-----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, VOiDxGuERKQCnkSpuzdXjIySujtOlgsrfUyrR5c/gwcZyoLyTsZqwLT6oaS+r+nv CG4RcFC1C/dB2dmI6EBcbg== 0000950144-98-006699.txt : 19980527 0000950144-98-006699.hdr.sgml : 19980527 ACCESSION NUMBER: 0000950144-98-006699 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980404 FILED AS OF DATE: 19980519 DATE AS OF CHANGE: 19980526 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARK VII INC CENTRAL INDEX KEY: 0000795425 STANDARD INDUSTRIAL CLASSIFICATION: 4213 IRS NUMBER: 431074964 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14810 FILM NUMBER: 98628684 BUSINESS ADDRESS: STREET 1: 10100 NW EXECUTIVE HILLS BLVD STREET 2: STE 200 CITY: KANSAS CITY STATE: MO ZIP: 64153 BUSINESS PHONE: 9017674455 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 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 April 4, 1998 [ ] 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 5, 1998 ---------------------------- -------------------------- Common stock, $.05 par value 8,940,172 Shares 2 MARK VII, INC. AND SUBSIDIARIES FORM 10-Q - FOR THE THREE MONTHS ENDED APRIL 4, 1998 INDEX
Page Part I. FINANCIAL INFORMATION Item 1. Financial Statements a) Condensed Consolidated Statements of Income - Three Months Ended April 4, 1998 and March 29, 1997......................................... 3 b) Consolidated Balance Sheets - April 4, 1998 and January 3, 1998............ 4 c) Condensed Consolidated Statements of Cash Flows - Three Months Ended April 4, 1998 and March 29, 1997......................................... 5 e) Notes to Condensed Consolidated Financial Statements....................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................... 7 Item 3. Quantitative and Qualitative Disclosures About Market Risk..................... 9 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 ---------------------------- APR. 4, 1998 MAR. 29, 1997 ------------ ------------- Operating Revenues........................................... $ 171,800 $ 145,914 Transportation Costs......................................... 151,242 127,379 --------- ---------- Net Revenues................................................. 20,558 18,535 --------- ---------- Operating Expenses: Salaries and related costs............................... 4,468 4,169 Selling, general and administrative...................... 13,340 12,253 --------- ---------- Total operating expenses.............................. 17,808 16,422 --------- ---------- Operating Income............................................. 2,750 2,113 Interest and Other Expense/(Income), Net..................... (55) (14) --------- ---------- Income Before Provision For Income Taxes..................... 2,805 2,127 Provision For Income Taxes................................... 1,178 893 --------- ---------- Net Income .................................................. $ 1,627 $ 1,234 ========= ========== Net Income Per Common Share.................................. $ .18 $ .13 ========= ========== Net Income Per Common Share, Assuming Dilution............... $ .17 $ .13 ========= ========== Average Common Shares and Equivalents Outstanding: Basic.................................................... 8,939 9,257 Diluted.................................................. 9,467 9,769 Dividends Paid............................................... -- --
See "Notes to Condensed Consolidated Financial Statements." 3 4 MARK VII, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts)
APR. 4, 1998 JAN. 3, 1998 ------------ ------------ ASSETS (Unaudited) ------ Current Assets: Cash and cash equivalents........................................... $ 1,835 $ 3,732 Accounts receivable, net of allowance of $3,192 and $2,641.......... 77,161 82,917 Notes and other receivables, net of allowance of $577 and $537...... 3,606 4,399 Other current assets................................................ 64 1,755 -------- -------- Total current assets............................................. 82,666 92,803 Deferred Income Taxes................................................... 1,244 1,262 Net Property and Equipment.............................................. 7,338 6,591 Intangibles and Other Assets............................................ 7,592 7,354 -------- -------- $ 98,840 $108,010 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current Liabilities: Accrued transportation expenses..................................... $ 54,746 $ 63,094 Deferred income taxes............................................... 4,277 5,591 Other current and accrued liabilities............................... 5,163 6,258 -------- -------- Total current liabilities........................................ 64,186 74,943 -------- -------- Long-Term Obligations................................................... 876 945 -------- -------- Contingencies and Commitments Shareholders' Equity: Common stock, $.05 par value, authorized 20,000,000 shares, issued 10,011,422 and 10,009,822 shares ................. 501 501 Paid-in capital..................................................... 29,652 29,623 Retained earnings................................................... 15,735 14,108 -------- -------- 45,888 44,232 Less: 1,071,250 shares of treasury stock, at cost.................. (12,110) (12,110) -------- -------- Total shareholders' equity....................................... 33,778 32,122 -------- -------- $ 98,840 $108,010 ======== ========
See "Notes to Condensed Consolidated Financial Statements." 4 5 MARK VII, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
FOR THE THREE MONTHS ENDED ------------------------------ APR. 4, 1998 MAR. 29, 1997 ------------ ------------- OPERATING ACTIVITIES: Net cash provided by (used for) operating activities........... $ (782) $ 6,722 ------- ------- INVESTING ACTIVITIES: Additions to property and equipment............................ (1,177) (404) Retirements of property and equipment.......................... 101 303 ------- ------- Net cash used for investing activities......................... (1,076) (101) ------- ------- FINANCING ACTIVITIES: Proceeds received from exercise of stock options............... 29 188 Repayments of long-term obligations............................ (68) (69) Net repayments under line of credit............................ -- (19) ------- ------- Net cash provided by (used for) financing activities........... (39) 100 ------- ------- Net increase (decrease) in cash and cash equivalents.............. (1,897) 6,721 Cash and cash equivalents: Beginning of period........................................... 3,732 959 ------- ------- End of period................................................. $ 1,835 $ 7,680 ======= ======= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest..................................................... $ 7 $ 32 Income taxes, net of refunds received........................ 889 137
See "Notes to Condensed 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 1997 Annual Report on Form 10-K. The results for the three months ended April 4, 1998 are not necessarily indicative of the results for the entire year. EARNINGS PER SHARE: Effective January 3, 1998, the Company adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share". Earnings per share have been restated for the periods presented to conform to the new accounting standard. In addition, on November 7, 1997, the Company's Board of Directors authorized a two-for-one stock split, thereby increasing the number of shares issued by 5,003,000 and decreasing the par value of each share to $ .05. All references to the number of common shares and per share amounts for the periods presented have been restated to reflect the stock split. A reconciliation between basic earnings per share and diluted earnings per share follows:
THREE MONTHS ENDED ------------------ APR. 4, MAR. 29, 1998 1997 ---- ---- (in thousands, except per share amounts) Net income................................................ $ 1,627 $ 1,234 ======== ======= Average common shares and equivalents outstanding: Basic................................................... 8,939 9,257 Effect of dilutive options.............................. 528 512 -------- ------- Diluted................................................. 9,467 9,769 ======== ======= Per share amounts: Net income per common share............................. $ .18 $ .13 ======= ======= Net income per common share, assuming dilution.......... $ .17 $ .13 ======= =======
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 April 4, 1998 vs. three months ended March 29, 1997. 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 1998 1997 ---- ---- Operating revenues..................................... 100.0% 100.0% Transportation costs................................... 88.0 87.3 ----- ----- Net revenues........................................... 12.0 12.7 Operating expenses: Salaries and related costs......................... 2.6 2.8 Selling, general and administrative................ 7.8 8.4 ----- ----- Total operating expenses...................... 10.4 11.2 ----- ----- Operating income....................................... 1.6 1.5 Interest and other expense/(income), net............... .0 .0 ---- ----- Income before provision for income taxes............... 1.6% 1.5% ===== =====
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 133,000 in 1997 to 170,000 in 1998. The increase in shipments of 28% 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 were 12.0% versus 12.7% in 1997. Net revenues as a percentage of operating revenues declined during the first quarter of 1998 due to the discontinuation of dedicated trucking operations in January 1998 for one of our customers. This customer's dedicated trucking operations accounted for one half of the Company's dedicated trucking services at the end of 7 8 1997. This decrease in net revenues as a percentage of operating revenues has been offset by proportionate decreases in operating expenses as a percentage of operating revenues. Operating Expenses - As discussed above under Net Revenues, the closing of the Company's largest dedicated trucking fleet 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 - Cash flow from operations has been adequate to cover the Company's operating needs and capital requirements in recent years, resulting in decreased interest expense and increased interest income in 1998 and 1997. Provision for Income Taxes - The Company's effective tax rate was 42% in both 1998 and 1997. LIQUIDITY AND CAPITAL RESOURCES In recent years, the Company's cash flows from operations have exceeded its working capital needs. In addition, the Company has available a $25,000,000 unsecured revolving credit facility (the "Facility"). On April 4, 1998, there were no borrowings under the Facility, but letters of credit totaling $3,102,000 had been issued on the Company's behalf to secure insurance deductibles and purchases of operating services, resulting in unused borrowing capacity of $21,898,000. The interest rate for borrowings under the Facility is a variable rate based upon the 30 day LIBOR Funding Rate, as defined, plus 50 to 125 basis points. The Company pays a varying fee of .35% to 1.00% on outstanding letters of credit and a varying commitment fee of .15% to .30% on the unused portion of the Facility, as defined. At April 4, 1998, the interest rate was 6.16% and the letter of credit fee and commitment fee were .35% and .15%, respectively. The line of credit expires on July 1, 2000, but may be extended by mutual agreement of the lender and the Company, for subsequent periods of one year each. Among the covenants contained in the Facility are maintenance of certain financial ratios, including debt to net worth, cash plus accounts receivable to current liabilities plus debt and debt to earnings before income taxes, depreciation and amortization (all as defined). Other covenants include the level of capital and lease expenditures, acquisitions and mergers, dividends and redemptions of stock. At April 4, 1998, the Company had a ratio of current assets to current liabilities of approximately 1.29 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 response to expanding capabilities in the area of information systems and issues related to the year 2000, the Company is designing a new financial and administrative system scheduled for implementation during the second half of 1998. The total cost of this system is not expected to exceed $2,000,000, a significant portion of which was expended in 1997. Additionally, the Company is performing an in-depth review of the year 2000 compliance aspects of all peripheral systems not included in the above system. Management is uncertain at this time what additional costs, if any, may be incurred in connection with these peripheral systems. Management is confident that all issues relating to the Company's internal information systems arising from the year 2000 will be addressed during the course of these two projects. The Company is also in the process of seeking information concerning year 2000 compliance from vendors, customers and other third parties upon whom the Company relies. As the Company continues its expansion into more comprehensive logistics management programs, the credit risk exposure on a limited number of major customers increases. While the Company takes measures to continually evaluate, monitor and, if necessary, reserve for these and other credit risks, it is possible, although unlikely, that circumstances could develop on a particular major customer which could have a material effect on the Company's short-term results. 8 9 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. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not applicable 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. None Item 5. Other Information. None Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit No. Description ----------- ----------- 27 Financial Data Schedule (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 18, 1998 /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 MARK VII, INC. CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED APRIL 4, 1998 AND CONSOLIDATED BALANCE SHEET AS OF APRIL 4, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JAN-02-1999 JAN-04-1998 APR-04-1998 1,835 0 80,353 3,192 0 82,666 12,188 4,850 98,840 64,186 876 0 0 501 33,277 98,840 0 171,800 0 151,242 17,746 0 7 2,805 1,178 1,627 0 0 0 1,627 .18 .17
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