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 June 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 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 June 30, 1997 was 8,762,725.
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 nine months ended June 30, 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 Ended Nine Months Ended
June 30, June 30,
1997 1996 1997 1996
Revenues $60,918 $57,600 $172,013 $170,828
Operating expenses 50,907 48,678 145,397 143,659
Depreciation 3,317 3,000 9,815 8,913
Selling and administrative
expenses 4,515 4,626 13,014 13,783
Other income (55) (4) (99) (2)
58,684 56,300 168,127 166,353
Operating earnings 2,234 1,300 3,886 4,475
Interest expense 780 678 2,334 2,220
Earnings before income taxes 1,454 622 1,552 2,255
Income taxes 721 352 768 1,082
Net earnings $ 733 $ 270 $ 784 $ 1,173
Earnings per share $ .08 $ .03 $ .09 $ .13
Average common shares and
equivalents outstanding (000) 8,816 8,874
Dividends paid per share None None None None
FORM 10-Q Page 3 of 7
MATLACK SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET
($000 Omitted)
June 30, September 30,
ASSETS 1997 1996
Current assets
Cash $ 2,435 $ 3,019
Accounts receivable, net of allowance for
doubtful accounts: June-$363;
September-$414 28,585 24,282
Inventories 5,302 5,439
Other current assets 3,535 2,907
Refundable income taxes - 1,114
Deferred income taxes 1,044 1,885
Total current assets 40,901 38,646
Property and equipment, at cost, net of
accumulated depreciation of:
June-$126,276; September-$125,858 89,797 89,267
Other assets 231 214
Total assets $130,929 $128,127
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 8,797 $ 10,047
Accrued liabilities 8,134 10,174
Income taxes payable 514 -
Current maturities of long-term debt 7,007 6,213
Total current liabilities 24,452 26,434
Long-term debt 34,125 29,878
Insurance reserves 2,703 1,716
Other liabilities 2,384 2,023
Deferred income taxes 10,851 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:
June-8,762,725 and
September-8,762,116 8,763 8,762
Additional paid-in capital 10,506 10,553
Retained earnings 37,145 36,361
Total shareholders' equity 56,414 55,676
Total liabilities and
shareholders' equity $130,929 $128,127
FORM 10-Q Page 4 of 7
MATLACK SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
($000 Omitted)
Nine Months Ended
June 30,
1997 1996
Cash flows from operating activities:
Net earnings $ 784 $ 1,173
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 9,832 8,913
Changes in assets and liabilities:
Accounts receivable (4,303) 494
Inventories and other assets (508) 434
Accounts payable and accrued liabilities (3,291) (3,070)
Current and deferred income taxes 920 460
Other, net 1,248 (591)
Net cash provided by operating activities 4,682 7,813
Cash flows from investing activities:
Purchase of property and equipment (11,258) (5,084)
Proceeds from sale of equipment 996 77
Net cash used in investing activities (10,262) (5,007)
Cash flows from financing activities:
Proceeds of long-term debt 38,200 29,410
Repayment of long-term debt (33,158) (31,661)
Exercise of stock options 30 21
Common stock acquired and retired (76) -
Net cash provided by (used in) financing activities 4,996 (2,230)
Net (decrease) increase in cash (584) 576
Cash beginning of period 3,019 2,845
Cash end of period $ 2,435 $ 3,421
Supplemental information:
Interest paid $ 2,373 $ 2,223
Income taxes (recovered) paid $ (152) $ 622
FORM 10-Q Page 5 of 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations: Nine Months Ended June 30, 1997 vs. Nine Months
Ended June 30, 1996
Revenues for the nine months ended June 30, 1997 increased by $1,185,000
(.7%) to $172,013,000 from $170,828,000. The number of loads carried
decreased 2.1% while average miles per load increased 4.7%. Revenues from
the Company's non-bulk trucking subsidiaries continued to increase and
represented more than 20% of revenues in fiscal 1997.
Operating expenses increased by $1,738,000 (1.2%) reflecting the increase
in the level of business. Higher fuel prices caused an increase in fuel
costs of $1,384,000 compared with the same nine months of last fiscal year.
Higher maintenance costs also contributed to the operating expense
increase. Cost containment efforts and a lower level of equipment rentals
helped to mitigate the effects of the higher fuel and maintenance costs.
Depreciation expense increased by $902,000 (10.1%) principally due to the
capital expenditures made during fiscal 1996 and the higher level of
capital spending during the first nine months of fiscal 1997.
Selling and administrative expenses decreased by $769,000 (5.6%) mainly
through the realignment of certain cost centers designed to eliminate
duplicative or non-essential costs.
Interest expense for the nine months ended June 30, 1997 increased by
$114,000 (5.1%) due to the higher level of borrowing during the current
fiscal year combined with slightly higher interest rates.
The effective income tax rates for the nine months ended June 30, 1997
and 1996 were 49.5% and 48.0%, respectively. Non-deductible expenses and
lower earnings caused the increase in the effective tax rate for fiscal
1997.
Net earnings decreased to $784,000 or $.09 per share from $1,173,000 or
$.13 per share in the prior year. The decrease in earnings resulted
principally from higher operating and depreciation expense.
Results of Operations: Quarter Ended June 30, 1997 vs. Quarter Ended June
30, 1996
Revenues for the quarter ended June 30, 1997 were $60,918,000 compared
with $57,600,000 reported in the third quarter last year. The increase of
$3,318,000 (5.8%) resulted from an increase in bulk trucking revenues of
approximately 4% and an increase in all other non-bulk trucking revenues of
approximately 18%.
Operating expenses increased by $2,229,000 (4.6%) reflecting the higher
level of business. Fuel and maintenance costs accounted for approximately
$904,000 of the increase. Driver and mechanics compensation costs
increased by $1,325,000 as a result of the higher level of business
experienced.
Capital expenditures made in fiscal 1996 and during the current year
resulted in an increase in depreciation expense of $317,000 (10.6%) for the
quarter ended June 30, 1997.
FORM 10-Q Page 6 of 7
Selling and administrative expenses decreased by $111,000 (2.4%) as a
result of cost containment efforts and the elimination of certain redundant
expenses. As a percentage of revenues, selling and administrative expenses
were 7.4% and 8.0% in 1997 and 1996, respectively.
Interest expense increased $102,000 (15.0%) primarily caused by a higher
level of borrowings during the current fiscal year compared with last year.
The Company reduced indebtedness by $662,000 between March 31, 1997 and
June 30, 1997.
The effective income tax rates for the quarters ended June 30, 1997 and
1996 were 49.6% and 56.6%, respectively.
Net earnings increased to $733,000 or $.08 per share from $270,000 or
$.03 per share in the prior year. The increase in earnings resulted
principally from the higher level of business.
Liquidity and Capital Resources
During the first nine months of fiscal 1997, the Company financed its net
capital additions of $10,262,000 through the use of new long-term debt of
$5,042,000, net cash provided by operating activities of $4,682,000 and
available cash. At June 30, 1997, a total of $1,074,000 was available to
the Company under its $30,000,000 revolving credit facility.
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.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
FORM 10-Q Page 7 of 7
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: July 23, 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