-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DuYA5FOrB5ZC8dIV1AJA50Uh+fayTP/zy2Wx5VVMu/x9X68mJ2H5nFMmj/NKQMc9 LYrEn8HhEVkTy8WW51dS1A== /in/edgar/work/0000912057-00-047761/0000912057-00-047761.txt : 20001109 0000912057-00-047761.hdr.sgml : 20001109 ACCESSION NUMBER: 0000912057-00-047761 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORTON INDUSTRIAL GROUP INC CENTRAL INDEX KEY: 0000064247 STANDARD INDUSTRIAL CLASSIFICATION: [3490 ] IRS NUMBER: 380811650 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-13198 FILM NUMBER: 755251 BUSINESS ADDRESS: STREET 1: 1021 WEST BIRCHWOOD STREET CITY: MORTON STATE: IL ZIP: 61550 BUSINESS PHONE: 3092667176 MAIL ADDRESS: STREET 1: 1021 WEST BIRCHWOOD STREET CITY: MORTON STATE: IL ZIP: 61550 FORMER COMPANY: FORMER CONFORMED NAME: MLX CORP /GA DATE OF NAME CHANGE: 19960823 FORMER COMPANY: FORMER CONFORMED NAME: MCLOUTH STEEL CORP DATE OF NAME CHANGE: 19850212 10-Q 1 a2029462z10-q.txt 10-Q - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 SEPTEMBER 30, 2000 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 0-13198 ------------------------ MORTON INDUSTRIAL GROUP, INC. (Exact name of registrant as specified in its charter) GEORGIA 38-0811650 (State or other jurisdiction of (IRS Employer Incorporation or organization) Identification No.)
1021 W. BIRCHWOOD, MORTON, ILLINOIS 61550 (Address of principal executive offices) (309) 266-7176 (Registrant's telephone number, including area code) ------------------------ 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. Yes /X/ No / /
OUTSTANDING AS OF OCTOBER 16, 2000 ----------------- Class A Common Stock, $.01 par value........................ 4,401,479 Class B Common Stock, $.01 par value........................ 200,000
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART 1--FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MORTON INDUSTRIAL GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND OCTOBER 2, 1999 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED ---------------------------- ---------------------------- SEPTEMBER 30, OCTOBER 2, SEPTEMBER 30, OCTOBER 2, 2000 1999 2000 1999 -------------- ----------- -------------- ----------- Net sales................................... $ 67,575 $ 60,123 $ 212,556 $ 159,553 Cost of sales............................... 59,802 52,853 183,796 140,260 ---------- ---------- ---------- ---------- Gross profit................................ 7,773 7,270 28,760 19,293 ---------- ---------- ---------- ---------- Operating expenses Selling expenses.......................... 1,724 1,598 4,875 4,594 Administrative expenses................... 4,189 4,336 14,803 12,892 ---------- ---------- ---------- ---------- 5,913 5,934 19,678 17,486 ---------- ---------- ---------- ---------- Operating income (loss)................. 1,860 1,336 9,082 1,807 ---------- ---------- ---------- ---------- Other income (expense) Interest expense.......................... (2,688) (2,269) (8,009) (5,818) Other..................................... 22 (15) 363 (22) ---------- ---------- ---------- ---------- Total other income (expense)............ (2,666) (2,284) (7,646) (5,840) ---------- ---------- ---------- ---------- Income (loss) before income taxes and cumulative effect of accounting change................................ (806) (948) 1,436 (4,033) Income taxes................................ (320) -- 550 (46) ---------- ---------- ---------- ---------- Income (loss) before cumulative effect of accounting change......................... (486) (948) 886 (3,987) Cumulative effect of accounting change...... -- -- -- (1,074) ---------- ---------- ---------- ---------- Net income (loss)........................... (486) (948) 886 (5,061) Dividends and accretion of discount on preferred shares.......................... (235) (399) (662) (730) ---------- ---------- ---------- ---------- Net income (loss) available to common shareholders.............................. $ (721) $ (1,347) $ 224 $ (5,791) ========== ========== ========== ========== Earnings (loss) per common share Basic..................................... $ (0.16) $ (0.31) $ 0.05 $ (1.32) ========== ========== ========== ========== Diluted................................... $ (0.16) $ (0.31) $ 0.05 $ (1.32) ========== ========== ========== ========== Weighted average number of common shares Basic..................................... 4,587,193 4,391,351 4,541,561 4,374,714 ========== ========== ========== ========== Diluted................................... 4,587,193 4,391,351 4,662,996 4,374,714 ========== ========== ========== ==========
See accompanying notes to condensed consolidated financial statements. 2 MORTON INDUSTRIAL GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2000 AND DECEMBER 31, 1999 (DOLLARS IN THOUSANDS)
SEPTEMBER 30 2000 DECEMBER 31 (UNAUDITED) 1999 ------------- ------------ ASSETS Current Assets Cash...................................................... $ -- $ -- Accounts, notes and other receivables, less allowance for doubtful accounts of $563 in 2000 and $320 in 1999...... 33,931 28,347 Inventories............................................... 27,099 22,420 Prepaid expenses.......................................... 3,598 898 Refundable income taxes................................... 63 63 Deferred income taxes..................................... 1,320 1,320 -------- -------- Total current assets.................................... 66,011 53,048 -------- -------- Property, plant and equipment, net of accumulated depreciation.............................................. 54,542 56,333 -------- -------- Other, primarily goodwill, at amortized cost................ 11,020 11,827 -------- -------- Deferred income taxes....................................... 4,073 4,646 -------- -------- $135,646 $125,854 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities Outstanding checks in excess of bank balance.............. $ 4,990 $ 1,123 Current installments of long-term debt.................... 8,988 10,076 Accounts payable.......................................... 34,379 26,471 Accrued expenses.......................................... 5,291 5,569 -------- -------- Total current liabilities............................... 53,648 43,239 -------- -------- Long term debt, excluding current installments and notes payable to banks.......................................... 78,485 80,880 -------- -------- Other....................................................... 302 312 -------- -------- Total liabilities....................................... 132,435 124,431 -------- -------- Redeemable preferred stock.................................. 6,041 5,379 -------- -------- Stockholders' Equity (Deficit) Class A common stock...................................... 44 43 Class B common stock...................................... 2 2 Additional paid-in capital................................ 20,883 19,981 Retained deficit.......................................... (23,759) (23,982) -------- -------- Total stockholders' equity (deficit).................... (2,830) (3,956) -------- -------- $135,646 $125,854 ======== ========
See accompanying notes to condensed consolidated financial statements. 3 MORTON INDUSTRIAL GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND OCTOBER 2, 1999 (DOLLARS IN THOUSANDS) (UNAUDITED)
2000 1999 -------- -------- Net cash provided by operating activities................... $ 1,005 $ 1,666 ------- ------- Cash flows from investing activities Capital expenditures...................................... (4,987) (4,009) Increase in intangible assets............................. (219) (1,308) Proceeds from sales of business units..................... 2,915 -- Worthington Custom Plastics, Inc. acquisition, net of estimated adjustment due seller......................... -- (30,287) Other..................................................... -- (34) ------- ------- Net cash used in investing activities................. (2,291) (35,638) ------- ------- Cash flows from financing activities Net borrowings (repayments) under revolving credit facility................................................ 6,310 11,642 Cash received on exercised options........................ 39 45 Proceeds from issuance of preferred stock................. -- 4,250 Principal payments on long-term debt...................... (8,930) (8,435) Proceeds from issuance of long-term debt.................. -- 26,000 Increase (decrease) in checks issued in excess of bank balance................................................. 3,867 448 Other..................................................... -- 22 ------- ------- Net cash provided by financing activities............. 1,286 33,972 ------- ------- Net increase in cash........................................ -- -- Cash at beginning of period................................. -- -- ------- ------- Cash at end of period....................................... $ -- $ -- ======= ======= Supplemental disclosure of cash flow information Cash paid during the period for: Interest................................................ $ 7,501 $ 5,745 ======= ======= Income taxes............................................ $ -- $ -- ======= =======
See accompanying notes to condensed consolidated financial statements. 4 MORTON INDUSTRIAL GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND OCTOBER 2, 1999 (UNAUDITED) (1) NATURE OF BUSINESS. The Company, operating through its subsidiaries, is a contract manufacturer and supplier of high-quality fabricated sheet metal and plastic components and subassemblies for construction, agricultural, and industrial original equipment manufacturers located primarily in the Midwestern and Southeastern United States. (2) INTERIM FINANCIAL DATA. The Condensed Consolidated Financial Statements at September 30, 2000, and October 2, 1999, and for the three months and nine months then ended are unaudited and reflect all adjustments, consisting of normal recurring accruals which are, in the opinion of management, necessary for a fair presentation of the financial position, operating results, and cash flows for the interim periods indicated. The Company's fiscal quarters end on a Saturday (nearest to a quarter end) except for the fourth quarter which ends on December 31. For both the quarters ended September 30, 2000, and October 2, 1999, there were 63 shipping days. For both the nine months ended September 30, 2000 and October 2, 1999, there were 192 shipping days. Results of operations for the interim periods are not necessarily indicative of the results of operations for the full fiscal year. The condensed consolidated financial statements should be read in connection with the consolidated financial statements and notes thereto, together with management's discussion and analysis of financial condition and results of operations of Morton Industrial Group, Inc. contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. Certain amounts presented in prior years' financial statements have been reclassified to conform to the current year presentation. (3) INVENTORIES The Company's inventory, in thousands of dollars, as of September 30, 2000, and December 31, 1999, is summarized as follows:
SEPTEMBER 30, DECEMBER 31, 2000 1999 -------------- ------------- Raw materials, purchased parts and Manufactured components.......................... $13,861 $ 8,646 Work-in-process.................................... 3,191 2,818 Finished goods..................................... 10,293 11,396 ------- ------- 27,345 22,860 Less allowance for obsolescence.................... (246) (440) ------- ------- $27,099 $22,420 ======= =======
(4) ACCOUNTING CHANGE In April 1998, the Accounting Standards Executive Committee of the AICPA issued Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up Activities" which requires costs of start-up activities and organization costs to be expensed as incurred. SOP 98-5 was effective for fiscal years beginning after December 15, 1998, with initial application reported as the cumulative effect of a change in accounting principle. Accordingly, adoption of the statement resulted in a cumulative effect charge of $1,074, net of state income tax benefits, in the first nine months of 1999. 5 (5) EARNINGS PER SHARE. The following reflects the reconciliation of the numerators and denominators of the earnings per share and the earnings per share assuming dilution computations:
QUARTER ENDED SEPTEMBER 30, 2000 QUARTER ENDED OCTOBER 2, 1999 --------------------------------------- --------------------------------------- EARNINGS SHARES PER SHARE (LOSS) SHARES PER SHARE (NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- --------- ----------- ------------- --------- Basic income (loss) available to common shareholders.......... $(721,000) 4,587,193 $(.16) $(1,347,000) 4,391,351 $ (.31) ========= =========== Effect of dilutive securities, stock options and warrants.............. -- -- -- -- --------- ----- --------- ------ Diluted income (loss) available to common shareholders.......... 4,587,193 $(.16) 4,391,351 $ (.31) ========= ===== ========= ======
NINE MONTHS ENDED SEPTEMBER 30, 2000 NINE MONTHS ENDED OCTOBER 2, 1999 --------------------------------------- --------------------------------------- EARNINGS SHARES PER SHARE (LOSS) SHARES PER SHARE (NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- --------- ----------- ------------- --------- Basic income (loss) available to common shareholders.......... $ 224,000 4,541,561 $ .05 $(5,791,000) 4,374,714 $(1.32) ========= =========== Effect of dilutive securities, stock options and warrants.............. 121,435 -- -- -- --------- ----- --------- ------ Diluted income (loss) available to common shareholders.......... 4,662,996 $ .05 4,374,714 $(1.32) ========= ===== ========= ======
The first nine months, 1999 net (loss) includes a cumulative effect of accounting change, net of state income tax benefit, of $(1,074). The following table reflects the nine month impact on basic (loss) per share of the cumulative effect of accounting change: (Loss) before cumulative effect of accounting change........ $(1.08) Cumulative effect of accounting change...................... (.24) ------ Net (loss).................................................. $(1.32) ======
(6) SEGMENT REPORTING. The Company has two reportable segments, contract metal fabrication and contract plastic fabrication. The contract metal fabrication segment provides full service fabrication of parts and sub-assemblies for the construction, agricultural and industrial equipment industry. The contract plastic fabrication segment provides full-service vacuum formed and injected-molded parts and sub-assemblies for 6 the construction, agricultural and industrial equipment industry. The following segment data is for the quarters and nine months ended September 30, 2000 and October 2, 1999:
CONTRACT METAL CONTRACT PLASTIC FABRICATION FABRICATION TOTAL -------------- ---------------- -------- QUARTER ENDED SEPTEMBER 30, 2000 Revenues from external customers....... $ 34,957 $32,618 $ 67,575 Segment operating income............... 1,141 719 1,860 QUARTER ENDED OCTOBER 2, 1999 Revenues from external customers....... $ 25,324 $34,799 $ 60,123 Segment operating income............... 1,034 302 1,336
CONTRACT METAL CONTRACT PLASTIC FABRICATION FABRICATION TOTAL -------------- ---------------- -------- NINE MONTHS ENDED SEPTEMBER 30, 2000 Revenues from external customers....... $117,649 $94,907 $212,556 Segment operating income............... 7,687 1,395 9,082 NINE MONTHS ENDED OCTOBER 2, 1999 Revenues from external customers....... $ 78,630 $80,923 $159,553 Segment operating income............... 2,561 (754) 1,807
(7) WARRANTS ISSUED TO LENDERS On September 20, 2000, the Company issued warrants to purchase an aggregate number of shares of its Class A common stock equal to the greater of (a) 4.99% of the total outstanding shares of Class A and Class B common stock, calculated at the time of exercise, exclusive of certain shares issued as employee or director compensation or pursuant to the warrants, or (b) 238,548 shares. The 238,548 warrants issued are exercisable at any time during the period from September 28, 2000 through September 28, 2001, at an exercise price of $.01 per share. These warrants were issued pursuant to a provision of the third amendment to a credit agreement with Harris Trust and Savings Bank which provided that if the credit facility was not retired by September 20, 2000, the Company would issue the warrants. This transaction was accounted for as a discount of long-term debt and an increase to additional paid-in capital of approximately $0.9 million. The discount is being amortized over the terms of the loans at Harris Trust and Savings Bank. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis describes changes in the Company's financial condition since December 31, 1999. The analysis of results of operations compares the quarters and nine months ended September 30, 2000 and October 2, 1999. RESULTS OF OPERATIONS THIRD QUARTER, 2000 VERSUS THIRD QUARTER, 1999 Our net revenues for the third quarter, 2000 were $67.6 million compared to $60.1 million for the third quarter of 1999, an increase of $7.5 million, or 12.4% The revenue increase results primarily from new projects for our sheet metal fabricated components used in construction and industrial equipment. Also, the agricultural markets are slowly starting to stabilize. The demand for our plastics components was slightly lower from quarter to quarter. 7 Our sales to Deere & Company and Caterpillar Inc., were approximately 52% and 40% of our revenues for the third quarters, 2000 and 1999, respectively. Our gross profits for the third quarter, 2000 increased by approximately $0.5 million, an increase of 6.9%, versus the same three months in 1999. The overall gross profit percentage decreased from 12.1% for the third quarter of 1999 to 11.5% for the third quarter of 2000. The decrease in gross profit dollars and percentage resulted primarily from start-up costs associated with introducing new projects into production. Our selling and administrative expenses for the third quarter, 2000 amounted to $5.9 million, or 8.8% of net sales compared to the same $5.9 million, or 9.9% of net sales for the third quarter of 1999. The reduced percentage was largely the result of the increase in net revenue. Our interest expense for the third quarter, 2000 was $2.7 million, an increase of $0.4 million compared to the third quarter of 1999. This increase was due primarily to higher rates of interest incurred in 2000 compared to 1999. For the third quarter of 2000, we recognized a $0.3 million income tax benefit on a pre-tax loss of $0.8 million. The effective rate was approximately 40%. For the third quarter of 1999, we recognized no income benefit on a pre-tax loss of $0.9 million. Our additional net operating loss carry forward created in the third quarter of 1999 was offset by an increase in the valuation allowance with no impact on the net deferred tax assets. FIRST NINE MONTHS, 2000 VERSUS FIRST NINE MONTHS, 1999 Our net revenues for the first nine months, 2000 were $212.6 million compared to $159.6 million for the first nine months of 1999, an increase of $53.0 million, or 33.2%. We concluded an acquisition during the second quarter of 1999 that has provided incremental revenue during the first nine months of 2000 of approximately $17.4 million. A revenue increase of approximately $35.6 million from the facilities owned in the first nine months of both years resulted primarily from a seasonal demand and new projects during the first six months for our sheet metal fabricated components used in construction and industrial equipment. Some of our major customers are shifting their demand more toward the first six months of the calendar year. Our sales to Deere & Company and Caterpillar Inc., were approximately 55% and 52% of the Company's revenues for the first nine months, 2000 and 1999, respectively. Our gross profits for the first nine months, 2000 increased by approximately $9.5 million, an increase of 49%, versus the same nine months in 1999. The overall gross profit percentage increased from 12.1% for the first nine months of 1999 to 13.5% for the first nine months of 2000. The favorable gross profit increase resulted primarily from the volume increase, partially offset by increased overtime and outsourcing costs that resulted from our customers shifting their demand into the first six months of the year. Our selling and administrative expenses for the nine months, 2000 amounted to $19.7 million, or 9.3% of net sales compared to $17.5 million, or 11.0% of net sales for the first nine months of 1999. The increase is due primarily to the additional 3 1/2 months of operations related to the April, 1999 Worthington acquisition. The reduced percentage was largely the result of the increase in net revenue. Our interest expense for the first nine months, 2000 was $8.0 million, an increase of $2.2 million compared to the first nine months of 1999. This increase was due primarily to higher average amounts of outstanding debt in the second quarter as a result of the April, 1999 Worthington acquisition and higher interest rates. For the first nine months of 2000, we provided for $0.6 million of income taxes on pre-tax income of $1.4 million. The effective tax rate was approximately 38.4%. For the first nine months of 1999, we recognized no income tax benefit on a pre-tax loss of $4.0 million. Our additional net operating loss carry 8 forward created in the first nine months of 1999 was offset by an increase in the valuation allowance with no impact on the net deferred tax assets. LIQUIDITY AND CAPITAL RESOURCES Our consolidated working capital at September 30, 2000 was $12.4 million compared to $9.8 million at December 31, 1999, an increase in working capital of approximately $2.6 million. We have two separate credit facilities. The first facility is with Harris Trust and Savings Bank (Harris), and serves the company's operations other than the operations acquired from Worthington Custom Plastics, Inc. (Worthington). The second facility, with General Electric Capital Corporation (GECC), serves the operations acquired from Worthington during the second quarter, 1999. These facilities are separate and provide financing for the named operations. The two credit facilities are separately secured by the assets of the operations they support. On May, 28, 1998, we entered into a credit agreement with Harris, as Agent. The credit agreement, as amended, provides a credit facility with the following components: (i) a $19 million secured revolving credit facility; (ii) a $25 million secured term loan that matures 5 years from the date of the credit agreement closing; and (iii) a $30 million secured term loan that matures 7 years from the date of the credit agreement closing. Both term loans fully amortize over their respective terms with quarterly payments. The interest rates on the loans vary from 1% to 3.75% above the lender's prime rate. We used the proceeds under the facility to refinance the then existing indebtedness, to finance the 1998 acquisitions, and for general corporate purposes. As described in Part II, Item 2, warrants were issued on September 20, 2000 in connection with the Harris credit agreement. The amount of revolving credit availability is calculated using a borrowing base of qualified accounts receivable and inventory. As of September 30, 2000, we had additional availability of approximately $4.0 million under the Harris facility. We are paying this lender a fee of .125% per month based upon the amount of the revolving credit commitment and the balance of the term loans. In connection with the Harris financing, we have two fixed interest rate swap agreements with a commercial bank (the "counter party"). The first agreement has a notional principal amount of $9.4 million and a termination date of May 31, 2003. The second agreement has a notional principal amount of $14.6 million and a termination date of June 30, 2003. The notional principal amount declines over the term of both agreements based upon a defined amortization schedule. The counter party has the unilateral right to cancel both agreements as of June 30, 2001. As described in Item 3 below, these agreements are for the purpose of limiting the effects of interest rate increases on half of the Company's floating rate term debt. Our sources of funds to meet near term liquidity requirements for the businesses not acquired from Worthington will be the cash flows from operations, the Harris line of credit, and management of working capital to reflect current levels of operations. We believe that these sources will be adequate through the end of the current fiscal year and beyond. Our separate financing arrangements for the operations acquired from Worthington are described below. On April 15, 1999, we entered into a financing agreement with GECC. The agreement contains a 4 1/2 year secured revolving credit facility with maximum availability of $24 million and a $26 million secured term loan with a 4 1/2 year term. The amount of availability is based upon a borrowing base of qualified accounts receivable and inventory. Both of the facilities bear interest at variable interest rates based on the prime rate, plus variable margins. We also incur a fee based upon a certain percentage of the unused revolving credit facility. The term loan facility amortizes quarterly throughout its term. We must also prepay certain amounts from the sale of assets, the issuance of new equity capital and from "excess cash flow", as defined in the agreement. 9 As of September 30, 2000, we had additional availability of $1.6 million, under the GECC credit facility. We believe that the agreement with GECC will provide the necessary term and revolving financing, and along with cash flows from operations, will provide the necessary levels of liquidity for the operations acquired from Worthington through the end of the current fiscal year and beyond. As part of the financing for the Worthington acquisition, we issued 10,000 shares of redeemable preferred stock, which we must redeem in April, 2004 at $1,000 per share plus any dividends accrued since April 15, 1999. The $10 million face value preferred stock was recorded at its fair value of $4.25 million. We are accreting the discount over a five year period using the effective yield method. Dividends are payable in kind at the rate of 8% per annum. We believe that certain provisions of the agreement with Worthington preclude the payment of dividends, and no dividends have been accrued in 2000. Overall, our increases in accounts receivable and inventories of approximately $10.3 million were more than offset by increases of $11.8 million in accounts payable and other current liabilities. We are reviewing various methods of adjusting the Company's capital structure to better reflect its current business organization. Actions may include the issuance of subordinated debt, the issuance of preferred stock and the consolidation of our two senior credit facilities. We incurred $5.0 million of capital expenditures during the first nine months of 2000, primarily for purchases of manufacturing equipment. We estimate that our capital expenditures in 2000 will total approximately $6.5 million, of which $2.5 million will be for additional production equipment and the remaining $4.0 million will be for normal replacement of equipment. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In June, 1998, the Financial Accounting Standards Board issued Statement No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. The Statement will require the Company to recognize all derivatives on the balance sheet at fair value. The Company does not anticipate that the adoption of this Statement will have a significant effect on its results of operations or financial position. In June, 1999, the Financial Accounting Standards Board issued Statement No. 137 amending the effective date of Statement No. 133 to January 1, 2001. FORWARD LOOKING STATEMENTS "Safe Harbor" Statement Under The Private Securities Litigation Reform Act Of 1995: This Form 10-Q contains "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements containing the words "anticipates," "believes," "intends," "estimates," "expects," "projects" and similar words. The forward looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results to be materially different from any future results expressed or implied by such forward looking statements. Such factors include, among others, the following: the loss of certain significant customers; the cyclicality of our construction and agricultural sales; risks associated with our acquisition strategy; general economic and business conditions, both nationally and in the markets in which we operate or will operate; competition; and other factors referenced in the Company's reports and registration statements filed with the Securities and Exchange Commission. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward looking statements. The forward looking statements contained herein speak only of the Company's expectation as of the date of this annual report. We disclaim any obligations to update any such factors or publicly announce the result of any revisions to any of the forward looking statements contained herein to reflect future events or developments. 10 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company is exposed to interest rate changes primarily as a result of its line of credit and long-term debt used for maintaining liquidity, funding capital expenditures, and expanding our operations. The Company's interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flow and to lower overall borrowing costs. To achieve its objectives, the Company has entered into two separate financing agreements, as described more fully in Item 2 above, for term loans and revolving credit facilities. The Company has also entered into two interest rate swap agreements, as required by its Harris financing arrangements, to limit the effect of increases in the interest rates on half of its floating rate term debt. Under the swap agreements, which expire May 31, 2003 to June 30, 2003, a LIBOR-equivalent interest rate component of the interest rate is limited to 5.875% on half of the Company's $37.9 million of term loans. The Company does not enter into derivative transactions for speculative purposes. PART II--OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES On September 20, 2000, the Company issued warrants to purchase an aggregate number of shares of its Class A common stock equal to the greater of (a) 4.99% of the total outstanding shares of Class A and Class B common stock, calculated at the time of exercise, exclusive of certain shares issued as employee or director compensation or pursuant to the warrants, or (b) 238,548 shares. The 238,548 warrants issued are exercisable at any time during the period from September 28, 2000 through September 28, 2001, at an exercise price of $.01 per share. These warrants were issued pursuant to a provision of the third amendment to a credit agreement with Harris Trust and Savings Bank which provided that if the credit facility was not retired by September 20, 2000, the Company would issue the warrants. ITEM 5. OTHER INFORMATION Effective October 20, 2000, the Company's common stock began trading on the Nasdaq SmallCap Market under the symbol MGRPC. The prior symbol was MGRP. The Company failed to meet Nasdaq's minimum net income requirement of $500,000 as of December 31, 1999, but was granted a temporary exception from the standard. The exception will expire on April 2, 2001, subject to several interim steps. In the event that the Company is deemed to have met the terms of the exception, it shall continue to be listed on the Nasdaq SmallCap Market. The Company believes that it can meet these conditions, however, there can be no assurance that it will do so. Failure to meet the conditions at any time over the course of the exception would result in delisting from the Nasdaq SmallCap Market. If at some future date the Company's securities should cease to be listed on the Nasdaq SmallCap Market, the Company may continue to be listed on the OTC-Bulletin Board. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS 11. The computation can be determined from this report. 27. Financial data schedule. 99.1 Press release dated October 19, 2000 99.2 Press release dated October 20, 2000
(B) Reports on Form 8-K. Form 8-K filed on October 6, 2000 related to the issuance of warrants. 11 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. MORTON INDUSTRIAL GROUP, INC. By: /s/ THOMAS D. LAUERMAN -------------------------------------------- Thomas D. Lauerman VICE PRESIDENT OF FINANCE
Dated: November 8, 2000 12 EX-27 2 a2029462zex-27.txt FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-2000 JUL-02-2000 SEP-30-2000 0 0 34,494 (563) 27,099 66,011 80,893 (26,351) 135,646 53,648 78,485 0 6,041 46 (2,876) 135,646 67,575 67,575 59,802 59,802 5,891 0 2,688 (806) 320 (486) 0 (235) 0 (721) $(.16) $(.16)
EX-99.1 3 a2029462zex-99_1.txt PRESS RELEASE 10/19/2000 PRESS RELEASE [LOGO] CONTACT: Thomas D. Lauerman Van Negris / Philip J. Denning Morton Industrial Group, Inc. Kehoe, White, Van Negris & Company, Inc. (309) 263-3300 (212) 396-0606 FOR IMMEDIATE RELEASE MORTON INDUSTRIAL GROUP, INC. ANNOUNCES CONTINUATION OF LISTING ON NASDAQ SMALLCAP MARKET MORTON, IL -- OCTOBER 19, 2000 -- Morton Industrial Group, Inc. (Nasdaq: MGRP), a leading contract manufacturing supplier to large industrial original equipment manufacturers (OEMs), today announced that its common stock will continue to be listed on The Nasdaq SmallCap Market via an exception from the net income requirement. While the Company failed to meet this requirement as of December 31, 1999, the Company was today granted a temporary exception from the standard subject to the Company meeting certain conditions. The exception will expire on April 2, 2001, subject to several interim steps. In the event the Company is deemed to have met the terms of the exception, it shall continue to be listed on The Nasdaq SmallCap Market. The Company believes that it can meet these conditions, however, there can be no assurance that it will do so. If at some future date, the Company's securities should cease to be listed on The Nasdaq SmallCap Market, they may continue to be listed on the OTC-Bulletin Board. For the duration of the exception, the Company's Nasdaq symbol will be MGRPC. Morton Industrial Group, Inc. is a supplier of highly engineered metal and plastic components and subassemblies for large industrial original equipment manufacturers (OEMs). The Company operates from 11 facilities in 5 states in the Midwest and Southeast with over 2,200 employees. The Company provides large industrial original equipment manufacturers with a wide range of services including design, prototype development, precision tool making and production of metal fabrications and plastic component parts. "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LEGISLATION REFORM ACT OF 1995: This press release contains "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements containing words "anticipates," "believes," "intends," "estimates," "expects," "projects," and similar words. The forward looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results to be materially different from any future results expressed or implied by such forward looking statements. Such factors include, among others, the following: the loss of certain significant customers; the cyclicality of our construction and agricultural sales; risks associated with our acquisition strategy; general economic and business conditions, both nationally and in the markets in which we operate or will operate; competition; and other factors referenced in the Company's reports and registration statements filed with the Securities and Exchange Commission. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward looking statements. The forward looking statements contained herein speak only of the Company's expectation as of the date of this press release. We disclaim any obligations to update any such factors or publicly announce the result of any revisions to any of the forward looking statements contained herein to reflect future events or developments. # # # 1021 W. Birchwood - Morton, Il 61550-0429 - (309) 263-3300 EX-99.2 4 a2029462zex-99_2.txt PRESS RELEASE 10/20/2000 PRESS RELEASE [LOGO] CONTACT: Thomas D. Lauerman Van Negris / Philip J. Denning Morton Industrial Group, Inc. Kehoe, White, Van Negris & Company, Inc. (309) 263-3300 (212) 396-0606 FOR IMMEDIATE RELEASE MORTON INDUSTRIAL GROUP, INC. ANNOUNCES STOCK SYMBOL CHANGE TO "MGRPC" ON NASDAQ SMALLCAP MARKET MORTON, IL -- OCTOBER 20, 2000 -- Morton Industrial Group, Inc. (Nasdaq: MGRP), a leading contract manufacturing supplier to large industrial original equipment manufacturers (OEMs), today announced that its common stock will begin trading today on The Nasdaq SmallCap Market under the symbol "MGRPC". Morton Industrial Group, Inc. is a supplier of highly engineered metal and plastic components and subassemblies for large industrial original equipment manufacturers (OEMs). The Company operates from 11 facilities in 5 states in the Midwest and Southeast with over 2,200 employees. The Company provides large industrial original equipment manufacturers with a wide range of services including design, prototype development, precision tool making and production of metal fabrications and plastic component parts. "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LEGISLATION REFORM ACT OF 1995: This press release contains "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements containing words "anticipates," "believes," "intends," "estimates," "expects," "projects," and similar words. The forward looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results to be materially different from any future results expressed or implied by such forward looking statements. Such factors include, among others, the following: the loss of certain significant customers; the cyclicality of our construction and agricultural sales; risks associated with our acquisition strategy; general economic and business conditions, both nationally and in the markets in which we operate or will operate; competition; and other factors referenced in the Company's reports and registration statements filed with the Securities and Exchange Commission. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward looking statements. The forward looking statements contained herein speak only of the Company's expectation as of the date of this press release. We disclaim any obligations to update any such factors or publicly announce the result of any revisions to any of the forward looking statements contained herein to reflect future events or developments. # # # 1021 W. Birchwood - Morton, Il 61550-0429 - (309) 263-3300 -----END PRIVACY-ENHANCED MESSAGE-----