-----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, Q9uEUVr+6L5fgu6GSMUBBzcBQg72/2t0w1Ui7elBNAoQR2vv3hez5OmsVQQXyHS9 gz9s5fkypnedFdume+veqQ== 0000908834-98-000204.txt : 19980817 0000908834-98-000204.hdr.sgml : 19980817 ACCESSION NUMBER: 0000908834-98-000204 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 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: SEC FILE NUMBER: 001-13586 FILM NUMBER: 98690263 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, D.C. 20549 --------------------------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended June 30, 1998 THE MORGAN GROUP, INC. 2746 Old U. S. 20 West Elkhart, Indiana 46515-1168 (219) 295-2200 Delaware 1-13586 22-2902315 (State of (Commission File Number) (I.R.S. Employer Incorporation) Identification Number) The Company (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. The number of shares outstanding of each of the Company's classes of common stock at July 31, 1998 was: Class A - 1,438,035 shares Class B - 1,200,000 shares The Morgan Group, Inc. INDEX PAGE NUMBER PART I FINANCIAL INFORMATION Item 1 Financial Statements Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997 3 Consolidated Statements of Operations for the Three and Six Month Periods Ended June 30, 1998 and 1997 4 Consolidated Statements of Cash Flows for the Six Month Periods Ended June 30, 1998 and 1997 5 Notes to Consolidated Financial Statements as of June 30, 1998 6 - 7 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 10 PART II OTHER INFORMATION 11 Item 4 Submission of Matter to a Vote of Security Holders 11 Item 6 Exhibits and Reports on Form 8-K 11 Signatures 12 PART I FINANCIAL INFORMATION The Morgan Group, Inc. and Subsidiaries Consolidated Balance Sheets (Dollars in thousands, except share amounts)
June 30, December 31, 1998 1997 ASSETS (unaudited) ------------- ---------------- Current assets: Cash and cash equivalents $538 $380 Trade accounts receivable, less allowance for doubtful accounts of $242 in 1998 and $183 in 1997 16,090 13,362 Accounts receivable, other 351 126 Refundable taxes 113 263 Prepaid expenses and other current assets 2,528 2,523 Deferred income taxes 1,095 1,095 ------- ------- Total current assets 20,715 17,749 ------- ------- Property and equipment, net 4,313 4,315 Intangible assets, net 8,154 8,451 Deferred income taxes 767 767 Other assets 863 1,464 ------- ------- Total assets $34,812 $32,746 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Note payable to bank $3,000 $2,250 Trade accounts payable 3,839 3,410 Accrued liabilities 6,101 4,966 Accrued claims payable 2,165 2,175 Refundable deposits 1,725 1,666 Current portion of long-term debt 676 1,153 ------- ------- Total current liabilities 17,506 15,620 ------- ------- Long-term debt, less current portion 1,180 1,360 Long-term accrued claims payable 3,094 3,042 Commitments and contingencies - - - - - - - - Shareholders' equity: Common stock, $.015 par value Class A: Authorized shares - 7,500,000 Issued shares - 1,605,553 23 23 Class B: Authorized shares - 2,500,000 Issued and outstanding shares - 1,200,000 18 18 Additional paid-in capital 12,459 12,453 Retained earnings 2,464 2,160 ------- ------- Total capital and retained earnings 14,964 14,654 Less - treasury stock at cost 166,918 and 167,643 Class A shares (1,428) (1,426) Loan to officer for stock purchase (504) (504) ------- ------- Total shareholders' equity 13,032 12,724 ------- ------- Total liabilities and shareholders' equity $34,812 $32,746 ======= =======
The Morgan Group, Inc. and Subsidiaries Consolidated Statements of Operations (Dollars in thousands, except share amounts) (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, 1998 1997 1998 1997 ------------ ------------ ------------ ------------ Operating revenues: Manufactured housing $26,073 $25,541 $47,297 $45,210 Driver outsourcing 6,111 5,209 11,478 10,098 Specialized transport 5,699 4,742 10,022 10,879 Other service revenues 3,640 3,719 6,697 6,657 ------- ------- ------- ------- Total operating revenues 41,523 39,211 75,494 72,844 Costs and expenses: Operating costs 37,123 35,582 68,778 66,257 Selling, general and administration 2,873 2,041 5,241 4,274 Depreciation and amortization 288 302 583 596 ------- ------- ------- ------- 40,284 37,925 74,602 71,127 Operating income 1,239 1,286 892 1,717 Interest expense, net 189 168 333 299 ------- ------- ------- ------- Income before income taxes 1,050 1,118 559 1,418 Income tax expense 433 419 173 453 ------- ------- ------- ------- Net income $617 $699 $386 $965 ======= ======= ======= ======= Net income per common share: Basic: Class A common stock $0.24 $0.27 $0.16 $0.37 ======= ======= ======= ======= Class B common stock $0.23 $0.26 $0.14 $0.35 ======= ======= ======= ======= Diluted: Class A common stock $0.24 $0.27 $0.15 $0.37 ======= ======= ======= ======= Class B common stock $0.23 $0.26 $0.13 $0.35 ======= ======= ======= =======
The Morgan Group, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited)
Six Months Ended June 30, 1998 1997 ------- ------- Operating activities: Net income $ 386 $ 965 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 583 596 Gain on disposal of property and equipment (15) (51) Changes in operating assets and liabilities: Trade accounts receivable (2,728) (4,280) Other accounts receivable (225) (8) Refundable taxes 156 456 Prepaid expenses and other current assets (5) 1,227 Other assets 601 (376) Trade accounts payable 429 1,933 Accrued liabilities 1,135 (1,164) Accrued claims payable 42 364 Refundable deposits 59 (431) ------- ------- Net cash provided by (used in) operating activities 418 (769) Investing activities: Purchases of property and equipment (358) (260) Proceeds from sale of property and equipment 89 896 Business acquisitions -- (302) ------- ------- Net cash provided by (used in) investing activities (269) 334 Financing activities: Net proceeds from note payable to bank 750 1,304 Principle payments on long-term debt (657) (1,219) Purchase of treasury stock (64) (350) Proceeds from sale of treasury stock 62 -- Common stock dividends paid (82) (81) ------- ------- Net cash provided by (used in) financing activities 9 (346) ------- ------- Net increase (decrease) in cash and equivalents 158 (781) Cash and cash equivalents at beginning of period 380 1,308 ------- ------- Cash and cash equivalents at end of period $ 538 $ 527 ======= =======
The Morgan Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) June 30, 1998 Note 1.Basis of Presentation The accompanying consolidated interim financial statements have been prepared by The Morgan Group, Inc. and Subsidiaries (the "Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. The consolidated interim financial statements should be read in conjunction with the financial statements, notes thereto and other information included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. The accompanying unaudited consolidated interim financial statements reflect, in the opinion of management, all adjustments (consisting of normal recurring items) necessary for a fair presentation, in all material respects, of the financial position and results of operations for the periods presented. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for the interim periods are not necessarily indicative of the results for the entire year. The consolidated financial statements include the accounts of the Company and its subsidiaries, Morgan Drive Away, Inc., TDI, Inc., Interstate Indemnity Company, MDA Corporation, and Morgan Finance, Inc., all of which are wholly owned. Significant intercompany accounts and transactions have been eliminated in consolidation. Note 2. Net Income Per Common Share Net income available to each class of common stock is determined by adding together the amount of applicable dividends declared and the amount of undistributed earnings allocated. Undistributed earnings are allocated to each class of common stock equally per share. Net income applicable to common stocks is the same for the basic and diluted EPS computations for all periods presented. The following table reconciles basic and diluted earnings per share (dollars in thousands, except share amounts):
Three Months Ended Six Months Ended June 30, June 30, 1998 1997 1998 1997 ---------- ---------- ---------- ---------- Allocation of net income to common stocks: Class A Stock: Dividends $ 29 $ 30 $ 58 $ 60 Allocation of undistributed earnings 314 362 166 486 ---------- ---------- ---------- ---------- Net income applicable to Class A stock - basic and diluted $ 343 $ 392 $ 224 $ 546 ---------- ---------- ---------- ---------- Class B Stock: Dividends 12 12 24 24 Allocation of undistributed earnings 262 295 138 395 ---------- ---------- ---------- ---------- Net income applicable to Class B stock - basic and diluted $ 274 $ 307 $ 162 $ 419 ---------- ---------- ---------- ---------- Net income $ 617 $ 699 $ 386 $ 965 ========== ========== ========== ========== Weighted average shares outstanding: Class A stock: Basic 1,437,421 1,462,487 1,436,821 1,475,677 Dilutive effect of stock options 17,779 9,636 13,116 6,483 ---------- ---------- ---------- ---------- Diluted 1,455,200 1,472,123 1,449,937 1,482,160 ========== ========== ========== ========== Class B stock-basic and diluted 1,200,000 1,200,000 1,200,000 1,200,000 ========== ========== ========== ========== Class A basic EPS $ 0.24 $ 0.27 $ 0.16 $ 0.37 ========== ========== ========== ========== Class B basic EPS $ 0.23 $ 0.26 $ 0.14 $ 0.35 ========== ========== ========== ========== Class A diluted EPS $ 0.24 $ 0.27 $ 0.15 $ 0.37 ========== ========== ========== ========== Class B diluted EPS $ 0.23 $ 0.26 $ 0.13 $ 0.35 ========== ========== ========== ==========
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations The Morgan Group, Inc. is the nation's largest service company managing the delivery of manufactured homes, trucks, specialized vehicles, and trailers in the United States. Morgan provides outsourcing transportation services principally through a national network of independent owner operators. The Company dispatches its drivers from approximately 112 offices in 32 states. The Company's services also include providing certain insurance and financing services to its owner operators. The Manufactured housing group provides specialized transportation to companies which produce new manufactured homes, modular homes, and office trailers. In addition, the Manufactured housing group transports used manufactured homes and offices. The Driver outsourcing group provides drivers to customers to deliver commercial trucks and recreational vehicles. The Specialized transport group moves a variety of specialized vehicles, including semi-trailers, military vehicles, travel trailers and other commodities by utilizing specialized equipment. RESULTS OF OPERATIONS The following table sets forth the percentage relationships of operations data to revenue for the periods indicated.
Three Months Ended Six Months Ended June 30, June 30, (Unaudited) (Unaudited) 1998 1997 1998 1997 ------ ------ ------ ------ Statement of Operations Data: Operating revenues 100.0% 100.0% 100.0% 100.0% Operating costs 89.4 90.7 91.1 91.0 Selling, general and administration 6.9 5.2 6.9 5.9 Depreciation and amortization .7 .8 .8 .8 ------ ------ ------ ------ Operating income 3.0 3.3 1.2 2.3 Interest expense, net .5 .4 .5 .4 ------ ------ ------ ------ Income before income taxes 2.5 2.9 .7 1.9 Income tax expense 1.0 1.1 .2 .6 ------ ------ ------ ------ Net income 1.5% 1.8% .5% 1.3% ====== ====== ====== ======
Operating revenues for the second quarter increased from $39.2 million in 1997, to a record amount of $41.5 million in 1998. The second quarter of 1997 included $0.7 million of revenues from the discontinued truckaway operation which was part of Specialized transport. The increase was primarily in the Specialized transport and Driver outsourcing operating revenues which increased 20.2% and 17.3%, respectively. Specialized transport operating revenues increased 41.0% after giving effect to the discontinuance of the truckaway operation in May of 1997. The increase in Driver outsourcing is principally due to the growth in delivery of Class Eight vehicles and also increases in the delivery of recreational vehicles. The increase in Specialized transport is primarily due to the reconstruction of this business segment and the growth of the driver force. Operating costs as a percent of operating revenues decreased from 90.7% in the second quarter of 1997 to 89.4% in the second quarter of 1998. This improvement was principally due to the effect of higher volume and less bodily injury and cargo claims expense in 1998, compared to 1997. Additionally, fixed costs were less in 1998 primarily due to the discontinuance of the truckaway operation and reductions in Manufactured housing, partially offset by increased dispatch and regional costs in Specialized transport. Selling, general and administration expenses increased from 5.2% of operating revenues in the second quarter of 1997 to 6.9% in the second quarter of 1998, primarily due to increased salaries, health care expense and professional fees principally relating to information systems initiatives and Year 2000 compliance. Operating income was 3.0% of operating revenues in the second quarter of 1998 compared to 3.3% in 1997. Net income was 1.5% of operating revenues in the second quarter of 1998 compared to 1.8% in 1997. Operating revenues for the six months ended June 30, increased from $72.8 million in 1997 to $75.5 million in 1998. The first six months of 1997 included $3.3 million of revenues from the discontinued truckaway operation. The increases were 4.6% in Manufactured housing, 13.7% in Driver outsourcing, and 32.2% in Specialized transport after giving effect to the discontinuance of the truckaway operation. Manufactured housing principally experienced increased volume with the existing customer base. The increases in Driver outsourcing and Specialized transport primarily are due to the reasons stated in the second quarter analysis. Operating costs for the first six months as a percent of operating revenue remained at approximately 91% of operating revenues. The adverse bodily injury and cargo claim expense in the first quarter of 1998 offset the benefits previously discussed. Selling, general and administration expenses for the first six months increased from 5.9% of operating revenue in 1997 to 6.9% in 1998, primarily due to increased salaries, information systems costs, and bad debt expense. Operating income was 1.2% of operating revenues for the first six months of 1998 compared to operating income of 2.3% in 1997. Net income was 0.5% of operating revenues in 1998 compared to 1.3% in 1997. Shipments of manufactured homes tend to decline in the winter months in areas where poor weather conditions inhibit transport. This usually reduces operating revenues in the first and fourth quarters of the year. Recreational vehicles and travel trailer 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 operating revenues, therefore, tend to be stronger in the second and third quarters. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents increased from $380,000 as of December 31, 1997 to $538,000 as of June 30, 1998, while debt levels increased $93,000. Cash was used during the first six months of 1998 to finance trade accounts receivable growth of $2.7 million associated with record operating revenues. The Company has generated net cash of $418,000 from operations in the first six months of 1998, compared to $769,000 net cash used in the first six months of 1997. This improvement in cash management has been due to accelerated trade accounts receivable collections and more stringent treasury management. The increase in trade accounts receivable was partially offset by increases in trade accounts payable and accrued liabilities. Trade accounts receivable days sales outstanding decreased from 37 days at December 31, 1997 to 32 days at June 30, 1998. FORWARD LOOKING DISCUSSION This report contains a number of forward-looking statements. From time to time, the Company may make other oral or written forward-looking statements regarding its anticipated operating revenues, costs and expenses, earnings and other matters affecting its operations and condition. Such forward-looking statements are subject to a number of material factors which could cause the statements or projections contained therein to be materially inaccurate. Such factors include, without limitation, the risk of declining production in the manufactured housing industry; the risk of losses or insurance premium increases from traffic accidents; the risk of loss of major customers; risks of competition in the recruitment and retention of qualified drivers in the transportation industry generally; risks of acquisitions or expansion into new business lines that may not be profitable; risks of changes in regulation and seasonality of the Company's business. Such factors are discussed in greater detail in the Company's Annual Report on Form 10-K for 1997 under Part I, Item 1, Business 7. PART II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders On June 18, 1998, the Company held its Annual Meeting of Shareholders, the results of which follow: Report of proxies received and shares voted June 18, 1998 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 1,433,910 1,359,367 95% 1. Election of directors elected by all shareholders (1-year term)
Against or For Withheld Abstained Non-Votes --- -------- --------- --------- Charles C. Baum 1,353,367 6,000 -0- 74,543 Richard B. Black 1,353,062 6,305 -0- 74,543 Frank E. Grzelecki 1,353,367 6,000 -0- 74,543 Robert S. Prather, Jr. 1,353,367 6,000 -0- 74,543 2. Election of directors by holders of Class A common stock (1-year term) Bradley J. Bell 1,353,367 6,000 -0- 74,543
Item 6 - Exhibits and Reports on Form 8-K (a) The following exhibits are included herein: Exhibit 27(1) - Financial Data Schedule for Six Month Period Ended June 30, 1998 Exhibit 27(2) - Restated Financial Data Schedule for Six Month Period Ended June 30, 1997 (b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter for which this report is filed. 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/ Dennis R. Duerksen -------------------------- Dennis R. Duerksen Chief Financial Officer Date: August 14, 1998 EX-27.1 2 FDS FOR THE SIX MONTHS ENDED JUNE 30, 1998
5 0000906609 The Morgan Group, Inc. 1,000 U.S. Dollars 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 1.000 538 0 16,332 242 0 20,715 6,849 2,536 34,812 17,506 0 41 0 0 12,991 34,812 75,494 75,494 0 74,602 0 228 333 559 173 386 0 0 0 386 0.16 0.15
EX-27.2 3 RESTATED FOR THE SIX MONTHS ENDED JUNE 30, 1997
5 0000906609 The Morgan Group, Inc. 1,000 U.S. Dollars 6-MOS DEC-31-1997 JAN-01-1997 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 0 71,127 0 0 299 1,418 453 965 0 0 0 965 0.37 0.37
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