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, 2000
[ ] 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, 2000
$1.00 Par Value Common Stock 1,565,250 Shares
Transitional Small Business Disclosure Format (Check One): Yes ; No X
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M CORP
INDEX
Page Number
PART I
Condensed Consolidated Financial Statements:
Balance Sheet -
June 30, 2000 2
Statements of Income and Comprehensive Income -
Three Months and Six Months Ended June 30, 2000
and 1999 3
Statements of Cash Flows -
Six Months Ended June 30, 2000 and 1999 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, 2000
ASSETS
Current Assets
Cash $ 18,593,356
Marketable Securities, at Fair Value 1,597,382
Receivables, Net 67,850
Income Tax Prepayments 37,941
Prepaid Expenses 22,600
Total Current Assets 20,319,129
Noncurrent Investments, at Fair Value 4,420,811
Property, Plant and Equipment, Net 982,142
TOTAL ASSETS $ 25,722,082
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Expenses $ 250,339
Deferred Income Taxes 169,000
Total Current Liabilities 419,339
Provision for Estimated Title and
Escrow Losses 902,737
Minority Interests 2,274,184
Deferred Income Taxes 188,200
Excess of Fair Value of Net Assets
Acquired Over Cost 36,305
STOCKHOLDERS' EQUITY
Common Stock, $1.00 Par Value,
5,000,000 shares authorized,
3,750,905 shares issued 3,750,295
Capital Surplus 18,266,853
Retained Earnings 1,505,856
Accumulated Other Comprehensive Income 758,347
Treasury Stock, at Cost (2,380,034)
Total Stockholders' Equity 21,901,317
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,722,082
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,
2000 1999 2000 1999
Operating Revenues $ 779,711 $ 876,756 $1,561,281 $1,832,402
Operating Expenses
Salaries and Payroll
Costs 219,722 257,597 443,492 527,329
Other Expenses 241,399 246,876 454,765 434,954
461,121 504,473 898,257 962,283
Operating Income 318,590 372,283 663,024 870,119
Minority Portion of
(Income) (14,121) (17,420) (28,365) (44,393)
Income Before
Income Taxes 304,469 354,863 634,659 825,726
Income Tax Expense (110,000) (130,000) (235,000) (320,000)
Net Income 194,469 224,863 399,659 505,726
Other Comprehensive Income (Loss)
Increase (Decrease) in
Unrealized Holding Gains
Net of Income Taxes 9,652 (106,485) (210,828) (246,056)
Comprehensive Income $ 204,121 $ 118,378 $ 188,831 $ 259,670
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,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net Cash Provided By
Operating Activities $ 678,465 $ 450,939
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Received on Sales and Redemptions
of Property and Equipment 4,990 -
Capital Expenditures Paid In Cash (16,350) (6,645)
Cash Purchases of Minority Interests (5,164) (2,107)
Cash Used for Purchases of Marketable
Securities Available for Sale (23,013) (21,652)
Cash Received on Dispostion of Marketable
Securities Available for Sale 9,793 6,373
Net Cash (Used)
By Investing Activities (29,744) (24,031)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Purchases of Treasury Stock (4,690) -
Dividends Paid In Cash (156,729) (393,412)
Net Cash (Used)
By Financiang Activities (161,419) (393,412)
NET INCREASE IN CASH 487,302 33,496
CASH - BEGINNING OF PERIOD 18,106,054 17,931,372
CASH - END OF PERIOD $18,593,356 $17,964,868
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, 2000 and
the results of the Company's operations for the three months and six months
ended June 30, 2000 and 1999 and cash flows for the six months ended June 30,
2000 and 1999.
The results of operations for the three months and six months ended June 30,
2000 and 1999 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.
Members of the Anne Marie and Paul J. McCann family control, directly or
indirectly, approximately 93% of the Company's issued and outstanding common
stock.
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 115, (SFAS No. 115) effective January 1, 1994. In accordance
with SFAS No. 115 the Company's portfolios, current and noncurrent, are
carried at fair value in the Company's balance sheet at June 30, 2000. The
net unrealized holding gain at June 30, 2000, net of the estimated income
tax effects and minority interests in the unrealized holding gains, is
included in Accumulated Other Comprehensive Income at June 30, 2000 in
accordance with the provisions of Financial Accounting Standards No. 130.
Sales to outside concerns, interest revenues and segment operating profit
for the Company's reportable segments were as follows for the quarter ended
June 30, 2000:
Sales To Segment
Outside Interest Operating
Concerns Revenues Profit
Financial Holding Company $ 27,875 $110,362 $130,721
Title Insurance Operations 364,688 140,580 123,207
Rental Properties 136,206 - 64,662
Consolidated $528,769 $250,942 $318,590
5
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M CORP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE INCOME STATEMENT
JUNE 30, 2000
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,
2000 AND 1999 2000 AND 1999
INCREASES (DECREASES)
Operating
Revenues $ (97,045) (11.1%) $ (271,121) (14.8%)
Operating
Expenses (43,352) (8.6%) (64,026) (6.7%)
Net Income (30,394) (13.5%) (106,067) (21.0%)
Revenues decreased $271,121, 14.8%, in the first six months of 2000 as
compared with the first six months of 1999 due primarily to decreases in
title insurance premiums and related fees and rent revenues partially offset
by an increase in interest income and other revenues. The decrease in
title insurance premiums and related fees in the first six months of 2000
as compared with the first six months of 1999 was due primarily to the
pirating of key employees from one of the Company's consolidated
subsidiaries by the competition in a manner which the Company considers
unfair trade practices and for which the Company is considering legal action
for the recovery of damages. There also was some decline in the real estate
economies within the Montana communities within which the Company operates.
Operating expenses decreased $64,026, 6.7%, in the first six months of 2000
as compared with the first six months of 1999. Salaries and related payroll
costs decreased $83,837, 15.9%, in the first six months of 2000 as compared
with the first six months of 1999 due primarily to decreases in the number
of employees in the Company's title insurance operations. The provision for
income tax expense decreased $85,000 (26.6%) in the first six months of 2000
as compared with the first six months of 1999 due to the decrease in pretax
income.
6
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M CORP
PART II
OTHER INFORMATION
JUNE 30, 2000
ITEM 1 LEGAL PROCEEDINGS
No legal proceedings presently pending by or against M Corp and
its consolidated subsidiaries are described herein as management
believes that the outcome of such litigation should not have a
material adverse effect on the financial position of the Company
and its subsidiaries taken as a whole.
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
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
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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: August 11, 2000 s/H. Contway
H. Contway,
Assistant Secretary-Treasurer
Date: August 11, 2000 s/Jerry K. Mohland
Jerry K. Mohland,
Accountant
8
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