-----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, GhPnLFEfBORxfJh8+LCtHygZBwn7+T4pgR/l1XshPEfAR7rjdBDeexwOe3ovXUL4 rf2KEwYryz2+Zkw6BM4czg== 0000950144-96-005142.txt : 19960813 0000950144-96-005142.hdr.sgml : 19960813 ACCESSION NUMBER: 0000950144-96-005142 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960629 FILED AS OF DATE: 19960812 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARK VII INC CENTRAL INDEX KEY: 0000795425 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 431074964 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14810 FILM NUMBER: 96608179 BUSINESS ADDRESS: STREET 1: 10100 NW EXECUTIVE HILLS BLVD STREET 2: STE 200 CITY: KANSAS CITY STATE: MO ZIP: 64153 BUSINESS PHONE: 8168910500 FORMER COMPANY: FORMER CONFORMED NAME: MNX INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: MNX TRUCKING DATE OF NAME CHANGE: 19870512 10-Q 1 MARK VII,INC FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 29, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to ____________ Commission File No. 0-14810 MARK VII, INC. ------------------------------------------------------ (Exact name of Registrant as specified in its charter) Delaware 43-1074964 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 965 Ridge Lake Boulevard, Suite 103 Memphis, Tennessee 38120 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (901) 767-4455 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 ( ) 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 August 2, 1996 ---------------------------- ----------------------------- Common stock, $.10 par value 4,579,861 Shares 2 MARK VII, INC. AND SUBSIDIARIES FORM 10-Q -- FOR THE QUARTER ENDED JUNE 29, 1996 INDEX
Page Part I. FINANCIAL INFORMATION Item 1. Financial Statements a) Consolidated Statements of Income--Three Months Ended June 29, 1996 and July 1, 1995 3 b) Consolidated Statements of Income--Six Months Ended June 29, 1996 and July 1, 1995 4 c) Consolidated Balance Sheets--June 29, 1996 and December 30, 1995 5 d) Condensed Consolidated Statements of Cash Flows for the Six months Ended June 29, 1996 and July 1, 1995 6 e) Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II. OTHER INFORMATION Item 1. Legal Proceedings 10 Item 2. Changes in Securities 10 Item 3. Defaults Upon Senior Securities 10 Item 4. Submission of Matters to a Vote of Security Holders 10 Item 5. Other Information 10 Item 6. Exhibits and Reports on Form 8-K 10 Signature 12
2 3 PART I. FINANCIAL INFORMATION. ITEM 1. FINANCIAL STATEMENTS. MARK VII, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited)
FOR THE THREE MONTHS ENDED --------------------------- JUNE 29, 1996 JULY 1, 1995 ------------- ------------ OPERATING REVENUES $142,755 $112,031 TRANSPORTATION COSTS 123,994 94,956 -------- -------- NET REVENUES 18,761 17,075 OPERATING EXPENSES: Salaries and related costs 4,249 4,011 Selling, general and administrative 9,774 9,056 Equipment rents 1,627 1,210 Depreciation and amortization 241 302 -------- -------- Total Operating Expenses 15,891 14,579 OPERATING INCOME 2,870 2,496 INTEREST AND OTHER EXPENSE, NET 80 206 -------- -------- INCOME BEFORE PROVISION FOR INCOME TAXES 2,790 2,290 PROVISION FOR INCOME TAXES 1,172 930 -------- -------- NET INCOME $ 1,618 $ 1,360 ======== ======== EARNINGS PER SHARE $ .34 $ .27 ======== ======== AVERAGE COMMON SHARES AND EQUIVALENTS OUTSTANDING 4,783 5,010 DIVIDENDS PAID - -
See "Notes to Consolidated Financial Statements." 3 4 MARK VII, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited)
FOR THE SIX MONTHS ENDED --------------------------- JUNE 29, 1996 JULY 1, 1995 ------------- ------------ OPERATING REVENUES $264,785 $217,488 TRANSPORTATION COSTS 229,719 184,747 -------- -------- NET REVENUES 35,066 32,741 OPERATING EXPENSES: Salaries and related costs 8,337 7,914 Selling, general and administrative 18,603 17,787 Equipment rents 2,981 2,540 Depreciation and amortization 536 563 -------- -------- Total Operating Expenses 30,457 28,804 OPERATING INCOME 4,609 3,937 INTEREST AND OTHER EXPENSE, NET 173 311 -------- -------- INCOME BEFORE PROVISION FOR INCOME TAXES 4,436 3,626 PROVISION FOR INCOME TAXES 1,863 1,486 -------- -------- NET INCOME $ 2,573 $ 2,140 ======== ======== EARNINGS PER SHARE $ .54 $ .43 ======== ======== AVERAGE COMMON SHARES AND EQUIVALENTS OUTSTANDING 4,804 4,961 DIVIDENDS PAID - -
See "Notes to Consolidated Financial Statements." 4 5 MARK VII, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts)
JUNE 29, 1996 DEC. 30, 1995 ------------- ------------- ASSETS (Unaudited) ------ CURRENT ASSETS: Cash and cash equivalents $ 409 $ 272 Accounts receivable, net of allowance 62,274 55,778 Notes and other receivables, net of allowance 6,054 6,789 Other current assets 415 1,415 ------- ------- Total current assets 69,152 64,254 DEFERRED INCOME TAXES 1,248 1,385 NET PROPERTY AND EQUIPMENT 4,137 4,399 INTANGIBLES AND OTHER ASSETS 2,682 4,106 NET ASSETS OF DISCONTINUED OPERATIONS 2,769 2,008 ------- ------- $79,988 $76,152 ======= ======= LIABILITIES AND SHAREHOLDERS' INVESTMENT ---------------------------------------- CURRENT LIABILITIES: Accrued transportation expenses $44,600 $43,246 Deferred income taxes 1,005 1,286 Other current and accrued liabilities 7,217 4,330 Borrowings under line of credit - 690 ------- ------- Total current liabilities 52,822 49,552 ------- ------- LONG-TERM OBLIGATIONS 652 712 ------- ------- CONTINGENCIES AND COMMITMENTS (Notes 2 and 3) SHAREHOLDERS' INVESTMENT: Common stock, $.10 par value, authorized 10,000,000 shares, issued 4,889,061 and 4,888,761 shares 489 489 Paid-in capital 27,880 27,875 Retained earnings 3,533 960 ------- ------- 31,902 29,324 Less: 310,000 and 200,000 shares of treasury stock, at cost (5,388) (3,436) ------- ------- Total shareholders' investment 26,514 25,888 ------- ------- $79,988 $76,152 ======= =======
See "Notes to Consolidated Financial Statements." 5 6 MARK VII, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
FOR THE SIX MONTHS ENDED ----------------------------- JUNE 29, 1996 JULY 1, 1995 ------------- ------------ OPERATING ACTIVITIES: Net cash provided by operating activities $ 3,922 $10,546 ------- ------- INVESTING ACTIVITIES: Additions to property and equipment (569) (233) Retirements of property and equipment 296 65 ------- ------- Net cash used for investing activities (273) (168) ------- ------- FINANCING ACTIVITIES: Proceeds received from exercise of stock options - 772 Purchase of treasury stock (1,952) - Repayments of long-term obligations (108) (178) Net repayments under line of credit (690) (8,546) ------- ------- Net cash used for financing activities (2,750) (7,952) ------- ------- Net cash provided by continuing operations 899 2,426 Net cash used in discontinued operations (762) (1,264) ------- ------- Net increase in cash and cash equivalents 137 1,162 Cash and cash equivalents: Beginning of period 272 1,246 ------- ------- End of period $ 409 $ 2,408 ======= ======= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest 62 275 Income taxes, net of refunds received 1,127 915
See "Notes to Consolidated Financial Statements." 6 7 MARK VII, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) GENERAL: The consolidated financial statements include Mark VII, Inc., a Delaware corporation, and its wholly owned subsidiaries, collectively referred to herein as "the Company". The Company is a sales, marketing and service organization that acts as a provider of transportation services and a manager of transportation logistics. The Company has a network of transportation sales personnel that provides services throughout the United States, as well as Mexico and Canada. The principal operations of the Company are conducted by its transportation services subsidiary, Mark VII Transportation Company, Inc. ("Mark VII"). The condensed, consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). In management's opinion, these financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods presented. Pursuant to SEC rules and regulations, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from these statements unless significant changes have taken place since the end of the most recent fiscal year. For this reason, the condensed, consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes included in the Company's 1995 Annual Report on Form 10-K. The results for the three and six months ended June 29, 1996 are not necessarily indicative of the results for the entire year 1996. (2) JOINT VENTURE: The Company has guaranteed $1 million of a $5 million line of credit to provide working capital for ERX Logistics, L.L.C. ("ERX"). ERX is a Michigan limited liability company formed by Mark VII and a warehousing and distribution company to provide contract management services for a number of regional distribution centers for one of the Company's largest customers. The line is secured by accounts receivable of ERX. The outstanding borrowing at June 29, 1996 was $2,646,000. (3) LEGAL PROCEEDINGS: The Company is engaged in an arbitration proceeding filed by Roger Crouch, the Company's former Vice Chairman of the Board, as a result of the Company's termination of his employment agreement with the Company for cause. The arbitration is being conducted by the American Arbitration Association. Under the terms of the agreement, if Mr. Crouch prevails in the arbitration he is entitled to payment of his annual salary of $225,000 per year for the remaining seven years of the agreement. Mr. Crouch also contends he is entitled to certain bonus payments and stock options, and also seeks attorneys' fees, interest and punitive damages. The Company intends to vigorously defend itself in this matter. An arbitration panel of three arbitrators has been selected and the hearing is scheduled to commence on February 3, 1997. 7 8 MARK VII, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS Three and six months ended June 29, 1996 vs. three and six months ended July 1, 1995. The following table sets forth the percentage relationship of the Company's revenues and expense items to operating revenues for the periods indicated:
QUARTER SIX MONTHS -------------- -------------- 1996 1995 1996 1995 ------ ------ ------ ------ OPERATING REVENUES 100.0% 100.0% 100.0% 100.0% TRANSPORTATION COSTS 86.9 84.8 86.8 84.9 ----- ----- ----- ----- NET REVENUES 13.1 15.2 13.2 15.1 OPERATING EXPENSES: Salaries, wages and related costs 3.0 3.5 3.1 3.6 Selling, general and administrative 6.8 8.1 7.0 8.2 Equipment rents 1.1 1.1 1.1 1.2 Depreciation and amortization .1 .3 .2 .3 ----- ----- ----- ----- TOTAL OPERATING EXPENSES 11.0 13.0 11.4 13.3 ----- ----- ----- ----- OPERATING INCOME 2.1 2.2 1.8 1.8 INTEREST AND OTHER EXPENSE, NET .1 .2 .1 .1 ----- ----- ----- ----- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 2.0% 2.0% 1.7% 1.7% ===== ==== ===== ====
General. The transportation services operation contracts with carriers for the transportation of freight by rail, truck, ocean or air for shippers. Operating revenues include the carriers' charges for carrying shipments plus commissions and fees, as well as revenues from fixed fee arrangements on the Company's integrated logistics projects. The carriers with whom the Company contracts provide transportation equipment, the charge for which is included in transportation costs. As a result, the primary operating cost in the transportation services operation is for purchased transportation. Selling, general and administrative expenses include the percentage of the net revenues paid to agencies as consideration for providing sales and marketing, arranging for movement of shipments, entering billing and accounts payable information on shipments and maintaining customer relations, as well as other operating expenses. The logistics management and dedicated trucking operations incur a greater portion of their costs in equipment rents, salaries and related costs, and selling, general and administrative costs than do the Company's transportation services operation. Lease payments for tractors, trailers and domestic containers are included in equipment rents. 8 9 Operating Income. The total number of shipments for the second quarter increased 21% to 127,000 in 1996 versus 105,000 for the same period of 1995. Year-to-date, the number of shipments was 235,000, up 19% from the 198,000 shipments for the same period of 1995. This increase in the number of shipments resulted from the expansion of services to existing and new customers. The Company's dedicated trucking fleets included in logistics management operations have historically reported higher net revenues as a percentage of operating revenues than the Company's transportation services operations because a greater portion of the costs generated by the dedicated trucking fleets are included in equipment rents, salaries and related costs, and selling, general and administrative costs. Management closed a portion of these operations at the end of 1995, resulting in decreased net revenues as a percentage of revenues for the first six months of 1996. The decrease in net revenue as a percentage of revenue was offset by decreases in operating expenses as a percentage of revenues. During the first and second quarters of 1996, the Company experienced a slight increase in rates in truck brokerage as excess capacity decreased marginally in the transportation market. The effect of the increase in rates was offset by volume improvements and did not negatively impact operating income. LIQUIDITY AND CAPITAL RESOURCES The Company's working capital needs have been met through cash flow provided from operations and a line of credit from a bank. Mark VII maintains a $20 million line of credit. This line bears interest at 1/2% over the bank's prime rate and expires in July 1997. The Company pays a fee of 1.5% on outstanding letters of credit and a commitment fee of .38% on the average daily unused portion of the line. The line is secured by accounts receivable and other assets of Mark VII and is guaranteed by the Company. Among other restrictions, the terms of the line of credit requires the Company to maintain consolidated tangible net worth of $21 million in 1996 and $23 million thereafter, and to obtain the approval of the lender before paying dividends. At June 29, 1996, the available line of credit was $12,231,000 and letters of credit totaling $7,769,000 had been issued on Mark VII's behalf to secure insurance deductibles and purchases of operating services. At June 29, 1996 the Company had a ratio of current assets to current liabilities of approximately 1.31 to 1. Management believes that the Company will have sufficient cash flow from operations and borrowing capacity to cover its operating needs and capital requirements for the foreseeable future. Other Information In the transportation industry generally, results of operations show a seasonal pattern as customers reduce shipments during and after the winter holiday season. In recent years, the Company's operating income and earnings have been higher in the second and third quarters than in the first and fourth quarters. 9 10 MARK VII, INC. AND SUBSIDIARIES PART II. OTHER INFORMATION. Item 1. Legal Proceedings. NONE Item 2. Changes in Securities. NONE Item 3. Defaults Upon Senior Securities. NONE Item 4. Submission of Matters to a Vote of Security Holders. (a) The Annual Meeting of Shareholders of the Company was held on May 22, 1996. (b) Not Applicable (c) 1. Election of Directors. All nominees for director were elected pursuant to the following vote:
Name of Nominee Votes in favor Withheld -------------------- -------------- -------- R. C. Matney 4,117,496 257,825 J. Michael Head 4,117,496 257,825 James T. Graves 4,117,496 257,825 David H. Wedaman 4,117,496 257,825 Douglas Wm. List 4,117,496 257,825 William E. Greenwood 4,117,496 257,825 Dr. Jay U. Sterling 4,117,496 257,825 Thomas J. Fitzgerald 4,117,496 257,825
2. Approval of the proposal to change the state of incorporation of the Company from Missouri to Delaware: 3,070,698 votes in favor; 727,758 votes against; 574,038 broker non-votes; and 2,827 shares abstained from voting. 3. Approval of the amendment of the 1995 Omnibus Stock Incentive Plan: 3,375,331 votes in favor; 411,494 votes against; 581,946 broker non-votes; and 6,550 shares abstained from voting. (d) Not Applicable Item 5. Other Information. Except for historical information contained herein, certain of the matters discussed above are forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth herein. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit No. Description ----------- ----------- 27 Financial Data Schedule (for SEC use only) 10 11 (b) Reports on Form 8-K. The Registrant filed a current report on Form 8-K, dated May 23, 1996, reporting under Item 5 - Other Events, the merger of Mark VII, Inc., a Missouri corporation ("Mark VII Missouri"), with and into Mark VII, Inc., a Delaware corporation ("Mark VII Delaware"), a wholly owned subsidiary of Mark VII Missouri, pursuant to an Agreement and Plan of Merger dated as of May 2, 1996, by and between Mark VII Missouri and Mark VII Delaware. 11 12 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. Mark VII, Inc. (Registrant) August 8, 1996 /s/ J. Michael Head - --------------- ------------------------------------------------- (Date) J. Michael Head, Executive Vice President, Chief Financial Officer, Treasurer (Principal Financial and Accounting Officer) 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF MARK VII, INC. FOR THE SIX MONTHS ENDED JUNE 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-29-1996 DEC-31-1995 JUN-29-1996 409 0 63,881 1,607 0 69,152 8,573 4,436 79,988 52,822 0 0 0 489 26,025 79,988 264,785 264,785 0 260,176 173 384 73 4,436 1,863 2,573 0 0 0 2,573 .54 .54
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