-----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, DAOGFayHJQe6NuBc+WAzjZllVf+K+YPE0UxG9587UfBwrhSDYRNb+zW++YrC8FFh Zn9i9gzGf3q3KMe9X/f8/Q== 0000908834-00-000141.txt : 20000922 0000908834-00-000141.hdr.sgml : 20000922 ACCESSION NUMBER: 0000908834-00-000141 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 DATE AS OF CHANGE: 20000829 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN GROUP INC CENTRAL INDEX KEY: 0000906609 STANDARD INDUSTRIAL CLASSIFICATION: 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: 701533 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 0001.txt FORM 10-Q FOR THE MORGAN GROUP, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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, 2000 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) (IRS 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 August 8, 2000 was: Class A - 1,248,157 shares Class B - 1,200,000 shares The Morgan Group, Inc. INDEX PAGE NUMBER PART I FINANCIAL INFORMATION Item 1 Financial Statements (unaudited) Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999 3 Consolidated Statements of Operations for the Three and Six Month Periods Ended June 30, 2000 and 1999 4 Consolidated Statements of Cash Flows for the Three and Six Month Periods Ended June 30, 2000 and 1999 5 Notes to Consolidated Interim Financial Statements as of June 30, 2000 6 -8 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 9-12 Item 3 Quantitative and Qualitative Disclosures About Market Risk 13 PART II OTHER INFORMATION Item 4 Submission of Matters to a Vote of Security Holders 14 Item 5 Other Information 15-22 Item 6 Exhibits and Reports on Form 8-K 23 Signatures 23 PART I - FINANCIAL INFORMATION Item 1 - Financial Statements The Morgan Group, Inc. and Subsidiaries Consolidated Balance Sheets (Dollars in thousands, except share amounts)
June 30, December 31, 2000 1999 -------- -------- ASSETS (Unaudited) (Note 1) Current assets: Cash and cash equivalents $ 1,349 $ 3,847 Trade accounts receivable, less allowance for doubtful accounts of $254 in 2000 and $313 in 1999 11,863 10,130 Accounts receivable, other 360 313 Refundable taxes 306 -- Prepaid expenses and other current assets 1,834 1,960 Deferred income taxes 1,474 1,475 -------- -------- Total current assets 17,186 17,725 -------- -------- Property and equipment, net 4,139 4,309 Intangible assets, net 7,011 7,361 Deferred income taxes 2,172 2,172 Other assets 631 697 -------- -------- Total assets $ 31,139 $ 32,264 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Trade accounts payable $ 3,941 $ 3,907 Accrued liabilities 4,945 4,852 Income taxes payable -- 278 Accrued claims payable 3,852 3,071 Refundable deposits 1,597 1,752 Current portion of long-term debt and capital lease obligations 610 676 -------- -------- Total current liabilities 14,945 14,536 -------- -------- Long-term debt and capital lease obligations, less current portion 152 289 Long-term accrued claims payable 4,623 5,347 Commitments and contingencies -- -- Shareholders' equity: Common stock, $.015 par value Class A: Authorized shares - 7,500,000 Issued shares - 1,607,303 23 23 Class B: Authorized shares - 2,500,000 Issued and outstanding shares - 1,200,000 18 18 Additional paid-in capital 12,459 12,459 Retained earnings 2,102 2,775 -------- -------- Total capital and retained earnings 14,602 15,275 Less - treasury stock at cost (359,146 Class A shares) (3,183) (3,183) -------- -------- Total shareholders' equity 11,419 12,092 -------- -------- Total liabilities and shareholders' equity $ 31,139 $ 32,264 ======== ========
See Notes to Consolidated Financial Statements. 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 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Operating revenues $ 29,961 $ 40,270 $ 57,828 $ 75,595 Costs and expenses: Operating costs 27,287 36,876 53,400 68,879 Selling, general and administration 2,273 2,650 4,632 5,338 Depreciation and amortization 288 308 581 617 ----------- ----------- ----------- ----------- 29,848 39,834 58,613 74,834 Operating income (loss) 113 436 (785) 761 Interest expense, net 76 119 133 207 ----------- ----------- ----------- ----------- Income (loss) before income taxes 37 317 (918) 554 Income tax expense (benefit) 20 148 (319) 267 ----------- ----------- ----------- ----------- Net income (loss) $ 17 $ 169 $ (599) $ 287 =========== =========== =========== =========== Net income (loss) per common share: Basic $ 0.01 $ 0.07 ( $0.24) $ 0.12 =========== =========== =========== =========== Diluted $ 0.01 $ 0.07 ( $0.24) $ 0.11 =========== =========== =========== =========== Weighted average shares outstanding Basic 2,448,157 2,447,532 2,448,157 2,492,820 =========== =========== =========== =========== Diluted 2,452,731 2,449,287 2,452,905 2,495,326 =========== =========== =========== =========== Cash dividends declared per common share Class A: $ 0.02 $ 0.02 $ 0.04 $ 0.04 =========== =========== =========== =========== Class B: $ 0.01 $ 0.01 $ 0.02 $ 0.02 =========== =========== =========== ===========
See Notes to Consolidated Financial Statements The Morgan Group, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited)
Six Months Ended June 30 2000 1999 ------- ------- Operating activities: Net (loss) income $ (599) $ 287 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Depreciation and amortization 581 617 Other 41 28 Changes in operating assets and liabilities: Trade accounts receivable (1,733) (1,375) Other accounts receivable (47) 941 Prepaid expenses and other current assets 126 302 Other assets 66 (186) Trade accounts payable 34 503 Accrued liabilities 93 1,257 Income taxes payable (584) (815) Accrued claims payable 57 11 Refundable deposits (155) 88 ------- ------- Net cash (used in) provided by operating activities (2,120) 1,658 Investing activities: Purchases of property and equipment (103) (421) Other investing activities 2 (30) ------- ------- Net cash used in investing activities (101) (451) Financing activities: Net proceeds from note payable to bank -- -- Principal payments on long-term debt (203) (195) Treasury stock purchases -- (1,014) Common stock dividends paid (74) (69) ------- ------- Net cash used in financing activities (277) (1,278) ------- ------- Net decrease in cash and equivalents (2,498) (71) Cash and cash equivalents at beginning of period 3,847 1,490 ------- ------- Cash and cash equivalents at end of period $ 1,349 $ 1,419 ======= =======
See Notes to Condensed Financial Statements The Morgan Group, Inc. and Subsidiaries Notes to Consolidated Interim Financial Statements (Unaudited) June 30, 2000 Note 1.Basis of Presentation The accompanying consolidated interim financial statements have been prepared by The Morgan Group, Inc. and Subsidiaries (the "Company"), in accordance with generally accepted accounting principles for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included for complete financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. The balance sheet at December 31, 1999 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 for complete financial statements. 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, 1999. Net income per common share ("EPS") is computed using the weighted average number of common shares outstanding during the period. Since each share of Class B common stock is freely convertible into one share of Class A common stock, the total of the weighted average number of shares for both classes of common stock is considered in the computation of EPS. 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, and Morgan Finance, Inc., all of which are wholly owned. Significant intercompany accounts and transactions have been eliminated in consolidation. Note 2. Indebtedness The Company has a $20,000,000 revolving credit facility ("Credit Facility") which expires February 28, 2001, and is subject to renewal annually, thereafter. The Credit Facility was amended March 30, 2000 to limit payment of dividends to $120,000 annually, to prohibit the acquisition of the Company's common stock, and to limit borrowings and letters of credit to the borrowing base. Note 3.Segment Reporting Description of Services by Segment The Company operates in four business segments: manufactured housing, driver outsourcing, specialized outsourcing services, and insurance and finance. The manufactured housing segment primarily provides specialized transportation to companies which produce new manufactured homes and modular homes through a network of terminals located in thirty-one states. The driver outsourcing segment provides outsourcing transportation primarily to manufacturers of recreational vehicles, commercial trucks, and other specialized vehicles through a network of service centers in seven states. The specialized outsourcing services segment consists of large trailer, travel and small trailer delivery. The fourth segment, insurance and finance, provides insurance and financing to the Company's drivers and independent owner-operators. This segment also acts as a cost center whereby all property damage and bodily injury and cargo costs are captured. The Company's segments are strategic business units that offer different services and are managed separately based on the differences in these services. The driver outsourcing segment and the specialized outsourcing services were reported as one segment titled "Specialized Outsourcing Services" in the prior year. The prior year periods have been restated. Measurement of Segment (Loss) The Company evaluates performance and allocates resources based on several factors, of which the primary financial measure is business segment operating income, defined as earnings before interest, taxes, depreciation and amortization (EBITDA). The accounting policies of the segments are the same as those described in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. Except for insurance premiums, there are no significant intersegment revenues. The following table presents the financial information for the Company's reportable segments for the three and six month periods ended June 30, (in thousands):
Three Months Ended Six Months Ended June 30, June 30, 2000 1999 2000 1999 -------- -------- -------- -------- Operating revenues Manufactured Housing $ 19,995 $ 27,648 $ 38,201 $ 51,516 Driver Outsourcing 5,820 6,323 11,431 12,040 Specialized Outsourcing Services 3,883 5,891 7,640 11,206 Insurance and Finance 734 1,032 1,549 2,060 All Other -- 20 (3) 72 -------- -------- -------- -------- 30,432 40,914 58,818 76,894 Total intersegment insurance revenues (471) (644) (990) (1,299) -------- -------- -------- -------- Total operating revenues $ 29,961 $ 40,270 $ 57,828 $ 75,595 ======== ======== ======== ======== Segment profit (loss) - EBITDA Manufactured Housing $ 1,896 $ 3,108 $ 3,638 $ 5,757 Driver Outsourcing 436 20 906 109 Specialized Outsourcing Services 24 190 (119) 305 Insurance and Finance (1,703) (2,376) (3,964) (4,406) All Other (252) (198) (665) (387) -------- -------- -------- -------- 401 744 (204) 1,378 Depreciation and amortization (288) (308) (581) (617) Interest expense (76) (119) (133) (207) -------- -------- -------- -------- Income (loss) before taxes $ 37 $ 317 $ (918) $ 554 ======== ======== ======== ========
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS For the Quarter Ended June 30, 2000 Consolidated Results During the second quarter of 2000, the Company continued to experience shipment and profit declines in its manufactured housing and specialized outsourcing business segments while the segment profit/loss of driver outsourcing and insurance and finance improved. In the second quarter, consolidated operating revenues decreased 25.6 percent to $29,961,000 from 1999's second quarter of $40,270,000. This decrease is primarily the result of a sharp industry-wide decline in shipments of manufactured homes. Additionally, operating revenues decreased significantly in the specialized outsourcing business segment. Second quarter 2000 operating revenues increased from first quarter 2000 by 7.5 percent principally due to the seasonality of the businesses. However, this volume increase was approximately half of the rate experienced in the prior year. The manufactured housing industry continues to be hampered by tighter credit standards and rising interest rates at the retail level, and a resultant excessive inventory of new and repossessed homes, which directly impacts production and sales volume of the Company's customers. The largest portion of the Company's operating revenues is derived from the transportation of manufactured homes. The Company believes that the depressed level of shipments in manufactured housing will continue through this year, possibly moderating the following year. Earnings before interest, taxes, depreciation and amortization ("EBITDA") was a profit of $401,000 for the quarter, compared with a profit of $744,000 for the corresponding period last year. Because of the existence of significant non-cash expenses, such as depreciation of fixed assets and amortization of intangible assets, the Company believes that EBITDA contributes to a better understanding of the Company's ability to satisfy its obligations and to utilize cash for other purposes. EBITDA should not be considered in isolation from or as a substitute for operating income, cash flow from operating activities, and other consolidated income or cash flow data prepared in accordance with generally accepted accounting principles. Net interest expense decreased from $119,000 in the second quarter of 1999 to $76,000 in 2000 as a result of continued improved cash management which reduced the amount of borrowings from the credit facility. Accordingly, net income for the second quarter of 2000 was $17,000 or $0.01 per basic share, compared to net income of $169,000 or $0.07 per basic share, for the same period of the prior year. The Company continues to review incremental marketing initiatives, is continuously reviewing staffing levels and expenditures to reduce its overhead structure. Segment Results The Company conducts its operations in four principal segments as discussed below. The following discussion sets forth certain information about the segment results. Manufactured Housing Manufactured Housing operating revenues are generated from providing transportation and logistical services to manufacturers of manufactured homes. Manufactured Housing operating revenues were $7,653,000 or 27.7 percent less in the second quarter of 2000 compared to the second quarter of a year ago, reflecting the continued softness in the manufactured housing industry. Manufactured Housing EBITDA decreased primarily due to the lower quarter-to-quarter shipment volume. EBITDA decreased $1,212,000 to $1,896,000. Driver Outsourcing Driver outsourcing provides outsourcing transportation services primarily to manufacturers of recreational vehicles, commercial trucks and other specialized vehicles. Operating revenues of $5,820,000 decreased $503,000 in the second quarter of 2000 compared to the second quarter of 1999. However, EBITDA increased to $436,000 in the second quarter of 2000 primarily due to the elimination of low margin business and to reductions in transportation and overhead costs. Specialized Outsourcing Services Specialized Outsourcing Services consists of delivering large trailers, travel and other small trailers and another specialized transport service ("Decking"). Operating revenues decreased by $2,008,000 in the second quarter of 2000 to $3,883,000. This decrease was primarily in the delivery of large trailers but also from the Decking operations. The Company essentially ceased delivery of the Decking units in the second quarter 2000. EBITDA decreased $166,000 compared to the year ago quarter to $24,000 in the second quarter 2000. This decrease is primarily due to the volume decreases. Insurance/Finance The Company's Insurance/Finance segment provides insurance and financing services to the Company's drivers and independent owner-operators. This segment also acts as a cost center whereby all bodily injury, property damage and cargo loss costs are captured. Insurance/Finance operating revenues decreased $298,000 in the second quarter of 2000 to $734,000 primarily reflecting a decrease in owner-operator insurance premiums caused by the slow-down in the manufactured housing industry. The loss at the EBITDA level in the second quarter of 2000 compared to the second quarter of the prior year decreased by $673,000 to $1,703,000 primarily due to decreases in cargo related claims but also lower bodily injury and property damage losses. RESULTS OF OPERATIONS For the First Six Months Ended June 30, 2000 For the first six months of 2000, operating revenues decreased to $57,828,000 from $75,595,000 for the same period last year. The decrease in operating revenues was primarily in Manufactured Housing but also decreased in the other business segments. EBITDA decreased $1,582,000 to a loss of $204,000 for the six month period of 2000 compared to the year ago period. This decrease was caused by Manufactured Housing and Specialized Outsourcing Services business segments partially offset by improved performance in Driver Outsourcing and the Insurance and Finance business segment. Net interest expense decreased $74,000 compared to the year ago period for the reasons previously noted. Accordingly, the net loss for the six months ended June 30, 2000 was $599,000 or $0.24 per diluted share, compared to net income of $287,000 or $0.11 per diluted share, for the same period of the prior year. The Company has instituted staff reduction and other cost savings initiatives. It is currently estimated that the cost savings of these initiatives will approximate $2,400,000 annually. The impact of the cost savings for 2000 is expected to approximate $1,800,000, net of severance costs. Segment Results The following discussion sets forth certain information about the segment results for the six months ended June 30, 2000 and 1999. Manufactured Housing Manufactured Housing operating revenues were $13,315,000 less in the first half of 2000 compared to the prior year period. As previously discussed, the decreases in operating revenues are primarily due to the continued softness in the Manufactured Housing industry. Manufactured Housing EBITDA decreased $2,119,000, primarily due to the reduction in volume partially offset by decreased overhead costs. Driver Outsourcing Operating revenues decreased by $609,000 in the first six months of 2000 compared to the first six months of 1999. This decrease as previously discussed occurred primarily in the second quarter. However, EBITDA increased from $109,000 to $906,000 primarily due to improved pricing, and reductions in transportation and overhead costs. Specialized Outsourcing Services Operating revenues decreased by $3,566,000 in the first six months of 2000 compared to the first six months of 1999. This decrease was primarily in the delivery of large trailers but the delivery of decking units also decreased, as described above. EBITDA decreased primarily because of the lower volume. Insurance/Finance Insurance/Finance operating revenues decreased $511,000 in the first six months of 2000 compared to the first six months of the prior year to $1,549,000 reflecting a decrease in owner-operator insurance premiums. The Company also experienced decreases in bodily injury, property damage and cargo related claims in the first six months of 2000. As a result of the above factors the loss at the EBITDA level decreased in the first six months of 2000 compared to the prior year period by $442,000 to $3,964,000. LIQUIDITY AND CAPITAL RESOURCES Operating activities used $2,120,000 of cash in the first six months of 2000 primarily to fund the net loss, the seasonal increase in trade accounts receivable and pay prior year federal and state tax liabilities. Trade accounts receivable days sales outstanding (DSO) decreased from 28 days at December 31, 1999 to 27 days at June 30, 2000. The March 30, 2000 amendment to the Credit Facility limits payments of dividends to $120,000 annually and limits borrowings and letters of credit to the borrowing base. The borrowing base as of June 30, 2000 was $11,082,000 with $8,775,000 letters of credit outstanding. The Company has no borrowings as of June 30, 2000. The letters of credit are primarily required for self-insurance retention reserves. The Company was in compliance with all covenants as of June 30, 2000. The Company had minimal exposure to interest rates as of June 30, 2000, as substantially all of its outstanding long-term debt bears fixed rates. The Credit Facility mentioned above bears variable interest rates based on either a Federal Funds rate or the Eurodollar rate. Accordingly, borrowings under the Credit Facility have exposure to changes in interest rates. Under its current policies, the Company does not use interest rate derivative instruments to manage exposure to interest rate changes. Also, the Company currently, is not using any fuel hedging instruments. Inflation Most of the Company's expenses are affected by inflation, which generally results in increased costs. As of June 30, 2000 the effect of inflation on the Company's results of operation was minimal. The transportation industry is dependent upon the availability and cost of fuel. Although fuel costs are paid by the Company's owner-operators, increases in fuel prices may have significant adverse effects on the Company's operations for various reasons. Since fuel costs vary between regions, drivers may become more selective as to which regions they will transport goods resulting in diminished driver availability. Also, the Company would experience adverse effects during the time period from when fuel costs begin to increase until the time when scheduled rate increases to customers are enacted. Increases in fuel prices may also affect the sale of recreational vehicles by making the purchase less attractive to consumers. A decrease in the sale of recreational vehicles would be accompanied by a decrease in the transportation of recreational vehicles and a decrease in the need for Driver Outsourcing services. Impact of Seasonality 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. The Company's operating revenues, therefore, tend to be stronger in the second and third quarters. 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 the year ended December 31, 1999. Item 3 - Quantitative and Qualitative Disclosures About Market Risk The information called for by this item is provided under the caption "Liquidity and Capital Resources" under 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 Security Holders On June 14, 2000, the Company held its Annual Meeting of Stockholders, the results of which follow: Report of proxies received and shares voted June 14, 2000 Total Voted % of Total ----- ----- ---------- Number of shares of Class A 1,248,157 1,223,263 98% common stock Number of shares of Class B common stock 1,200,000 1,200,000 100% 1. Election of directors elected by all shareholders (1-year term), shares of Class B common stock are entitled to two votes Against or For Withheld Abstained Non-Votes --- -------- --------- --------- Charles C. Baum 3,621,733 1,530 - 0 - 24,894 Bradley J. Bell 3,621,733 1,530 - 0 - 24,894 Richard B. Black 3,621,733 1,530 - 0 - 24,894 Anthony T. Castor, III 3,621,733 1,530 - 0 - 24,894 Richard L. Haydon 3,621,733 1,530 - 0 - 24,894 2. Election of director by holders of Class A common stock (1-year term) Robert S. Prather, Jr. 1,221,733 1,530 - 0 - 24,894 Item 6 Exhibits and Reports on Form 8-K (a) The following exhibits are included herein: Exhibit 10.1 - Amendment Agreement No. 1 to Revolving Credit and Term Loan Agreement dated as of January 28, 1999 Exhibit 27.1 - Financial Data Schedule for Six Month Period Ended June 30, 2000 (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, 2000 EX-10.1 2 0002.txt REVOLVING CREDIT AND TERM LOAN AGREEMENT AMMEND. AMENDMENT AGREEMENT NO. 1 to that certain REVOLVING CREDIT AND TERM LOAN AGREEMENT dated as of January 28, 1999 This AMENDMENT AGREEMENT NO. 1 (the "Amendment"), dated as March 31, 2000, among Morgan Drive Away, Inc., TDI, Inc. and Morgan Finance, Inc. (collectively, the "Borrowers"), The Morgan Group, Inc. (the "Parent", and together with the Borrowers, the "Obligors"), Fleet National Bank (formerly known as BankBoston, N.A.), and Fleet National Bank (formerly known as BankBoston, N.A.), as agent for the Banks (the "Agent"). WHEREAS, the Obligors, the Banks and the Agent are parties to that certain Revolving Credit and Term Loan Agreement, dated as of January 28, 1999, as amended (as so amended, the "Credit Agreement"); and WHEREAS, the Obligors have requested that the Banks and the Agent agree, and the Banks and the Agent have agreed, on the terms and subject to the conditions set forth herein, to amend certain provisions of the Credit Agreement; NOW, THEREFORE, the parties hereto hereby agree as follows: ss.1. Defined Terms. Capitalized terms which are used herein without definition and which are defined in the Credit Agreement shall have the same meanings herein as in the Credit Agreement. ss.2. Amendment of Credit Agreement. The Credit Agreement shall be amended as follows: (a) The definition of "Applicable Overadvance Amount" in ss.1.1 of the Credit Agreement is hereby amended by inserting the following new sentence at the end thereof: "Notwithstanding the foregoing, at all times from and after March 31, 2000, the Applicable Overadvance Amount shall be equal to $0." (b) The definition of "Consolidated EBITDA" shall be amended by inserting at the end of such definition immediately preceding the period, the following clause: "plus, in the case of expense, and minus, in the case of income, (g) noncash income or expense for such period in respect of compensatory stock options." (c) The definition of "Pricing Table" in ss.1.1 of the Credit Agreement is hereby amended by deleting said definition in its entirety and substituting therefor the following new definition: "Pricing Table... For each period commencing on an Adjustment Date through the date immediately preceding the next Adjustment Date (each a "Rate Adjustment Period"), the applicable margin shall be the applicable percentage set forth below with respect to the Obligors' Leverage Ratio, as determined at the end of the fiscal quarter of the Obligors and their Subsidiaries ending immediately prior to the applicable Rate Adjustment Period:
- - - ------------------------------------------------------------------------------------------------------ Level Leverage Ratio Applicable Applicable Base Commitment Fee Eurodollar Rate Rate Margin Margin - - - ------------------------------------------------------------------------------------------------------ I Greater than or equal to 3.00 2.250% 0.750% 0.625% to 1.00 - - - ------------------------------------------------------------------------------------------------------ II Less than 3.00 to 1.00 and 2.000% 0.500% 0.625% greater than or equal to 2.25 to 1.00 - - - ------------------------------------------------------------------------------------------------------ III Less than 2.25 to 1.00 and 1.750% 0.250% 0.500% greater than or equal to 1.50 to 1.00 - - - ------------------------------------------------------------------------------------------------------ IV Less than 1.50 to 1.00 and 1.500% 0.250% 0.500% greater than or equal to 1.00 to 1.00 - - - ------------------------------------------------------------------------------------------------------ V Less than 1.00 to 1.00 1.250% 0.250% 0.500% - - - ------------------------------------------------------------------------------------------------------
Notwithstanding the foregoing, (a) for the period commencing on the Closing Date through the end of the month in which the quarterly compliance certificate for the fiscal quarter ending March 31, 1999 is delivered pursuant to ss.9.4(d) hereof, the applicable margin for Loans shall be that percentage corresponding to Level II in the table above, and (b) if the Obligors fail to deliver any Compliance Certificate pursuant to ss.9.4(d) hereof, then for the period commencing on the first day of the month immediately following the date such Compliance Certificate was due through the date immediately preceding the Adjustment Date that occurs immediately following the date on which such Compliance Certificate is delivered, the applicable margin for Loans shall be that percentage corresponding to Level I in the table above." (d) The following new definition shall be inserted in Section 1 in appropriate alphabetical sequence: "Reference Period. A period of twelve consecutive calendar months ending on the relevant date of calculation, or such smaller number of months as shall have elapsed from April 1, 2000 to such date." (e) Section 9.4(d) of the Credit Agreement is hereby amended by inserting after the words "referred to in subsections (a) and (b) above", the words "and, for each calendar month ending during the period of June 30, 2000 through December 31, 2000, within fifteen (15) days after the end of each calendar month". (f) Section 10.4 of the Credit Agreement is hereby amended by (i) replacing the number "200,000" with the number "$120,000" in subclause (b)(i), and (ii) by deleting subclauses (b)(ii) and (b)(iii) in their entirety. (g) Section 11.2 of the Credit Agreement is amended by deleting said Section 11.2 in its entirety and substituting therefor the following new Section 11.2: "11.2. Cash Flow Coverage Ratio. (a) The Obligors and their Subsidiaries will not permit, as at the end of any calendar quarter of the Obligors ending during any period described in the table set forth below, the ratio of (1) Consolidated EBITDA for the period of twelve consecutive calendar months then ending to (2) the sum of (A) Consolidated Total Interest Expense for such period plus (B) scheduled principal payments with respect to Consolidated Funded Debt (including capitalized lease payments) due and payable during such period to be less than the ratio set forth opposite such period in such table: ----------------------------------------------------------------------- Fiscal Period Ratio ----------------------------------------------------------------------- Closing Date - 6/30/99 1.20:1.00 ----------------------------------------------------------------------- 7/1/99 - 12/31/99 1.50:1.00 ----------------------------------------------------------------------- provided, that, scheduled principal payments with respect to Consolidated Funded Debt shall be deemed to include an amount equal to twenty percent (20%) of the sum of (A) outstanding Revolving Credit Loans plus (B) Unpaid Reimbursement Obligations as at the end of such fiscal month. (b) The Obligors and their Subsidiaries will not permit, as at the end of any calendar month of the Obligors commencing with the calendar month ended April 30, 2000, the ratio of (a) Consolidated EBITDA for the Reference Period then ending to (b) the sum of (1) Consolidated Total Interest Expense for such period plus (2) scheduled principal payments with respect to Consolidated Funded Debt (including capitalized lease payments) due and payable during such period to be less than 1.50:1.00; provided, that, scheduled principal payments with respect to Consolidated Funded Debt shall be deemed to include an amount equal to twenty percent 20% of the result of (X) the sum of (A) outstanding Revolving Credit Loans plus (B) Unpaid Reimbursement Obligations as at the end of such fiscal quarter times (Y) a fraction equal to (C) the number of months in such Reference Period divided by (D) 12." (h) Section 11.3 of the Credit Agreement is hereby amended by deleting said Section 11.3 in its entirety and substituting therefor the following new Section 11.3: "11.3. Interest Coverage Ratio. (a) The Obligors and their Subsidiaries will not permit, as at the end of any fiscal quarter of the Obligors ending during any period described in the table set forth below, the ratio of (a) Consolidated EBITDA for four consecutive fiscal quarters then ending to (b) Consolidated Total Interest Expense for such period to be less than the ratio set forth opposite such period in such table: ----------------------------------------------------------------------- Period Ratio ----------------------------------------------------------------------- Closing Date - 6/30/99 3.00:1.00 ----------------------------------------------------------------------- 7/1/99 - 12/31/99 4.00:1.00 ----------------------------------------------------------------------- (b) The Obligors and their Subsidiaries will not permit, as at the end of any calendar month the Obligors commencing with the fiscal quarter ending April 30, 2000, the ratio of (a) Consolidated EBITDA for the Reference Period then ending to (b) Consolidated Total Interest Expense for such period to be less than 4.00:1.00." (i) Section 11 of the Credit Agreement is hereby amended by inserting the following newss.11.6: "ss.11.6. Minimum Net Income.. The Obligors will not permit, for any fiscal quarter commencing with the fiscal quarter ending June 30, 2000, Consolidated Net Income to be less than $1.00 for such fiscal quarter." ss.3. Representations and Warranties. The Obligors hereby jointly and severally represent and warrant to the Banks as follows: (a) The execution and delivery by the Obligors of this Amendment and all other instruments and agreements required to be executed and delivered by the Obligors in connection with the transactions contemplated hereby or referred to herein (collectively, the "Amendment Documents"), and the performance by the Obligors of their obligations and agreements under the Amendment Documents and the Credit Agreement as amended hereby, are within the corporate authority of the each of the Obligors, have been authorized by all necessary corporate proceedings on behalf of each of such Persons, and do not and will not contravene any provision of law or any of such Persons' charter, other incorporation papers, by-laws or any stock provision or any amendment thereof or of any indenture, agreement, instrument or undertaking binding upon any of such Persons. (b) The Amendment Documents and the Credit Agreement as amended hereby constitute legal, valid and binding obligations of the Obligors, enforceable in accordance with their respective terms, except as limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting generally the enforcement of creditors' rights. (c) No approval or consent of, or filing with, any governmental agency or authority is required to make valid and legally binding the execution, delivery or performance by the Obligors of the Amendment Documents or the Credit Agreement as amended hereby, or the consummation by the Obligors of the transactions among the parties contemplated hereby and thereby or referred to herein. (d) The representations and warranties contained in ss.8 of the Credit Agreement were correct at and as of the date made. Except to the extent that the facts upon which such representations and warranties were based have changed in the ordinary course of business (which changes, either singly or in the aggregate, have not been materially adverse), such representations and warranties also are correct at and as of the date hereof. (e) The Obligors have performed and complied in all material respects with all terms and conditions herein required to be performed or complied with by them prior to or at the time hereof, and as of the date hereof, after giving effect to the provisions hereof, there exists no Default or Event of Default or condition which, with either or both the giving of notice or the lapse of time, would result in a Default or an Event of Default upon the execution and delivery of the Amendment Documents or otherwise. ss.4. Conditions to Effectiveness. This Amendment shall become effective as of the date hereof upon satisfaction of each of the conditions precedent set forth in thisss.4: (a) Delivery. The Obligors, the Banks and the Agent shall have executed and delivered this Amendment. (b) Amendment Fee.. The Obligors shall have paid an amendment fee in the amount of $25,000 to the Agent for the benefit of the Banks. (c) Proceedings and Documents... All proceedings in connection with the transactions contemplated by this Amendment and all documents incident thereto shall be reasonably satisfactory in substance and form to the Agent, and the Agent shall have received copies of all final documents relating to the Leaseback Transaction, and all information and such counterpart originals or certified or other copies of such documents as the Agent may reasonably request. ss.5. Miscellaneous Provisions. (a) Except as otherwise expressly provided by this Amendment, all of the terms, conditions and provisions of the Credit Agreement shall remain the same. It is declared and agreed by each of the parties hereto that the Credit Agreement, as amended hereby, shall continue in full force and effect, and that this Amendment and the Credit Agreement shall be read and construed as one instrument. (b) This Amendment is intended to take effect as an agreement under seal and shall be construed according to and governed by the laws of the Commonwealth of Massachusetts. (c) This Amendment may be executed in any number of counterparts, but all such counterparts shall together constitute but one instrument. In making proof of this Amendment it shall not be necessary to produce or account for more than one counterpart signed by each party hereto by and against which enforcement hereof is sought. (d) The Obligors hereby agree to pay to the Agent, on demand by the Agent, all reasonable out-of-pocket costs and expenses incurred or sustained by the Agent in connection with the preparation of this Amendment (including reasonable legal fees and expenses). IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above. MORGAN DRIVE AWAY, INC. By:/s/ Dennis R. Duerksen ----------------------------------- Title: Vice President TDI, INC. By:/s/ Dennis R. Duerksen ----------------------------------- Title: Vice President MORGAN FINANCE, INC. By:/s/ Dennis R. Duerksen ----------------------------------- Title: Vice President THE MORGAN GROUP, INC. By:/s/ Dennis R. Duerksen ----------------------------------- Title: Vice President FLEET NATIONAL BANK (formerly known as BankBoston, N.A.), individually and as Agent By:/s/ Katherine A. Brand ----------------------------------- Title: Vice President EX-27 3 0003.txt FDS FOR THE MORGAN GROUP, INC.
5 This schedule contains unaudited summary financial information extracted from the Registrant's consolidated financial statements for the 6 months ended June 30, 2000 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-31-2000 JAN-1-2000 JUN-30-2000 1.000 1,349 0 11,863 254 0 17,186 6,752 2,613 31,139 14,945 0 41 0 0 11,378 31,139 57,828 57,828 0 58,613 0 (78) 133 (918) (319) (599) 0 0 0 (599) (.24) (.24)
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