-----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, C3jKaFPD3MLjXO4EFZzTxZvCcq+0NJxb4J7vOevWoTt7j/jmPdQmvHJBi6V/PzP2 D+x2gQNHcu0i9ADevK+bJQ== 0000950144-96-002278.txt : 19960515 0000950144-96-002278.hdr.sgml : 19960515 ACCESSION NUMBER: 0000950144-96-002278 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960330 FILED AS OF DATE: 19960514 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: 96562836 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 03-30-96 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 30, 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) 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 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 10, 1996 - ---------------------------- --------------------------- Common stock, $.10 par value 4,589,061 Shares 2 MARK VII, INC. AND SUBSIDIARIES FORM 10-Q -- FOR THE QUARTER ENDED MARCH 30, 1996 INDEX
Page Part I. FINANCIAL INFORMATION Item 1. Financial Statements a) Consolidated Statements of Income--Three Months Ended March 30, 1996 and April 1, 1995 3 b) Consolidated Balance Sheets--March 30, 1996 and 4 December 30, 1995 c) Consolidated Statements of Cash Flows for the Three months Ended March 30, 1996 and April 1, 1995 5 d) Notes to Consolidated Financial Statements 6 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 11
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 --------------------------- MAR. 30, 1996 APR. 1, 1995 ------------- ------------ OPERATING REVENUES $122,030 $105,457 TRANSPORTATION COSTS 105,725 89,791 -------- -------- NET REVENUES 16,305 15,666 OPERATING EXPENSES: Salaries and related costs 4,088 3,903 Selling, general and administrative 8,829 8,731 Equipment rents 1,354 1,330 Depreciation and amortization 295 261 -------- -------- Total Operating Expenses 14,566 14,225 OPERATING INCOME 1,739 1,441 INTEREST AND OTHER EXPENSE, NET 93 105 -------- -------- INCOME BEFORE PROVISION FOR INCOME TAXES 1,646 1,336 PROVISION FOR INCOME TAXES 691 556 -------- -------- NET INCOME $ 955 $ 780 ======== ======== EARNINGS PER SHARE $ .20 $ .16 ======== ======== AVERAGE COMMON SHARES AND EQUIVALENTS OUTSTANDING 4,825 4,911 DIVIDENDS PAID - -
See "Notes to Consolidated Financial Statements." 3 4 MARK VII, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts)
MAR. 30, 1996 DEC. 30, 1995 ------------- ------------- ASSETS (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 411 $ 272 Accounts receivable, net of allowance 50,631 55,778 Notes and other receivables, net of allowance 8,241 6,789 Other current assets 1,185 1,415 ------- ------- Total current assets 60,468 64,254 DEFERRED INCOME TAXES 694 1,385 NET PROPERTY AND EQUIPMENT 4,163 4,399 INTANGIBLES AND OTHER ASSETS 2,749 4,106 NET ASSETS OF DISCONTINUED OPERATIONS 2,512 2,008 ------- ------- $70,586 $76,152 ======= ======= LIABILITIES AND SHAREHOLDERS' INVESTMENT CURRENT LIABILITIES: Accrued transportation expenses $37,368 $43,246 Deferred income taxes 1,286 1,286 Other current and accrued liabilities 6,170 4,330 Borrowings under line of credit - 690 ------- ------- Total current liabilities 44,824 49,552 ------- ------- LONG-TERM OBLIGATIONS 671 712 ------- ------- CONTINGENCIES AND COMMITMENTS (Notes 2 and 4) SHAREHOLDERS' INVESTMENT: Common stock, $.10 par value, authorized 10,000,000 shares, issued 4,888,761 shares 489 489 Paid-in capital 27,875 27,875 Retained earnings 1,915 960 ------- -------- 30,279 29,324 Less: 300,000 and 200,000 shares of treasury stock, at cost (5,188) (3,436) ------- ------- Total shareholders' investment 25,091 25,888 ------- ------- $70,586 $76,152 ======= =======
See "Notes to Consolidated Financial Statements." 4 5 MARK VII, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
FOR THE THREE MONTHS ENDED -------------------------- MAR. 30, 1996 APR. 1, 1995 ------------- ------------ OPERATING ACTIVITIES: Net cash provided by operating activities $3,205 $1,484 ------ ------ INVESTING ACTIVITIES: Additions to property and equipment, net (60) (19) ------ ------ FINANCING ACTIVITIES: Proceeds received from exercise of stock options - 275 Purchase of treasury stock (1,751) - Net borrowings (repayments) under line of credit (690) 764 Other (61) (86) ------ ------ Net cash provided by (used for) financing activities (2,502) 953 ------ ------ Net cash provided by continuing operations 643 2,418 Net cash used in discontinued operations (504) (2,846) ------ ------ Net increase (decrease) in cash and cash equivalents 139 (428) Cash and cash equivalents: Beginning of period 272 1,246 ------ ------ End of period $ 411 $ 818 ====== ====== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest 44 166 Income taxes, net of refunds received 93 886
See "Notes to Consolidated Financial Statements." 5 6 MARK VII, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) GENERAL: The consolidated financial statements include Mark VII, Inc., a Missouri 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 1995 Annual Report on Form 10-K. The results for the three months ended March 30, 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 March 30, 1996 was $3,470,000. (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. The Company intends to vigorously defend the arbitration. Selection of the arbitrators is in process, but no date has been set for the hearing. (4) NEW ACCOUNTING PRONOUNCEMENTS: The Company adopted Statement of Financial Accounting Standard (SFAS) No. 121 "Accounting for Impairment of Long-Lived Assets and For Long-Lived Assets to be Disposed Of" during the first quarter of 1996. The adoption of this accounting standard had no material effect on the Company's results of operations or consolidated financial position. SFAS No. 123 "Accounting for Stock-Based Compensation" was issued in October, 1995 for fiscal years beginning after December 15, 1995. The Company has not adopted this method of accounting, but will instead continue to apply the accounting provisions of Accounting Principles Board Opinion, No. 25 "Accounting for Stock Issued to Employees' and related Interpretations in accounting for its employee stock options. The Company will, however, comply with the 6 7 disclosure requirements of the new standard, beginning with the annual financial statements issued for the year ending December 29, 1996. 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 months ended March 30, 1996 vs. three months ended April 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:
THREE MONTHS ----------------- 1996 1995 ------ ------ OPERATING REVENUES 100.0% 100.0% TRANSPORTATION COSTS 86.6 85.1 ----- ----- NET REVENUES 13.4 14.9 OPERATING EXPENSES: Salaries, wages and related costs 3.4 3.7 Selling, general and administrative 7.2 8.3 Equipment rents 1.1 1.3 Depreciation and amortization .2 .2 ----- ----- TOTAL OPERATING EXPENSES 11.9 13.5 ----- ----- OPERATING INCOME 1.5 1.4 INTEREST AND OTHER EXPENSE, NET .1 .1 ----- ----- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 1.4% 1.3% ===== =====
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. Operating Income. The total number of shipments for the quarter increased 16% to 108,000 in 1996 versus 93,000 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 active sales force responsible for generating these sales increases, including agents, was 252 at the end of the first quarter of 1996 compared to 249 at the end of the first quarter of 1995. 8 9 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 revenue for the first quarter of 1996. The decrease in net revenue as a percentage of revenue was offset by decreases in operating expenses as a percent of revenues. During the quarter, the Company experienced a slight increase in rates in truck brokerage as excess capacity decreased marginally in the transportation market due to normal seasonal shipping trends not experienced in the first quarter of 1995. 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. At March 30, 1996, the available line of credit was $12,371,000 and letters of credit totaling $7,629,000 had been issued on Mark VII's behalf to secure insurance deductibles and purchases of operating services. At March 30, 1996 the Company had a ratio of current assets to current liabilities of approximately 1.6 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. 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. 10 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. Mark VII, Inc. (Registrant) May 13, 1996 /s/ J. Michael Head - ------------ ------------------------------------------ (Date) J. Michael Head, Executive Vice President, Chief Financial Officer, Treasurer (Principal Financial and Accounting Officer) 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-29-1996 DEC-31-1995 MAR-30-1996 411 0 52,077 1,446 0 60,468 8,359 4,196 70,586 44,824 0 0 0 489 24,602 70,586 122,030 122,030 0 105,725 14,566 101 69 1,646 691 955 0 0 0 955 .20 .20
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