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, 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 March 31, 1996 was 8,803,218.
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, 1996 are
not necessarily indicative of the results that may be expected for the year
ending September 30, 1996. 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, 1995.
MATLACK SYSTEMS, INC.
CONSOLIDATED STATEMENT OF EARNINGS
($000 Omitted Except for Per Share Amounts)
Quarter Six Months Ended
March 31, March 31,
1996 1995 1996 1995
Revenues $57,666 $60,750 $113,228 $117,835
Operating expenses 48,161 49,966 94,981 97,790
Depreciation 2,978 2,532 5,913 4,715
Selling and administrative
expenses 4,617 4,727 9,157 9,372
Interest expense 752 881 1,542 1,589
Other (income) expense (6) (95) 2 (104)
56,502 58,011 111,595 113,362
Earnings before income taxes 1,164 2,739 1,633 4,473
Income taxes 535 1,137 730 1,857
Net earnings $ 629 $ 1,602 $ 903 $ 2,616
Earnings per share $ .07 $ .18 $ .10 $ .29
Average common shares and
equivalents outstanding (000) 8,880 8,926
Dividends paid per share None None None None
<PAGE>
FORM 10-Q Page 3 of 7
MATLACK SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET
($000 Omitted)
March 31, September 30,
ASSETS 1996 1995
Current assets
Cash $ 3,976 $ 2,845
Accounts receivable, net of allowance for
doubtful accounts: March-$400;
September-$391 25,527 24,688
Inventory of tires, parts and supplies 5,689 6,307
Other current assets 4,166 3,071
Deferred income taxes 1,542 1,586
Total current assets 40,900 38,497
Property and equipment, at cost, net of
accumulated depreciation of:
March-$121,069; September-$115,351 90,845 93,454
Other assets 23 23
Total assets $131,768 $131,974
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 10,607 $ 10,603
Accrued liabilities 8,940 9,146
Income taxes payable 206 53
Current maturities of equipment financing
obligations and long-term debt 6,220 6,169
Total current liabilities 25,973 25,971
Equipment financing obligations 30,637 31,065
Long-term debt 1,575 1,905
Insurance reserves 1,269 1,795
Other liabilities 2,330 2,157
Deferred income taxes 11,540 11,549
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-8,803,218 and
September-8,800,050 8,803 8,800
Capital in excess of par value 10,899 10,894
Retained earnings 38,742 37,838
Total shareholders' equity 58,444 57,532
Total liabilities and shareholders' equity $131,768 $131,974
<PAGE>
FORM 10-Q Page 4 of 7
MATLACK SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
($000 Omitted)
Six Months Ended
March 31,
1996 1995
Cash flows from operating activities:
Net earnings $ 903 $ 2,616
Reconciliation of net earnings to net
cash flows from operating activities:
Depreciation 5,913 4,715
Changes in assets and liabilities:
Accounts receivable (839) (1,007)
Inventories and other assets (477) (1,224)
Accounts payable and accrued liabilities (202) (2,928)
Current and deferred income taxes 188 612
Other, net (351) (217)
Net cash provided by operating activities 5,135 2,567
Cash flows from investing activities:
Purchase of property and equipment (3,352) (18,441)
Proceeds from sale of equipment 46 2,516
Net cash used in investing activities (3,306) (15,925)
Cash flows from financing activities:
Proceeds of equipment financing obligations 18,125 32,353
Repayment of equipment financing obligations (18,502) (21,418)
Repayment of long-term debt (330) (347)
Exercise of stock options 9 179
Net cash (used in) provided by financing activities (698) 10,767
Net increase (decrease) in cash 1,131 (2,591)
Cash beginning of period 2,845 5,039
Cash end of period $ 3,976 $ 2,448
Supplemental information:
Interest paid $ 1,370 $ 1,528
Income taxes paid $ 542 $ 1,245
<PAGE>
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, 1996 vs. Six Months
Ended March 31, 1995
Revenues for the first six months ended March 31, 1996 decreased by
$4,607,000 (3.9%) from $117,835,000 to $113,228,000. The number of loads
carried remained essentially the same in both six-month periods, while the
revenue per load was lower in the current fiscal year. The Company's
ancillary service revenues including Brite-Sol cleaning and international
container operations increased during the current six-month period.
Operating expenses decreased by $2,809,000 (2.9%) reflecting the decrease
in revenues. Operating expenses as a percentage of revenues increased to
83.9% in 1996 from 83.0% in 1995.
Depreciation expense increased by $1,198,000 (25.4%) principally due to
the increase in capital expenditures associated with the Company's tractor
replacement program and several major new facilities completed in fiscal
year 1995.
Selling and administrative expenses decreased by $215,000 (2.3%) mainly
due to the lower level of business. Selling and administrative expenses
were 8.1% of revenues in 1996 and 8.0% in 1995.
Interest expense decreased by $47,000 (3.0%) mainly due to a reduction
of borrowings and lower interest rates during the current fiscal year.
The effective income tax rates for the six months ended March 31, 1996
and 1995 were 44.7% and 41.5%, respectively.
Net earnings decreased to $903,000 or $.10 per share from $2,616,000 or
$.29 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, 1996 vs. Quarter Ended
March 31, 1995
Revenues for the quarter ended March 31, 1996 decreased by $3,084,000
(5.1%) to $57,666,000 from $60,750,000 reported in the second quarter last
year. Severe winter weather conditions, a slower economy and, most
recently, the General Motors strike adversely affected revenue during the
second quarter.
Operating expenses decreased by $1,805,000 (3.6%) reflecting the decrease
in revenues. Operating expenses were affected by higher fuel prices during
the quarter. Operating expenses as a percentage of revenues increased to
83.5% in 1996 from 82.2% in 1995.
Depreciation expense increased by $446,000 (17.6%) principally due to the
increase in capital expenditures during fiscal year 1995.
Selling and administrative expenses decreased by $110,000 (2.3%) mainly
due to the lower level of business. Selling and administrative expenses
were 8.0% of revenues in 1996 and 7.8% in 1995.
Interest expense decreased $129,000 (14.6%) due to reduced borrowings and
lower interest rates during the current fiscal year.
FORM 10-Q Page 6 of 7
The effective income tax rates for the quarters ended March 31, 1996 and
1995 were 46.0% and 41.5%, respectively. The increased effective tax rate
was caused by the greater effect the non-deductible expenses had upon the
computation of taxable income relative to the level of pretax earnings.
Net earnings decreased to $629,000 or $.07 per share from $1,602,000 or
$.18 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 1996, the Company financed its
capital additions through a combination of cash flows from operations and
available cash. At March 31, 1996, a total of $5,179,000 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, 1995.
For further details, see pages 3 and 4 of the Company's 1995 Annual Report
to Shareholders on Form 10-K for the year ended September 30, 1995.
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, it is only
remotely likely that the ultimate resolution of these claims and actions
will be material.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on January 25,
1996. With regard to Proposal No. 1 of the NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON JANUARY 25, 1996 to elect two Class I Directors
to the Board of Directors, Patrick J. Bagley and Gerard J. Trippitelli were
elected. At the meeting, 8,278,004 and 8,276,257 affirmative votes were
cast for Patrick J. Bagley and Gerard J. Trippitelli, respectively. There
were no votes case against either nominee and 42,469 and 44,216 votes were
withheld from Patrick J. Bagley and Gerard J. Trippitelli, respectively.
The Company's 1995 Stock Option Plan was approved as proposed by Proposal
No. 2 of the NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY
25, 1996. At the meeting, 5,183,375 affirmative votes and 73,460 negative
votes were cast with regard to Proposal No. 2, while 16,818 votes were
withheld.
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: April 24, 1996 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
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