facility. Cash flow
from operations is expected to be in excess of capital expenditures during
the second half of the fiscal year.
Otherwise, there have been no material changes in the Company's financial
condition and its liquidity and capital resources since September 30, 1996.
For further details, see the Company's 1996 Annual Report to Shareholders
on Form 10-K for the year ended September 30, 1996.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings to which the Company or any of
its subsidiaries is a party. Certain subsidiaries of the Company are
involved in ordinary routine litigation incidental to the operation of its
business.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
FORM 10-Q Page 7 of 7
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on January 30,
1997. With regard to Proposal No. 1 of the NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON JANUARY 30, 1997 to elect two Class II Directors
to the Board of Directors, John W. Rollins, Jr. and William B. Philipbar,
Jr. were elected. At the meeting, 7,720,091 and 7,720,274 affirmative
votes were cast for John W. Rollins, Jr. and William B. Philipbar, Jr.,
respectively. There were no votes case against either nominee and 36,481
and 36,298 votes were withheld from John W. Rollins, Jr. and William B.
Philipbar, Jr., respectively.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 3(ii) By-Laws
By-Laws of Matlack Systems, Inc. as last amended on January 30,
1997.
(b) 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: April 24, 1997 MATLACK SYSTEMS, INC.
(Registrant)
/s/ G. J. Trippitelli
G. J. Trippitelli
President and Chief Executive Officer
/s/ Patrick J. Bagley
Patrick J. Bagley
Vice President-Finance and Treasurer
Chief Financial Officer
Chief Accounting Officer