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, 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 June 30, 1996 was 8,808,168.
<PAGE>
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, 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 to Shareholders and 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 Ended Nine Months Ended
June 30, June 30,
1996 1995 1996 1995
Operating revenues $57,600 $61,301 $170,828 $179,136
Operating expenses 48,678 49,546 143,659 147,336
Depreciation 3,000 2,630 8,913 7,345
Selling and administrative
expenses 4,626 4,497 13,783 13,869
Interest expense 678 842 2,220 2,431
Other (income) (4) (3) (2) (107)
56,978 57,512 168,573 170,874
Earnings before income taxes 622 3,789 2,255 8,262
Income taxes 352 1,551 1,082 3,408
Net earnings $ 270 $ 2,238 $ 1,173 $ 4,854
Earnings per share $ .03 $ .25 $ .13 $ .54
Average common shares and
equivalents outstanding (000) 8,874 8,923
Dividends paid per common share None None None None
<PAGE>
FORM 10-Q Page 3 of 7
MATLACK SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET
($000 Omitted)
June 30, September 30,
ASSETS 1996 1995
Current assets
Cash $ 3,421 $ 2,845
Accounts receivable, net of allowance for
doubtful accounts: June-$402;
September-$391 24,194 24,688
Inventory of tires, parts and supplies 5,534 6,307
Other current assets 3,411 3,071
Deferred income taxes 1,576 1,586
Total current assets 38,136 38,497
Property and equipment, at cost, net of
accumulated depreciation of:
June-$123,895; September-$115,351 89,550 93,454
Other assets 22 23
Total assets $127,708 $131,974
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 8,401 $ 10,603
Accrued liabilities 8,278 9,146
Income taxes payable 409 53
Current maturities of equipment financing
obligations and long-term debt 6,220 6,169
Total current liabilities 23,308 25,971
Equipment financing obligations 29,490 31,065
Long-term debt 1,178 1,905
Insurance reserves 1,358 1,795
Other liabilities 2,005 2,157
Deferred income taxes 11,643 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:
June-8,808,168 and
September-8,800,050 8,808 8,800
Capital in excess of par value 10,907 10,894
Retained earnings 39,011 37,838
Total shareholders' equity 58,726 57,532
Total liabilities and shareholders' equity $127,708 $131,974
<PAGE>
FORM 10-Q Page 4 of 7
MATLACK SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
($000 Omitted)
Nine Months
Ended June 30,
1996 1995
Cash flows from operating activities:
Net earnings $ 1,173 $ 4,854
Reconciliation of net earnings to net
cash flows from operating activities:
Depreciation 8,913 7,345
Changes in assets and liabilities:
Accounts receivable 494 1,822
Inventories and other assets 434 185
Accounts payable and accrued liabilities (3,070) (6,074)
Current and deferred income taxes 460 1,439
Other, net (591) (624)
Net cash provided by operating activities 7,813 8,947
Cash flows from investing activities:
Purchase of property and equipment (5,084) (24,732)
Proceeds from sale of equipment 77 2,757
Net cash used in investing activities (5,007) (21,975)
Cash flows from financing activities:
Proceeds of equipment financing obligations 29,410 36,752
Repayment of equipment financing obligations (30,934) (25,889)
Repayment of long-term debt (727) (744)
Proceeds of stock options exercised 21 179
Net cash (used in) provided by
financing activities (2,230) 10,298
Net increase (decrease) in cash 576 (2,730)
Cash beginning of period 2,845 5,039
Cash end of period $ 3,421 $ 2,309
Supplemental information:
Interest paid $ 2,223 $ 2,480
Income taxes paid $ 622 $ 1,739
<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: Nine Months Ended June 30, 1996 vs. Nine Months
Ended June 30, 1995
Revenues for the nine months ended June 30, 1996 decreased by
$8,308,000 (4.6%) from $179,136,000 to $170,828,000. Within the
Company's domestic bulk trucking operations, the number of loads carried
remained essentially the same in both nine-month periods. However, the
revenue per load was lower in the current fiscal year due to the
competitive pricing conditions the Company has experienced in its
services to the chemical industry. The Company's ancillary service
revenues increased during the current nine-month period but were not
sufficient to offset the decline in domestic bulk trucking revenues.
Operating expenses decreased by $3,677,000 (2.5%) reflecting the
decrease in revenues and a significant reduction in the Company's
utilization of leased operators. Operating expenses increased to 84.1%
of revenue in 1996 compared with 82.2% in 1995.
Depreciation expense increased by $1,568,000 (21.3%) 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 $86,000 (.6%) mainly
due to the lower level of business. Selling and administrative expenses
were 8.1% of revenues in 1996 and 7.7% in 1995.
Interest expense decreased by $211,000 (8.7%) due to a reduction of
borrowings and lower interest rates during the current fiscal year.
The effective income tax rates for the nine months ended June 30, 1996
and 1995 were 48.0% and 41.2%, respectively. The higher effective tax
rate was caused by non-deductible expenses having a greater effect on the
computation of taxable income relative to the level of pretax earnings in
1996.
Net earnings decreased to $1,173,000 or $.13 per share from $4,854,000
or $.54 per share in the prior year. The decrease in earnings resulted
principally from lower revenues and higher depreciation expense.
Results of Operations: Quarter Ended June 30, 1996 vs. Quarter Ended
June 30, 1995
Revenues for the quarter ended June 30, 1996 decreased by $3,701,000
(6.0%) to $57,600,000 from $61,301,000 reported in the third quarter last
year. A slower economy and competitive pricing conditions continued to
adversely affect revenues.
Operating expenses decreased by $868,000 (1.8%) 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 84.5% in 1996 from 80.8% in 1995.
FORM 10-Q Page 6 of 7
Depreciation expense increased by $370,000 (14.1%) principally due to
the increase in capital expenditures during fiscal year 1995.
Selling and administrative expenses increased by $129,000 (2.9%) and
were 8.0% of revenues in 1996 and 7.3% in 1995.
Interest expense decreased by $164,000 (19.5%) due to reduced
borrowings and lower interest rates during the current fiscal year.
The effective income tax rates for the quarters ended June 30, 1996 and
1995 were 56.6% and 40.9%, respectively. The higher effective tax rate
was caused by non-deductible expenses having a greater effect on the
computation of taxable income relative to the level of pretax earnings in
1996.
Net earnings decreased to $270,000 or $.03 per share from $2,238,000
or $.25 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 nine months of fiscal 1996, the Company financed its
capital additions through a combination of cash flows from operations and
available cash. In addition, the Company reduced its equipment financing
obligations and long-term debt by $2,251,000 during the same nine-month
period. At June 30, 1996, a total of $5,074,000 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,
1995. For further details, see page 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
None.
FORM 10-Q Page 7 of 7
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: July , 1996 MATLACK SYSTEMS, INC.
(Registrant)
______________________________________
Gerard J. Trippitelli
President and Chief Executive Officer
______________________________________
Patrick J. Bagley
Vice President-Finance and Treasurer
Chief Financial Officer
Chief Accounting Officer
<PAGE>
FORM 10-Q Page 7 of 7
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: July , 1996 MATLACK SYSTEMS, INC.
(Registrant)
/s/ Gerard J. Trippitelli
Gerard 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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<PERIOD-END> JUN-30-1996
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<RECEIVABLES> 24,596
<ALLOWANCES> 402
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