UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 Quarterly Period Ended September 27, 2003 | ||
| OR | ||
| o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 0-13198
MORTON INDUSTRIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
| Georgia (State or other jurisdiction of Incorporation or organization) |
38-0811650 (IRS Employer Identification No.) |
1021 W. Birchwood, Morton, Illinois 61550
(Address of principal executive offices)
(309) 266-7176
(Registrant’s telephone number, including area code)
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 o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes o No x
The aggregate market value of the common stock held by non-affiliates of the registrant (based upon the last reported sale price on the Nasdaq Small Cap Market) on the last business day of the registrant’s most recently completed second fiscal quarter was approximately $850,000.
| Outstanding as of | ||||
| October 24, 2003 | ||||
Class A Common Stock, $.01 par value |
4,560,547 | |||
Class B Common Stock, $.01 par value |
100,000 | |||
MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September 27, 2003 and December 31, 2002
(Dollars in thousands)
| Assets | September 27, 2003 | December 31, 2002 | |||||||||
| (Unaudited) | |||||||||||
Current assets: |
|||||||||||
Trade accounts receivable, less allowance for doubtful accounts
of $166 in 2003 and $82 in 2002 |
$ | 8,967 | 5,251 | ||||||||
Note receivable |
99 | — | |||||||||
Inventories |
12,374 | 14,322 | |||||||||
Prepaid expenses and other current assets |
1,450 | 1,179 | |||||||||
Deferred income taxes |
— | 400 | |||||||||
Assets held for sale |
— | 8,990 | |||||||||
Total current assets |
22,890 | 30,142 | |||||||||
Property, plant, and equipment, net |
22,120 | 23,364 | |||||||||
Note receivable |
1,141 | ||||||||||
Intangible assets, at cost, less accumulated amortization |
924 | 1,336 | |||||||||
Deferred income taxes |
1,136 | 1,351 | |||||||||
Other assets |
557 | 660 | |||||||||
| $ | 48,768 | 56,853 | |||||||||
| Liabilities and Stockholders’ Equity (Deficit) | |||||||||||
Current liabilities: |
|||||||||||
Outstanding checks in excess of bank balance |
$ | 3,066 | 1,289 | ||||||||
Current installments of long-term debt |
39,155 | 5,331 | |||||||||
Accounts payable |
14,245 | 14,731 | |||||||||
Accrued expenses |
4,730 | 4,831 | |||||||||
Liabilities held for sale |
— | 6,254 | |||||||||
Redeemable preferred stock |
9,536 | — | |||||||||
Total current liabilities |
70,732 | 32,436 | |||||||||
Long-term debt, excluding current installments |
1,696 | 39,771 | |||||||||
Other liabilities |
199 | 262 | |||||||||
Total liabilities |
72,627 | 72,469 | |||||||||
Redeemable preferred stock |
— | 8,608 | |||||||||
Stockholders’ equity (deficit): |
|||||||||||
Class A common stock |
46 | 45 | |||||||||
Class B common stock |
1 | 2 | |||||||||
Additional paid-in capital |
20,895 | 20,895 | |||||||||
Retained deficit |
(44,801 | ) | (45,166 | ) | |||||||
Total stockholders’ equity (deficit) |
(23,859 | ) | (24,224 | ) | |||||||
| $ | 48,768 | 56,853 | |||||||||
See accompanying notes to condensed consolidated financial statements.
MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the Three and Nine Months Ended September 27, 2003 and September 28, 2002
(Dollars in thousands, except per share data)
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 27, 2003 | September 28, 2002 | September 27, 2003 | September 28, 2002 | ||||||||||||||||
Net sales |
$ | 31,452 | 28,981 | 98,230 | 90,399 | ||||||||||||||
Cost of sales |
27,389 | 25,596 | 84,566 | 78,047 | |||||||||||||||
Gross profit |
4,063 | 3,385 | 13,664 | 12,352 | |||||||||||||||
Operating expenses: |
|||||||||||||||||||
Selling expenses |
728 | 674 | 2,141 | 2,101 | |||||||||||||||
Administrative expenses |
2,449 | 2,064 | 7,656 | 7,042 | |||||||||||||||
Total operating expenses |
3,177 | 2,738 | 9,797 | 9,143 | |||||||||||||||
Operating income |
886 | 647 | 3,867 | 3,209 | |||||||||||||||
Other income (expense): |
|||||||||||||||||||
Interest expense |
(612 | ) | (1,057 | ) | (2,481 | ) | (3,286 | ) | |||||||||||
Interest on redeemable preferred stock |
(213 | ) | — | (213 | ) | — | |||||||||||||
Other |
45 | 89 | 382 | 288 | |||||||||||||||
Total other expense |
(780 | ) | (968 | ) | (2,312 | ) | (2,998 | ) | |||||||||||
Earnings (loss) before income taxes and
discontinued operations |
106 | (321 | ) | 1,555 | 211 | ||||||||||||||
Income taxes |
— | — | 560 | — | |||||||||||||||
Earnings (loss) before discontinued operations |
106 | (321 | ) | 995 | 211 | ||||||||||||||
Discontinued operations: |
|||||||||||||||||||
Net earnings (loss) from operations of discontinued
plastics operations |
— | (4,326 | ) | 140 | (7,581 | ) | |||||||||||||
Income taxes |
— | — | 55 | 862 | |||||||||||||||
| — | (4,326 | ) | 85 | (8,443 | ) | ||||||||||||||
Earnings (loss) before cumulative effect of
accounting change |
106 | (4,647 | ) | 1,080 | (8,232 | ) | |||||||||||||
Cumulative effect of change in accounting principle,
net of tax of $0 |
— | — | — | (8,118 | ) | ||||||||||||||
Net earnings (loss) |
106 | (4,647 | ) | 1,080 | (16,350 | ) | |||||||||||||
Accretion of discount on preferred shares |
— | (331 | ) | (715 | ) | (933 | ) | ||||||||||||
Net earnings (loss) available to common shareholders |
$ | 106 | (4,978 | ) | 365 | (17,283 | ) | ||||||||||||
Earnings (loss) available to common shareholders per common share — basic: |
|||||||||||||||||||
Earnings (loss) from continuing operations |
$ | 0.02 | (0.14 | ) | 0.06 | (0.16 | ) | ||||||||||||
Earnings (loss) from discontinued operations |
— | (0.92 | ) | 0.02 | (1.81 | ) | |||||||||||||
Net earnings (loss) available to common shareholders before
cumulative effect of a change in accounting principle |
0.02 | (1.06 | ) | 0.08 | (1.97 | ) | |||||||||||||
Cumulative effect of a change in accounting principle |
— | — | — | (1.76 | ) | ||||||||||||||
Net earnings (loss) available to common shareholders |
$ | 0.02 | (1.06 | ) | 0.08 | (3.73 | ) | ||||||||||||
Earnings (loss) available to common shareholders per common share — diluted: |
|||||||||||||||||||
Earnings (loss) from continuing operations |
$ | 0.02 | (0.14 | ) | 0.05 | (0.16 | ) | ||||||||||||
Earnings (loss) from discontinued operations |
— | (0.92 | ) | 0.02 | (1.81 | ) | |||||||||||||
Net earnings (loss) available to common shareholders before
cumulative effect of a change in accounting principle |
0.02 | (1.06 | ) | 0.07 | (1.97 | ) | |||||||||||||
Cumulative effect of a change in accounting principle |
— | — | — | (1.76 | ) | ||||||||||||||
Net earnings (loss) available to common shareholders |
$ | 0.02 | (1.06 | ) | 0.07 | (3.73 | ) | ||||||||||||
See accompanying notes to condensed consolidated financial statements.
MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 27, 2003 and September 28, 2002
(Dollars in thousands)
(Unaudited)
| Nine Months Ended | ||||||||||
| September 27, 2003 | September 28, 2002 | |||||||||
Net cash provided by operating activities |
$ | 4,254 | 3,585 | |||||||
Cash flows from investing activities: |
||||||||||
Proceeds from sale of machinery and equipment |
— | 257 | ||||||||
Proceeds from sale of business |
4,800 | — | ||||||||
Cash received on notes receivable |
99 | — | ||||||||
Capital expenditures |
(2,629 | ) | (3,014 | ) | ||||||
Net cash provided by (used in) investing activities |
2,270 | (2,757 | ) | |||||||
Cash flows from financing activities: |
||||||||||
Net borrowings (repayments) under revolving credit facility |
(4,650 | ) | 4,596 | |||||||
Increase (decrease) in checks outstanding in excess of bank balance |
1,777 | (1,185 | ) | |||||||
Increase in financing fees |
(300 | ) | (1,412 | ) | ||||||
Principal payments on long-term debt and capital leases |
(3,351 | ) | (2,840 | ) | ||||||
Cash received on exercised options |
— | 13 | ||||||||
Net cash used in financing activities |
(6,524 | ) | (828 | ) | ||||||
Net change in cash |
— | — | ||||||||
Cash at beginning of period |
— | — | ||||||||
Cash at end of period |
$ | — | — | |||||||
Supplemental disclosures of cash flow information: |
||||||||||
Cash paid during the period for interest |
$ | 2,452 | 4,732 | |||||||
See accompanying notes to condensed consolidated financial statements.
MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Stockholders’ Equity (Deficit)
For the Nine Months Ended September 27, 2003
(Dollars in thousands)
(Unaudited)
| Class A | Class B | ||||||||||||||||||||||||||||
| common stock | common stock | ||||||||||||||||||||||||||||
| Additional | Retained | ||||||||||||||||||||||||||||
| Shares | Shares | paid-in | earnings | ||||||||||||||||||||||||||
| issued | Amount | issued | Amount | capital | (deficit) | Total | |||||||||||||||||||||||
Balance, December 31, 2002 |
4,460,547 | $ | 45 | 200,000 | $ | 2 | $ | 20,895 | $ | (45,166 | ) | $ | (24,224 | ) | |||||||||||||||
Net earnings |
— | — | — | — | — | 1,080 | 1,080 | ||||||||||||||||||||||
Accretion of discount on
preferred shares |
— | — | — | — | — | (715 | ) | (715 | ) | ||||||||||||||||||||
Conversion of shares of Class B common
stock into shares of Class A
common stock |
100,000 | 1 | (100,000 | ) | (1 | ) | — | — | — | ||||||||||||||||||||
Balance, September 27, 2003 |
4,560,547 | $ | 46 | 100,000 | $ | 1 | $ | 20,895 | $ | (44,801 | ) | $ | (23,859 | ) | |||||||||||||||
See accompanying notes to condensed consolidated financial statements.
MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Nine Months Ended September 27, 2003 and September 28, 2002
(Unaudited)
(1) Nature of Business
Through our operating subsidiaries, we are a contract manufacturer and supplier of high-quality fabricated sheet metal components and subassemblies for industrial, construction and agricultural original equipment manufacturers located primarily in the Midwestern and Southeastern United States.
(2) Interim Financial Data
The Condensed Consolidated Financial Statements at September 27, 2003, and for the three and nine months ended September 27, 2003 and September 28, 2002, are unaudited and reflect all adjustments, consisting of normal recurring accruals and other adjustments which, in the opinion of our management, are necessary for a fair presentation of the financial position, operating results, and cash flows for the interim periods indicated. Our fiscal quarters end on a Saturday (nearest to a quarter end) except for the fourth quarter which ends on December 31. For both the quarters ended September 27, 2003 and September 28, 2002 there were 63 shipping days. For both the nine months ended September 27, 2003 and September 28, 2002 there were 189 shipping days. Results of operations for the interim periods are not necessarily indicative of the results of operations for the full fiscal year. You should read the condensed consolidated financial statements in connection with the consolidated financial statements and notes thereto, together with management’s discussion and analysis of financial condition and results of operations of Morton Industrial Group, Inc. contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002, as filed on March 31, 2003.
(3) Discontinued Operations
The results from discontinued operations for the three and nine months ended September 28, 2002 reflect the results of both Morton Custom Plastics, LLC, which we so