-----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, WS2e43VL+OH7kICg61Ed92GIijNua+JZ2a4IN7oIAHZrs72Bd4Ivx0ri4i5C3wZx PS/Go7/89hj2OB46alfhlA== 0000950144-95-003147.txt : 19951119 0000950144-95-003147.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950144-95-003147 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 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: 95590652 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 TRANSPORTATION 10-Q 09-30-95 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 September 30, 1995 [ ] 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) Missouri 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 10100 N.W. Executive Hills Boulevard, Suite 200, Kansas City, Missouri ---------------------------------------------------------------------- (Former address) 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 November 9, 1995 ---------------------------- ------------------------------- Common stock, $.10 par value 4,862,261 Shares 2 MARK VII, INC. AND SUBSIDIARIES Form 10-Q -- For the Quarter Ended September 30, 1995 INDEX
Page Part I. FINANCIAL INFORMATION Item 1. Financial Statements a) Consolidated Statements of Income--Three Months Ended September 30, 1995 and October 1, 1994 3 b) Consolidated Statements of Income--Nine Months Ended September 30, 1995 and October 1, 1994 4 c) Consolidated Balance Sheets--September 30, 1995 and December 31, 1994 5 d) Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1995 and October 1, 1994 6 e) Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II. OTHER INFORMATION Item 1. Legal Proceedings 12 Item 2. Changes in Securities 12 Item 3. Defaults Upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 12 Signature 13
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 ---------------------------------- SEPT. 30, 1995 OCT. 1, 1994 -------------- ------------ OPERATING REVENUES $114,852 $111,386 TRANSPORTATION COSTS 97,582 95,520 -------- -------- NET REVENUES 17,270 15,866 OPERATING EXPENSES: Salaries and related costs 4,111 3,436 Selling, general and administrative 9,054 8,703 Equipment rents 1,368 983 Depreciation and amortization 277 453 -------- -------- Total Operating Expenses 14,810 13,575 -------- -------- OPERATING INCOME 2,460 2,291 INTEREST AND OTHER EXPENSE, NET 103 155 -------- -------- INCOME BEFORE PROVISION FOR INCOME TAXES 2,357 2,136 PROVISION FOR INCOME TAXES 979 879 -------- -------- NET INCOME $ 1,378 $ 1,257 ======== ======== EARNINGS PER SHARE $ .27 $ .26 ======== ======== AVERAGE COMMON SHARES AND EQUIVALENTS OUTSTANDING 5,071 4,910 ======== ========
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 NINE MONTHS ENDED ------------------------------ SEPT. 30, 1995 OCT. 1, 1994 -------------- ------------ OPERATING REVENUES $332,340 $314,193 TRANSPORTATION COSTS 282,329 271,579 -------- -------- NET REVENUES 50,011 42,614 OPERATING EXPENSES: Salaries and related costs 12,025 9,818 Selling, general and administrative 26,841 23,800 Equipment rents 3,908 2,729 Depreciation and amortization 840 1,002 -------- -------- Total Operating Expenses 43,614 37,349 -------- -------- OPERATING INCOME 6,397 5,265 INTEREST AND OTHER EXPENSE, NET 414 377 -------- -------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 5,983 4,888 PROVISION FOR INCOME TAXES 2,465 2,032 -------- -------- INCOME FROM CONTINUING OPERATIONS 3,518 2,856 LOSS ON DISCONTINUED OPERATIONS, LESS INCOME TAX BENEFIT OF $1,054,000 - (1,286) -------- -------- NET INCOME $ 3,518 $ 1,570 ======== ======== EARNINGS (LOSS) PER SHARE: Income from continuing operations $ .71 $ .58 Loss on discontinued operations - (.26) -------- -------- Net income $ .71 $ .32 ======== ======== AVERAGE COMMON SHARES AND EQUIVALENTS OUTSTANDING 4,975 4,908 ======== ======== DIVIDENDS PAID - -
See "Notes to Consolidated Financial Statements." 4 5 MARK VII, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands)
SEPT. 30, 1995 DEC. 31, 1994 -------------- ------------- ASSETS (Unaudited) ------ CURRENT ASSETS: Cash and cash equivalents $ 165 $ 1,246 Accounts receivable, net of allowance 49,247 51,188 Notes and other receivables, net of allowance 6,595 5,748 Current deferred income taxes 497 1,732 Other current assets 980 643 ------- ------- Total current assets 57,484 60,557 ------- ------- DEFERRED INCOME TAXES 771 1,110 ------- ------- NET PROPERTY AND EQUIPMENT 4,367 5,078 ------- ------- INTANGIBLES AND OTHER ASSETS 4,508 3,651 ------- ------- PROPERTY HELD FOR SALE 3,330 3,330 ------- ------- $70,460 $73,726 ======= ======= LIABILITIES AND SHAREHOLDERS' INVESTMENT ---------------------------------------- CURRENT LIABILITIES: Accrued transportation expenses $36,604 $33,646 Accrued income taxes - 471 Other current and accrued liabilities 4,048 2,966 Borrowings under line of credit - 8,546 Net current liabilities of discontinued operations 1,311 2,708 ------- ------- Total current liabilities 41,963 48,337 ------- ------- LONG-TERM OBLIGATIONS 728 1,916 ------- ------- CONTINGENCIES AND COMMITMENTS (Notes 2 and 4) SHAREHOLDERS' INVESTMENT: Common stock, $.10 par value, authorized 10,000,000 shares, issued and outstanding 4,888,461 shares and 4,781,234 shares, respectively 489 478 Paid-in capital 27,536 26,769 Retained deficit (256) (3,774) ------- ------- Total shareholders' investment 27,769 23,473 ------- ------- $70,460 $73,726 ======= =======
See "Notes to Consolidated Financial Statements." 5 6 MARK VII, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
FOR THE NINE MONTHS ENDED -------------------------------- SEPT. 30, 1995 OCT. 1, 1994 -------------- ------------ OPERATING ACTIVITIES: Net income $ 3,518 $ 1,570 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Loss on discontinued operations - 1,286 Depreciation and amortization 840 1,002 Amortization of intangibles 249 163 Provision for doubtful accounts and notes receivable 560 408 Non-current deferred income taxes 339 2 CHANGES IN OPERATING ASSETS AND LIABILITIES: Accounts receivable 1,381 (11,030) Accrued transportation 2,958 6,845 Accrued income taxes 764 508 Other, net (1,010) (800) ------- -------- Net cash provided by (used for) operating activities 9,599 (46) ------- -------- INVESTING ACTIVITIES: Additions to property and equipment, net (129) (1,801) Net investment in discontinued operations (1,397) (371) ------- -------- Net cash used for investing activities (1,526) (2,172) ------- -------- FINANCING ACTIVITIES: Proceeds received from exercise of stock options 778 46 Net borrowings (repayments) under line of credit (8,546) 3,776 Repayments of long-term obligations (1,386) (303) Other - (29) ------- -------- Net cash provided by (used for) financing activities (9,154) 3,490 ------- -------- Net increase (decrease) in cash and cash equivalents (1,081) 1,272 Cash and cash equivalents: Beginning of period 1,246 291 ------- -------- End of period $ 165 $ 1,563 ======= ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 309 $ 506 Income taxes 1,392 747 SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES: Direct financing under capital lease obligations $ - $ 2,416
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. and its wholly owned subsidiaries, collectively referred to herein as "the Company". The principal operations of the Company are conducted by its transportation services subsidiary, Mark VII Transportation Company, Inc. ("Mark VII"). As a result of the sale of substantially all of the assets of the Company's truckload subsidiaries completed on October 3, 1994 (the "Asset Sale"), the operations of MNX Carriers, Inc., ("Carriers"), and its subsidiaries (Missouri-Nebraska Express, Inc. ("Mo-Neb"), MNX Trucking, Inc. and MNX Transport, Inc.) are reported as a discontinued operation in these consolidated financial statements. 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 1994 Annual Report on Form 10-K. The results for the three and nine months ended September 30, 1995 are not necessarily indicative of the results for the entire year 1995. (2) CREDIT FACILITY: The Company has a $20 million line of credit. This line bears interest at 1/2% over the bank's prime rate and expires on July 31, 1997. The line is secured by accounts receivable and other assets of Mark VII and is guaranteed by the Company. The available line of credit at September 30, 1995 was $12.8 million. Letters of credit totaling $7.2 million have been issued to secure insurance deductibles and purchases of operating services. The line of credit has no restrictions on intercompany advances among the Company's subsidiaries. The line of credit requires that the Company earn annual consolidated income from continuing operations of $2 million and maintain minimum consolidated tangible net worth of $19 million in 1995, $21 million in 1996 and $23 million thereafter and obtain approval from the lender prior to paying dividends. The following is a summary of data on the line of credit:
THIRD QUARTER NINE MONTHS ------------------------ ------------------------ 1995 1994 1995 1994 ---- ---- ---- ---- (in thousands) (in thousands) Balance outstanding at end of period $ - $14,853 $ - $14,853 Average amount outstanding 2 5,985 2,069 6,475 Maximum period end balance outstanding - 14,853 9,310 14,853 Interest rate at end of period - 8.25% - 8.25% Weighted average interest rate 9.33% 7.95% 9.35% 7.28%
7 8 (3) EARNINGS (LOSS) PER SHARE: Earnings per share is computed based on the weighted average number of common and common equivalent shares outstanding during the period. Reported earnings per share amounts include common equivalents relating to dilutive stock options of 183,000 and 154,000 for the third quarter and nine months ended September 30, 1995, respectively, and 131,000 and 145,000 for the third quarter and nine months ended October 1, 1994, respectively. (4) JOINT VENTURE: The Company has guaranteed $1 million of a $5 million line of credit to provide working capital for ERX Logistics ("ERX"). ERX is a partnership 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. Borrowings under this line have averaged $1,235,000 in the nine months ended September 30, 1995. The maximum monthend borrowing was $2,411,000. The outstanding borrowing at September 30, 1995 was $1,898,000. (5) RELATED PARTY TRANSACTIONS: Prior to the Asset Sale, the Company and Carriers routinely engaged in intercompany transactions as Carriers hauled freight for Mark VII's customers and as Mark VII brokered loads for Carriers' customers. Transportation costs on Mark VII's loads hauled by Carriers for the third quarter and nine months ended October 1, 1994 were $957,000 and $5,179,000, respectively. The Company's operating revenues on Carriers' loads brokered to Mark VII were $62,000 and $167,000 for the third quarter and nine months ended October 1, 1994, respectively. 8 9 MARK VII, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS Three and nine months ended September 30, 1995 vs. three and nine months ended October 1, 1994. The following table sets forth the percentage relationship of the Company's revenues and expense items to operating revenues for the periods indicated:
THIRD QUARTER NINE MONTHS ------------------ ------------------ 1995 1994 1995 1994 ---- ---- ---- ---- OPERATING REVENUES 100.0% 100.0% 100.0% 100.0% TRANSPORTATION COSTS 84.9 85.8 85.0 86.4 ----- ----- ----- ----- NET REVENUES 15.1 14.2 15.0 13.6 OPERATING EXPENSES: Salaries, wages and related costs 3.6 3.1 3.6 3.1 Selling, general and administrative 7.9 7.8 8.1 7.6 Equipment rents 1.2 .9 1.2 .9 Depreciation and amortization .2 .4 .2 .3 ----- ----- ----- ----- TOTAL OPERATING EXPENSES 12.9 12.2 13.1 11.9 ----- ----- ----- ----- OPERATING INCOME 2.2 2.0 1.9 1.7 INTEREST AND OTHER EXPENSE, NET .1 .1 .1 .1 ----- ----- ----- ----- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 2.1% 1.9% 1.8% 1.6% ===== ===== ===== =====
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. 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. Net revenues include only the commissions and fees. 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. The Company currently has several logistics management projects which are in their initial phases and are producing lower operating income than more mature projects. Management believes this is not a continuing material trend and expects these projects to contribute more to earnings in the future. Lease payments for tractors, trailers and domestic containers are included in equipment rents. 9 10 Revenues. The total number of shipments for the quarter increased 13% to 107,000 in 1995 versus 95,000 for the same period of 1994. Year-to-date, the number of shipments was 305,000, up 15% from the 266,000 shipments for the same period in 1994. This increase in the number of shipments resulted from the expansion of services to existing and new customers. Although there has been a softness in the transportation market since early 1995, the Company has been able to maintain volume and margin growth. While operating revenues have increased 3% for the quarter and 6% for the year-to-date period, transportation costs have decreased similarly as a percentage of operating revenue, resulting in net revenue growth of 9% for the quarter and 17% for the year-to-date period. During this period of slow economic growth, the Company has been able to purchase transportation at reduced costs, resulting in both lower operating revenues and lower transportation costs. Consequently, net revenues were not significantly impacted by the economy during the first three quarters of the year. Net revenues were impacted, however, by the significant increase in logistics management and dedicated trucking operations discussed above, as a greater portion of their costs are included in equipment rents, salaries and related costs, and selling, general and administrative costs compared to the Company's transportation services operations. Operating revenues from the Company's temperature-controlled freight operations declined $3.4 million and $10.7 million for the quarter and year-to-date periods, respectively, compared to 1994. Net revenues from these operations declined $0.4 million and $1.5 million for the quarter and year-to-date periods. These decreases resulted from management's decision during the fourth quarter of 1994 to reduce temperature-controlled freight operations to service only a core group of customers. Salaries and Related Costs. Salaries and related costs increased 20% and 23% in the third quarter and year-to-date period, respectively, compared to 1994. This was primarily due to the addition of driver wages for the Company's dedicated trucking operations, the increase in logistics management operations, salary increases to existing employees and the addition of administrative and operations personnel to handle continued growth in the number of shipments arranged. This increase, as well as the increase in selling, general and administrative expenses discussed below, exceeds the percentage increase in operating revenues due to growth in the dedicated trucking and logistics management operations. While management expects these operations to continue to grow and, consequently, these expenses to increase as a percentage of operating revenues, the impact on operating results in future periods should be offset by the increase in net revenues as a percentage of operating revenues. Selling, General and Administrative. Selling, general and administrative expenses increased 4% and 13% in the third quarter and year-to-date period, respectively. This increase was primarily due to commissions paid to agency operating offices and the sales force, which are based on a percentage of net revenues, as well as the addition of several large dedicated trucking projects. Equipment Rents. The 39% and 43% increase in this expense for the quarter and year-to-date periods, respectively, is due to the leasing of additional tractors and trailers for use in dedicated trucking. LIQUIDITY AND CAPITAL RESOURCES The Company's working capital needs have been met through bank lines of credit and cash flow provided from operations. 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 line is secured by accounts receivable and other assets of Mark VII and is guaranteed by the Company. At September 30, 1995, the available line of credit was $12.8 million and letters of credit totaling $7.2 million had been issued on Mark VII's behalf to secure insurance deductibles and purchases of operating services. The line of credit has no restrictions on intercompany advances among the Company's subsidiaries. Among other restrictions, the terms of the line of credit require that the Company earn $2 million in consolidated income from continuing operations annually, maintain consolidated tangible net worth of $19 million in 1995, $21 million in 1996 and $23 million thereafter and obtain approval of the lender before paying dividends. The Company remains liable for certain potential claims which may arise in connection with its former truckload operations. 10 11 At September 30, 1995, the Company had a ratio of current assets to current liabilities of approximately 1.37 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. 11 12 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. 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. 12 13 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) November 13, 1995 /s/ J. Michael Head - ----------------- -------------------------------------------------- (Date) J. Michael Head, Executive Vice President, Chief Financial Officer, Treasurer (Principal Financial and Accounting Officer) 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-30-1995 JAN-01-1995 SEP-30-1995 165 0 50,723 1,476 0 57,484 8,064 3,697 70,460 41,963 0 489 0 0 27,280 70,460 332,340 332,340 0 325,383 (30) 560 444 5,983 2,465 3,518 0 0 0 3,518 .71 .71
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