<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, 1999
-----------------------------------------------
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
-------------------------------------------------------
MTL Inc.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-3239073
- ------------------------------------------------------------------------------
(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, 1999
- ------------------------------ ----------------------------------
(Common Stock, $.01 par value) 2,140,000
<PAGE> 2
MTL INC. AND SUBSIDIARIES
INDEX
Part I Financial Information Page No.
Item 1 Financial Statements
Condensed consolidated balance sheets -
March 31, 1999 (unaudited) and December 31, 1998 3-4
Condensed consolidated statements of operations -
three months ended March 31, 1999 and 1998 (unaudited) 5-6
Condensed consolidated statements of cash flows -
three months ended March 31, 1999 and 1998 (unaudited) 7
Notes to condensed consolidated financial
statements 8-19
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 20-22
Part II Other Information
Item 1 Legal proceedings 23
Item 4 Submission of matters to a vote of
security holders 23
Item 6 Exhibits
Reports on Form 8-K 23
Signatures 24
<PAGE> 3
FORM 10-Q
PART 1 - FINANCIAL INFORMATION
MTL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
(Unaudited) *
----------- ------------
<C> <C>
<S>
ASSETS
Current Assets
Cash $ 1,160 $ 85
Restricted cash - 10,867
Accounts receivable 97,941 92,833
Allowance for doubtful accounts (4,018) (3,935)
Current maturities of other receivables 1,260 1,260
Notes receivable 733 784
Inventories 2,071 2,001
Prepaid expenses 8,849 7,751
Prepaid tires 7,734 7,364
Income tax receivable 3,979 4,940
Deferred income taxes 13,772 11,559
Other 5,177 3,793
--------- ---------
Total Current assets 138,658 139,302
Property, plant and equipment 324,950 327,496
Less - accumulated depreciation and
amortization (103,130) (94,274)
--------- ----------
221,820 233,222
Intangibles and goodwill, net 136,299 137,532
Insurance proceeds receivable 30,965 45,916
Other Assets 26,274 27,274
-------- ---------
$554,016 $583,246
======== =========
</TABLE>
* Condensed from audited financial statements
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 4
FORM 10-Q
PART 1 - FINANCIAL INFORMATION
MTL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(continued)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
(Unaudited) *
---------- ----------
<C> <C>
<S>
Current Liabilities
Current maturities of indebtedness $ 2,949 $ 3,461
Accounts payable and accrued expenses 52,005 64,750
Independent contractors payable 13,123 8,339
Other current liabilities 9,020 10,362
Income tax payable 1,685 1,546
------- -------
Total Current liabilities 78,782 88,458
Long term debt, less current maturities 289,609 297,662
Capital lease obligations, less current
maturities 191 208
Subordinated debt, 140,000 140,000
Environmental liabilities 66,583 69,956
Other long term obligations 9,763 9,963
Accrued loss and damage claims 3,290 3,290
Minority interest in subsidiaries 4,829 4,825
Manditorily redeemable preferred stock 11,356 15,994
Redeemable common stock (30,239 shares) 1,210 1,210
Stockholders' equity (deficit)
Common stock 21 20
Additional paid-in-capital 105,262 104,807
Retained earnings 34,526 38,495
Stock recapitalization (189,589) (189,589)
Other stockholders' equity (419) (655)
Note receivable (1,398) (1,398)
--------- ---------
Total stockholders' equity (deficit) (51,597) (48,320)
--------- --------
$554,016 $583,246
========= ========
</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 OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 1998
------- --------
<C> <C>
<S>
Operating Revenues
Transportation $128,854 $ 67,178
Other 15,659 5,201
-------- --------
144,513 72,379
Operating Expenses
Purchased transportation 78,834 44,347
Depreciation and amortization 16,109 4,896
Compensation - options - -
Other operating expenses 45,500 17,782
--------- --------
Operating income 4,070 5,354
Interest expense, net 9,770 768
Other (income) expense (35) (7)
--------- ---------
Income (loss) before taxes (5,665) 4,593
Income taxes (2,101) 1,884
Minority interest 5 -
--------- ---------
Net income (loss) before
extraordinary item (3,569) 2,709
Extraordinary item,
net of tax - -
--------- ---------
Net income (loss) $(3,569) $ 2,709
Preferred stock dividends
and accretions (401) -
-------- ---------
Net income (loss) attributable
to common shareholders $(3,970) $2,709
======== =======
</TABLE>
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 INCOME
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 1998
------ -----
<C> <C>
<S>
Per Share Data:
Basic earnings per common share
Net income (loss) before
extraordinary item $(1.89) $ 0.60
Extraordiary item (0.00) -
------ ------
Net earnings (loss) per share $(1.89) $ 0.60
====== =======
Weighted average shares outstanding 2,105 4,551
====== ======
Diluted earnings per common per share
Net income (loss) before
extraordinary item N/A $ 0.57
Extraordinary item N/A _
------ -------
Net earnings per share N/A $ 0.57
====== =======
Weighted average shares
outstanding N/A 4,781
====== ======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 7
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,
1999 1998
------- ------
<C> <C>
<S>
Cash provided by (used for)
Operating activities:
Net income (loss) ($ 3,569) $ 2,709
Adjustments for non cash charges 14,311 6,078
Changes in assets and liabilities 2,146 (1,373)
-------- --------
Net cash provided by operating
activities 12,888 7,414
Investing activities:
Other investments 1 (357)
Acquisition of subsidiary - -
Capital expenditures (4,499) (8,357)
Proceeds from asset dispositions 1,184 258
Other (14) 239
-------- --------
Net cash provided by (used for)
investing activities (3,328) (8,217)
Financing activities:
Proceeds from issuance of long
term debt - 1,973
Payment of obligatios (8,851) (972)
Issuance of common stock 456 -
Issuance of preferred stock
Recapitalization expenditures - -
Other (77) -
-------- --------
Net cash provided by (used in)
financing activities (8,472) 1,001
-------- ---------
Net Increase (decrease) in cash 1,088 198
Effect of exchange rate changes on cash (13) (28)
Cash, beginning of period 85 1,377
--------- ---------
Cash, end of period $ 1,160 $ 1,547
======== =========
Cash payments (refunds received) for:
Interest $ 6,598 $ 873
Income taxes $ (749) $ 269
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 8
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
adjustments and 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, 1998, included in the Company's
Form 10-K dated March 30, 1999.
Operating results for the quarter ended March 31, 1999 are not necessarily
indicative of the results that may be expected for the entire fiscal year.
2. RECAPITALIZATION:
On June 9, 1998, the Company completed the transactions contemplated by an
agreement with Sombrero Acquisition Corporation ("Sombrero"), an affiliate of
Apollo Management L.P.("Apollo"), pursuant to which Sombrero merged with and
into the Company. According to the terms of the merger agreement, the stock-
holders of the Company (other than certain management shareholders) received
$40.00 per share in cash. The total transaction value was approximatley
$250.0 million, including payment for outstanding stock options and payment of
approximately $51.0 million in debt.
The transaction was accounted for as a leveraged recapitalization. The effect
of the recapitalization on stockholders' equity was a charge of approximatley
$189 million.
The recapitalization was funded by a cash equity investment of approximately
$62.3 million from Apollo, members of the Company's existing management and
third party financing sources. $140.0 million of senior subordinated debt was
used to finance the acquisition along with $60.0 million dollars of senior
secured bank debt. Additionally, a $75 million revolving credit facility is
currently available to the Company for working capital and acquisition purposes.
<PAGE>9 FORM 10 - Q
ITEM 1 - Financial Statements
MTL INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)-(continued)
3. CHEMICAL LEAMAN ACQUISITION:
On August 28, 1998, the Company completed its agreement and plan of merger
with Chemical Leaman Corporation ("CLC") and the shareholders of CLC in a
transaction accounted for as a purchase.
The Company completed a tender offer to purchase CLC's 10 3/8 % senior notes
due 2005 at a puchase price equal to:
(i) the present value on the payment date of $1,051.88 per note (the amount
payable on June 15, 2001, which is the first date on which the notes are
redeemable)("the Earliest Redemption Date")) and all future interest payments
payable up to the Earliest Redemption Date, determined on the basis of a
yield to the Earliest Redemption Date equal to the sum of (x) the yield on
the 5 5/8 percent U.S. Treasury Notes due May 15, 2001, based on the bid
price for such security as of 2:00 p.m., New York City time, on August 19,
1998, the third business day immediately preceeding the scheduled expiration
date of the tender offer, plus (y) 75 basis points less (ii) a consent payment
of $20.00 per $1,000.00 principal amount on notes for which a valid consent to
certain matters relating to the notes is received in connection with the
tender offer.
The sources of funds to consumate the merger included additional loans of
$235.0 million, preferred equity of approximately $20.0 million and common
equity of $12.0 million.
Approximately $136 million of the purchase price has been allocated to
goodwill which is being amortized over a 40 year period.
On February 3, 1999 the Company entered into a settlement agreemeent with the
former shareholders of CLC regarding the remaining consideration owed in the
CLC acquisition. The agreement called for a payment of $3 million of restricted
cash to the former shareholders as a settlement of final payment of amounts
owed under the merger agreement and a cancellation of the 5,000 preferred
shares issued in connection with the acquisition. This agreement resulted in
the recording of additional goodwill of approximatley $3 million.
Giving effect to the CLC acquisition as of January 1, 1998 on a proforma
basis results in the following: revenue three months ending March 31, 1998
$157.3 million, net income three months ending March 31, 1998 $3.6 million,
basic earnings per share three months ended March 31, 1998 $1.51.
4. NEW ACCOUNTING PRONOUNCEMENTS:
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 stockholders' 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:
<PAGE>10
FORM 10 - Q
ITEM 1 - Financial Statements
MTL INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)-(continued)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
------- --------
<C> <C>
<S>
Net income (loss) $(3,569) $ 2,709
Other comprehensive income, net of tax:
Foreign currency translation adjustments 235 19
-------- --------
Comprehensive income (loss) $(3,334) $ 2,728
======== ========
</TABLE>
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
guidance 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 Company
has adopted SOP 98-1 for the period ending December 31, 1999.
5. DERIVATIVES
The Company utilizes derivative financial instruments to reduce its exposure
to market risks from changes in interest rates and foreign exchange rates.
The instruments primarily used to mitigate these risks are interest rate
swaps and foreign exchange contracts. All derivative instruments held by the
Company are designed as hedges and accordingly, the gains and losses from
changes in derivative fair values are deferred. Gains and losses upon settle-
ment are recognized in the statement of operations or recorded as part of the
underlying asset or liability as appropriate. The Company is exposed to credit
related losses in the event of nonperformance by counterparties to these
financial instruments; however, counterparties to these agreements are major
financial institutions; and the risk of loss due to nonperformance is considered
by management to be minimal. The Company does not hold or issue interest rate
swaps or foreign exchange contracts for trading purposes.
The Company currently has appproximately $340 million of variable interest
debt. The Company has entered into interest rate swap agreements designed as
a partial hedge of the Company's portfolio of variable rate debt. The purpose
of these swaps is to fix interest rates on variable rate debt and reduce certain
exposures to interest rate fluctuations. At March 31, 1999 the Company had
interest rate swaps with a notional amount of $100 million. The notional
amounts do not represent a measure of exposure of the Company. The Company will
pay counterparties interest at a fixed rate ranging from 5.41% to 5.48%, and
the counter parties will pay the Company interest at at a variable rate equal
to LIBOR. The LIBOR rate applicable to these agreements at March 31, 1999 was
5.03%. These agreements mature and renew every three months and expire on
<PAGE>11
FORM 10 - Q
Item 1 - Financial Statements
MTL INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited) - (continued)
September 2, 2001. A 10% fluctuation in interest rates would have a $1.9
million impact, net of interest rate swap agreements, on future earnings.
The Company has entered into short-term foreign currency agreements to exchange
US dollars (US $1,650) for Canadian dollars (CN $2,503). The purpose of these
agreements are to hedge against fluctuations in foreign currency exchange
rates. The Company is required to make US dollar payments at fixed exchange
rates ranging from 1.5126 to 1.5238, and as such, the market risk based upon a
10% fluctuation in the exchange rate in immaterial.
6. GUARANTOR SUBSIDIARIES:
The 10% Series B Senior Subordinated Notes issued in June 1998 and due 2006
are unconditionally guaranteed on a senior unsecured basis pursuant to
guarantees by all the Company's direct and indirect domestic subsidiaries
("The Guarantors"). In 1996, the Company acquired Levy Transport, Ltd, a
Canadian corporation, which is a non-guarantor subsidiary.
The Company conducts all of its business through and derives virtually all
its income from its subsidiaries. Therefore, the Company's ability to make
required principal and interest payments with respect all to the Company's
debt depends on the earnings of subsidiaries and its ability to receive funds
from its subsidiaries. The subsidiary guarantors are wholly owned subsidiarys
of the Company and have fully and unconditionally guaranteed the Notes on a
joint and several basis.
The Company has not presented seperate financial statements and other
disclosures concerning subsidiary guarantors because management has determined
such information is not material to the holders of the Notes.
The following condensed consolidating financial information presents:
1. Balance Sheets as of March 31, 1999 and 1998.
2. Statements of Operations for the three months ended March 31,1999 and 1998.
3. Statements of Cash Flows for the three months ended March 31,1999 and 1998.
4. The parent company and combined guarantor subsidiaries.
5. Elimination entries necessary to consolidate the parent company and all
its subsidiaries.
<PAGE> 12
FORM 10-Q
MTL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING BALANCE SHEET
MARCH 31, 1999
(Unaudited)
(In thousands)
<TABLE>
<CAPTION> Guarantor Non-Guaran- Consol-
Parent Subs tor Subs Elim's idated
--------- -------- -------- ------- --------
<C> <C> <C> <C> <C>
<S>
ASSETS
Current Assets
Cash and cash equivalents $ - $ 330 $ 830 $ - $ 1,160
Accounts receivable, net - 87,893 6,030 - 93,923
Inventories - 1,819 252 - 2,071
Prepaid expenses and
other current assets - 40,706 798 - 41,504
-------- -------- -------- -------- ---------
Total Current assets - 130,748 7,910 - 138,658
Property and equipment,net - 200,134 21,686 - 221,820
Intangibles & goodwill,net - 135,211 1,088 - 136,299
Insurance proceeds receivable - 30,965 - - 30,965
Other assets 100,000 26,043 231 (100,000) 26,274
Investment in Subsidiaries 284,642 - - (284,642) -
--------- -------- -------- -------- -------
$384,642 $523,101 $30,915 $(384,642) $554,016
======== ========= ======== ========= =========
</TABLE>
<PAGE> 13
FORM 10-Q
MTL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED BALANCE SHEETS
CONSOLIDATING BALANCE SHEET
MARCH 31, 1999
(Unaudited) - (In thousands, continued)
<TABLE>
<CAPTION>
Guarantor Non-Guaran- Consol-
Parent Subs tor Subs Elim's idated
--------- ---------- --------- ------- -------
<C> <C> <C> <C> <C>
<S>
Current Liabilities
Current maturities of
indebtedness $ 2,949 $ - $ - _ $ 2,949
Accounts payable and
accrued expenses - 48,495 3,510 - 52,005
Independent contractors
payable - 12,957 166 - 13,123
Other current liabilities - 7,582 1,438 - 9,020
Income tax payable - 1,342 343 - 1,685
--------- -------- -------- ------- -------
Total Current liabilities 2,949 70,376 5,457 - 78,782
Bank debt, less
current maturities 280,724 - 8,885 - 289,609
Capital lease obligations,
less current maturities - 191 - - 191
Subordinated debt, less
current maturities 140,000 100,000 - (100,000) 140,000
Environmental liabilities - 66,583 - - 66,583
Other long term liabilities - 9,763 - - 9,763
Deferred income taxes - (1,931) 1,931 - -
Accrued loss and damage claims - 3,290 - - 3,290
Commitments & contingent liab. - - - - -
Minority interest in subs - 4,829 - - 4,829
Mandatorily redeemable
preferred stock 11,356 - - - 11,356
Redeemable common stock 1,210 - - - 1,210
Stockholders' equity
Common stock and
Additional paid-in-capital 105,283 222,314 15,084 (237,398) 105,283
Retained earnings 34,526 47,687 52 (47,739) 34,526
Stock recapitalization (189,589) - (55) 55 (189,589)
Other stockholders' equity (419) - (439) 439 (419)
Note receivable (1,398) - - - (1,398)
-------- -------- --------- -------- --------
Total stockholders'
equity or (deficit) (51,597) 270,000 14,642 (284,642) (51,597)
-------- --------- -------- -------- --------
$384,642 $523,101 $30,915 ($384,642) $554,016
======== ======== ======== ========= ========
</TABLE>
* Condensed from audited financial statements.
<PAGE> 14
FORM 10-Q
MTL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
(Unaudited)
(In thousands)
<TABLE>
<CAPTION> Guarantor Non-Guaran- Consol-
Parent Subs tor Subs Elim's idated
--------- -------- --------- ------- ---------
<C> <C> <C> <C> <C>
<S>
ASSETS
Current Assets
Cash and cash equivalents $ - $ (721) $ 806 $ - $ 85
Accounts receivable, net - 85,867 3,031 - 88,898
Inventories - 1,740 261 - 2,001
Prepaid expenses and
other current assets - 46,627 1,691 - 48,318
-------- -------- -------- -------- ---------
Total Current assets - 133,513 5,789 - 139,302
Property and equipment,net - 211,905 21,317 - 233,222
Intangibles & goodwill,net - 136,276 1,076 - 137,352
Insurance proceeds receivable - 45,916 - - 45,916
Other assets 100,000 27,454 - (100,000) 27,454
Investment in Subsidiaries 301,391 - - (301,391) -
--------- -------- -------- -------- -------
$401,391 $555,064 $28,182 $(401,391) $583,246
======== ========= ======= ========= ========
</TABLE>
<PAGE> 15
FORM 10-Q
MTL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED BALANCE SHEETS
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
(Unaudited, in thousands, continued)
<TABLE>
<CAPTION>
Guarantor Non-Guaran- Consol-
Parent Subs tor Subs Elim's idated
--------- ---------- --------- ------- -------
<C> <C> <C> <C> <C>
<S>
Current Liabilities
Current maturities of
indebtedness $ 3,153 $ 208 $ 100 _ $ 3,461
Accounts payable and
accrued expenses - 60,532 4,218 - 64,750
Independent contractors
payable - 8,266 73 - 8,339
Other current liabilities - 10,362 - - 10,362
Income tax payable - 1,331 215 - 1,546
--------- -------- -------- ------- -------
Total Current liabilities 3,153 80,699 4,606 - 88,458
Bank debt, less
current maturities 289,146 100,000 8,516 (100,000) 297,662
Capital lease obligations,
less current maturities 208 - - - 208
Subordinated debt, less
current maturities 140,000 - - - 140,000
Environmental liabilities - 69,956 642 - 69,956
Other long term liabilities - 9,321 - - 9,963
Deferred income taxes - - - -
Accrued loss and damage claims - 3,290 - - 3,290
Commitments & contingent liab. - - - - -
Minority interest in subs - 4,825 - - 4,825
Mandatorily redeemable
preferred stock 15,994 - - - 15,994
Redeemable common stock 1,210 - - - 1,210
Stockholders' equity
Common stock and
Additional paid-in-capital 104,827 241,381 15,082 (256,463) 104,827
Retained earnings 38,495 45,592 69 (45,661) 38,495
Stock recapitalization (189,589) (54) 54 (189,589)
Other stockholders' equity (655) - (679) 679 (655)
Note receivable (1,398) - - - (1,398)
-------- -------- --------- -------- -------
Total stockholders'
equity or (deficit) (48,320) 286,973 14,418 (301,391) (48,320)
------- ------- -------- -------- -------
$401,391 $555,064 $28,182 ($401,391) $583,246
======= ======== ======= ========= ========
</TABLE>
* Condensed from audited financial statements.
<PAGE> 16
FORM 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MTL INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF INCOME
THREE MONTHS ENED MARCH 31, 1999
(Unaudited) - (In thousands, except per share data)
<TABLE>
<CAPTION>
Guarantor Non-Guaran- Consol-
Parent Subs tor Subs Elim's idated
------- --------- ---------- -------- --------
<C> <C> <C> <C> <C>
<S>
Operating Revenues
Transportation $ - $122,685 $ 6,169 - $128,854
Other - 15,323 336 - 15,659
-------- -------- -------- -------- -------
- 138,008 6,505 - 144,513
Operating Expenses
Purchased transportation - 78,162 672 - 78,834
Depreciation and amortization - 15,203 906 - 16,109
Compensation - options - - - - -
Other operating expenses - 41,128 4,372 - 45,500
--------- -------- -------- -------- -------
Operating income (loss) - 3,515 555 - 4,070
Interest expense, net 9,620 - 150 - 9,770
Other (income) expense - (35) - - (35)
Equity in earnings (loss)
of Subsidiaries 2,336 - - (2,336) -
--------- --------- -------- --------- ------
Income (loss) before taxes (7,285) 3,550 405 (2,336) (5,665)
Income taxes (3,716) 1,456 159 - (2,101)
Minority interest 5 5
--------- --------- -------- -------- ------
Net income (loss) before
extraordinary item (3,569) 2,090 246 (2,336) (3,569)
Extraordinary item,
net of tax - - - - -
--------- --------- ------- -------- -------
Net income (loss) ($3,569) $2,090 $ 246 ($2,336) ($3,569)
========= ========= ======= ======== =======
</TABLE>
<PAGE> 17
FORM 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MTL INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF INCOME
THREE MONTHS ENED MARCH 31, 1998
(Unaudited) - (In thousands, except per share data)
<TABLE>
<CAPTION>
Guarantor Non-Guaran- Consol-
Parent Subs tor Subs Elim's idated
------- --------- ---------- -------- --------
<C> <C> <C> <C> <C>
<S>
Operating Revenues
Transportation $ - $ 61,397 $ 5,781 - $ 67,178
Other - 4,772 429 - 5,201
-------- -------- -------- -------- -------
- 66,169 6,210 - 72,379
Operating Expenses
Purchased transportation - 43,347 1,000 - 44,347
Depreciation and amortization - 4,045 851 - 4,896
Compensation - options - - - - -
Other operating expenses - 13,902 3,880 - 17,782
--------- -------- -------- -------- -------
Operating income (loss) - 4,875 479 - 5,354
Interest expense, net - 583 185 - 768
Other expense - (4) (3) - (7)
Equity in earnings (loss)
of Subsidiaries 2,709 - - (2,709) -
--------- --------- -------- --------- ------
Income (loss) before taxes 2,709 4,296 297 (2,709) 4,593
Income taxes - 1,761 123 - 1,884
--------- --------- -------- -------- ------
Net income (loss) before
extraordinary item 2,709 2,535 174 (2,709) 2,709
Extraordinary item,
net of tax - - - - -
--------- --------- ------- ------- ------
Net income (loss) 2,709 2,535 174 (2,709) 2,709
--------- --------- ------- ------- ------
Preferred stock dividends - - - - -
Net income (loss)
attributable to common
shareholders $ 2,709 $ 2,535 $ 174 ($2,709) $ 2,709
======== ======== ======= ======== ======
</TABLE>
<PAGE> 18 FORM 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MTL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31,1999 (Unaudited) - (In thousands)
<TABLE>
<CAPTION>
Guarantor Non-Guaran- Consol-
Parent Subs tor Subs Elim's idated
------- --------- ---------- ------- ----------
<C> <C> <C> <C> <C>
<S>
Cash provided by (used for)
Operating activities:
Net income (loss) $(3,569) $ 2,090 $ 246 ($2,336) $ (3,569)
Adjustments for non
cash charges 3,569 9,735 1,007 14,311
Changes in assets/liabilities - 9 (198) 2,336 2,146
-------- --------- --------- -------- --------
Net cash provided by
operating activities - 11,833 1,055 - 12,888
Investing activities:
Acquisition of subsidiary - - - - -
Capital expenditures - (3,595) (904) - (4,499)
Proceeds from asset
dispositions - 1,035 149 - 1,184
Other - (13) - - (13)
-------- --------- --------- -------- -------
Net cash provided by (used
for)investing activities - (2,573) (755) - (3,328)
Financing activities:
Proceeds from issuance of
long term debt - - - - -
Payment of obligations - (8,851) - - (8,851)
Issuance of common stock 456 - - - 456
Issuance of preferred stock - - - -
Recapitalization expenditures
Other 186 (263) - (77)
Net change in intercompany
balances (456) 456
-------- ---------- ---------- ------- --------
Net cash provided by
financing activities - (8,209) (263) - (8,472)
-------- ---------- ---------- ------- -------
Net increase (decrease) in
cash - 1,051 37 - 1,088
Effect of exchange rate
changes on cash - - (13) - (13)
Cash, beginning of period - (721) 806 - 85
--------- --------- --------- ------- -------
Cash, end of period - $ 330 $ 830 - $ 1,160
========= ========= ========== ======= =======
</TABLE>
<PAGE> 19 FORM 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MTL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31,1998 (Unaudited) - (In thousands)
<TABLE>
<CAPTION>
Guarantor Non-Guaran- Consol-
Parent Subs tor Subs Elim's idated
------- --------- ---------- ------- ----------
<C> <C> <C> <C> <C>
<S>
Cash provided by (used for)
Operating activities:
Net income (loss) $ 2,709 $ 2,535 $ 174 ($2,709) $ 2,709
Adjustments for non
cash charges (2,709) 5,165 913 2,709 6,078
Changes in assets/liabilities - (1,058) (315) - (1,373)
-------- --------- --------- -------- --------
Net cash provided by
operating activities - 6,642 772 - 7,414
Investing activities:
Acquisition of subsidiary - - - - -
Capital expenditures - (3,653) (4,704) - (8,357)
Proceeds from asset
dispositions - 165 93 - 258
Other - (118) - - (118)
-------- --------- --------- -------- -------
Net cash used for investing
activities - (3,606) (4,611) - (8,217)
Financing activities:
Proceeds from issuance of
long term debt - 117 1,856 - 1,973
Payment of obligations - (721) (251) - (972)
Issuance of common stock - (2,627) 2,627 - -
Issuance of preferred stock - - - - -
Recapitalization expenditures
Other 825 (825) - -
Net change in intercompany
balances
-------- ---------- ---------- ------- ------
Net cash provided by
financing activities - (2,406) 3,407 - 1,001
-------- ---------- ---------- ------- ------
Net increase (decrease) in
cash - 630 432 - 198
Effect of exchange rate
changes on cash - (34) 6 - (28)
Cash, beginning of period - 703 674 - 1,377
--------- --------- --------- ------- ------
Cash, end of period - $ 1,299 $ 248 - $1,547
========= ========= ========= ======= =======
</TABLE>
<PAGE>20
FORM 10-Q
PART 1 - FINANCIAL INFORMATION
MTL INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FIRST QUARTER 1999 COMPARED TO THE FIRST QUARTER 1998
The Company's comparative operating results for the first quarter of 1999
were materially affected by the recapitalization accounting resulting from the
June 30, 1998 transaction with an affiliate of Apollo Management L.P. and the
acquisition of Chemical Leaman on August 28, 1998.
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 volumes of food products and
certain other consumer products tend to be subject to fewer fluctuations due
to swings in economic activity.
For the quarter ended March 31, 1999, revenues totaled $144.5 million, a 50.1%
increase over revenues of $72.4 million for the same period in 1998. The
Company attributes its increased revenue to the acquisition of CLC.
For the quarter ended March 31, 1999, operating income totaled $4.1 million,
representing a 24.0% decrease compared to $5.4 million for the same period in
1998. This decrease is primarily due to a $6.0 million charge to depreciation
and amortization attributable to the reduction in the usefull life of acquired
computer software which will be replaced in the trucking operation. Without
this charge operating income would have been $10.1 million, an increase of
$4.7 million or 88.1%. Operating income was also impacted by the amortization
of goodwill recognized with the acquisition of Chemical Leaman.
The operating ratio increased by 4.6 % due primarily to the aforementioned
change relating to acquired computer software. Without this charge the
operating ratio would have increased only 0.5%, due to the inclusion of CLC
which has historically had a higher operating ratio.
Net interest expense increased to $9.8 million in the quarter ended
March 31 1999, from $0.8 million in the quarter ended March 31, 1998. This
increase is the result of the increased debt arising from the leveraged
recapitalization and the acquisition of Chemical Leaman.
The pretax loss for the quarter ended March 31, 1999 totaled $5.7 million
compared to $4.6 million profit for the same period in 1998.
Pretax income decreased primarily due to the decrease in operating income
and the increase in interest expense both discussed above.
For the quarter ended March 31,1999, the Company's net loss, was $3.6 million
compared with $2.7 million profit for the same period last year. This was
the result of decreased pretax income previously discussed above.
Basic weighted average shares outstanding decreased from 4,551,000 in the
first quarter of 1998 to 2,105,000 in the first quarter of 1999 due to the
recapitalization. As of March 31, 1999, a total of 2,140,000 shares were
outstanding.
<PAGE> 21
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 $12.9 million for the three
months ended March 31,1999, versus $7.4 million for the same period in 1998.
This increase is due to the settlement with the former shareholders of CLC.
The cash used in financing activities totaled $8.5 million during the three
month period ended March 31, 1999, compared to $1.0 million provided in the
the comparable period in 1998. This difference is due to the increased
payment of debt.
Cash used for investing activities totaled $3.3 million for the three
month period ended March 31, 1999, compared to $8.2 million used for the
comparable 1998 period. This reduction in cash used was the result of fewer
capital expenditures.
Capital was used primarily to acquire additional revenue equipment to expand
the Company's operations.
As a result of the leveraged recapitalization transaction and the Chemical
Leaman acquisition, the Company has significantly increased its outstanding
long term debt.
The Company obtained a $285,000,000 credit facility with a group of banks
maturing at various times from June of 2004 to 2006. Additionally, the
Company has a revolving credit facility available in the amount of $75.0
million until June 9, 2004.
As of March 31,1999, the Company has available $ 66.3 million under this
revolving credit facility. The Company also has $100.00 million in 10% senior
subordinated notes due in 2006 and $40.0 million in floating interest rate
subordinated term securities also due in 2006.
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> 22
FORM 10 -Q
PART 1 - FINANCIAL INFORMATION
YEAR 2000
Some of MTL's older computer programs and systems were written using two
digits rather than four to define the applicable year. As a result, those
computer programs have time sensitive software that recognizes a date using
"00" as the year 1900 rather than 2000. This could cause a system failure
or other miscalculations causing disruptions of operations, including
among other things, a temporary inability to process transactions, send
invoices or engage in similar normal business activities.
MTL has developed a plan to ensure that its systems are compliant with the
requirements to process transactions in the year 2000. Most of MTL's combined
systems implementation effort is now directed toward the migration of the
CLC billing, settlement and financial reporting systems from mainframe based
systems which are not Year 2000 compliant. The target completion date for
changeover of the critical systems is September 30,1999. The estimated cost
of MTL's completed and remaining replacement and modification for the year
2000 issue is not expected to be material to MTL's earnings or financial
position. Due to cost considerations and MTL's belief that its critical
systems will be compliant by the end of the third quarter of 1999, MTL has
determined not to develop or maintain a contingency plan.
MTL has also done an assessment of its non-IT systems. MTL has determined that
it currently owns approximatley 300 Qualcom units which are located in its
trucks and deal with the communication to the trucks, which have embedded
chips that are not Year 2000 compliant. These units are not an integral
part of the operation of MTL's business. These units have been earmarked
to be upgraded over the next six months and MTL does not expect the costs of
such units to be material. In addition to assessing its own Year 2000
compliance, MTL has had discussions with many of its major vendors and
suppliers reguarding their Year 2000 compliance. MTL has received letters of
compliance from many of its material partners and is in the process of
obtaining such letters from others.
There can be no assurance that MTL's timetable will be met, that the
programming changes required to accommodate current billing and driver
settlement requirements will be completed in this time frame, or that such
changes will not negatively impact MTL's ability to meet its customers
or its drivers requirements or that MTL's failure to maintain a contingency
plan will not have a material adverse effect on the Company.
FORWARD LOOKING STATEMENTS
Some of the statements contained in this report discuss future expectations,
contain projections of results of operations or financial condition or state
other "forward-looking" information. Those statements are subject to known and
unknown risks, uncertainties and other factors that could cause the actual
results to differ materially from those contemplated by the statements. The
forward-looking information is based on various factors and was derived using
numerous assumptions. Important factors that could cause our actual results
to be materially different from the forward-looking statements include general
economic conditions, cost and availability of diesel fuel, adverse weather
conditions and competitive rate fluctuations. Future financial and operating
results of MTL may fluctuate as a result of these and other risk factors as
detailed from time to time in company filings with the Securities and
Exchange Commission.
<PAGE> 23
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, 1998. There have been no material changes in the
Company's legal proceedings since this filing.
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 6. (a) Exhibits: 27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K: None
<PAGE> 24
Signatures
MTL INC.
-------------------------------------------
MAY 17, 1999 /S/ CHARLES J. O'BRIEN, JR.
-------------------------------------------
CHARLES J. O'BRIEN, JR., (CEO, PRESIDENT)
(DULY AUTHORIZED OFFICER)
MAY 17, 1999 /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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1160
<SECURITIES> 0
<RECEIVABLES> 97941
<ALLOWANCES> 4018
<INVENTORY> 2071
<CURRENT-ASSETS> 138658
<PP&E> 324950
<DEPRECIATION> 103130
<TOTAL-ASSETS> 554016
<CURRENT-LIABILITIES> 78782
<BONDS> 0
0
0
<COMMON> 21
<OTHER-SE> (1398)
<TOTAL-LIABILITY-AND-EQUITY> 554016
<SALES> 144513
<TOTAL-REVENUES> 144513
<CGS> 0
<TOTAL-COSTS> 140443
<OTHER-EXPENSES> (35)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9770
<INCOME-PRETAX> (5665)
<INCOME-TAX> (2101)
<INCOME-CONTINUING> (3569)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3569)
<EPS-PRIMARY> (1.89)
<EPS-DILUTED> 0
</TABLE>
