-----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, QmEOSIRkhJr7qch/fNfpboG0PJHc+Ji3cyLvM65cfxhJSr4wQdwgtw9/W7dMbWo8 tLZM/XCHaD2b6SxZH1YXBQ== 0000908834-97-000181.txt : 19970815 0000908834-97-000181.hdr.sgml : 19970815 ACCESSION NUMBER: 0000908834-97-000181 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN GROUP INC CENTRAL INDEX KEY: 0000906609 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 222902315 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13586 FILM NUMBER: 97661511 BUSINESS ADDRESS: STREET 1: 2746 OLD U S 20 W STREET 2: PO BOX 1168 CITY: ELKHART STATE: IN ZIP: 46514 BUSINESS PHONE: 2192952200 10-Q 1 FORM 10-Q FOR THE MORGAN GROUP, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------------------- FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended June 30, 1997 ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ For the transition period from to Commission File Number 1-13586 THE MORGAN GROUP, INC. Delaware 22-2902315 (State of other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 2746 Old U.S. 20 West, Elkhart, Indiana 46514-1168 (Address of principal executive offices) (Zip Code) (219) 295-2200 (Registrant's telephone number, include area code) Not applicable (Former name, former address and former fiscal year, if changed since last report) 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. __X___ Yes ______ No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Common Stock, $0.15 Par Value: Class A - 1,446,010 shares as of June 30, 1997 Class B - 1,200,000 shares as of June 30, 1997 The Morgan Group, Inc. INDEX PAGE NUMBER PART I FINANCIAL INFORMATION Item 1 Financial Statements (Unaudited) Condensed Consolidated Balance Sheets as of June 30, 1997 and December 31, 1996 Condensed Consolidated Statements of Operations for the Three and Six Month Periods Ended June 30, 1997 and 1996 Condensed Consolidated Statements of Cash Flows for the Six Month Periods Ended June 30, 1997 and 1996 Notes to Condensed Consolidated Financial Statements as of June 30, 1997 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations PART II OTHER INFORMATION Item 4 Submission of Matters to a Vote of the Security Holders Item 6 Exhibits and Reports on Form 8-K Signatures PART I FINANCIAL INFORMATION Item 1 Financial Statements The Morgan Group, Inc. and Subsidiaries Condensed Consolidated Balance Sheets June 30, Dec. 31, 1997 1997 ------- ------- Assets Current assets: Cash and cash equivalents $527 $1,308 Trade accounts receivable, less allowance for doubtful accounts of $86,000 in 1997 and $59,000 in 1996 15,592 11,312 Accounts receivable, other 282 274 Refundable taxes 128 584 Prepaid expenses and other current assets 2,218 3,445 ------- ------- Total current assets 18,747 16,923 Property and equipment, net 2,673 2,763 Assets held for sale 1,575 2,375 Intangible assets, net 8,922 8,911 Deferred income taxes 1,683 1,683 Other assets 787 411 ------- ------- Total assets $34,387 $33,066 ======= ======= The Morgan Group, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (continued)
June 30, Dec. 31, 1997 1997 ------- ------- (Unaudited) (Note) (Dollars in Thousands) Liabilities and Shareholders' Equity Current liabilities: Note payable to bank $2,554 $1,250 Trade accounts payable 5,159 3,226 Accrued liabilities 3,644 4,808 Accrued claims payable 1,863 1,744 Refundable deposits 1,477 1,908 Current portion of long-term debt 1,196 1,892 ----- ------- Total current liabilities 15,893 14,828 Long-term debt, less current portion 1,791 2,314 Long-term accrued claims payable 3,065 2,820 Commitments and contingencies - - - - - - Shareholders' equity Class A Authorized shares - 7,500,000; Issued and outstanding shares - 1,446,010 and 1,485,520 23 23 Class B Authorized shares - 2,500,000; Issued and outstanding shares - 1,200,000 18 18 Additional paid-in capital 12,441 12,441 Retained earnings 3,010 2,126 ----- ------ Total capital and retained earnings 15,492 14,608 Less - treasury stock, 159,543 and 120,043 shares, at cost (1,350) (1,000) - loan to officer for purchase of stock (504) (504) ----- ------- Total shareholders' equity 13,638 13,104 ------ ------ Total liabilities and shareholders' equity $34,387 $33,066 ======= =======
Note: The balance sheet at December 31, 1996 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles or complete financial statements. The Morgan Group, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited)
Three Months Ended Six Months Ended June 30 June 30 1997 1996 1997 1996 --------- --------- --------- --------- Operating revenues: Manufactured housing outsourcing $25,541 $20,008 $45,210 $35,566 Driver outsourcing 5,209 6,871 10,098 12,130 Specialized transport 4,742 6,938 10,879 14,081 Other service revenue 3,719 2,881 6,657 5,427 --------- --------- --------- --------- Total operating revenues 39,211 36,698 72,844 67,204 Costs and expenses: Operating costs 35,582 33,564 66,257 61,763 Depreciation and amortization 302 380 596 742 Selling, general and administrative 2,041 2,076 4,274 4,069 --------- --------- --------- --------- Operating income 1,286 678 1,717 630 Interest expense, net 168 109 299 172 --------- --------- --------- --------- Income before taxes 1,118 569 1,418 458 Income tax benefit 419 152 453 32 --------- --------- --------- --------- Net income $699 $417 $965 $426 ========= ========= ========= ========= Net income per common share: Primary $.26 $.15 $.36 $.16 ========= ========= ========= ========= Fully Diluted $.26 $.15 $.36 $.16 ========= ========= ========= ========= Average number of common shares and common stock equivalents 2,664,041 2,708,128 2,660,098 2,677,957 ========= ========= ========= =========
See notes to condensed consolidated financial statements. The Morgan Group, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flow (Unaudited) Six Months Ended June 30, ------------------ 1997 1996 ------- ------- (Dollars in thousands) Operating activities Net income $ 995 $ 426 Adjustment to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 596 742 Debt amortization 18 16 ------- ------- 1,609 1,184 Changes in operating assets and liabilities: Accounts receivable (4,280) (2,727) Accounts receivable, other 8 (195) Refundable taxes 476 - - - Prepaid expenses and other current expenses 1,209 411 Accounts payable 1,917 (967) Accrued liabilities (1,164) (473) Accrued insurance claims 314 287 Refundable deposits (431) (31) ------- ------- Net cash provided by (used in operating activities) (342) (2,511) Investing activities Purchases of property and equipment, net of disposals (215) (285) Sale of assets held 800 - - - Intangible assets purchased (302) - - - Increase in other assets (376) (167) ------- ------- Net cash used in investing activities (93) (452) Financing activities Net proceeds from bank and seller financed notes and credit line 85 1,558 Dividends on common stock (81) (88) Treasury stock purchase, net of officer loan (350) (115) ------- ------- Net cash provided by (used in) financing activities (346) 1,355 ------- ------- Net (decrease) in cash and equivalents (781) (1,608) Cash and cash equivalents at beginning of period 1,308 2,851 ------- ------- Cash and cash equivalents at end of period $ 527 $ 1,243 ======= ======= See notes to condensed consolidated financial statements. The Morgan Group, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) June 30, 1997 Note 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of The Morgan Group, Inc. and Subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial reporting and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for fair presentation have been included. Operating results for the six months ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto, for the year ended December 31, 1996. The condensed consolidated financial statements include the accounts of the Company and its subsidiaries, Morgan Drive Away, Inc. ("Morgan"), TDI, Inc. ("TDI"), Interstate Indemnity Company ("Interstate"), and Morgan Finance, Inc. ("Finance") all of which are wholly owned. Significant intercompany accounts and transactions have been eliminated in consolidation Note 2. Earnings Per Share In February, 1997, the Financial Accounting Standards Board issued Statement No. 128 Earnings Per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact on second quarter ended June 30, 1997 and year to date June 30, 1997 earnings per share is not expected to be material. The impact of Statement 128 on the calculation of fully diluted earnings per share for these quarter is not expected to be material. Note 3. Special Charges The sale of the truckaway operation was completed during the second quarter of 1997. The reserves established in 1996 for losses on the sale of equipment and close down costs appear to be adequate. The Company is still in the process of selling the four properties which were written down to fair market value at the end of 1996. PART I - FINANCIAL INFORMATION Item 2 - Management Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS The following table sets for the percentage relations of operations data to revenue for the periods indicated.
Three Months Ended Six Months Ended June 30, June 30, -------------------- ---------------------- 1997 1996 1997 1996 ----- ----- ----- ----- (Unaudited) (Unaudited) Statement of Operations Data: Operating revenue 100.0% 100.0% 100.0% 100.0% Operating costs 90.7 91.4 91.0 92.0 Depreciation and amortization .8 1.0 .8 1.1 Selling, general and administrative 5.2 5.7 5.9 6.1 ----- ----- ----- ----- Operating income 3.3 1.9 2.3 .8 Net interest expense (.4) (.3) (.4) (.2) ----- ----- ----- ----- Income before income taxes 2.9 1.6 1.9 .6 Income taxes 1.1 .4 .6 - - - ----- ----- ----- ----- Net income 1.8 1.2 1.3 .6 ===== ===== ===== =====
Operating Revenues: Operating revenues for the second quarter of 1997 increased from $36.7 million in 1996, to $39.2 million in 1997, an increase of 9%. Prior to giving effect to the acquisition of Transit Homes which became effective on December 30, 1996, comparable revenues decreased 8%. Backing out the revenues in 1997 and 1996 of the recently sold truckaway operation, the revenue decline during the second quarter before giving effect to the Transit Homes acquisition was 2%. The manufactured housing outsourcing revenues, which includes revenues generated from arranging delivery service for new manufactured homes, modular homes, and office trailers, increased from $20.0 million in the second quarter of 1996, to $25.5 million in the second quarter of 1997. The revenue growth is substantially related to the acquisition of Transit Homes. Prior to giving effect to the Transit acquisition, Morgan's manufactured housing revenues increased 4% while industry production remained relatively flat with the second quarter of 1996. Driver outsourcing revenues in the first quarter of 1997 of $5.2 million were 24% lower than first quarter of 1996 revenues of $6.9 million. Competitive pressures, specifically on the relocation of rental trucks, have resulted in a decline in driver outsourcing revenues. Specialized transport revenues consist of arranging delivery services for van conversions, automobiles, semi-trailers, military vehicles, and other commodities by utilizing specialized equipment. This area's decrease was solely due to the sale of the truckaway operation. Other services revenues, which include revenues from Interstate Indemnity, Morgan Finance, permit ordering services, and labor services increased 29% to $3.7 million in the second quarter of 1997 over the same period from the prior year. Year to date, operating revenues reached $72.8 million, a growth of 8% compared to $67.2 million in the first six months of 1996. Prior to giving effect to the Transit Homes acquisition, comparable revenues decreased 6%. Adjusting revenues for the Transit acquisition and also the recently closed truckaway operation, operating revenues were flat with 1996. The manufactured housing industry production for the first six months of 1997 was flat with 1996 production. The decline in driver outsourcing revenue from $12.1 million the first six months of 1996 to $10.1 million for the first six months of 1997 is related to competitive pressures, specifically on the relocation of rental trucks. Operating Costs: Operating costs as a percent of revenue decreased from 91.4% in the second quarter of 1996 to 90.7% in the second quarter of 1997. The improvement in the operating ratio during the second quarter was the result of the closing of the truckaway operation where operating costs were in excess of 100% of revenue in 1996. The improved operating margins, due to the sale of the truckaway operation, were partially offset by an increase in claims cost of 1.3% compared to 1996, specifically related to accident severity not frequency. Year to date operating costs, as a percent of revenue, have decreased from 92% to 91%. The improvement year to date is also reflective of the closing of the truckaway operation where margin gains have been only partially offset by claims costs which have increased .6% since 1996. Depreciation and Amortization: Depreciation and amortization decreased from $380,000, or 1.0% of revenue, in the second quarter of 1996 to $302,000, or .8% of revenue, in 1997. Year to date depreciation and amortization expenses are down .3%. The decrease in depreciation and amortization expense relates to the discontinuance of depreciation on equipment and properties which have been sold or are currently held for sale. This reduction of depreciation expense has been partially offset by higher amortization related to the Transit acquisition. Selling, General and Administrative Expenses: Selling, general and administrative expenses decreased from $2,076,000 or 5.6% of revenue, in the second quarter of 1996 to $2,041,000, or 5.2% of revenue, in 1997. The decline in selling, general and administrative expenses for the quarter are attributed to a reduction in corporate staff levels partially offset by higher computer lease expenses. Year to date selling, general and administrative expenses have increased from $4,069,000, or 6.1% of revenue, to $4,274,000, or 5.9% of revenue this year. The year to date increase relates to duplicate general and administrative costs occurring primarily in the first quarter due to the the Transit acquisition and higher computer lease costs. Operating Income: Operating income was $1,286,000 for the second quarter of 1997 compared to $678,000 in the second quarter of 1996. Year to date operating income increased to $1,717,000 in 1997 from $630,000 in 1996. The increase in operating income during the quarter and first six months was principally related to the fourth quarter of 1996 decision to close the company's truckaway operation which lost in excess of $400,000 in the second quarter of 1996 and approximately $750,000 during the first six months of last year. Interest Expense, Net: During the second quarter of 1997, the company had net interest expense of $168,000 compared to net interest expense of $109,000 in the second quarter of 1996. The increase in interest cost is attributed to higher debt levels as a result of the Transit acquisition. Pretax Income: During the second quarter of 1997, the company had pretax income of $1,118,000, or 2.9% of revenue, versus a pretax income of $569,000 or 1.6% of revenue, in the second quarter of 1996. Year to date pretax has increased from $458,000, or .7% of revenue, to $1,418,000, or 1.3% of revenue. Income Taxes: The effective tax rate during the second quarter of 1997 was 37% compared to 27% during the second quarter of 1996. Year to date the effective tax rate is 32% versus 7% during the first six months of 1996. The lower tax rate in 1996 reflects the fact that the prior year's profits had a higher portion of earnings generated by Interstate Indemnity, the Company's captive insurance company which obtains favorable tax treatment. Net Income: Net income was $699,000 in the second quarter of 1997, or $.26 primary earnings per common share, compared to net income of $417,000, of $.15 primary earnings per common share, in the second quarter of 1996. Year to date net income of $965,000, or $.36 primary earnings per common share, is double the $426,000, or $.16 primary earnings per common share earned in the first six months of 1996. Seasonality: Shipments of manufactured housing tend to decline in the winter months in areas where poor weather conditions inhibit transport. This may reduce revenues in the first and fourth quarters of the year. RV movements are generally stronger in the spring when dealers build stock in anticipation of the summer vacation season and late summer and early fall when new vehicle models are introduced. The company's revenues, therefore, are generally stronger in the second and third quarters of the year. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents decreased from $1,308,000 as of December 31, 1996 to $527,000 as of June 30, 1997, while debt level stayed approximately the same. Cash was used during the first six months to finance receivable growth of $4,280,000, associated with the strong second quarter revenues, and also reflects a decrease in accrued liabilities of $1,164,000 which is principally related to cash used in closing the truckaway operation. Further effects on cash include decreases in refundable deposits of $431,000 as the Company eliminated the need for driveaway drivers to hold deposits, increase in tractor financing resulting in an increase in other assets of $376,000, and treasury stock purchases of $350,000. Cash was generated during the first six months through operating profits before depreciation and amortization of $1.6 million, reduction of refundable tax receivable of $476,000, reduction in prepaid expenses of $1,209,000 related to reduced prepayments to drivers and insurance costs, increase in accounts payable $1,917,000, increase in accrued insurance claims costs of $314,000, and cash generated from the assets held for sale at the end of the year of $800,000. As of June 30, 1997, the company has $527,000 in cash, marketable securities and short-term investments. Additionally, the company has $3,182,000 of unused credit facilities. The company expects that current cash flow from existing operations, existing cash and the line of credit will be adequate to fund the company's existing operations for the foreseeable future. (See next paragraph for possible circumstances which could alter this expectation). FORWARD LOOKING DISCUSSION The company's improvement in operating performance during the first six months of 1997 can be specifically traced to the closing of the truckaway operation and reduced overhead expenses. Operating margins should continue to increase in comparison to 1997 in comparison to 1996 operating margins as the company should continue to receive the benefit of the closing of the truckaway operation and should have increased manufactured housing margins due to the Transit Homes acquisition. In addition, improvements in the safety and claims area, though inherently unpredictable, should continue to aid improved operating margins if recent positive reduction in accident frequency continues. The acquisition of Transit Homes of America, which generated approximately $9.7 million of additional revenues during the first six months, should more than offset the lost operating revenue from the sale of the truckaway operation for the remainder of 1997. Matters discussed in this paragraph and the adequacy of available capital resources are forward looking statements that are subject to important factors and involve risk and uncertainties. Potential risk and uncertainties include, without limitation, continued competitive pressures in the market place, the effect of overall economic conditions, the cost of accident claims and the ability to continue to recruit qualified drivers to service the business. These factors may cause actual results to differ materially from what the Company is projecting. PART II - OTHER INFORMATION Item 4 Submission of Matters to a Vote of Security Holders On May 12, 1997, the Company held its annual meeting of shareholders, the results of which follow: Report of proxies received and shares voted May 12, 1997 Total Voted % of Total --------- --------- ---------- Number of Shares of Class B Common Stock 1,200,000 1,200,000 100% Number of Shares of Class A Common Stock 1,482,020 1,212,033 82% 1. Election of Directors Elected by all Shareholders (1-year term) Against For or Withheld Abstained Non-Votes --------- ------------ --------- --------- Charles C. Baum 1,206,633 5,400 269,957 Richard B. Black 1,204,463 7,570 269,957 Frank B. Grzelecki 1,206,633 5,400 269,957 2. Election of Directors by Holders of Class A Common Stock (1-year term) Bradley J. Bell 1,206,663 5,400 269,957 Item 6 Exhibits and Reports on Form 8-K (a) The following exhibits are included herein: Exhibit 11 - Statement re: computation of earnings per share. Exhibit 27 - Financial Data Schedule (b) No reports on Form 8-k were filed for the quarter ended June 30, 1997 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. THE MORGAN GROUP, INC. BY: /s/ Richard B. DeBoer ---------------------------------- Richard B. DeBoer Vice President and CFO Date: August ___, 1997 EX-11 2 COMPUTATION OF PER SHARE EARNINGS Exhibit 11 - Statement re: Computation of Per Share Earnings (Unaudited)
Three Months Ended Six Months Ended June 30 June 30 -------------------------- ------------------------- 1997 1996 1997 1996 ----------- ----------- ----------- ----------- Primary Average shares outstanding 2,566,665 2,566,665 2,566,665 2,566,665 Exercise of warrants 88,888 88,888 88,888 88,888 Redemption of shares of series A preferred stock 150,000 150,000 150,000 150,000 Treasury stock repurchased (141,512) (97,425) (145,455) (127,596) ----------- ----------- ----------- ----------- Total 2,664,041 2,708,128 2,660,098 2,677,957 Fully Diluted Net effect of dilutive warrants based upon the treasury stock method using the average stock prices - - - - - - - - - - - - ----------- ----------- ----------- ----------- Total 2,664,041 2,708,128 2,660,098 2,677,957 =========== =========== =========== =========== Net Income $ 699,000 $ 417,000 $ 965,000 $ 426,000 =========== =========== =========== =========== Primary earnings per share $ .26 $ .15 $ .36 $ .16 =========== =========== =========== =========== Fully diluted earnings per share $ .26 $ .15 $ .36 $ .16 =========== =========== =========== ===========
EX-27 3 FINANCIAL DATA SCHEDULE FOR THE MORGAN GROUP, INC.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. The Morgan Group, Inc. 0000906609 1,000 U.S. Dollars 6-MOS Dec-31-1997 Jan-1-1997 Jun-30-1997 1.000 299 228 15,678 86 0 18,747 5,817 3,144 34,387 15,893 0 41 0 0 13,638 34,387 72,844 72,844 66,257 71,127 0 0 299 1,418 453 965 0 0 0 965 .36 .36
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