U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-1008
M CORP
(Exact name of small business issuer as specified in its charter)
Montana 81-0268769
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
128 Second Street South, Great Falls, Montana 59405
(Address of principal executive offices)
(406) 727-2600
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Class Outstanding at June 30, 1997
$1.00 Par Value Common Stock 867,358 Shares
Transitional Small Business Disclosure Format (Check One): Yes ; No X
<PAGE>
M CORP
INDEX
Page Number
PART I
Condensed Consolidated Financial Statements:
Balance Sheet -
June 30, 1997 2
Statements of Income -
Three Months and Six Months Ended June 30, 1997
and 1996 3
Statements of Cash Flows -
Six Months Ended June 30, 1997 and 1996 4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis of the
Consolidated Statements of Income 6
PART II
Other Information 7
Signatures 8
1
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M CORP
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997
ASSETS
Current Assets
Cash $ 14,265,133
Marketable & Government Securities,
at Fair Value 2,264,724
Receivables - Net 65,033
Prepaid Expenses 12,600
Total Current Assets 16,607,490
Noncurrent Investments, at Fair Value 6,949,702
Noncurrent Receivables 10,473
Property, Plant and Equipment, Net 1,222,961
TOTAL ASSETS $ 24,790,626
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Expenses $ 217,323
Income Taxes Payable 1,347,841
Deferred Income Taxes 208,500
Total Current Liabilities 1,773,664
Provision for Estimated Title and
Escrow Losses 1,034,613
Minority Interests 2,361,528
Excess of Fair Value of Net Assets
Acquired Over Cost 60,965
Deferred Income Taxes 1,207,500
STOCKHOLDERS' EQUITY
Common Stock - $1.00 Par Value, 5,000,000
shares authorized, 3,051,004 shares issued 3,051,004
Paid-In-Capital 9,934,562
Retained Earnings 5,753,237
Unrealized Gains on Investments 1,979,897
Treasury Stock, at Cost (2,366,344)
Total Stockholders' Equity 18,352,356
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 24,790,626
See Notes to Consolidated Financial Statements
2
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M CORP
CONSOLIDATED STATEMENTS OF INCOME
For The Three Months For the Six Months
Ended Ended
June 30, June 30,
1997 1996 1997 1996
Operating Revenues $ 850,251 $ 778,778 $7,325,585 $1,616,335
Operating Expenses
Salaries and Payroll
Costs 192,096 198,548 382,999 382,205
Other Expenses 246,426 243,498 952,132 415,114
438,522 442,046 1,335,131 797,319
Operating Income 411,729 336,732 5,990,454 819,016
Minority Portion of
(Income) (60,245) (24,277) (369,597) (56,727)
Income Before Income
Taxes 351,484 312,455 5,620,857 762,289
Income Tax Expense 1,000 (118,000) (2,250,000) (290,000)
Net Income $ 352,484 $ 194,455 $3,370,857 $ 472,289
Earnings Per Share
Net Income Per Share $ .33 $ .22 $ 3.13 $ .54
Dividends Per Share $ -- $ -- $ -- $ --
See Notes To Consolidated Financial Statements
3
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M CORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Six Months Ended
June 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net Cash Provided (Used) By Operating
Activities $ (203,027) $ 265,027
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds From Sales and Redemptions
of Property, Plant and Equipment 6,994 5,523
Capital Expenditures Paid in Cash (23,650) -
Cash Received on Principal of
Notes Receivable 906 1,914
Cash Purchases of Minority Interests (555) (1,496)
Cash Used for Purchases of Marketable &
Government Securities Available for Sale (515,694) (71,887)
Cash Received on Dispostion of Marketable
Securities Available for Sale 5,383,074 206,100
Net Cash Provided By Investing Activities 4,851,075 140,154
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Payments Received From Affiliates - 306,878
Net Cash Provided (Used) By
Financing Activities - 306,878
NET INCREASE (DECREASE) IN CASH 4,648,048 712,059
CASH - BEGINNING OF PERIOD 9,617,085 8,132,517
CASH - END OF PERIOD $14,265,133 $ 8,844,576
See Notes to Consolidated Financial Statements
4
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M CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, all adjustments necessary (consisting of only
normal recurring accruals) have been made to the unaudited financial
statements to present fairly the financial position as of June 30, 1997 and
the results of the Company's operations for the three months and six months
ended June 30, 1997 and 1996 and cash flows for the six months ended June 30,
1997 and 1996.
The results of operations for the three months and six months ended June 30,
1997 and 1996 are not indicative of the results to be expected for the full
year.
The consolidated financial statements include the accounts of the Company and
its majority owned subsidiaries. All significant intercompany transactions
and balances have been eliminated in consolidation.
Earnings Per Share -
The computation of earnings per share in the accompanying statements is based
on the weighted average number of shares outstanding during each period.
Options granted by the Company are considered common stock equivalents for
purposes of the computation of earnings per share in the accompanying
unaudited financial statements.
Lines of Business -
M Corp is engaged in the title insurance business and in the ownership and
rental of properties.
GNI, Inc. owns approximately 80% of the Company's issued and outstanding
common stock.
The Company adopted the provisions of Statement of Finanacial Accounting
Standards No. 115 (SFAS No. 115) effective January 1, 1994. The Company has
classified its investments, both current and noncurrent, in debt and equity
securities as Available-For-Sale, in accordance with the various
classifications of securities contained in SFAS No. 115.
In accordance with SFAS No. 115 the Company's portfolios, current and
noncurrent, of Availabe-For-Sale investments are carried at fair value in the
Company's balance sheet at June 30, 1997. The net unrealized holding gain at
June 30, 1997, net of the estimated income tax effects and minority interests
in the unrealized holding gains, is reported as a separate component of
stockholders's equity at June 30, 1997.
5
<PAGE>
M CORP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE INCOME STATEMENT
JUNE 30, 1997
A summary of the period to period changes in items included in the statements
of income is shown below.
COMPARISON OF
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1997 AND 1996 1997 AND 1996
INCREASES (DECREASES)
Operating
Revenues $ 71,473 9.2% $5,706,250 353.2%
Operating
Expenses (3,524) (.8%) 537,812 67.5%
Net Income 158,029 81.3% 2,898,568 613.7%
Revenues increased $5,706,250 in the first six months of 1997 as compared
with the first six months of 1996 due to the gain recognized by the Company
on the merger of Security Bancorp with and into WesterFed Financial
Corporation which was completed during the first quarter of 1997. The Company
recognized a gain on the merger in the pretax amount of approximately
$5,351,000. Pursuant to the terms of the merger, the Company received
approximately 275,000 shares of WesterFed Financial Corporation common stock
and cash in the amount of approximately $5,351,000. During the first six
months of 1997 the Company recognized a gain on the contribution of assets in
kind to a charitable organization in the amount of approximately $408,000. The
gains recognized during the first six months of 1997 were the primary reason
for the increase in revenues and the increase in net income in the first six
months of 1997 as compared with the first six months of 1996. Operating
expenses increased $537,812 (67.5%) in the first six months of 1997 as
compared with the first six months of 1996 due primarily to the contribution
in kind by the Company of assets having a fair market value of approximately
$525,000 to a charitable organization which resulted in an income tax savings
to the Company in the amount of approximately $215,000. The provision for
income tax expense increased $1,960,000 (675.9%) in the first six months of
1997 as compared with the first six months of 1996 due to the increase in
pretax income.
6
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M CORP
PART II
OTHER INFORMATION
JUNE 30, 1997
ITEM 1 LEGAL PROCEEDINGS
None
ITEM 2 CHANGES IN SECURITIES
None
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 OTHER INFORMATION
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
None
7
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
M CORP
Registrant
Date: July 28, 1997 s/N. Scott Atchison
N. Scott Atchison,
Assistant Secretary-Treasurer
Date: July 28, 1997 s/Jerry K. Mohland
Jerry K. Mohland,
Accountant
8
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statements contained in the Company's Form 10-QSB and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 14,265,133
<SECURITIES> 2,264,724
<RECEIVABLES> 65,033
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,607,490
<PP&E> 1,222,961
<DEPRECIATION> 0
<TOTAL-ASSETS> 24,790,626
<CURRENT-LIABILITIES> 1,773,664
<BONDS> 0
<COMMON> 3,051,004
0
0
<OTHER-SE> 15,301,352
<TOTAL-LIABILITY-AND-EQUITY> 24,790,626
<SALES> 0
<TOTAL-REVENUES> 7,325,585
<CGS> 0
<TOTAL-COSTS> 1,335,131
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,620,857
<INCOME-TAX> 2,250,000
<INCOME-CONTINUING> 3,370,857
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,370,857
<EPS-PRIMARY> 3.13
<EPS-DILUTED> 3.13
</TABLE>