<PAGE> 1
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 SECURITY
EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1998
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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: 0-24180
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MTL Inc.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-3239073
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(State or other jurisdiction of incorporation I.R.S. Employer
or organization) Identification No.)
- ------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 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.
(X) Yes ( ) No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
( ) Yes ( ) No
APPLICABLE ONLY TO CORPORATE USERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 31, 1998
- ------------------------------ ----------------------------------
(Common Stock, $.01 par value) 4,552,218
<PAGE> 2
MTL INC. AND SUBSIDIARIES
INDEX
Part I Financial Information Page No.
Item 1 Financial Statements (unaudited)
Condensed consolidated balance sheets -
March 31, 1998 and December 31, 1997 3-4
Condensed consolidated statements of income -
three months ended March 31, 1998
and 1997 5
Condensed consolidated statements of cash flows -
Three months ended March 31, 1998 and 1997 6
Notes to condensed consolidated financial
statements 7-8
Item 2 Management's Discussion and Analysis
Of Financial Condition and Results
of Operations
Management's discussion and analysis of financial
condition and results of operations 9-10
Part II Other Information
Item 1 Legal proceedings 11
Item 6 Exhibits
Reports on Form 8-K 11
Signatures 12
<PAGE> 3
FORM 10-Q
PART 1 - FINANCIAL INFORMATION
MTL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
(Unaudited) *
----------- ------------
<C> <C>
<S>
ASSETS
Current Assets
Cash $ 1,547 $ 1,377
Accounts receivable 41,030 40,152
Allowance for doubtful accounts (2,131) (1,980)
Current maturities of other receivables 1,163 1,163
Notes receivable 582 547
Inventories 637 958
Prepaid expenses 3,886 2,822
Prepaid tires 4,431 4,324
Deferred income taxes 2,295 2,686
Other 127 127
-------- --------
Total Current assets 53,567 52,176
Property, plant and equipment 219,400 211,530
Less - accumulated depreciation and
amortization (79,478) (75,020)
-------- --------
139,922 136,510
Other Assets 5,373 5,350
-------- --------
$198,862 $194,036
======== ========
</TABLE>
<PAGE> 4
FORM 10-Q
PART 1 - FINANCIAL INFORMATION
MTL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
(continued)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
(Unaudited) *
---------- ----------
<C> <C>
<S>
Current Liabilities
Current maturities of indebtedness $ 1,799 $ 2,307
Accounts payable and accrued expenses 14,120 15,201
Independent contractors payable 6,925 6,432
Other current liabilities 5,240 4,906
Income tax payable 1,436 798
------- -------
Total Current liabilities 29,520 29,644
Long term debt, less current maturities 54,059 52,433
Capital lease obligations, less current
maturities 325 358
Other long term obligations 4,896 5,065
Deferred income taxes 27,808 27,004
Commitments and contingent liabilities
Stockholders' equity
Common stock 45 45
Other stockholders' equity 82,209 79,487
------- -------
Total stockholders' equity 82,254 79,532
------- -------
$198,862 $194,036
======== ========
</TABLE>
* Condensed from audited financial statements.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 5
FORM 10-Q
PART 1 - FINANCIAL INFORMATION
MTL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
March 31,
1998 1997
------ ------
<C> <C>
<S>
Operating Revenues
Transportation $67,178 $62,838
Other 5,201 4,546
-------- --------
72,379 67,384
Operating Expenses
Purchased transportation 44,347 42,478
Depreciation and amortization 4,896 3,871
Other operating expenses 17,782 16,348
-------- --------
Operating income 5,354 4,687
Interest expense, net 768 737
Other expense (7) (10)
-------- --------
Income before taxes 4,593 3,960
Income taxes 1,884 1,626
-------- --------
Net income $ 2,709 $ 2,334
======== ========
</TABLE>
Weighted average number of
shares outstanding
Basic 4,551 4,526
Diluted 4,781 4,686
Net income per share
Basic $0.60 $0.52
Diluted $0.57 $0.50
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 6
FORM 10-Q
PART 1 - FINANCIAL INFORMATION
MTL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997
------- ------
<C> <C>
<S>
Cash provided by (used for)
Operating activities:
Net Income $2,709 $2,334
Adjustments for non cash charges 6,078 4,686
Changes in Assets and liabilities (1.373) (354)
-------- --------
Net cash provided by operating
activities 7,414 6,666
Investing activities:
Repayment from (Advance to) investee 0 (533)
Other Investments (357) 174
Capital expenditures (8,357) (5,011)
Proceeds from asset dispositions 258 230
Other 239 0
-------- --------
Net cash used for investing
activities (8,217) (5,140)
Financing activities:
Proceeds from issuance of long
term debt 1,973 0
Payment of obligations (972) (1,291)
Issuance of common stock - net 0 50
------- --------
Net cash (used in) provided by
financing activities 1,001 (1,241)
------- -------
Net Increase in cash 198 285
Effect of exchange rate changes on cash (28) (31)
Cash, beginning of period 1,377 695
-------- --------
Cash, end of period $1,547 $ 949
======== ========
Cash payments for:
Interest $ 873 $ 899
Income taxes $ 269 $ 95
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 7
FORM 10-Q
Item 1. Financial Statements
MTL INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The accompanying unaudited condensed, consolidated financial statements of MTL
Inc. (the Company) have been prepared in accordance with the instructions to
Form 10-Q and do not include all of the information and notes 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.
For further information, refer to the consolidated financial statements and
notes thereto for the year ended December 31, 1997, included in the Company's
Form 10-K dated March 23, 1998.
Operating results for the quarter ended March 31, 1998 are not necessarily
indicative of the results that may be expected for the entire fiscal year.
2. ADDITIONAL DISCLOSURES:
On February 10, 1998, the Company entered into an agreement with Sombrero
Acquisition Cororation (Sombrero), an affiliate of Apollo Management LP
(Apollo), pursuant to which Sombrero will merge with the Company. According
to the terms of the merger agreement, stockholders of the Company will
receive $40.00 per share in cash. The total transaction value is approximately
$250 million, including outstanding stock options, fees and approximately
$54 million in debt.
The transaction will be subject to the customary conditions, including the
affirmative vote of the holders of a majority of the outstanding stock of
the Company.
The Company will be funded by an equity investment of approximately $70 million
from Apollo and members of the Company's existing management. Approximately
$200 million of senior subordinated debt will be used to finance the
acquisition. Additionally, a $100 million revolving credit facility will be
available to the Company for working capital and acquisition purposes.
<PAGE> 8
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income"
(SFAS 130). SFAS 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in the financial statements and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in-capital in the stockholder's equity
section of the consolidated balance sheets for annuual financial statements.
The Company adopted SFAS 130 in 1998 and accordingly, Comprehensive Income is
as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
------- --------
<C> <C>
<S>
Net Income $ 2,709 $ 2,334
Other comprehensive income, net of tax:
Foreign currency translation adjustments 19 (17)
------- --------
Comprehensive Income $ 2,728 $ 2,317
======= ========
</TABLE>
In June 1997, the Financial Accounting Stantards Board released Statement of
Financial Standards No.131 (SFAS 131) "Disclosures about Segments of an
Enterprise and Related Information". SFAS 131 requires that a public business
enterprise report financial and descriptive information about its reportable
segments. The Company has not considered the the effects of SFAS 131 on the
consolidated financial statements.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" (SOP 98-1). SOP 98-1 provides guidence
for capitalizing and expensing the costs of computer software developed or
obtained for internal use. SOP 98-1 is effective for financial statements
for fiscal years beginning after December 15, 1998.
The effect of SOP 98-1 on the Company has not been determined at this time.
<PAGE> 9
FORM 10-Q
PART 1 - FINANCIAL INFORMATION
MTL INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITON AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FIRST QUARTER 1998 COMPARED TO THE FIRST QUARTER 1997
The Company's operating results are affected by shipments for the bulk
chemical industry. Shipments of chemical products are in turn affected by
many other industries, including consumer and industrial products, automotive,
paint and coatings, and paper, and tend to vary with changing economic
conditions. The Company also participates in the shipment of bulk food
products through its food-grade division. The volume of food products and
certain other consumer products tends to be subject to fewer fluctuations due
to swings in economic activity.
For the quarter ended March 31, 1998, revenues totaled $72.4 million, a 7.4%
increase over revenues of $67.4 million for the same period in 1997. The
Company attributes its increased revenue to sustained strength in chemical
industry shipments nationwide and continued implementation of both its
affiliate and core carrier strategies.
For the quarter ended March 31, 1998, operating income totaled $5.4 million,
representing a 14.2% increase compared to $4.7 million for the same period in
1997. This increase is primarily due to the increase in sales. The operating
ratio decreased by 0.44% due to continued cost containment emphasis.
Net interest increased slightly to $768,000 in the quarter ended March 31,
1998, from $737,000 in the quarter ended March 31, 1997.
Pretax income for the quarter ended March 31, 1998, totaled $4.6 million, a
16.0% increase compared to $4.0 million for the same period in 1997. Pretax
income increased primarily due to the increase in operating income year to
year.
For the quarter ended March 31, 1998, the Company's net income and earnings
per share were $2.7 million and $0.57 respectively, compared to $2.3 million
and $0.50 respectively for the same period in 1997. Weighted average shares
outstanding increased from 4,686,000 in the first quarter of 1997 to 4,781,000
in the first quarter of 1998. As of March 31, 1998, a total of 4,552,218
shares were outstanding.
<PAGE> 10
FORM 10-Q
PART 1 - FINANCIAL INFORMATION
MTL INC. AND SUBSIDIARIES
Liquidity and Capital Resources
The Company's primary sources of liquidity are funds provided by operations
and borrowings under various credit arrangements with financial institutions.
Net cash provided by operating activities totaled $7.4 million for the three
month period ending March 31, 1998, versus $6.7 million for the same period in
1996. The cash provided by financing activities totaled $1.0 million during
the three month period ending March 31, 1998, compared to $1.2 million used in
financing activities during the comparable period in 1997.
Capital used for investing activities totaled $8.2 million for the three month
period ended March 31, 1998, compared to $5.1 million used for the comparable
1997 period. Capital was used primarily to acquire additional revenue
equipment to expand the Company's operations.
The Company maintains a $50,000,000 unsecured revolving credit facility with a
group of banks maturing in May of 2000. As of March 31, 1998, the Company has
available $37.3 million under this revolving credit facility. Additionally,
the Company has maintained a $25,000,000,10-year fixed rate private placement
of debt since February 2, 1996. The Company also maintains a CDN $23.5 million
credit facility on behalf of Levy.
The Company's management believes that borrowings under these loan agreements,
together with available cash and internally generated funds, will be
sufficient to fund MTL's continued growth and meet its working capital
requirements for the foreseeable future.
<PAGE> 11
FORM 10-Q
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
Reference is made to Item 3 on page 11 of the Company's Form 10-K for the
year ended December 31, 1997. There have been no material changes in the
Company's legal proceedings since this filing.
ITEM 6. (a) Exhibits: 27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K:
1.In a Form 8-K dated February 25, 1998, the Company reported
a purchase agreement wherein an affiliate of Apollo Management
will merge with the Company and the shareholders of the
Company will receive $40.00 per share.
2. Form 10-K for the year ended December 31,1997 (File No 0-24180)
dated March 23, 1998.
<PAGE> 12
Signatures
MTL INC.
-------------------------------------------
May 7, 1998 /S/ CHARLES J. O'BRIEN, JR.
-------------------------------------------
CHARLES J. O'BRIEN, JR., (CEO, PRESIDENT)
(DULY AUTHORIZED OFFICER)
May 7, 1998 /S/ RICHARD J. BRANDEWIE
-------------------------------------------
RICHARD J. BRANDEWIE, (TREASURER)
(PRINCIPAL FINANCIAL OFFICER)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1547
<SECURITIES> 0
<RECEIVABLES> 41030
<ALLOWANCES> 2131
<INVENTORY> 637
<CURRENT-ASSETS> 53567
<PP&E> 219400
<DEPRECIATION> 79478
<TOTAL-ASSETS> 198862
<CURRENT-LIABILITIES> 29520
<BONDS> 0
0
0
<COMMON> 45
<OTHER-SE> 82809
<TOTAL-LIABILITY-AND-EQUITY> 198862
<SALES> 72379
<TOTAL-REVENUES> 72379
<CGS> 0
<TOTAL-COSTS> 67025
<OTHER-EXPENSES> (7)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 768
<INCOME-PRETAX> 4593
<INCOME-TAX> 1884
<INCOME-CONTINUING> 2709
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2709
<EPS-PRIMARY> .60
<EPS-DILUTED> .57
</TABLE>
