-----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, OW3ueLPSYirCFMHDyv8FVK50wRMPi9QeE9PdQajZH3DnOR2BeRUWkL1U25pwFeYL I0kG8+KtGXRtvV35ZhSYGg== 0000950144-97-005434.txt : 19970513 0000950144-97-005434.hdr.sgml : 19970513 ACCESSION NUMBER: 0000950144-97-005434 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970329 FILED AS OF DATE: 19970512 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: 97600288 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 3-29-97 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 March 29, 1997 [ ] 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 May 7, 1997 - ---------------------------- -------------------------- Common stock, $.10 par value 4,637,122 Shares 2 MARK VII, INC. AND SUBSIDIARIES FORM 10-Q -- FOR THE QUARTER ENDED MARCH 29, 1997 INDEX
Page Part I. FINANCIAL INFORMATION Item 1. Financial Statements a) Condensed Consolidated Statements of Income--Three Months Ended March 29, 1997 and March 30, 1996 3 b) Consolidated Balance Sheets--March 29, 1997 and 4 December 28, 1996 c) Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 29, 1997 and March 30, 1996 5 e) Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II. OTHER INFORMATION Item 1. Legal Proceedings 9 Item 2. Changes in Securities 9 Item 3. Defaults Upon Senior Securities 9 Item 4. Submission of Matters to a Vote of Security Holders 9 Item 5. Other Information 9 Item 6. Exhibits and Reports on Form 8-K 9 Signature 10
2 3 PART I. FINANCIAL INFORMATION. ITEM 1. FINANCIAL STATEMENTS. MARK VII, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited)
FOR THE THREE MONTHS ENDED ------------------------------- MAR. 29, 1997 MAR. 30, 1996 ------------- ------------- OPERATING REVENUES $ 145,914 $ 122,030 TRANSPORTATION COSTS 127,379 105,725 --------- ---------- NET REVENUES 18,535 16,305 --------- ---------- OPERATING EXPENSES: Salaries and related costs 4,169 4,088 Selling, general and administrative 12,253 10,478 --------- ---------- Total Operating Expenses 16,422 14,566 --------- ---------- OPERATING INCOME 2,113 1,739 INTEREST AND OTHER EXPENSE/(INCOME), NET (14) 93 --------- ---------- INCOME BEFORE PROVISION FOR INCOME TAXES 2,127 1,646 PROVISION FOR INCOME TAXES 893 691 --------- ---------- NET INCOME $ 1,234 $ 955 ========= ========== EARNINGS PER SHARE $ .25 $ .20 ========= ========== AVERAGE COMMON SHARES AND EQUIVALENTS OUTSTANDING 4,892 4,825 DIVIDENDS PAID - -
See "Notes to Consolidated Financial Statements." 3 4 MARK VII, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts)
MAR. 29, 1997 DEC. 28, 1996 ------------- ------------- ASSETS (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 7,680 $ 959 Accounts receivable, net of allowance of $1,736 and $1,693 62,507 73,315 Notes and other receivables, net of allowance of $1,822 and $1,611 5,223 7,583 Other current assets 361 1,131 --------- -------- Total current assets 75,771 82,988 DEFERRED INCOME TAXES 919 946 NET PROPERTY AND EQUIPMENT 4,395 4,518 INTANGIBLES AND OTHER ASSETS 2,443 2,540 NET ASSETS OF DISCONTINUED OPERATIONS 2,737 2,605 --------- -------- $ 86,265 $ 93,597 ========= ======== LIABILITIES AND SHAREHOLDERS' INVESTMENT CURRENT LIABILITIES: Accrued transportation expenses $ 45,746 $ 52,734 Deferred income taxes 2,046 2,193 Other current and accrued liabilities 6,483 8,031 --------- -------- Total current liabilities 54,275 62,958 --------- -------- LONG-TERM OBLIGATIONS 530 601 --------- -------- CONTINGENCIES AND COMMITMENTS (Note 2) SHAREHOLDERS' INVESTMENT: Common stock, $.10 par value, authorized 10,000,000 shares, issued 4,967,322 and 4,950,522 shares 497 495 Paid-in capital 28,851 28,665 Retained earnings 7,966 6,732 --------- -------- 37,314 35,892 Less: 332,000 shares of treasury stock, at cost (5,854) (5,854) --------- -------- Total shareholders' investment 31,460 30,038 --------- -------- $ 86,265 $ 93,597 ========= ========
See "Notes to Consolidated Financial Statements." 4 5 MARK VII, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
FOR THE THREE MONTHS ENDED ---------------------------------- MAR. 29, 1997 MAR. 30, 1996 ------------- ------------- OPERATING ACTIVITIES: Net cash provided by operating activities $ 6,854 $ 3,205 --------- ---------- INVESTING ACTIVITIES: Additions to property and equipment (404) (283) Retirements of property and equipment 303 223 --------- ---------- Net cash used for investing activities (101) (60) --------- ---------- FINANCING ACTIVITIES: Proceeds received from exercise of stock options 188 - Purchase of treasury stock - (1,751) Repayments of long-term obligations (69) (61) Net repayments under line of credit (19) (690) --------- ---------- Net cash provided by (used for) financing activities 100 (2,502) --------- ---------- Net cash provided by continuing operations 6,853 643 Net cash used in discontinued operations (132) (504) --------- ---------- Net increase in cash and cash equivalents 6,721 139 Cash and cash equivalents: Beginning of period 959 272 --------- ---------- End of period $ 7,680 $ 411 ========= ========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest 32 44 Income taxes, net of refunds received 137 93
See "Notes to Consolidated Financial Statements." 5 6 MARK VII, INC. AND SUBSIDIARIES NOTES TO CONDENSED 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 transportation logistics manager. 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 1996 Annual Report on Form 10-K. The results for the three months ended March 29, 1997 are not necessarily indicative of the results for the entire year 1997. (2) JOINT VENTURE: Mark VII owns 50% of ERX Logistics, L.L.C. ("ERX"), a limited liability company formed with a warehousing and distribution company to provide contract management services for a number of regional distribution centers for one of Mark VII's largest customers. ERX employs management, administrative personnel, drivers and warehousemen to operate the warehouses, tractors and trailers owned by the customer. The Company has guaranteed $1 million of a $5 million line of credit to provide working capital for ERX. 6 7 MARK VII, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS Three months ended March 29, 1997 vs. three months ended March 30, 1996. The following table sets forth the percentage relationship of the Company's revenues and expense items to operating revenues for the periods indicated:
THREE MONTHS ------------------- 1997 1996 ---- ---- OPERATING REVENUES 100.0% 100.0% TRANSPORTATION COSTS 87.3 86.6 ------ ------ NET REVENUES 12.7 13.4 OPERATING EXPENSES: Salaries and related costs 2.8 3.3 Selling, general and administrative 8.4 8.6 ------ ------ TOTAL OPERATING EXPENSES 11.2 11.9 ------ ------ OPERATING INCOME 1.5 1.5 INTEREST AND OTHER EXPENSE/(INCOME), NET .0 .1 ------ ------ INCOME BEFORE PROVISION FOR INCOME TAXES 1.5% 1.4% ====== =====
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 a portion of 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 costs incurred by the transportation services operations and logistics projects are for purchased transportation. Net revenues include only the commissions and fees. Selling, general and administrative expenses primarily consist of the percentage of net revenue paid to agencies and independent sales contractors 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 company operating expenses. Certain costs incurred by the Company's dedicated trucking fleets are also reported in salaries and related costs and selling, general and administrative expenses. Operating Revenues - The Company's total number of shipments increased from 108,000 in 1996 to 133,000 in 1997. The increase in shipments of 23% resulted from the expansion of services to both new and existing customers. Net Revenues. The Company's net revenues as a percentage of operating revenues was 12.7% versus 13.4% in 1996. Net revenues as a percentage of operating revenues declined in 1997 due to the closure of certain unprofitable dedicated trucking operations during 1996. This decrease in net revenues as a percentage of operating revenues during 1997 has been offset by proportionate decreases in operating expenses as a percentage of operating revenues. 7 8 Operating Expenses - As discussed above under Net Revenues, the closing of certain dedicated trucking fleets has resulted in fluctuations in operating expenses as a percentage of operating revenues. In general, the Company's dedicated trucking fleets have relatively higher fixed costs as a percentage of operating revenues than the Company's transportation services and logistics management operations. Interest and Other Expense/(Income), Net - Interest and other expenses declined in 1997 due to decreased borrowings under the line of credit and increased interest income as cash flow from operations has exceeded the Company's operating needs and capital requirements. Provision for Income Taxes - The Company's effective tax rate was 42% in both 1997 and 1996. LIQUIDITY AND CAPITAL RESOURCES The Company's working capital needs have been met through cash flow from operations and a line of credit from a lending institution. Mark VII maintains a $20 million line of credit which bears interest at 1/2% over the bank's prime rate. The line of credit expires in July 1997, but may be extended, by mutual agreement of the lender and the Company, for subsequent periods of one year each. 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. On March 29, 1997, $13,000 was outstanding on the line of credit and letters of credit totaling $6,769,000 had been issued on Mark VII's behalf to secure insurance deductibles and purchases of operating services, resulting in unused borrowing capacity of $13,218,000. Among other restrictions, the terms of the line of credit require that the Company earn $2,000,000 in consolidated income from continuing operations annually and maintain consolidated tangible net worth of $23,000,000 and obtain approval of the lender before paying dividends. The line of credit agreement allows for adjustments to the net worth requirements under certain circumstances, one of which is the repurchase of the Company's stock. After adjustment for stock repurchases, the consolidated tangible net worth required to be maintained for 1997 is $18,000,000. At March 29, 1997, the Company had a ratio of current assets to current liabilities of approximately 1.4 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 Except for the historical information contained herein, this document contains forward-looking statements based on management's current expectations of the Company's near term results, based on current information available pertaining to the Company. Actual future results and trends may differ materially depending on a variety of factors, including competition in the marketplace, changes in the carrier base, changes in capacity and changes in government regulations. Results of operations in the transportation industry generally 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. 8 9 MARK VII, INC. AND SUBSIDIARIES PART II. OTHER INFORMATION. Item 1. Legal Proceedings. In January 1997, the Company settled 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 for cause in December 1995. Mr. Crouch was seeking payment of his annual salary of $225,000 per year for the remaining seven years of the employment agreement, as well as certain bonus payments. According to the terms of the settlement, Mr. Crouch was compensated for approximately 13 months at a rate less than the salary provided for in the original employment agreement. The Company and Mr. Crouch also entered into a consulting agreement on February 3, 1997 with a term of approximately six years which provides for consulting fees, at a rate less than the salary provided for in the original employment agreement. Item 2. Changes in Securities. NONE Item 3. Defaults Upon Senior Securities. NONE Item 4. Submission of Matters to a Vote of Security Holders. NONE Item 5. Other Information. NONE Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit No. Description ----------- ----------- 27 Financial Data Schedule (for SEC use only) (b) Reports on Form 8-K. NONE 9 10 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) May 12, 1997 /s/ Philip L. Dunavant ------------ -------------------------------------------- (Date) Philip L. Dunavant, Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF MARK VII, INC. FOR THE THREE MONTHS ENDED MARCH 29, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JAN-03-1998 DEC-28-1996 MAR-29-1997 7,680 0 64,243 1,736 0 75,771 8,514 4,119 86,265 54,275 0 0 0 497 85,768 86,265 0 145,914 0 127,379 16,408 0 43 2,127 893 1,234 0 0 0 1,234 .25 0
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