The Morgan Group, Inc. Reports 2000 Q4 and Full-Year Financial Results
ELKHART, Ind.--April 2, 2001--The Morgan Group, Inc. (AMEX:MG), today announced financial results for the fourth quarter and full year ended December 31, 2000.For the 2000 fourth quarter, operating revenues decreased to $22.0 million from the $32.7 million reported for 1999's comparable quarter. The decline was primarily attributable to the recessive economic conditions being experienced by manufactured housing, the major industry the Company services, compounded by normal seasonal softness. The operating loss before interest, taxes, depreciation and amortization (EBITDA loss) was $1,181,000 for the 2000 final quarter versus an EBITDA loss of $122,000 for the year-ago period. The fourth-quarter net loss, including a non-cash charge of $3.2 million, was $4,275,000, or $1.75 per share, versus the net loss of $302,000, or $0.12 per share, for 1999's final three months.
Currently, the Company is seeking alternative financial institutions to replace the credit facility that expired on January 28, 2001. The Company has no debt but does have $6.6 million of standby letters of credit outstanding from the expired facility. The Company is in the process of receiving proposals from replacement financial institutions. Given that the Company has not finalized these arrangements with a financial institution, the Report of Independent Auditors contains an explanatory paragraph indicating that the financial statements for the year ended December 31, 2000 have been prepared assuming that it will continue as a going-concern, but that the default under the credit facility raises doubt about its ability to do so. The Company is also engaged in discussions to raise additional equity capital.
For the year, operating revenues declined 26 percent to $108.0 million from the $145.6 million reported for 1999, a result of the manufactured housing industry conditions mentioned previously and declines in activity in other vehicle markets the Company serves. The 2000 EBITDA loss was $971,000, compared with EBITDA of $1.8 million in 1999. The net loss for 2000 was $4.8 million, or $1.96 per share, compared with net income of $19,000, or $0.01 per share in 1999. The loss includes non-cash charges of $3.2 million relating to the valuation of deferred tax assets. Because the Company has a cumulative loss in its three most recent fiscal years and is in default on its credit facility Management believes that with the technical provisions of Statement of Financial Accounting Standard No. 109 it would be inconsistent to rely on future taxable income to support realization of the deferred tax assets.
Anthony T. Castor, III, President and Chief Executive Officer of The Morgan Group, said: "While we are not pleased with these results, we are continuing to make progress in significantly reducing operating expenses to bring cost structure in line with current demand. 2001 will reflect a full year benefit of these initiatives".
`The manufactured housing industry is still plagued by inventory levels that are higher than current demand justifies. While this situation may persist into the foreseeable future, we have identified initiatives within our control to mitigate the impact, including aggressively booking incremental sales, improving customer service, and enhancing our transportation claim experience. Further, the cycle is not unlike previous ones the Company has experienced in its more than sixty years of successful operations. With a leaner cost structure in place, a return to profitability should accompany improvement in the manufactured housing markets".
(Comparative Financial Statements Follow)
The Morgan Group, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share amounts)
December 31
2000 1999
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ASSETS
Current assets:
Cash and cash equivalents $ 2,092 $ 3,847
Trade accounts receivable,
less allowances of $248 in
2000 and $313 in 1999 7,748 10,130
Accounts receivable, other 133 313
Refundable taxes 499 --
Prepaid expenses and
other current assets 1,147 1,960
Deferred income taxes 319 1,475
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Total current assets 11,938 17,725
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Property and equipment, net 3,688 4,309
Intangible assets, net 6,727 7,361
Deferred income taxes 282 2,172
Other assets 634 697
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Total assets $ 23,269 $ 32,264
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 2,373 $ 3,907
Accrued liabilities 3,704 4,852
Income taxes payable -- 278
Accrued claims payable 3,224 3,071
Refundable deposits 1,357 1,752
Current portion of long-term
debt and capital lease
obligations 217 676
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Total current liabilities 10,875 14,536
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Long-term debt and capital lease
obligations, less current portion 71 289
Long-term accrued claims payable 5,122 5,347
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 (deficit) earnings (2,116) 2,775
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Total capital and retained earnings 10,384 15,275
Less - treasury stock at cost
(359,146 Class A Shares in
2000 and 1999) (3,183) (3,183)
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Total shareholders' equity 7,201 12,092
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Total liabilities and shareholders' equity $ 23,269 $ 32,264
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The Morgan Group, Inc. and Subsidiaries
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
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(Unaudited)
2000 1999 2000 1999
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Operating revenues $ 22,032 $ 32,722 $ 108,024 $ 145,629
Costs and expenses:
Operating costs 20,562 30,569 99,552 133,774
Selling, general
and administration 2,651 2,275 9,443 10,090
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(Loss) earnings before
interest, taxes,
depreciation, and
amortization (EBITDA) (1,181) (122) (971) 1,765
Depreciation and amortization 250 297 1,067 1,215
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Operating (loss) income (1,431) (419) (2,038) 550
Interest expense, net 100 56 310 338
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(Loss) income before
income taxes (1,531) (475) (2,348) 212
Income tax
expense (benefit) 2,744 (173) 2,451 193
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Net (loss) income $ (4,275) $ (302) $ (4,799) $ 19
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Net (loss) income
per basic and
diluted share $ (1.75) $ (0.12) $ (1.96) $ 0.01
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