-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, LOrmHwwyza/dWL1KuR82a68BAp0lNKA02e7Fbk/KlPADN+htg6HcVp633OfNurhh NPFw9uLLyfaVr/FgXm0hmw== 0000908834-94-000040.txt : 19940404 0000908834-94-000040.hdr.sgml : 19940404 ACCESSION NUMBER: 0000908834-94-000040 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAYFLOWER GROUP INC /IN/ CENTRAL INDEX KEY: 0000063506 STANDARD INDUSTRIAL CLASSIFICATION: 4210 IRS NUMBER: 351692925 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 000-20332 FILM NUMBER: 94519617 BUSINESS ADDRESS: STREET 1: 9998 N MICHIGAN RD CITY: CARMEL STATE: IN ZIP: 46032 BUSINESS PHONE: 3178751000 10-K 1 MAYFLOWER GROUP, INC. FORM 10-K FOR Y/E 12-31-93 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1993 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from _______________ to _______________ Commission file number 0-20332 MAYFLOWER GROUP, INC. Indiana 35-1692925 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 9998 North Michigan Road, Carmel, Indiana 46032 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (317) 875-1000 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, no par value 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 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] [Cover page 1 of 2 pages.] State the aggregate market value of the voting stock held by non-affiliates of the Registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of March 7, 1994. $54,643,216 * Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES x NO Indicate the number of shares outstanding of each of the Registrant's classes of Common Stock, as of March 7, 1994. 12,662,445 shares of Common Stock, no par value. DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive Proxy Statement, dated March 31, 1994, are incorporated in Part III (Items 10, 11, 12 and 13) hereof. _________________________________ * Aggregate market value of the Registrant's voting stock held by non-affiliates on March 7, 1994, based on the average bid and asked price for the Registrant's Common Stock on the Nasdaq National Market on such date. For purposes of the foregoing calculation only, required by Form 10-K, the Registrant has included as shares owned by affiliates shares of Common Stock beneficially owned by Executive Officers and Directors of the Registrant and by holders of 10% or more of the Registrant's Common Stock. Such inclusion shall not be construed as an admission that any such person is an affiliate for any purpose. [Cover page 2 of 2 pages.] FORM 10-K TABLE OF CONTENTS Part I Page Item 1 - Business 3 Item 2 - Properties 11 Item 3 - Legal Proceedings 13 Item 4 - Submission of Matters to a Vote of Security Holders 13 Part II Item 5 - Market for the Registrant's Common Equity and Related Stockholder Matters 14 Item 6 - Selected Financial Data 15 Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations 17 Item 8 - Financial Statements and Supplementary Data 25 Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 49 Part III Item 10 - Directors and Executive Officers of the Registrant 40 Item 11 - Executive Compensation 49 Item 12 - Security Ownership of Certain Beneficial Owners and Management 49 Item 13 - Certain Relationships and Related Transactions 49 Part IV Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K 50 Signatures 53 PART I Item 1. Business. The business of Mayflower Group, Inc. ("Group") is conducted entirely through its two operating subsidiaries, Mayflower Contract Services, Inc. ("Contract Services"), and Mayflower Transit, Inc. ("Transit") and their respective subsidiaries (Group, with its respective subsidiaries, being referred to collectively herein as "the Company or "the Registrant"). Group, formerly known as MG Holdings, Inc., was formed in 1986 for the purpose of acquiring another company whose name was Mayflower Group, Inc. ("Old Mayflower"), a holding company that owned 100% of the stock of three operating subsidiaries: Mayflower Contract Services, Inc. ("Contract Services"), Mayflower Transit, Inc. ("Transit"), and Mayflower Consumer Products, Inc. ("Consumer Products"). The acquisition was completed in December 1986 in a two-step merger: a cash tender offer for all the 7.9 million outstanding common shares of Old Mayflower at $31.50 per share followed by a merger of Old Mayflower into a wholly-owned subsidiary of Group. To finance the acquisition, Group raised approximately $330 million of debt financing, including a $110 million senior secured credit facility and $160 million through private placement of 12 5/8% Senior Subordinated Debentures ("Debentures") with Warrants to purchase common stock of Group. The remaining debt financing consisted of a secured bank loan to a subsidiary of Contract Services. Group sold Consumer Products in 1987 and eventually refinanced the senior secured credit facility with secured credit facilities at Contract Services and Transit. Group is a holding company that relies upon the cash flow of its two operating subsidiaries to satisfy its obligations, which through December 1990 consisted primarily of interest payments on the Debentures. Following Group's financial reorganization, discussed below, it had no significant obligations remaining. From 1987 through 1991, operating results and cash flow generated by Group and its operating subsidiaries were not sufficient to pay significant amounts of principal on Group's senior debt or allow Group to remain in compliance with all financial covenants contained in the secured credit facilities. As a result, beginning after December 1990, Contract Services and Transit were prohibited by terms of the secured credit facilities from making any further cash dividend payments to Group for the purposes of servicing interest payments on its Debentures. Consequently, the two scheduled semiannual interest payments on the Debentures of $10.1 million each were not made in 1991 resulting in a default under provisions of the related indenture. After various restructuring proposals were considered, Group's Debenture holders, along with Group's common stock and warrant holders, overwhelmingly approved a Prepackaged Plan of Reorganization ("Plan of Reorganization") in early 1992. The Plan of Reorganization was confirmed by the court and became effective March 1992. Under the Plan of Reorganization, the holders of the Debentures received shares of newly issued common stock equal to approximately 94% of the common stock of Group. The existing holders of the common stock and warrants of Group received shares of newly issued common stock equal to approximately 5% of the common stock of Group. Two other creditors received approximately 1% of the common stock as payment in lieu of cash for services in connection with the Plan of Reorganization. The Plan of Reorganization did not affect Contract Services or Transit. Contract Services Contract Services was created through the acquisition of R.W. Harmon & Sons, Inc. by Old Mayflower in October 1984. Since that date, Contract Services has purchased 17 additional passenger transportation companies. Contract Services provides service in 28 states. Contract Services derives revenues from two distinct lines of business: student transportation and public transportation. Student Transportation. Student transportation represents the largest source of revenue for Contract Services. Revenues from this segment were approximately $166.4 million in 1993, which represents approximately 71% of Contract Services' total revenues. Contract Services renders daily transportation services to more than 200 school districts in 20 states. While the nature and scope of services to school districts vary, the most typical arrangement encompasses a multi-year contract under which Contract Services operates owned or leased school buses driven by its own drivers. Services rendered to school districts include traditional daily home-to-school transportation for students, as well as after-hours or mid-day activity charters. Contracts are typically priced in terms of a per-day charge for base services and a per-hour charter rate for extracurricular transportation. In most instances, billings are rendered monthly and remittances are collected immediately. Public Transportation. The Federal Transit Administration (formerly the Urban Mass Transit Administration), the Department of Transportation, and certain legislation have, in recent years, established additional rules and guidelines governing participants in federally assisted transportation programs. These rules encourage private enterprise participation, prohibit discrimination and require programs to provide transit service to disabled individuals. Contract Services has capitalized on these trends by establishing public transportation operations in several major metropolitan markets beginning in 1988. In 1993, revenues from this segment were approximately $69.5 million, which represents approximately 29% of Contract Services' total revenues. In this segment, Contract Services provides year-round local demand-responsive service and fixed route transit service for transportation authorities in ten major metropolitan markets. As in its student transportation segment, these contracts are performed through use of Contract Services-provided and/or managed vehicles. Marketing. Traditionally, government agencies and municipalities have performed the bulk of student and public transportation services. While there has been a gradual trend toward privatizing such municipal/ government services, only about 30% of student transportation is provided by private sector companies today, and the figure in the public and para transit industries is considerably lower. In this market, the competitive challenge for Contract Services lies in persuading its potential public sector customers to convert to a private vendor. Contract Services believes that the key to success in both the student and public transportation markets is demonstrated expertise. Contract Services competes on the basis of quality, efficiency and price. In both markets, Contract Services has determined that a reputation as a safe provider is essential. Complementing safety, a company must demonstrate sensitivity in the school market and expertise in the transit market. These attributes may induce a customer to renew or extend contracts, foregoing the bid process. Most transit authorities award contracts via an overall evaluation process that gives weight to operating qualifications as well as price. Contract Services has operating or sales management assigned to certain geographical areas that are responsible for maintaining contact with active and prospective customers and for prospecting conversion leads, as well as staying alert to public bid opportunities in adjacent geographic markets. Competition. The private, public and student transportation industries are highly fragmented and regionalized. Contract Services believes it is the nation's largest provider of paratransit services and has one of the three largest market shares of any private contractor in the United States student transportation industry. Safety Program. Contract Services operates formal safety programs centering on employee selection and training, and bus maintenance. A prospective driver's record is screened for past criminal and motor vehicle violations through a search of public records (where such searches are permitted). The prospective driver must also pass certain tests that screen for traits that may affect the driver's performance. In addition, Contract Services has conducted pre-employment and random drug and alcohol tests since 1989. Contract Services has a formal training program for its drivers that involves at least ten hours of one-on-one, behind the wheel instruction with a certified trainer. The driver also receives at least ten hours of classroom training, covering student discipline on the bus, safety rules and other bus procedures. On an ongoing basis, drivers attend at least nine hours per year of meetings to view films and review safety procedures. Field safety supervisors periodically perform road observations to assure drivers are complying with traffic laws and safety procedures. Motor vehicle and criminal records are also monitored on an ongoing basis for violations and accidents. Environmental Laws. Compliance by Contract Services with federal, state and local environmental protection laws has not in the past had, and is not expected to have in the future, a material effect upon its capital expenditures, liquidity, earnings or competitive position. Insurance. Contract Services' insurance program consists of three principal types of coverage: auto liability (for third party personal injury or property damage claims), general liability and workers' compensation. Workers' compensation is regulated by the individual states in which Contract Services operates. With the rising cost of liability insurance in the mid-1980's, Contract Services moved to an "economic" self-insurance program in 1987 whereby Contract Services retains financial exposure for the first $2.0 million of each claim. Though Contract Services does not purchase insurance coverage for this exposure, Contract Services purchases a "fronted" policy from an insurance carrier. The insurance carrier's liability under this arrangement is to make any claim payments that are not made by Contract Services. Contract Services indemnifies the insurance company for any losses and collateralizes this indemnification obligation with letters of credit. The amounts of letter of credit collateralization are calculated based upon expected losses for a given policy year. Because of the nature of this liability, it takes several years to settle fully all claims for a given policy period. As of December 31, 1993, Contract Services had $28.1 million in letters of credit outstanding under its primary credit facility as collateral for its insurance related obligations. Contract Services also maintains excess liability insurance policies providing in total up to an additional $42 million in limits. Fuel Costs. The impact of additional fuel taxes, which became effective in October 1993 following the enactment of the 1993 Omnibus Budget Reconciliation Act will not be significant as Contract Services' student transportation system is exempt from federal fuel taxes. Also Contract Services limits the effects of significant increases in fuel prices by including fuel escalator clauses in many of its contracts, a "fuel cap" which provides price protection against such increases, and arrangements with certain vendors to fix fuel costs within a predetermined range. Employees. Contract Services employs approximately 11,000 people, approximately 9,000 of whom are employed as drivers and driver aides. Most drivers are part-time employees, 60% working fewer than 1,000 hours per year. Approximately 20% of Contract Services' drivers belong to collective bargaining units. These unions represent employees in major metropolitan markets or in school districts where drivers and mechanics were formerly employed by the school corporation. Relations with employees are satisfactory. Transit Transit is involved in a number of transportation service businesses. It provides household goods moving services and transportation services for goods that require special handling, such as electronic products and trade show exhibits. It also provides warehousing services such as storage and distribution, freight forwarding for domestic and international shipments, and flatbed hauling of containerized shipments. In these operations, Transit uses its network of approximately 550 independent agents in the United States and Canada as well as more than 800 independent owner-operators who are skilled in providing transportation services. Transit also currently owns and operates 25 moving and storage agencies located throughout the United States. Other Transit operations sell and finance transportation equipment to Transit's agents and owner-operators, and sell and underwrite commercial lines of insurance coverage. Transit operates through two lines of business: domestic household goods moving services and special transportation services. Domestic Household Goods Moving Services -- Household Goods. The Household Goods division ("Household Goods") is the largest single operating division of Transit, generating line haul revenue in 1993 equal to 42% of Transit's total revenue. Total revenue generated by Household Goods in 1993, including both line haul and accessorial revenue, accounted for approximately 60% of Transit's total revenue. -- The Household Goods division serves individual residential customers, governmental entities and national accounts. The national account business, which consists of providing household goods moving services to corporations transferring their employees, is generally the most profitable segment of the business, due to the larger shipment sizes and the accessorial services such as packing and storage that are normally provided in connection with these moves. Transit's agent/owner-operator system is used to transport household goods shipments. See "Agent/ Owner- Operator System." -- Moving and Storage Division ("M&S"). This division consists of 25 agencies owned and operated by Transit. These agents function and provide the same services as the independent agents included in the Transit agent/ owner-operator system. See "Agent/ Owner-Operator System." Special Transportation Services -- Electronic and Trade Show ("E&TS"). This division, which generated line haul revenue in 1993 equal to approximately 19% of Transit's total revenue, is engaged primarily in the transportation of electronic products and trade show exhibits for corporate customers. These items typically require special handling and other services. The E&TS division began commercial operations in the early 1970's and has experienced significant growth since then. Operating revenues have increased from $71.9 million in 1991 to $92.7 million in 1993. Transit's agent/owner- operator system is used to transport E&TS shipments. -- International ("International"). This division operates four business segments: commercialhousehold goods, its largest business segment; a motor van/ sea van operation that provides trailer service between the continental United States and Alaska or Hawaii; international commodities and tradeshows; and a consolidating service for household goods being shipped to foreign locations. While Transit has provided international services for over 25 years, it has seen its most significant growth in the past few years. In 1993, this division generated $29.7 million in revenues, or 6.7% of Transit's total revenue. -- Other Transportation Operations ("Other"). Several smaller subsidiaries and divisions of Transit engage in sales of products and services to serve the needs of Transit's owner- operators and agents, including: (i) sales of tractors, trailers and other equipment, and the administration of the financing of such equipment by independent lending institutions for Transit owner-operators and agents; (ii) the operation of a full service road equipment maintenance facility to service vehicles for agents, owner-operators and nonaffiliated customers as well as Transit's own fleet; (iii) the operation of a full service insurance agency and captive insurance company that sell and underwrite property, casualty and other insurance coverages, primarily to agents and owner-operators; and (iv) sales of moving supplies, equipment and uniforms to agents and owner-operators. Revenues and Expenses. Transit derives its revenues primarily from three sources. Line haul revenues consist of revenues obtained from transporting goods. These revenues are generally based upon the weight of the shipment, distance traveled, type of goods transported and points of origin and destination. The Household Goods and E&TS divisions generate substantially all of Transit's line haul revenues. Accessorial revenues are fees received for other services such as packing, unpacking, storage and other related services. The majority of accessorial revenues are related to household goods line haul activities. The balance of Transit's revenues are generated by the M&S, International and Other divisions. Transit's expenses consist primarily of commissions paid to agents and owner-operators for their services. Sales and origin commissions are paid to agents for obtaining orders and providing support services at point of origin. Hauler commissions are paid primarily to agents and owner-operators for hauling the goods from the point of origin to their destination. The total of these line haul related expenses is historically between 82% and 83% of line haul revenues. Additional operating expenses not related to the services of the agent and owner-operator systems are also incurred in connection with Transit's line haul activities and the activities of other divisions within Transit. Overhead expenses incurred by Transit include overhead costs directly related to Transit operations. Customers. The Household Goods market is made up of three basic customer groups: individual residential customers, national account customers and various agencies of the United States Government. Individual residential customers arrange and pay for their own moves and are required to pay for shipping services upon delivery. National account customers are generally corporate customers, or their representatives, which are billed for moves they arrange for employees. United States Government moves are arranged by various departments of the United States Government, including the Military Traffic Management Command, which coordinates the movement of household goods for military personnel of all branches of the service. Most individual shippers choose a mover from Yellow Pages advertising and discuss their move, services and prices with a local agent. National account business is generally solicited by agent sales personnel and, to a lesser extent, by sales personnel employed by Transit. United States Government business is generally awarded on a shared basis among qualified carriers meeting the lowest rate for the particular installation. The E&TS business is solicited by agents and, to a lesser extent, by the employees of Transit. This business is formed almost entirely by national account customers, which include major computer and other high technology companies, hospitals and trade show exhibitors. Transit provides marketing support for its agents through field sales representatives, advertising, incentive programs and promotional materials and services. Agent/ Owner-Operator System. Transit has approximately 550 agents in the United States and Canada, of which 25 are owned by Transit, with the remainder being independent business entities. Agents operate full service moving and storage businesses in their geographic areas. They solicit business, pack, unpack and store goods and provide labor to assist haulers in loading and unloading goods. Agents also provide tractor/ trailer units and drivers for the transportation of household goods and E&TS products. In a typical interstate move of household goods or E&TS products, the agent at the point of origin provides packing and preparation services. From its Indianapolis headquarters, Transit arranges and coordinates the transportation of the goods, which about half of the time are hauled by one of Transit's agents with the balance by independent owner-operators. The agent at the destination of the shipment provides unpacking and other support services. In addition to arranging for and coordinating the interstate transportation of goods, pursuant to orders booked by its agents, Transit provides national advertising and other marketing support, administers the settlement of damage claims, provides certain data processing services to agents and collects and distributes the revenues among Transit, its agents and its owner- operators. All United States agents enter agreements with Transit that generally provide that the agent will represent Transit exclusively. Agents are compensated according to commission schedules for services rendered. Agents receive substantially all the revenue from the packing, unpacking and storage services, a portion of the line haul revenue for booking and origination services and a majority of the line haul revenue if the agent provides the equipment and driver for hauling the goods. Some agents have their own interstate operating authority (which is generally limited to states surrounding their locations). Transit's operations outside the United States and Canada are conducted through approximately 125 independent representatives whose arrangements with Transit permit them to represent other carriers. For the year ended December 31, 1993, orders booked by agents owned by Transit accounted for approximately 11% of Transit's revenues. No other agent or group of agents under common control accounted for as much as 5% of such revenues. Approximately 30% of Transit's revenues were generated by the 20 largest agents or group of agents under common control, excluding the agents owned by Transit. Approximately 35% of Transit's agents have been with Transit for 25 years or more; approximately 50% have been agents of Transit for 15 years or more. Transit does not employ drivers except for local, intrastate and, during the peak season, interstate hauling services in agencies owned by Transit. Transit typically uses approximately 800 independent owner-operators to haul and, generally with the assistance of local agents, to load and unload shipments. During the peak summer season, however, Transit may use up to 1,200 owner-operators. Each owner-operator is engaged pursuant to an agreement with Transit that requires the owner-operator to furnish a tractor and to pay maintenance, insurance, fuel and other expenses incurred in hauling goods. Transit trains the owner-operators and, for the majority of owner-operators, provides a trailer. Owner-operators in the Household Goods division are generally compensated by Transit through a base commission which has traditionally averaged 56% of the line haul revenues. While the majority of owner-operators in the E&TS division are also compensated through a base commission that has averaged 56% of line haul revenues, an increasing portion of these owner-operators are being compensated on a mileage basis. As discussed above, Transit's independent owner-operators and independent agent drivers agree to pay for fuel costs incurred in providing their services. Higher fuel costs hurt the profitability of Transit's independent owner-operators, and result in higher costs for Transit associated with driver turnover. The impact of the additional taxes on fuel prices, which became effective in October 1993 following the enactment of the 1993 Omnibus Budget Reconciliation Act, is not expected to be significant to Transit. Further, Transit does not expect changes in fuel prices will materially affect its financial condition or its results of operations in the foreseeable future. Employees. Transit employs approximately 1,400 full time employees, approximately 500 of whom are salaried employees and the remainder of whom are hourly employees. Transit has not experienced any material strikes or work stoppages during the past five years and believes that its relations with employees are satisfactory. Insurance. Transit's insurance program consists of three principal types of coverage: auto liability (for third party personal injury or property damage claims), general liability and workers' compensation. Auto liability coverage is regulated by the Interstate Commerce Commission ("ICC") and workers' compensation is regulated by the individual states in which Transit operates. In order to comply with ICC regulations, evidence of insurance must be provided to the ICC. With the rising cost of liability insurance in the mid-1980's, Transit moved to an "economic" self-insurance program in 1987 whereby Transit retains financial exposure for the first $2.0 million of each claim. Though Transit does not purchase insurance coverage for this exposure, due to ICC regulations the ICC must be provided evidence of insurance. This is accomplished by Transit purchasing a "fronted" policy from an insurance carrier. The insurance carrier's liability under this arrangement is to make any claim payments that are not made by Transit. Transit indemnifies the insurance company for any losses and collateralizes this indemnification obligation with letters of credit. The amounts of letter of credit collateralization are calculated based upon expected losses for a given policy year. Because of the nature of this liability, it takes several years to settle fully all claims for a given policy period. As of December 31, 1993, Transit had $26.2 million in letters of credit outstanding under its primary credit facility as collateral for its insurance related obligations. Transit management has received approval from the ICC to self-insure the first $1.0 million of each auto liability claim effective April 1, 1994, eliminating the need for Transit to purchase a "fronted" policy from an insurance carrier for these claims. The Company will benefit by reducing its fronting costs and its letter of credit requirements in the future, as the ICC only requires a $1.0 million letter of credit related to this self-insurance liability. Transit also maintains excess liability insurance policies providing in total up to an additional $42 million in limits. Competition. Transit is in direct competition in the United States with approximately 2,000 motor common carriers having ICC authority for the interstate transportation of household goods and E&TS products. Based upon financial data filed with the ICC, Transit is the fourth largest mover in the United States in terms of intercity revenues. According to reports filed with the ICC, 1993 intercity revenues aggregated approximately $2.5 billion for the 20 largest motor carriers of which Transit accounted for 11.1% and the six largest carriers, including Transit accounted for 82.0% of this amount. Carriers compete on the basis of the number and location of agents, perceived quality of service, price and carrier name recognition. Transit's name recognition and its reputation for quality service, together with Transit's agency network, are important factors in its competitive position. As a result of reduced government regulation, increased price competition, principally in the form of binding estimates and discounts, has become more significant. Rates, Pricing and Regulation. Since 1980, a significant reduction in statutory and administrative restrictions on entry into surface transportation and the moving industry has increased competition. Traditionally, in Transit's industry, pricing has been based upon tariffs approved by the ICC for each class of goods hauled by an interstate carrier. These tariffs are a function of the weight of the shipment, the distance the shipment is moved and accessorial services rendered. Most moves are now priced below tariffs through individual discount programs filed by each carrier with the ICC, binding estimates negotiated between Transit and, primarily, individual residential customers or on the basis of a contract entered between Transit and a corporate customer. Household goods carriers participate in rate bureaus through which competitors jointly establish and publish tariffs and rates. Transit is currently a member of the Household Goods Carriers' Committee of the American Movers Conference, along with approximately 2,000 other common carriers of household goods, including the ten largest carriers in the industry. The Interstate Commerce Act permits certain collective ratemaking activities through a rate bureau by exempting such ratemaking from the antitrust laws. Certain members of Congress have proposed legislation that could result in complete deregulation of rates and tariff filings, repeal of antitrust immunity for collective ratemaking, total elimination of the ICC over a period of time and transfer of authority over motor carriers of property (as to unfair competition and trade practice matters) to other governmental agencies. Although trade association and industry leaders do not believe that such legislation will be enacted, they have provided comments to Congress in opposition to the legislation. Transit is unable to assess the likelihood of passage by Congress of such legislation. Environmental Laws. Compliance by Transit with federal, state and local environmental protection laws has not in the past had, and is not expected to have in the future, a material effect upon its capital expenditures, liquidity, earnings or competitive position. Operating Authority. Transit operates nationwide as an interstate common carrier pursuant to a Certificate of Public Convenience and Necessity granted by the ICC. This Certificate authorizes Transit to transport various classes of goods and products. Transit also operates as a contract carrier, pursuant to contract authority granted by the ICC. Transit is required to comply with ICC regulations and the failure to do so could subject it to civil or criminal penalties, the suspension or revocation of its operating authority or both. The suspension of operating authority could have a material adverse impact upon Transit's operations depending primarily upon the duration of the suspension and the class or classes of goods or products affected. In addition, the Department of Transportation regulates the hours of service of Transit's drivers and other safety aspects of operations. A failure by Transit with these regulations could subject it to civil or criminal liabilities. The agencies owned by Transit also hold intrastate operating authority that subjects them to the jurisdiction of various state regulatory commissions. Transit believes that a material suspension or revocation of these certificates of operating authority would not have a material adverse effect upon Transit's operations. Trademarks. Transit has registered trademarks on a number of variations of the Mayflower name and corporate logo in the United States and approximately 25 foreign countries. Depending on the jurisdiction of registration, trademarks are generally protected 10 to 20 years (if they are in continuous use during that period) and are renewable. These trademarks are material to Transit in the marketing of its services because of the name recognition possessed by Transit in the transportation services industry. Executive Officers of the Registrant. The following persons comprise the Executive Officers of the Registrant. All of the Executive Officers have been employed by the Registrant or its subsidiaries in one of the capacities indicated below for more than five (5) years. Each officer serves a term of one year expiring at the Annual Meeting of the Board of Directors. Name Age Position Michael L. Smith 45 Chairman, President and Chief Executive Officer Patrick F. Carr 42 Senior Vice President, Chief Financial Officer and Treasurer Robert H. Irvin 42 Senior Vice President, Secretary and General Counsel Michael L. Smith: Mr. Smith was originally employed at Old Mayflower in 1974. He has been a Director of the Registrant since October 1986, President of the Registrant since April 1989, Chief Executive Officer of the Registrant since January 1990, and Chairman of the Board of the Registrant since April 1992. He was Chief Operating Officer of the Registrant between April 1989 and January 1990. Mr. Smith was Executive Vice President of the Registrant from January 1987 to April 1989. He has been Chief Executive Officer of Transit since June 1989 and a director of Transit since October 1986. He was President of Transit from June 1989 to April 1991. He has been Chairman of the Board and Chief Executive Officer of the subsidiaries of Transit since June 1989. He has been Chairman of the Board and Chief Executive Officer of Contract Services since January 1987 and has been a director of Contract Services since October 1986. He was President of Contract Services and the subsidiaries of Contract Services from January 1987 through December 1992. Mr. Smith also serves as a Director of First Indiana Corporation, Somerset Group, Inc. and Acordia, Inc. Patrick F. Carr: Mr. Carr has been Senior Vice President and Chief Financial Officer of the Registrant since January 1987. He has been President of Transit and its subsidiaries since April 1991 and has been a director of Transit since January 1987. Between January 1989 and January 1990, Mr. Carr was Executive Vice President of Transit and Executive Vice President of the subsidiaries of Transit. From January 1987 to January 1989, he was the Treasurer of Transit. He has been an officer of Contract Services since 1987 and was a director of Contract Services from 1987 to 1993. Robert H. Irvin: Mr. Irvin has been Secretary of the Registrant since September 1986 and Senior Vice President and General Counsel since January 1987. He has been a director and an officer of Transit since 1987. From 1987 to 1993, he was a director of Contract Services. He has been an officer of Contract Services since 1987. Item 2. Properties. The Company itself owns no property other than the stock of Contract Services and Transit. All properties are owned by Contract Services and Transit. Contract Services Properties Contract Services is headquartered in Overland Park, Kansas, a suburb of Kansas City, Missouri. The Company moved to these premises in December 1987 and occupies approximately 18,000 square feet under a multi-year lease. Contract Services owns twelve operating terminals and leases approximately 130 others. Contract Services' strategy is to lease facilities on terms that approximate the length of the service contracts at each locale. These properties typically include two to five acres of parking space with a small office facility for driver training and dispatch and a two to three bay maintenance facility. In some instances, Contract Services will secure its operating terminals from its client and negotiates its occupancy costs as a part of its service contract. The average age of Contract Services' fleet is approximately 6 years. The 8,447 vehicles operated by Contract Services are primarily diesel and gas powered, although some units are propane powered. The operating fleet includes 1,345 customer owned vehicles. Nearly all vehicles owned by Contract Services are encumbered by liens in favor of the Company's lenders, under its financing agreements.
The following table summarizes the fleet as of December 31, 1993: Model Year Leased Owned Total Pre 1984 0 296 296 1984 0 390 390 1985 0 946 946 1986 42 1,225 1,267 1987 11 324 335 1988 612 199 811 1989 552 108 660 1990 752 148 900 1991 20 573 593 1992 272 116 388 1993 0 491 491 1994 0 25 25 ----- ----- ----- Totals 2,261 4,841 7,102 Customer owned 1,345 ----- ----- ----- 2,261 4,841 8,447 ===== ===== ===== Avg. Model Year 1989 1987 1988
Contract Services' equipment is maintained under a comprehensive preventive maintenance program emphasizing avoidance of on-the-road failures while minimizing per mile maintenance and tire costs. Fleet maintenance standards are established by a corporate department located in its Overland Park headquarters facility. This department supervises the purchasing of equipment and establishes standards for preventive maintenance in addition to monitoring levels of repair parts inventories throughout the Contract Services system. Contract Services has obtained a substantial portion of the additions to its fleet through operating leases. As of December 31, 1993, Contract Services was a party to operating leases with eight equipment finance entities. The Company has guaranteed the performance of Contract Services' obligations under a portion of these operating leases. Transit Properties Transit owns a 190-acre tract northwest of Indianapolis, Indiana upon which the Company's headquarters building is located. Located on the same tract is Transit's driver training facility, a building used for the preparation and maintenance of trailers, a storage building, and a warehouse and office facility used by an agent wholly owned by Transit. This entire tract is mortgaged to Mellon Bank, N.A. ("Mellon") as part of the security for a $5.0 million loan to Transit. Transit also owns a total of approximately 182,000 square feet of office and warehouse space in Indianapolis, Indiana and Alexandria, Virginia that is used in its local moving and storage operations. All these properties owned by Transit are also mortgaged to Mellon. In addition, Transit owns another 40,000 square feet which are not encumbered and leases approximately 1.3 million additional square feet at various other locations. At December 31, 1993, Transit and its Moving & Storage subsidiaries owned approximately 1,600 trailers, with an average age of 11 years, which are used primarily by owner-operators in hauling goods with the owner-operator's tractor. Transit also owned approximately 240 tractors, straight trucks and other vehicles at December 31, 1993. The majority of the tractors and trailers owned by Transit are subject to a security interest granted to the Company's lenders under its financing agreements. Agents also provide equipment for Transit's use under long-term and short-term contract hauling arrangements. Approximately 400 of Transit's fleet of tractor-trailer units are maintained pursuant to long-term contract hauling arrangements, while approximately 1,700 additional units are available on a short-term basis, some of which are added to the fleet during the peak season. Item 3. Legal Proceedings Litigation On October 24, 1989, two alleged shareholders of Old Mayflower filed suit in the federal district court against certain directors of Old Mayflower and the Company. The plaintiffs in this lawsuit are also the plaintiffs in a suit filed in Indiana state court on October 29, 1986. These complaints allege that the directors breached their fiduciary obligations to the shareholders of Old Mayflower by entering into a leveraged buy-out transaction at a grossly inadequate price. The suits purport to be class actions on behalf of all the shareholders. In addition to seeking injunctive relief, the plaintiffs are asking for compensatory and punitive damages. The defendants in these suits believe the plaintiffs' claims to be without merit; however, because of the costs associated with defending these actions, the Company has joined in an agreement to settle both lawsuits. The settlement agreement must be approved by the federal and state courts. If approved, the maximum amount of the settlement will be approximately $2.1 million in cash and notes. Attorneys for the settlement class will receive approximately $725,000 in cash for fees and litigation expenses. The Company's insurance carrier will contribute $617,000 toward the cash payment with the balance to be paid by the Company. The remainder of the settlement amount, not more than approximately $1.4 million, will be paid in the form of unsecured subordinated notes of the Company to members of the settlement class that properly complete and submit proofs of claim. The settlement notes (a) will mature in ten years, (b) will be unsecured and subordinated to certain indebtedness of the Company, (c) will pay interest semi-annually, (d) will require no payment of principal until maturity, and (e) will not be registered with the Securities and Exchange Commission. The subsidiaries become involved from time to time in various actions that are incidental to the ordinary course of their business, including property damage and personal injury claims. Based upon information currently available to it, the Registrant believes that its reserves and insurance coverage with respect to all such actions are adequate to cover liabilities reasonably anticipated at the date of this filing. (See Note 4 to Consolidated Financial Statements.) The Registrant becomes involved from time to time in actions arising from the operations of its subsidiaries. The Registrant routinely seeks to be dismissed from such actions on the grounds that it is not a proper party defendant. Item 4. Submission of Matters to a Vote of Security Holders. No matters were submitted during the fourth quarter of 1993 to a vote of security holders of the Registrant, through the solicitation of proxies or otherwise. [The remainder of this page was intentionally left blank.] PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. The Registrant's Common Stock was registered effective August 22, 1992, under Section 12 of the Securities Exchange Act of 1934. The Common Stock of the Registrant was listed on the Nasdaq National Market on December 1, 1992. Prior to that date there was no established public trading market for these securities. As of December 31, 1993, the Registrant had 276 shareholders of record. The high and low sales prices for the Registrant's Common Stock during the portion of the fourth calendar quarter of 1992 following the date on which the Registrant's Common Stock began trading on the Nasdaq National Market were $10.50 and $7.50, respectively, as reported by Nasdaq. The high and low sales prices reported by for the Registrant's Common Stock reported by the Nasdaq National Market during each calendar quarter of 1993 were as follows: Quarter High Low 1 12 1/4 9 2 11 1/2 8 1/4 3 13 9 1/2 4 12 1/4 10 3/4 There were 278 holders of record of the Registrant's Common Stock on March 7, 1994. The high and low sales prices reported by the Nasdaq National Market on that date were $11 3/4 and $11 1/4. The Registrant has not paid cash dividends in its two most recent fiscal years. The senior bank credit agreement entered into by the Registrant and its operating subsidiaries prohibits the payment of dividends on its Common Stock. (For a discussion of the Registrant's credit facilities, see Note 7 to Consolidated Financial Statements.) Therefore, the Registrant does not anticipate paying cash dividends on its Common Stock in the foreseeable future. [The remainder of this page was intentionally left blank.]
Item 6. Selected Financial Data Selected Historical Financial Information The following table sets forth selected consolidated financial data regarding the Registrant. This information should be read in conjunction with the discussion contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and with the consolidated financial statements and notes thereto included in Item 8. (Dollars in thousands except per share data) Years ended December 31, 1993 1992 (b) 1991 1990 1989 -------------------------------------------------------------------- Income Statement Data: Operating Revenues: Contract Services $235,918 $209,411 $193,442 $186,216 $156,063 Transit (c) 441,575 426,444 405,600 447,769 483,246 -------- -------- -------- -------- -------- Total $677,493 $635,855 $599,042 $633,985 $639,309 ======== ======== ======== ======== ======== Operating Profit: (d) Contract Services $ 7,471 (a) $ 10,840 $ 4,829 $ 10,101 $ 14,283 Transit 5,738 13,208 (58,221) 10,313 17,540 Unallocated Corporate Overhead (1,089) (1,142) (3,774) (1,521) (887) -------- -------- -------- -------- -------- 12,120 22,906 (57,166) 18,893 30,936 Net interest expense and purchase fee on receivables sold (6,736) (9,661) (31,306) (31,737) (33,252) Miscellaneous, net 32 234 (161) 1,290 537 -------- -------- -------- -------- -------- Income (loss) before federal income taxes and extraordinary items $ 5,416 $ 13,479 $(88,633) $(11,554) $ (1,779) ======== ======== ======== ======== ======== Income (loss) before ext. items $ 2,435 $ 7,835 $(88,633) $ (9,988) $ (3,525) Income before ext. items per share (e) $ 0.19 $ n/a $ n/a $ n/a $ n/a ======== ======== ======== ======== ======== Pro Forma Financial Information: (unaudited) (e): Net Income $ n/a $ 8,336 $ 1,465 $ n/a $ n/a Earnings Per Share $ n/a $ 0.66 $ 0.12 $ n/a $ n/a ======== ======== ======== ======== ======== Balance Sheet Data: Working capital (deficit) (f) $ 39,197 $ 23,997 $(16,615) $(21,441) $(14,626) Net property and equipment 114,747 104,449 101,460 85,146 97,173 Total assets (g) 322,677 302,751 298,945 328,424 353,244 Short-term debt (h) 2,276 21,078 37,015 16,125 15,756 Long-term obligations (h) 95,407 79,149 234,529 201,470 212,970 Shareholders' investment (deficit) (a)(i)(j) $ 82,671 $ 80,771 $(88,910) $ (219) $ 9,887 ======== ======== ======== ======== ======== See footnotes which follow. - ---------------------------------- (a) The Company is self-insured for certain risks, and, accordingly, maintains reserves for losses and premium adjustments which are determined using case basis evaluations and other analyses. Based on a review by management during the fourth quarter of 1993 of the calculations underlying the reserve for self-insured claims, the Company has determined that the portion of Contract Services' reserve attributable to claims incurred prior to 1991 was $4.9 million below an appropriate level. As a result, the Company recognized $4.9 million in additional self-insured claims expense during 1993. The annual expense related to the self-insurance program since January 1, 1991, excluding this adjustment, has been sufficient to provide for anticipated losses, and this adjustment represents a one-time nonrecurring increase to its reserve for self-insured claims. (b) See Note 2 to Consolidated Financial Statements for discussion of the Registrant's Plan of Reorganization which became effective March 24, 1992, and included the exchange of Group's subordinated debentures for common stock. (c) Transit's equipment financing subsidiary sells transportation equipment to certain of its owner- operators and agents. Beginning in 1993, revenues associated with these installment sales is recorded net of the related cost of goods sold as an operating expense, with the related gain on the sale being recognized on the installment basis. Revenues for each of the years 1992 through 1989 have been reclassified to conform with this presentation. (d) See Note 12 to Consolidated Financial Statements for discussion of the components of operating profit. (e) See Notes 1B and 3 to Consolidated Financial Statements for discussion of the earnings per share computation and the pro forma financial information. (f) The Registrant's working capital balance was negative during 1989 and 1990 because the initial proceeds of a sale of Transit's receivables in 1988 were used to retire long-term debt. Working capital remained negative in 1991 after this facility expired due to the accrued interest on the Debentures, which was subsequently eliminated when the Debentures were exchanged for Common Stock under the Registrant's Plan of Reorganization in 1992. (g) See Note 6 to Consolidated Financial Statements for discussion of the Registrant's revaluation of intangible assets which resulted in a $69.0 million write-down of total assets during 1991. (h) See Note 7 to Consolidated Financial Statements for a discussion of the Registrant's refinancing of its debt facilities. (i) Effective April 1, 1992, the Registrant changed its method of accounting for federal income taxes from the deferred to the liability method required by FASB Statement No. 109, "Accounting for Income Taxes" ("SFAS 109"). As permitted under the new rules, prior years' financial statements have not been restated. In accordance with Statement of Position (SOP) 90-7, the cumulative effect of adopting SFAS 109 as of April 1, 1992 was to decrease Shareholder's Investment (deficit) by $8.9 million. (j) Effective April 1, 1992, the Registrant adopted FASB Statement No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" ("SFAS 106"). In accordance with SOP 90-7, the cumulative effect of the accounting change was recognized as a $3.0 million reduction in shareholders' investment. In prior years, the Registrant had recognized the expense related to these benefits as they were paid. As the effect on net income of adopting SFAS 106 was not significant, postretirement benefit cost for prior periods has not been restated. /TABLE Item 7. Management's Discussion and Analysis Fiscal Year 1993 compared with fiscal year 1992 Operating revenue for 1993 totaled $677.5 million, an increase of 6.5% over operating revenues of $635.9 million for 1992. Income before extraordinary items was $2.4 million and $7.8 million for the years ended December 31, 1993 and December 31, 1992, respectively. Income before extraordinary items in 1993 was reduced by $3.0 million resulting from the unusual charge increasing Contract Services' reserve for self-insured claims, as discussed below and in Note 4 to Consolidated Financial Statements. Additionally, the Registrant recognized a $549,000 extraordinary loss in 1993 related to the extinguishment of debt, and a $93.1 million extraordinary gain in 1992 related to the conversion of its subordinated debt to common stock in accordance with its Plan of Reorganization (See Note 2 to Consolidated Financial Statements). The operating results for 1992 included $1.7 million of interest expense related to the Registrant's subordinated debentures, which were converted to common stock through the Registrant's Plan of Reorganization. Note 3 to Consolidated Financial Statements presents pro forma financial information before nonrecurring items, including this charge, and assuming certain other events which occurred in 1992 had taken place as of December 31, 1990. On a pro forma basis, income before extraordinary items decreased from $8.3 million for the year ended December 31, 1992 to $2.4 million for 1993. Contract Services Contract Services' revenues for 1993 were $235.9 million versus $209.4 million during the comparable period in 1992, an increase of 12.7%. Public transportation revenues increased $21.2 million, or 43.8%, to $69.5 million. This growth is attributable to new customer contracts, primarily paratransit operations in California and Hawaii, and the acquisition of CTS Management Company in September 1993. Student transportation revenues increased $5.3 million, or 3.3%, to $166.4 million, largely the result of pricing changes. Contract Services' operating profits increased $1.6 million to $12.4 million in 1993, excluding a $4.9 million unusual charge to increase Contract Services' reserve for self-insured claims. Contract Services increased its reserve for self-insured claims, having determined that the portion of the reserve attributable to claims incurred prior to 1991 was below an appropriate level. (See Note 4 to Consolidated Financial Statements.) Including this unusual charge, Contract Services' operating profits decreased to $7.5 million in 1993 compared to $10.8 million in 1992. Contract Services realized a $1.6 million increase in operating profits, excluding the unusual charge previously discussed, largely as a result of realizing additional margin of $2.7 million from 1993's revenue growth and bus sales profits increasing $400,000 over the prior year. Also, margin improvements included decreased insurance costs of $1.6 million and decreased school revenue equipment depreciation and lease costs of $300,000. Adversely affecting profits were $800,000 of costs in resolving an unsuccessful attempt to organize Contract Services' labor force at a contract site in Pennsylvania, margin reductions totalling $1.4 million at two metropolitan operations, one in Pennsylvania and one in Colorado, additional expense totalling $300,000 resulting from SFAS 106 ("Accounting for Postretirement Benefits other than Pensions"), and $600,000 of additional depreciation expense related to the adoption of SFAS 109 as discussed further below. As a result of the adoption of SFAS 109 ("Accounting For Income Taxes") in April 1992, Contract Services recognized additional depreciation expense of $600,000 in 1993. On a pro forma basis, incorporating this change and the impact of the shorter lives over which intangible assets are being amortized since October 1992 as though both changes had occurred prior to 1992 (see Note 3 to Consolidated Financial Statements), Contract Services' operating profit, excluding the self-insurance adjustment discussed earlier, increased $2.6 million to $12.4 million, or 27% over the previous year's $9.8 million. Transit Operating revenues for Transit for 1993 increased to $441.6 million , or by 3.6% over operating revenues during the same period in 1992. Line haul revenues, the largest component of Transit revenues, increased $10.0 million, or 3.8%. Also, the Moving and Storage division increased revenues by $3.2 million and Transit's equipment sales and financing subsidiary's revenues rose $2.2 million versus 1992. Line haul for the Household Goods division increased 1.5%, resulting from a 3.2% increase in the average price per shipment, offset by a 1.7% decline in the number of shipments handled. The division's 3.2% increase in the average price reflects the higher price associated with corporate account orders whose weight and traffic characteristics favorably affect its average price. The decrease in number of shipments was primarily affected by a reduction in U.S. government and military orders versus last year, which had been favorably impacted by the pent-up demand which developed in 1991 following the Gulf War. Partially offsetting this decrease in the number of shipments was a 4.2% increase in the number of shipments to corporate accounts during 1993 versus 1992. Line haul for the Electronics & Trade Show division increased 9.3%, resulting from a 7.8% increase in the number of shipments handled coupled with a 1.5% increase in the average price per shipment. The increased number of shipments handled reflects both an increase in the size of Transit's truckload fleet and the addition to Transit's agency network in 1993 of an agency which handles a large number of electronic and tradeshow orders. Operating profit for the year was $5.7 million, compared to a $13.2 million profit in the same period in 1992. Operating profit was unfavorably affected by additional driver costs of $2.7 million, increased advertising and sales expenses of $1.1 million, reduced profitability in Transit's International and Moving and Storage divisions totalling $1.4 million, a $1.7 million increase in salaries and benefits costs, and $1.0 million of additional amortization expense. Additional gross margin from increased line haul revenue compared to the prior year was offset by lesser increases in other expenses. Transit's independent contract drivers have been adversely impacted by downward price pressures over the past few years, as well as higher equipment, insurance and fuel costs, resulting in Transit having incurred higher contract driver turnover. Driver turnover results in increased recruiting and training expenses, bad debts and other operating and administrative costs. Transit incurred increased sales and advertising costs primarily resulting from new programs initiated in 1993 to increase line haul revenues, especially in the corporate account market. The International division's margin was unfavorably affected by the slowdown in the European economy causing revenues to remain constant compared to 1992, coupled with increased general and administrative costs related to new programs which management believes will favorably impact future revenues. The Moving and Storage division's profitability was unfavorably affected by start-up costs related to two agencies opened in 1993, increased bad debt expenses and reduced margins realized on local revenues at certain agencies. Amortization expense increased in 1993 compared to 1992 by $1.0 million primarily resulting from the shorter lives used to amortize intangible assets beginning October 1992. On a pro forma basis incorporating this change and the adoption of SFAS 109 as though they had occurred prior to 1992 (see Note 3 to Consolidated Financial Statements), Transit's operating profit decreased $6.0 million from $11.7 million in 1992 to $5.7 million in 1993. Unallocated Corporate Overhead Unallocated corporate overhead was $1.1 million in both 1993 and 1992. Net Interest Expense Net interest expense decreased by $2.9 million from 1992 to 1993. Most significantly, interest on the Registrant's subordinated debentures (the "Debentures") decreased $1.7 million as the Debentures and their related claim to interest payments were converted to common stock under the Registrant's Plan of Reorganization in 1992. Last year included interest on the Debentures through January 27, the date the Plan of Reorganization was filed with the Bankruptcy Court. The remaining reduction in expense resulted primarily from increased net interest income realized by Transit's equipment sales and financing subsidiary and a reduction in average principal outstanding compared to 1992. Federal Income Taxes In August 1993, the Omnibus Budget Reconciliation Act was enacted which, among other things, resulted in an increase in the maximum federal income tax rate from 34% to 35%. In accordance with SFAS 109, the Registrant recorded a one-time charge to its federal income tax provision of $405,000 during 1993 to reflect the impact the higher federal tax rate has on its net deferred federal income tax liability. At December 31, 1993, the Registrant has net operating loss carryforwards of $4.8 million for federal income tax purposes and alternative minimum tax credit carryforwards of $3.2 million. The net operating loss carryforwards expire in years 2003 and 2006, while the alternative minimum tax credit carryforwards have an indefinite carryforward period. Because management believes these carryforwards will be used prior to expiration, no valuation allowance has been recorded. Transit also has a capital loss carryforward of $2.6 million which will expire in 1994. Because of the uncertainty of the ability to generate sufficient capital gains against which to use the capital loss, this carryforward has been fully provided for in the valuation allowance. Due to the Registrant's change in ownership resulting from its Plan of Reorganization (see Note 2 to Consolidated Financial Statements), the annual aggregate utilization of the net operating loss carryforward and the capital loss tax carryforward will be limited to approximately $6.0 million annually. Fiscal Year 1992 Compared with Fiscal Year 1991 Operating revenues for 1992 totaled $635.9 million, or an increase of 6.2% over operating revenues of $599.0 million for 1991. Income before extraordinary gain increased $96.5 million to $7.8 million for 1992. Additionally, the Registrant recognized a $93.1 million extraordinary gain on conversion of its Debentures to Common Stock in 1992 as part of the Registrant's Plan of Reorganization as described in Note 2 to Consolidated Financial Statements. The operating results for 1991 included a $69.0 million non-cash charge related to the revaluation of certain intangible assets and $21.6 million of interest expense related to the Registrant's Debentures, as described in Notes 6 and 2 to Consolidated Financial Statements, respectively. Note 3 to Consolidated Financial Statements presents pro forma financial information assuming these and certain other events which occurred in 1991 and 1992 had occurred as of December 31, 1990. On a pro forma basis, income before extraordinary gain increased from $1.5 million in 1991 to $8.3 million in 1992. Contract Services Revenues for Contract Services for 1992 were $209.4 million compared to $193.4 million for 1991, an increase of 8.3%. Nonseasonal public transportation revenues increased $11.4 million, or 32.2%, compared to 1991. Contract Services was awarded nine new public transportation contracts in 1992 which contributed $9.8 million in revenues. Student transportation revenues increased 2.9% from $158.1 million in 1991 to $162.6 million in 1992. Contractual price escalators contributed approximately 4% of each segment's revenue increase. Operating profits increased $6.0 million to $10.8 million in 1992. This increase was primarily attributable to a $4.9 million margin improvement resulting from reduced accident costs, decreases in driver wage and hiring costs of $2.3 million, a decrease in fuel cost of $2.1 million and additional operating profits of approximately $1.6 million resulting from the increase in revenues discussed above. These favorable variances were somewhat offset by increases in field administrative salaries and benefit programs of $2.3 million, increases in miscellaneous operating expenses of $500,000, a decrease in margin realized on bus sales of $400,000 and $1.3 million of non-cash charges resulting from the implementation of SFAS 109 and the reduction in lives used to amortize excess reorganization value and intangible assets, as discussed further below. Transit Transit's operating revenues for 1992 increased to $426.4 million, or by 5.1% over operating revenues for 1991. Line haul revenues, the largest component of Transit's revenues, increased $17.9 million, or 7.2%. The remainder of the revenue increase was primarily due to an increase in accessorial revenues of $6.2 million, partially offset by a reduction in fuel surcharge revenues of $2.5 million. Line haul for Transit's Household Goods division increased $12.1 million, or 6.8%, resulting from a 6.5% increase in the number of shipments handled and a .3% increase in the average price per shipment. The increase in number of shipments was affected by a significant increase in U.S. military shipments versus last year (which had been unfavorably impacted by the Gulf War) and, to lesser extent, an increase in the number of COD orders. Line haul for Transit's Electronics & Trade Show division increased $5.8 million, or 8.1%, resulting from a 6.7% increase in the number of shipments handled, coupled with a 1.4% increase in the average price per shipment primarily due to an increase in trade show business. Average price is affected by order size and distance, which accounts for a portion of the price increase. Accessorial revenues, which consist of packing, unpacking, storage and other services performed in connection with line haul transportation, increased during the year compared to 1991 due to the increase in the number of shipments handled. In 1991, the Registrant collected a fuel surcharge, which was paid in its entirety to agents and owner-operators to help offset a sharp increase in the amount they paid for fuel costs prior to, during and after the Gulf War. This surcharge was discontinued in late 1991 resulting in an unfavorable revenue variance in 1992, though it had no impact on operating profit in either year. Operating profit for 1992 was $13.2 million, which is an improvement of $2.4 million compared to 1991, excluding the $69.0 million charge in 1991 related to the revaluation of intangible assets. This improvement resulted from the following factors: - -- Additional margin on the accessorial revenue and a reduction in net cargo claims and casualty insurance costs improved profits by $3.2 million. 1991 included an unusually high provision in casualty insurance costs to increase reserves for prior accidents. - -- Gross margin on line haul revenue for 1992 decreased by $3.1 million as $3.3 million in additional margin contributed by the increased line haul was more than offset by an increase in hauling commissions paid as a percentage of the line haul revenues, as well as increased advertising costs and driver recruiting expenses to promote and support the increased revenues. Various factors caused this unfavorable commission variance including: (i) an increase in the number of drivers with more than one year of service and the number of drivers with higher performance ratings, both of which cause higher hauling commission payments to the driver under Transit's Pay for Performance program; (ii) increased deadhead expenses paid to Transit's drivers due to traffic imbalances; (iii) the unfavorable impact on hauling commissions related to U.S. government orders (the higher discounts on government orders resulted in a higher percentage of revenue paid to the hauler as commission); (iv) an increase in the proportion of Transit's agent haulers compared to Transit's independent owner-operators (agent haulers receive a commission which is higher than independent owner-operators' commissions); and (v) increased expenses paid to Transit's summer "collegiate" fleet. - -- Improved profits in the Moving and Storage division of approximately $500,000 due to increased profit margins and increased revenues. - -- Overhead expenses decreased $1.0 million compared to the same period last year, as reduced bad debt and amortization expenses were only partially offset by increased salaries and benefit costs. - -- Amortization expenses decreased during 1992 compared to 1991 by $800,000 resulting from the revaluation and resulting decreased amortization of Transit's intangible assets as of December 31, 1991, net of an increase in amortization expense related to financing costs, amortization resulting from adoption of SFAS 109, and the change in amortization periods for the Registrant's intangible assets and excess reorganization value effective October 1, 1992, as discussed further below. Unallocated Corporate Overhead Unallocated corporate overhead decreased by $2.6 million for 1992 compared to the previous year. The variance primarily reflects a decrease in professional fees related to the Registrant's reorganization of $2.0 million and a decrease of $900,000 in amortization expense related to the Debentures due to the conversion of those Debentures to Common Stock in 1992. These favorable variances were partially offset by an increase in administrative expenses including insurance premiums and professional fees. Interest and Purchase Fee Total purchase fee and net interest expense decreased by $21.6 million to $9.7 million. Most significantly, interest on the Debentures decreased $19.9 million as the Debentures and their related accrued interest were converted to Common Stock. In 1992, interest on the Debentures is included only through January 27, 1992, the date the Plan of Reorganization was filed with the Bankruptcy Court. Also, lower outstanding debt and lower interest rates had a favorable effect on net interest expense. Federal Income Taxes Effective April 1, 1992, the Registrant changed its method of accounting for income taxes from the deferred to the liability method required by SFAS 109. As permitted under the new rules, prior years' financial statements have not been restated. The cumulative effect of adopting SFAS 109 as of April 1, 1992 was to decrease shareholders' investment by $8.9 million. For the nine months ended December 31, 1992, application of the new accounting method decreased pre-tax income and federal income tax expense by approximately $2.1 million. Federal income tax expense (credit) is computed using an annual estimated effective tax rate, adjusted quarterly. For both 1992 and 1991, an effective rate which differs from the statutory rate was used in recording federal tax expense. The difference in rates is primarily the result of the amortization of nondeductible intangible assets incurred at the time of Group's formation in 1986, and nondeductibility of amortization of the excess reorganization value resulting from the Plan of Reorganization for 1992. With the adoption of SFAS 109 in April 1992, the amortization of intangible assets became deductible for financial reporting purposes, resulting in an effective rate more closely approximating the federal statutory rate. Intangible Assets Effective October 1, 1992, the Registrant changed the amortization period for its intangible assets. Intangible assets are now amortized over periods ranging from five to 35 years. This change will decrease net income by $1.6 million annually in future periods. LIQUIDITY AND CAPITAL RESOURCES Total cash decreased by $3.4 million from December 31, 1992 to December 31, 1993. Operating activities contributed $25.4 million, which was more than offset by the use of cash in investing activities of $26.0 million and financing activities of $2.8 million. The $25.4 million in cash provided by operations was primarily due to $26.5 million provided by net income, excluding items not affecting cash. Cash provided by operations was reduced by a $1.1 million change in certain working capital items. Most significantly, cash used for an $11.0 million increase in accounts receivables and for a $3.7 million increase in equipment and inventory held for resale was somewhat offset by cash provided by a $8.1 million increase in accounts payable and a $7.6 million increase in the reserve for self-insured claims. Other working capital items, net, represent a $2.1 million use of cash. The increase in accounts receivable mostly reflects an increase in revenues at both Transit and Contract Services compared to last year. Equipment and inventory held for resale has grown due to an increase in the number of units held by Transit's equipment sales and financing subsidiary largely attributable to the higher level of driver turnover. The increase in accounts payable largely represents a heightened focus on cash management by the Registrant's two operating subsidiaries. The Registrant increased its reserve for self- insured claims largely due to the $4.9 million increase in Contract Services' reserve related to claims which occurred prior to 1991, as discussed earlier. During 1993, the Registrant used $26.0 million, net, for investing activities. The Registrant used $30.2 million for the purchase of property and equipment, primarily the purchase of school buses by Contract Services and, to a lesser extent, trailers and other transportation equipment by Transit. The net increase of $8.9 million in non-current assets and non-current liabilities, net of non-cash items, resulted from an increase of $4.2 million in long-term notes receivable used to finance sales by Transit's equipment sales and financing subsidiary (prior to these notes receivable being sold, as discussed below) and lesser increases in deferred debt costs related to the Registrant's refinancing in the second quarter, as well as deferred start-up costs and security deposits related to Contract Services' new customer contracts. The Registrant also used $3.0 million related to a purchase acquisition by Contract Services. Proceeds from disposal of property and equipment, less gains included in net income, totaled $2.1 million. In December 1993, Transit's equipment sales and financing subsidiary received $13.9 million in proceeds from the sale of its long-term notes receivable described above to the same creditors it had owed notes payable collateralized by those notes receivable. The proceeds were used to fully repay the amounts outstanding on the notes payable. Total debt at December 31, 1993, was $97.7 million compared to $100.2 million at December 31, 1992, representing a $2.5 million decrease in total debt during 1993. The Registrant received $80.0 million from a new financing agreement, which was one of three separate agreements consummated by the Registrant in May 1993 to refinance previously existing debt. (See Note 7 to Consolidated Financial Statements for further discussion of these agreements.) Using the proceeds from the refinancing discussed above, coupled with cash provided by operations, the Registrant repaid $81.9 million of outstanding debt, including Transit's and Contract Services' senior bank debt facilities totalling $52.0 million, Contract Services' short-term borrowing of $9.5 million, certain of Contract Services' equipment obligations totalling $17.5 million, and $2.9 million of other debt. During 1993, Transit prepaid $10.0 million of its $15.0 million mortgage note payable collateralized by certain of Transit's properties, including its headquarters facility. Also, as discussed above, Transit used proceeds from its sale of installment notes receivable to repay certain notes payable totalling $13.9 million. The Registrant repaid $700,000 of other debt during 1993. The Registrant received $23.7 million proceeds from its equipment financing agreements, used to finance the purchase of buses by Contract Services and to fund long-term notes receivable used to finance sales by Transit's equipment sales and financing subsidiary (prior to the sale of these notes receivable). At December 31, 1993, the Registrant has committed to approximately $19.4 million in capital purchases during 1994. This includes $15.0 million, or 159 units, for school and transit buses by Contract Services and $4.4 million for 175 trailers by Transit. The Registrant believes cash flow from operations combined with existing financing resources will be adequate to meet its short-term and long-term cash requirements. At December 31, 1993, the Registrant has a $15.7 million credit capacity available under its revolving credit facility discussed in Note 7 to Consolidated Financial Statements. SEASONALITY Peak business levels for Contract Services occur during the traditional school months of September through May. For example, during 1993 approximately 86% of Contract Services' transportation revenues were generated during these nine months. At Transit, proportionately more household goods moves occur during the summer months. During 1993, for example, approximately 45% of the Household Goods division's revenues were generated during the months of June through September. Due to the seasonal impact of revenue being generated by each of the Registrant's two operating subsidiaries as discussed above, the Registrant historically realizes higher net income in the second and fourth quarters than in the first and third quarters of the year. Item 8. Financial Statements and Supplementary Data. Following are the consolidated financial statements of the Registrant as of December 31, 1992 and 1993, and for each of the three years in the period ended December 31, 1993, and the independent auditors' report on the consolidated financial statements. A list of the report and financial statements appears in response to Item 14 of this report: [The remainder of this page was intentionally left blank.] REPORT OF COOPERS & LYBRAND, INDEPENDENT ACCOUNTANTS MAYFLOWER GROUP, INC. Board of Directors Mayflower Group, Inc. We have audited the accompanying consolidated balance sheet of Mayflower Group, Inc. as of December 31, 1993, and the related consolidated statements of operations, shareholders' investment and cash flows for the year then ended. We have also audited the financial statement schedules listed in Item 14(a) of this Form 10-K. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audit. The consolidated balance sheet of Mayflower Group, Inc. as of December 31, 1992, the consolidated statements of operations, shareholders' investment and cash flows for each of the two years in the period ended December 31, 1992, and the related financial statement schedules for such periods were audited by other auditors whose report, dated February 1, 1993, expressed an unqualified opinion on those statements. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Mayflower Group, Inc. as of December 31, 1993, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. /s/ Coopers & Lybrand Indianapolis, Indiana March 29, 1994 REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS Board of Directors Mayflower Group, Inc. We have audited the accompanying consolidated balance sheet of Mayflower Group, Inc. as of December 31, 1992, and the related consolidated statements of operations, shareholders' investment and cash flows for each of the two years in the period ended December 31, 1992. Our audits also included the financial statement schedules listed in the Index at Item 14(a) for the years ended December 31, 1992 and 1991. These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As more fully described in Note 2, the financial statements as of and for the year ended December 31, 1992 are not comparable with those of 1991 as a result of the reorganization. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Mayflower Group, Inc. at December 31, 1992, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 1992, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. As described in Notes 1, 9 and 10 to the financial statements effective April 1, 1992 (date of reorganization), the Company changed its method of accounting for income taxes and postretirement benefits. /s/ Ernst & Young Indianapolis, Indiana February 1, 1993 CONSOLIDATED STATEMENTS OF OPERATIONS MAYFLOWER GROUP, INC.
Years Ended December 31 (In thousands except per share data) 1993 1992 1991 - ---------------------------------------------------------------------------------- Operating Revenues: Contract Services $ 235,918 $ 209,411 $ 193,442 Transit 441,575 426,444 405,600 --------- --------- --------- 677,493 635,855 599,042 Operating Expenses: --------- --------- --------- Contract Services 210,949 186,189 178,022 Transit 365,144 348,658 331,175 General and administrative 84,380 78,102 77,992 --------- --------- --------- Unusual Charges: Self-insured claims adjustment (Note 4) 4,900 --- --- Revaluation of intangible assets (Note 6) --- --- 69,019 --------- --------- --------- Operating Profit (Loss) 12,120 22,906 (57,166) Other Income and Expense: Interest income 2,862 1,995 903 Interest expense (Note 2) (9,598) (11,656) (32,209) Miscellaneous, net 32 234 (161) --------- --------- --------- Income (loss) before federal income taxes and extraordinary items 5,416 13,479 (88,633) --------- --------- --------- Provision for federal income taxes (Note 9): Current 2,966 3,679 --- Deferred 15 1,965 --- --------- --------- --------- 2,981 5,644 --- --------- --------- --------- Income (loss) before extraordinary items 2,435 7,835 (88,633) Extraordinary items (Note 5) (549) 93,141 --- --------- --------- --------- Net income (loss) $ 1,886 $ 100,976 $ (88,633) ========= ========= ========= Earnings Per Share (Notes 1B and 3): Pro Forma Weighted average shares outstanding 12,740 12,646 Earnings Per Share before ext. items $ .19 $ .66 Extraordinary items (.04) --- Earnings Per Share $ .15 $ .66 See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS MAYFLOWER GROUP, INC.
December 31 (Dollars in thousands) 1993 1992 - ------------------------------------------------------------------------------ Assets: Current assets: Cash (including cash equivalents at market value of $5,814 in 1993 and $9,141 in 1992) $ 6,093 $ 9,449 Receivables (Note 7): Trade receivables 74,136 72,041 Accrued unbilled accounts receivable 16,845 16,012 Other 15,814 11,260 Less allowance for possible collection losses (6,174) (6,178) -------- ------- Total receivables 100,621 93,135 Equipment and inventory held for resale (Note 7) 8,911 5,190 Deferred income taxes (Note 9) 13,230 9,095 Prepaid expenses and deposits 8,147 8,180 -------- ------- Total current assets 137,002 125,049 -------- ------- Property and equipment (Note 7): Land 2,175 2,155 Buildings and improvements 16,273 15,675 Revenue equipment 117,561 102,020 Other operating equipment and improvements 9,072 6,966 Less accumulated depreciation (30,334) (22,367) -------- -------- Net property and equipment 114,747 104,449 Intangible assets (less accumulated amortization of $6,852 in 1993 and $2,706 in 1992) (Note 1C) 53,372 55,085 Other assets 17,556 18,168 -------- -------- $322,677 $302,751 ======== ======== /TABLE CONSOLIDATED BALANCE SHEETS MAYFLOWER GROUP, INC.
December 31 (Dollars in thousands) 1993 1992 - ------------------------------------------------------------------------------ Liabilities and Shareholders' Investment: Current liabilities: Current maturities of long-term debt $ 2,276 $ 11,608 Short-term borrowings (Note 7) --- 9,470 Trade accounts payable 39,141 31,112 Accrued expenses and deposits: Liabilities on unbilled shipments 9,026 8,961 Reserve for self-insured claims (Note 4) 28,940 20,840 Salaries and withholding taxes 6,755 9,582 Other 11,667 9,479 --------- --------- Total current liabilities 97,805 101,052 --------- --------- Noncurrent liabilities: Reserve for self-insured claims, less current portion (Note 4) 11,210 9,195 Accrued postretirement benefits cost (Note 10) 5,621 4,948 Long-term debt, less current maturities (Note 7) 95,407 79,149 Deferred income taxes (Note 9) 29,963 27,636 Commitments and contingencies (Note 11) Shareholders' investment (Note 8): Common shares; no par value; 30,000,000 authorized; issued and outstanding: 12,662,403 in 1993 and 12,630,344 in 1992 73,865 73,851 Retained earnings 8,806 6,920 --------- --------- Total shareholders' investment 82,671 80,771 --------- --------- $ 322,677 $ 302,751 ========= ========= See notes to consolidated financial statements. /TABLE CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT MAYFLOWER GROUP, INC.
Additional Retained Common Paid In Earnings (In thousands) Stock Capital (Deficit) - ------------------------------------------------------------------------------ Balance, January 1, 1991 $ 23,346 $ 6,986 $ (30,551) Net loss --- --- (88,633) Repurchase of common stock (58) --- --- --------- --------- --------- Balance, December 31, 1991 23,288 6,986 (119,184) Income before extraordinary gain- three months ended March 31, 1992 --- --- 915 --------- --------- --------- Balance, March 31, 1992 23,288 6,986 (118,269) Reorganization (Note 2): Retired common stock (23,288) (6,986) 30,274 Extraordinary gain on exchange of common stock for subordinated debt --- --- 93,141 Capitalization of Company: Issuance of new common stock 85,774 --- (5,146) Cumulative effect of adopting SFAS 109 (Note 9) (8,897) --- --- Cumulative effect of adopting SFAS 106 (Note 10) (3,026) --- --- --------- --------- --------- Balance, April 1, 1992 73,851 --- --- Net income- nine months ended December 31, 1992 --- --- 6,920 --------- --------- --------- Balance, December 31, 1992 73,851 --- 6,920 Net income --- --- 1,886 Issuance of restricted shares, net of unearned compensation (Note 8) 14 --- --- --------- --------- --------- Balance, December 31, 1993 $ 73,865 $ --- $ 8,806 See notes to consolidated financial statements. /TABLE CONSOLIDATED STATEMENTS OF CASH FLOWS MAYFLOWER GROUP, INC.
Years ended December 31 (In thousands) 1993 1992 1991 - ---------------------------------------------------------------------------------- Net cash provided by (used in): Operating activities $ 25,392 $ 34,860 $ (22,459) Investing activities (26,008) (12,398) (31,489) Financing activities (2,740) (18,309) 53,831 (3,356) 4,153 (117) Cash and cash equivalents-beginning of year 9,449 5,296 5,413 Cash and cash equivalents-end of year $ 6,093 $ 9,449 $ 5,296 Operating activities: Net income (loss) (Note 5) $ 1,886 $100,976 $ (88,633) Add items not affecting cash: Extraordinary items 871 (93,141) --- Revaluation of intangible assets (Note 6) --- --- 69,019 Depreciation 18,203 17,712 16,589 Amortization and other 5,494 4,573 5,066 Changes in certain working capital items: Receivables (10,997) (8,200) (3,109) Equipment and inventory held for resale (3,721) 5,722 539 Prepaid expenses and deposits (1,899) 682 (1,161) Trade accounts payable 8,029 3,516 29 Reserve for self-insured claims 7,611 (1,426) 2,116 Other accrued expenses and deposits (85) 4,446 22,084 Repurchase of sold receivables --- --- (39,675) Payments on receivables purchase facility --- --- (5,323) Net cash provided by (used in) operating activities $ 25,392 $ 34,860 $ (22,459) Investing activities: Purchases of property and equipment $(30,196) (9,160) $ (27,542) Purchase acquisitions (2,966) --- --- Proceeds from disposal of property and equipment, less gains included in net income (loss) 2,096 1,837 1,441 Proceeds from sale of notes receivable (Note 7) 13,913 --- --- Increase in other noncurrent assets (liabilities) (8,855) (5,075) (5,388) Net cash used in investing activities $(26,008) $(12,398) $ (31,489) Financing activities: Payment of long-term debt $(96,988) $(29,288) $ (16,659) Proceeds from long-term debt: Term loan 80,000 --- 39,675 Equipment financing and other 23,718 12,529 19,853 Net change in revolving credit agreements (9,470) (1,550) 11,020 Repurchase of common stock --- --- (58) Net cash provided by (used in) financing activities $ (2,740) $(18,309) $ 53,831 See notes to consolidated financial statements. /TABLE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MAYFLOWER GROUP, INC. Note 1- Summary of Significant Accounting Policies A. Principles of Consolidation The accompanying consolidated financial statements include Mayflower Group, Inc. ("Group") and its subsidiaries (the "Company"), all of which are wholly owned. The Company owns two operating subsidiaries: Mayflower Contract Services, Inc. ("Contract Services") and Mayflower Transit, Inc. ("Transit"). All significant intercompany transactions and balances have been eliminated. B. Earnings Per Share Since the historical capital structure of the Company is not indicative of the Company's capital structure following its Plan of Reorganization (Note 2), earnings per share is presented in the statements of operations for the current year and pro forma earnings per share is shown for the year ended December 31, 1992 only. The computation of earnings per share for the current year is based upon the weighted average number of shares outstanding and the dilutive effect of common equivalent shares issued under the Stock Option and Restricted Stock Plans discussed in Note 8. See Note 3 for discussion of the pro forma information. C. Intangible Assets Intangible assets consist of the following (in thousands):
1993 1992 Customer base and agency network (less accumulated amortization of $1,679 in 1993 and $729 in 1992) $17,804 $18,754 Reorganization value in excess of amounts allocated to assets (less accumulated amortization of $1,228 in 1993 and $444 in 1992) (Note 2) 14,285 15,068 Other intangible assets (less accumulated amortization of $3,945 in 1993 and $1,533 in 1992) 21,283 21,263 ------- ------- $53,372 $55,085
Intangible assets are amortized by the straight-line basis over periods ranging from 5 to 35 years. D. Federal Income Taxes Effective April 1, 1992, the Company adopted Financial Accounting Standards Board Statement No. 109 "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires a significantly different approach to the financial accounting and reporting of income taxes than had been previously used and, in accordance with SFAS 109, the Company has chosen not to restate prior year financial statements. Refer to Note 9 for further discussion of SFAS 109. Prior to April 1, 1992, the Company computed income taxes in accordance with Accounting Principles Board Opinion No. 11. E. Post-retirement Benefits Other Than Pensions Effective April 1, 1992, the Company adopted Financial Accounting Standards Board Statement No. 106 "Employers' Accounting for Post-retirement Benefits Other Than Pensions" ("SFAS 106"). SFAS 106 requires the Company to accrue for the expected cost of Post-retirement benefits during the years an employee renders service rather than the previous practice of expensing such costs as incurred. Refer to Note 10 for further discussion of SFAS 106. F. Reserve for Self-insured Claims The Company is self-insured for certain risks and is covered by insurance policies for other risks. The Company maintains reserves for losses and premium adjustments using case basis evaluations and other analyses. Reserve and premium adjustment estimates are continually reviewed and adjustments are reflected in current operations. The Company recognizes the noncurrent nature of the self insured claims reserves by classifying a portion of these reserves as a noncurrent liability. See Note 4 for discussion of adjustment to self-insured claims reserves recorded in 1993. G. Recognition of Operating Revenues Revenues and related direct expenses for Contract Services, which is primarily involved in student transportation, are recognized over the period during which the service is rendered, which generally corresponds with the traditional nine month school year. Transit, which is primarily involved in the shipment of household goods and electronic and trade show products, recognizes revenue and associated transportation costs when the order has been unloaded at the destination. Transit's equipment financing subsidiary sells transportation equipment to certain of its owner-operators and agents. Beginning in 1993, revenues associated with these installment sales are recorded net of the related cost of goods sold as an operating expense, with the related gain on the sale being recognized on the installment basis. Revenues and operating expenses for 1992 and 1991 have been reclassified to conform with this presentation. H. Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The carrying amount reported on the balance sheet for cash approximates fair value. I. Inventories Inventories are stated at the lower of cost or market as determined for each specific unit. J. Property and Equipment Property and equipment is stated on a cost basis. Depreciation is provided primarily by the straight-line method at annual rates considered adequate to amortize the costs over the estimated useful lives of the assets. The lives used in computing depreciation during the periods were: Building and improvements 3 to 40 years Revenue equipment 3 to 10 years Other operating equipment and improvements 2 to 10 years The portion of fleet operating buses used in the operations of Contract Services and classified as property and equipment, is based upon the Company's requirements for fleet buses to fulfill existing contract requirements, including an estimate of reserve buses necessary to ensure continuity of service based on historical maintenance records and experience. The remaining buses are classified as equipment and inventory held for resale. K. Reclassification Certain amounts within the 1992 and 1991 Consolidated Financial Statements have been reclassified to conform with the 1993 presentation. Note 2- Corporate Reorganization Plan of Reorganization Group was formed in 1986 for the purpose of acquiring another company whose name was Mayflower Group, Inc. ("Old Mayflower"), a holding company that owned 100% of the stock of three operating subsidiaries: Contract Services, Transit, and Mayflower Consumer Products, Inc. ("Consumer Products"). The acquisition was completed in December 1986 in a two-step merger (the "Merger"): a cash tender offer for all of the 7.9 million outstanding common shares of Old Mayflower at $31.50 per share followed by a merger of Old Mayflower into a wholly-owned subsidiary of Group. To finance the acquisition, Group raised approximately $330 million of debt financing, including a $110 million senior secured credit facility and $160 million through private placement of 12 5/8% Senior Subordinated Debentures ("Debentures") with Warrants to purchase common stock of Group. The remaining debt financing consisted of a secured bank loan to a subsidiary of Contract Services. Group sold Consumer Products in 1987 and eventually refinanced the senior secured credit facility with secured credit facilities at Transit and Contract Services. Group is a holding company that relies upon the cash flow of its two operating subsidiaries to satisfy its obligations, which through December 1990 consisted primarily of interest payments on the Debentures. Following Group's financial reorganization, discussed below, it had no significant obligations remaining. From 1987 through 1991, operating results and cash flow generated by Group and its operating subsidiaries were not sufficient to pay significant amounts of principal on Group's senior debt or allow Group to remain in compliance with all financial covenants contained in the secured credit facilities. As a result, beginning after December 1990, Contract Services and Transit were prohibited by terms of the secured credit facilities from making any further cash dividend payments to Group for the purposes of servicing interest payments on its Debentures. Consequently, the two scheduled semiannual interest payments on the Debentures of $10.1 million each were not made in 1991 resulting in a default under the provisions of the related indenture. After various restructuring proposals were considered in early 1992, Group's Debenture holders, along with Group's common stock and warrant holders, overwhelmingly approved a Prepackaged Plan of Reorganization ("Plan of Reorganization"). The Plan of Reorganization was confirmed by the court and became effective in March 1992. Under the Plan of Reorganization, the holders of the Debentures received shares of newly issued common stock equal to approximately 94% of the common stock of Group. The existing holders of the common stock and warrants of Group received shares of newly issued common stock equal to approximately 5% of the common stock of Group. Two other creditors received approximately 1% of the common stock as payment in lieu of cash for services in connection with the Plan of Reorganization. The Plan did not affect Contract Services or Transit. Basis of Presentation Group emerged from the Plan of Reorganization on March 24, 1992, successfully completing Group's financial reorganization. Because the results of operations from March 25, 1992 to March 31, 1992 were not significant, the Company has used March 31, 1992 as the effective date of the Reorganization for accounting purposes. Accordingly, the Consolidated Statements of Operations and Cash Flows for the year ended December 31, 1992 reflect the results of operations of the Company prior to reorganization for the three months ended March 31, 1992 and the operations of the Company after reorganization for the nine months ended December 31, 1992. The Consolidated Balance Sheet at December 31, 1992 reflects the financial position of the Company subsequent to reorganization. The Consolidated Statements of Operations and Cash Flows for the year ended December 31, 1991 reflects the financial position and results of operations of the Company prior to reorganization. See discussion of pro forma financial information contained in Note 3. Accounting Treatment Using Fresh Start Reporting The Company accounted for the Reorganization using Fresh Start Reporting, in accordance with Statement of Position (SOP) 90-7 (Financial Reporting by Entities in Reorganization under the Bankruptcy Code) issued by the AICPA. Accordingly, all assets and liabilities were adjusted to reflect their estimated reorganization value, which approximated Group's book value less liabilities at the date of reorganization. This resulted in reorganization value in excess of amounts allocated to assets of $16.7 million, which is comparable to the amount of goodwill existing prior to reorganization. The reorganization value of Group, less liabilities, was determined to be approximately $86 million at March 31, 1992. This value was determined to fall within an acceptable range developed by considering several factors and relying upon various valuation methods including discounted values of estimated future cash flows, earnings multiples as appropriate in the two industries in which Transit and Contract Services operate, and other recent financial transactions. Forecasts used in earnings and cash flow estimates assumed revenue and cost patterns similar to historical levels in recent years. The most significant of the reorganization adjustments reduced Long-Term Debt by $155.1 million and Accrued Interest by $23.6 million, and increased Shareholders' Investment by $173.8 million, including the elimination of a retained deficit totaling $118.3 million prior to the Reorganization. The conversion of the Debentures to common stock resulted in an extraordinary gain totaling $93.1 million. In accordance with SOP 90-7, the Consolidated Statement of Operations for the year ended December 31, 1992 includes $1.7 million of interest expense related to the Debentures, representing the amount accrued in 1992 and shown as part of a claim on the petition filed with the court. Note 3- Pro Forma Financial Information (Unaudited) During 1992 and 1991, certain events occurred that result in the Consolidated Financial Statements not being comparable between the respective fiscal periods. As presented below, the pro forma net income excludes credits and charges relating to a) the corporate reorganization in March 1992 as discussed in Note 2 (which resulted in the exchange of common stock for subordinated debentures significantly increasing the equity and decreasing the debt of the Company) and b) the write-down of Transit's intangible assets of $69.0 million in December 1991 as discussed in Note 6. It also includes a) additional expense relative to the adoption of SFAS 109 and SFAS 106 (actual adoption date was April 1, 1992), and b) additional expense relative to the adoption of shorter lives of intangible assets and excess reorganization value to reflect the prevailing useful lives of similar assets (actual adoption date was October 1, 1992) as if these events and their related adjustments had occurred as of December 31, 1990. The effects of these pro forma adjustments result in the following pro forma operating profit, net income, and earnings per share for the years ended December 31, 1992 and 1991: Year ended December 31 1992 1991 - ----------------------------------------------------------------- (In thousands except per share data) Operating revenues $635,855 $599,042 Operating profit $ 21,066 $ 12,584 Net income $ 8,336 $ 1,465 Weighted average shares outstanding 12,646 12,646 Earnings per share $ 0.66 $ 0.12
Pro forma earnings per share is based on the number of shares issued and outstanding as a result of the Plan of Reorganization. The pro forma financial information should be read in conjunction with the related historical financial statements, and is not necessarily indicative of results of operations that would have occurred had the events giving rise to the pro forma adjustments actually taken place earlier. Note 4 - Self-Insured Claims Adjustment As discussed in Note 1F, the Company is self-insured for certain risks and, accordingly, maintains reserves for losses and premium adjustments which are determined using case basis evaluations and other analyses. Based on a review by management during the fourth quarter of 1993 of the calculations underlying the reserve for self-insured claims, the Company has determined that the portion of the reserve attributable to claims incurred by Contract Services prior to 1991 was $4.9 million below an appropriate level. As a result, the Company recognized $4.9 million, or $3.0 million net of tax, in additional self-insured claims expense, which had the effect of reducing earnings per share in 1993 by $.23. Management believes that the annual expense related to risks incurred under the self-insurance program since January 1, 1991, excluding this adjustment, has been sufficient to provide for anticipated losses, and that the magnitude of this expense is such that this adjustment represents a one-time nonrecurring increase to its reserve for self-insured claims. Note 5- Extraordinary Items In May 1993, the Company refinanced its primary debt facilities which were scheduled to mature in 1994 (Note 7). Such refinancing resulted in the write-off of $549,000 of deferred debt costs, net of tax, which has been accounted for as an extraordinary loss. In 1992, the Company recognized an extraordinary gain totaling $93.1 million, resulting from the conversion of the Company's debentures to common stock in conjunction with its Plan of Reorganization (Note 2). Note 6- Revaluation of Intangible Assets The revaluation of intangible assets in 1991 represents a non-cash charge to operations that does not relate directly to normal ongoing business activity and, in the opinion of management, is nonrecurring. In 1986, the Merger (Note 2) was accounted for as a purchase and, accordingly, the assets and liabilities were adjusted to their estimated fair values based upon independent appraisals and business conditions at that time. During the final analysis and evaluation of various restructuring proposals, which were completed in 1991, the Company determined that the recorded value of Transit's goodwill and intangible assets were stated in excess of current market value. Accordingly, during 1991, goodwill and intangible assets were adjusted to reflect a write down of $37.8 million and $31.2 million, respectively. Note 7- Financing Agreements Long-term debt consists of the following:
December 31 1993 1992 Collateralized Debt: (In thousands) Senior secured term loans, interest rates and terms vary through April 2003, as discussed below, collateralized by substantially all of the assets of Contract Services and Transit and guaranteed by the Company $ 80,000 $ --- Mortgage note payable of Transit, 11%, interest only payable in monthly installments through 1997, collateralized by land and buildings 5,000 14,960 Notes payable of Contract Services, interest at 7.5%, payable in monthly installments through 1998, collateralized by certain buses of Contract Services 11,735 --- Senior secured term loan of Transit, interest at 7.75%, refinanced in 1993 as discussed below --- 29,200 Senior secured term loans of Contract Services, interest ranging from 8% to 11%, refinanced in 1993 as discussed below --- 22,301 Notes payable of Contract Services, interest varying between 10.25% and 11.6%, refinanced in 1993 as discussed below --- 14,330 Notes payable of Transit, interest varying between 7% and 7.5%, repaid in 1993 as discussed below --- 8,841 Uncollateralized Debt: Other notes payable, various interest rates, payable in installments through 2003 948 1,125 -------- -------- 97,683 90,757 Less current maturities (2,276) (11,608) -------- -------- $ 95,407 $ 79,149 ======== ========
Maturities on long-term debt during each of the next five years ending December 31, are as follows (in thousands): 1994 $ 2,276 1995 2,521 1996 2,521 1997 16,807 1998 15,126 Thereafter 58,432 -------- $ 97,683 ======== New Financing Agreements Effective May 27, 1993, the Company consummated three separate agreements for refinancing certain of its debt facilities which were scheduled to expire in 1993 and 1994. The first agreement was for an $80 million term loan from a group of lenders, the proceeds of which were used both to refinance existing obligations to secured lenders of Contract Services and Transit, and for working capital purposes. The term loan has two separate facilities. The first facility is for $65 million and has a ten-year maturity with interest only payments required in the initial three years. Amortization of principal begins in year four with equal annual installments through April 2003. Interest on this facility is to be paid quarterly, and is fixed at 9.5% per annum. The second facility is for $15 million and has a seven-year maturity with repayment of principal occurring in eight equal quarterly installments during years six and seven through April 2000. Interest on this facility is to be paid quarterly, and is computed using LIBOR plus 2.8% per annum, which was 6.3% at December 31, 1993. The second financing agreement was for a $25 million loan facility to be used by Contract Services to finance the acquisition of new school buses over a period of approximately two years. At December 31, 1993, $11.7 million was outstanding under this loan facility. Periodic fundings under this agreement convert to five-year term notes when the amount outstanding exceeds $5 million, with no term note maturing later than September, 1999. The term notes bear interest at the prime rate plus 1.5% per annum, which was 7.5% at December 31, 1993. Alternatively, the Company may elect to fix the interest rate at the time each funding converts to a term note. The notes will be collateralized by a lien on the purchased school buses. Through the third agreement, a group of banks provide the Company with a $70 million revolving credit facility. The facility, which has a maturity date of June 1995, will be used for letters of credit and seasonal working capital purposes. At December 31, 1993, the Company has letters of credit totaling $54.3 million, and no borrowings were outstanding under its line of credit. Interest is to be paid monthly, and is computed using the prime rate plus 1.5% per annum. The facility does not require compensating balances but does require the payment of a commitment fee at an annual rate of .375% of the unused portion of the facility and a fee of 2% per annum of the amount of letters of credit outstanding. The first and third financing facilities discussed above are collateralized by substantially all of the assets of Transit and Contract Services and guaranteed by the Company. Effective December 31, 1993, the Company entered into two new agreements to sell $13.9 million of installment notes receivable of Transit's equipment sales and financing subsidiary to the same creditors which had previously financed such notes receivable. The Company recognized no gain or loss on the sale of the notes receivable and proceeds were used to fully repay amounts outstanding under the related notes payable. Financial Covenants and Restrictions Under terms of the financing agreements with senior lenders, the ability of Contract Services and Transit to transfer cash to Group is limited to required income tax payments and $1.5 million annually for on-going cash expenses. The financing agreements also contain various restrictive financial covenants that, among other things, prohibit cash dividend payments, restrict property and equipment additions, restrict certain additional indebtedness, and require the maintenance of certain financial ratios. Other Interest paid during 1993, 1992 and 1991 totaled $8.3 million, $9.9 million, and $9.6 million, respectively. The carrying value of the Company's borrowings does not significantly differ from its fair value. The fair value of the Company's long- term debt is estimated using discounted cash flow analyses, based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. Note 8- Common Stock Stock Option Plan In 1992, the Company established two Stock Option Plans ("Option Plans"). The Option Plans provide for the issuance of 530,000 shares of common stock, no par value, to directors of the Company and officers and key employees of the Company and its subsidiaries. Options granted under the Option Plans become exercisable in 33.3% increments on the first, second and third anniversaries of the date of grant and must be exercised within ten years from the date of grant. As of December 31, 1993, 336,500 options are outstanding including options to acquire 159,500 shares of common stock at an exercise price of $6.875 per share and options to acquire 177,000 shares of common stock at an exercise price of $9.00 per share. In 1993, options to acquire 53,167 shares of the common stock at $6.875 per share became exercisable. No options have lapsed or were exercised in 1993 or 1992. Restricted Stock Plan In 1993, the Company adopted a restricted stock plan whereby key employees were granted restricted shares of the Company's stock. Shares were granted in the name of the employee, who has all rights of a shareholder, subject to certain restrictions or forfeitures. Restrictions on the grants expire on the third anniversary of the date of the grant. During 1993, 17,000 shares were granted. As of December 31, 1993, there were 8,000 shares available for grant. The market value of shares granted under the plan has been recorded as unearned compensation and is presented as a reduction in the value of common stock. Compensation expense will be charged to general and administrative expense over the respective three-year vesting period. Such compensation expense was $14,000 in 1993. Note 9- Federal Income Taxes Effective April 1, 1992, the Company changed its method of accounting for income taxes from the deferred to the liability method required by SFAS 109. As provided by SFAS 109, financial statements have not been restated. The cumulative effect of adopting SFAS 109 as of April 1, 1992 was to decrease shareholders' investment by $8.9 million. For the nine months ended December 31, 1992, application of the new accounting method decreased income before federal income taxes and federal income tax expense by approximately $2.1 million. Federal income taxes paid totaled $4.5 million, $4.2 million, and $.4 million in 1993, 1992 and 1991, respectively. At December 31, 1993, the Company has net operating loss carryforwards of $4.8 million and alternative minimum tax credit carryforwards of $3.2 million for federal income tax purposes. The net operating loss carryforwards expire in years 2003 and 2006, while the alternative minimum tax credit carryforwards have an indefinite carryforward period. Because management believes these carryforwards will be used prior to expiration, no valuation allowance has been recorded. Transit has a capital loss carryforward of $2.6 million. The capital loss carryforward will expire in 1994. Because of the uncertainty of the ability to generate sufficient capital gains against which to utilize the capital loss, this carryforward has been fully provided for in the valuation allowance. Due to the Company's change in ownership resulting from its Plan of Reorganization (Note 2) the annual aggregate utilization of the net operating loss carryforward and the capital loss tax carryforward will be limited to approximately $6.0 million annually. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for federal income tax purposes. Significant components of the Company's noncurrent and current deferred taxes as of December 31, 1993 are as follows (in thousands): Net noncurrent deferred tax liabilities: Excess tax depreciation $ 19,184 Intangible assets 14,643 Fair value of assets in excess of book value 5,340 Tax Credit carryforwards (3,468) Noncurrent portion of reserve for self-insured claims (3,583) Noncurrent portion of valuation allowance for deferred tax assets 341 Other, net (2,494) -------- Total net noncurrent deferred tax liabilities 29,963 -------- Net current deferred tax assets: Current portion of reserve for self-insured claims 7,881 Current portion of net operating loss carryforwards 1,885 Allowance for possible collection losses 2,379 Current portion of valuation allowance for deferred tax assets (659) Other, net 1,744 -------- Total net current deferred tax assets 13,230 -------- Net deferred tax liabilities $ 16,733 ========
For 1991, the Company did not provide for any deferred income taxes on timing differences in the recognition of revenues and expenses for tax and financial statement purposes, due to the absence of taxable income after consideration of net operating loss carryforwards. For 1993, 1992, and 1991, effective rates that differed from the U.S. federal statutory rates were used in recording federal tax expense. The primary reasons for these differences are as follows. For 1993, the Company recorded additional income tax expense to reflect the cumulative effect on the net deferred income tax liability of tax rate increases, as required by SFAS No. 109, primarily as a result of the enactment in August 1993 of Omnibus Budget Reconciliation Act. Also in 1993, the Company recorded additional income tax expense to eliminate a federal income tax receivable from prior years which was determined to be unrealizable. In 1993, 1992 and 1991, a difference in rates was created as a result of the nondeductibility of amortization of intangible assets. These intangible assets were created at the time of Group's formation in 1986 and were also generated by the excess reorganization value resulting from the Plan of Reorganization for 1992. The following table summarizes the differences between the statuary federal income tax rate and the effective tax rate provided in the Consolidated Statements of Operations.
Years ended December 31 1993 1992 1991 Statutory rate (credit) 35.0% 34.0% (34.0)% Increase (decrease) in rate due to: Amortization of non-deductible acquisition costs 5.2 6.3 3.1 Effect of revaluation of intangible assets --- --- 26.5 Loss not utilized in current year --- --- 3.5 Cumulative effect of tax rate increases 9.8 --- --- Elimination of prior year federal income tax receivable 8.2 --- --- Other, net (3.2) 1.6 0.9 ----- ----- ------ 55.0% 41.9% ---% ===== ===== ======
Federal income taxes currently payable are remitted to Group in the form of dividends from Transit and Contract Services based upon the separate liability of each segment, but limited to the consolidated liability. The benefit of consolidation, if any, upon the current liability is shared ratably between Transit and Contract Services. Note 10- Pension Plans and Other Post-retirement Benefits Pension Plans Transit sponsors a noncontributory defined benefit pension plan that covers full-time Transit employees. Benefits are based on years of service and compensation during the five highest consecutive years of earnings before retirement. The Company's policy is to fund actuarially determined amounts adequate to meet future benefit payment requirements. At December 31, 1993, plan assets consisted of U.S. government and corporate bonds, listed stocks, and cash equivalents. Net pension cost for the Company's defined benefit pension plan included the following components:
1993 1992 1991 (In thousands) Service cost-benefits earned during the year $ 583 $ 503 $ 608 Interest cost on projected benefit obligation 1,467 1,355 1,363 Actual return on plan assets (1,521) (1,396) (3,107) Net amortization and deferral (519) (565) 1,237 Lump-sum settlement --- --- 82 ------ ------ ------ $ 10 $ (103) $ 183 ======= ======= ======
The funded status and amount recognized in the Consolidated Balance Sheets at December 31, 1993 and 1992 were as follows (in thousands):
1993 1992 Actuarial present value of benefit obligation: Accumulated benefit obligation (including vested benefits of $17,708 in 1993 and $14,793 in 1992) $(18,150) $(15,154) Effect of projected future compensation increases (2,533) (2,159) -------- -------- Projected benefit obligation for service rendered through December 31 (20,683) (17,313) Plan assets at fair value 20,553 19,912 -------- -------- Plan assets in excess of (less than) projected benefit obligation (130) 2,599 Unrecognized net loss 2,887 208 Unrecognized net assets at December 31 (1,360) (1,632) Unrecognized prior service cost (reduction) (306) (295) -------- -------- Prepaid pension cost $ 1,091 $ 880 ======== ========
The discount rate used in determining the actuarial present value of the projected benefit obligation was 7.5% and 8.5% at December 31, 1993 and 1992, respectively. The rate of future compensation increases used was 5% and 6% at December 31, 1993 and 1992, respectively. The weighted average expected long-term rate of return on plan assets in 1993, 1992, and 1991 was 9.0%. Contract Services sponsors a defined contribution profit sharing plan covering substantially all full-time employees. Contributions to this plan are made by Contract Services based upon a discretionary contribution formula. Contract Services expensed $170,000 and $350,000 in connection with this plan in 1993 and 1992, respectively. No amount was expensed in 1991. Other Postretirement Benefit Plans Effective April 1, 1992, the Company adopted SFAS 106. In accordance with SOP 90-7, the cumulative effect of the accounting change was recognized as a $3.0 million reduction in shareholders' investment ($.24 per share). In prior years, the Company had recognized the expense related to these benefits as they were paid. As the effect on net income of adopting SFAS 106 was not significant, postretirement benefit cost for prior periods has not been restated. The Company's contributory defined benefit postretirement plans make available health and life insurance benefits to the majority of the Company's retirees and their eligible dependents. The postretirement plans are contributory, with retiree contributions adjusted annually, and contain other cost-sharing features such as deductibles and co-insurance. Eligibility for these benefits is based upon retirement from the Company as well as those retirees having met certain age and vesting service requirements. The Company provides contributions to the plan as necessary to fund the plan's current benefits and expenses. Net postretirement benefit expense for the Company included the following components for the year ended December 31, 1993 and the nine months ended December 31, 1992 (in thousands):
1993 1992 Service cost-benefits earned during the year $ 190 $ 110 Interest cost on accumulated post- retirement benefit obligation 437 305 Amortization of Loss 33 --- Amortization of Prior Service Cost (10) --- ----- ----- Net periodic postretirement benefit cost $ 650 $ 415 ===== =====
The funded status and amounts recognized in the Consolidated Balance Sheets for the Company's defined benefit postretirement plans at December 31, 1993 and 1992, were as follows (in thousands):
Accumulated postretirement benefit obligation: 1993 1992 ------- ------- Retirees $ 4,183 $ 3,773 Fully eligible active plan participants 635 346 Other active plan participants 1,416 829 ------- ------- 6,234 4,948 Unrecognized net loss (613) --- Plan assets at fair value --- --- Accumulated postretirement benefit obligation in excess of plan assets $ 5,621 $ 4,948 ======= =======
For measurement purposes, the weighted average discount rate used in determining the accumulated postretirement benefit obligation was 7.5% in 1993 and 8.5% in 1992. The Company's health care cost trend rate is 11% for 1994 and is assumed to gradually decrease to approximately 8% by the year 2000 and remain approximately at that level thereafter. If these trend rates were to be increased by one percent each year, the December 31, 1993, accumulated postretirement benefit obligation would increase by $1.1 million and the aggregate of the service and interest cost components of 1993 annual expenses would increase by $166,000. Note 11- Commitments and Contingencies During 1993, the Company agreed to a settlement of two class action lawsuits which had been filed against it in 1986 and 1989 on behalf of the shareholders of Old Mayflower. The complaints had alleged that the directors of Old Mayflower had breached their fiduciary obligation by entering into the Merger, discussed in Note 2. The Company and other defendants in these suits believe the plaintiffs' claims to be without merit. Because of the costs associated with defending these actions, however, the Company agreed to settle the two lawsuits. The settlement is subject to approval by the courts. The maximum amount of the settlement will be $1.5 million, net of approximately $600,000 contributed by the Company's insurance carrier. The Company will pay approximately $100,000 in cash, and the remainder, not to exceed $1.4 million, in the form of unsecured subordinated notes which mature in ten years. Contract Services and Transit become involved from time to time in various actions that are incidental to the ordinary course of their businesses, including property damage and personal injury claims. Management believes that the disposition of these matters will not have a material adverse effect on the financial position of the Company. The Company has guaranteed aggregate rental and certain residual values under various leasing arrangements entered into by the Company's subsidiaries. It also has guaranteed the collection of certain installment notes receivable, which were sold by Transit's equipment sales and financing subsidiary. The contingent liability resulting from these guarantees totaled approximately $44.9 million at December 31, 1993. The Company has a right to property and equipment which serves as collateral against these contingent obligations that, the Company believes, would substantially offset any potential obligation. The Company's operating subsidiaries lease certain transportation equipment and warehouse facilities, as well as data processing and other office equipment. Generally, these leases require the Company's operating subsidiaries to pay maintenance and insurance costs. There are no significant capital leases. Total rent expense was $25.8 million, $23.9 million, and $22.7 million for 1993, 1992, and 1991, respectively. Future minimum lease payments on noncancellable operating leases are as follows (in thousands): 1994 $ 22,076 1995 18,562 1996 14,088 1997 5,961 1998 2,074 Thereafter 1,753 ---------- $ 64,514 ========== At December 31, 1993, the Company has committed to approximately $19.4 million in capital purchases during 1994. This includes $15.0 million, or 159 units, for school and transit buses by Contract Services and $4.4 million for 175 trailers by Transit. Note 12- Segments of Business
Contract Services Transit Corporate Consolidated (In thousands) - ---------------------------------------------------------------------------------------------- Year ended December 31, 1993 Operating revenues $ 235,918 $ 441,575 $ 677,493 ========= ========= ========= Operating profit (loss) $ 7,471(Note 4) $ 5,738 $ (1,089) $ 12,120 ========= ========= ========= Net interest expense (6,736) Miscellaneous, net 32 --------- Income before federal income taxes and extraordinary items 5,416 ========= Depreciation and amortization $ 15,437 $ 8,260 $ --- $ 23,697 ========= ========= ========= ========= Capital expenditures $ 22,539 $ 7,657 $ --- $ 30,196 ========= ========= ========= ========= Identifiable assets at December 31 $ 159,249 $ 161,369 $ 2 ,059 $ 322,677 ========= ========= ========= ========= Year ended December 31, 1992 Operating revenues $ 209,411 $ 426,444 $ 635,855 ========= ========= ========= Operating profit (loss) $ 10,840 $ 13,208 $ (1,142) 22,906 ========= ========= ========= Net interest expense (9,661) Miscellaneous, net 234 --------- Income before federal income taxes and extraordinary items $ 13,479 ========= Depreciation and amortization $ 14,945 $ 7,267 $ 73 $ 22,285 ========= ========= ========= ========= Capital expenditures $ 6,295 $ 2,865 $ --- $ 9,160 ========= ========= ========= ========= Identifiable assets at December 31 $ 136,551 $ 164,180 $ 2,020 $ 302,751 ========= ========= ========= ========= Year ended December 31, 1991 Operating revenues $ 193,442 $ 405,600 $ 599,042 ========= ========= ========= Operating profit (loss) (Note 6) $ 4,829 $ (58,221) $ (3,774) $ (57,166) ========= ========= ========= Net interest expense and purchase fee on receivables sold (31,306) Miscellaneous, net (161) --------- Income (loss) before federal income taxes and extraordinary items $ (88,633) ========= Depreciation and amortization $ 12,236 $ 8,411 $ 1,008 $ 21,655 ========= ========= ========= ========= Capital expenditures $ 26,183 $ 1,359 $ --- $ 27,542 ========= ========= ========= ========= Identifiable assets at December 31 $ 139,203 $ 160,903 $ (1,161) $ 298,945 ========= ========= ========= =========
Contract Services engages in passenger transportation service businesses, primarily contract public school busing and, to a lesser extent, municipal transit and paratransit contracting. Transit primarily operates as a common carrier and a contract carrier under ICC authority, engaging in the shipment and storage of household goods, electronic, trade show, and other commercial products for individual and corporate customers. Other operations sell and finance transportation equipment to Transit's agents and owner-operators, and sell and underwrite commercial lines of insurance coverage. Operating profit represents operating revenue less operating expenses. In computing operating profit, interest expense, purchase fee on receivables sold, gains on the sale of property and equipment (other than sales of new and used buses) and federal income taxes have not been included. Corporate assets primarily include deferred debt costs, prepaid federal income taxes and cash. Both Contract Services and Transit operate throughout the United States with no significant geographic emphasis. No single customer accounts for 10% or more of the consolidated operating revenues, and export sales to foreign unaffiliated customers are immaterial to consolidated operating revenues. Note 13- Related Party Transactions Four directors of the Company, prior to its reorganization, were associated with firms that are shareholders of the Company and which provided financial services in relation to the Merger and Plan of Reorganization. The Company incurred fees of $871,000 during 1991 related to services provided by those firms. No fees were incurred in 1993 and 1992.
Selected Financial Data (Dollars in thousands except per share data) December 31 1993 1992 1991 1990 1989 - --------------------------------------------------------------------------------------------- Operating revenues $677,493 $635,855 $599,042 $633,985 $639,309 Net income (loss) Notes 2, 4 and 5) 1,886 100,976 (88,633) (9,988) (1,798) Total assets 322,677 302,751 298,945 328,424 353,244 Long-term obligations (Notes 2 and 6) 95,407 79,149 234,529 201,470 212,970 Per share data (Notes 1b and 3): Earnings Per Share $ .15 Pro forma Earnings Per Share $ .66 $ .12 N/A N/A
Quarterly Financial Data (Unaudited) (In thousands except per share data) Quarters ended March 31 June 30 Sept. 30 Dec. 31 - --------------------------------------------------------------------------------------------- (Note 4) 1993 Operating revenues $152,971 $168,609 $180,772 $175,141 ======== ======== ======== ======== Operating profit $ 3,276 $ 6,617 $ 1,800 $ 427 ======== ======== ======== ======== Income before extraordinary loss $ 925 $ 3,348 $ (379) $ (1,459) ======== ======== ======== ======== Net income $ 925 $ 2,799 $ (379) $ (1,459) ======== ======== ======== ======== Earnings per share: Before extraordinary loss $ .07 $ .26 $ (.03) $ (.11) Extraordinary loss --- (.04) --- --- -------- -------- -------- -------- Net income $ .07 $ .22 $ (.03) $ (.11) ======== ======== ======== ======== Weighted avg. shares outstanding 12,708 12,713 12,741 12,761 1992 Pro Forma (Note 3) Operating revenues $144,975 $155,264 $172,634 $162,982 ======== ======== ======== ======== Operating profit $ 4,880 $ 6,383 $ 1,102 $ 8,701 ======== ======== ======== ======== Net income (loss) $ 1,604 $ 2,826 $ (347) $ 4,253 ======== ======== ======== ======== Earnings (loss) per share $ .13 $ .22 $ (.03) $ .34 ======== ======== ======== ======== Weighted avg. shares outstanding 12,646 12,646 12,646 12,646 Beginning in the fourth quarter of 1993, operating revenues associated with installment sales of certain transportation equipment by a subsidiary of Transit have been recorded net of the related cost of goods sold as an operating expense. The related gain on the sale is being recognized on the installment basis. Quarterly financial data for 1993 and 1992 have been restated to conform with this presentation. Operating revenues, compared to those previously reported, have been reduced by $4,956,000, $14,373,000, and $5,448,000 in the first, second, and third quarters, respectively, of 1993 as a result of this restatement. Operating revenues have been reduced by $2,245,000, $7,918,000, $4,553,000, and $4,113,000 for the first, second, third, and fourth quarters, respectively, for 1992. /TABLE Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Commencing with fiscal year 1993, Coopers & Lybrand replaced Ernst & Young as the Company's independent public accountant. This change was made after management and the Audit Committee reviewed bids for performing such service received from four public accounting firms, including Ernst & Young. Based on the review of the competing bids, management and the Audit Committee believed that Coopers & Lybrand would provide the services required by the Company at a lower cost. The appointment of Coopers & Lybrand to examine the financial statements of the Company for fiscal year 1993 was ratified by the shareholders of the Company at the Company's 1993 Annual Meeting of Shareholders. During fiscal years 1993, 1992 and 1991, the audit reports issued with respect to the Company's financial statements did not contain an adverse opinion or disclaimer of opinion, or a qualification as to uncertainty, audit scope, or accounting principles. During 1992 and 1991, the two fiscal years immediately preceding the replacement of Ernst & Young as the Company's independent accountant, there were no disagreements between the Company and Ernst & Young on any matter of accounting principles or practices, financial statement, disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Ernst & Young, would have caused it to make a reference to the subject matter of the disagreement in connection with its audit report. PART III Item 10. Directors and Executive Officers of the Registrant. Directors The required information regarding Directors of the Registrant is contained in the definitive Proxy Statement of the Registrant, dated March 31, 1994 under the caption "Election of Directors" and is incorporated herein by reference. Executive Officers For information regarding the executive officers of the Registrant, see Part I, Item 1 of this report. Compliance with Section 16(a) of the Exchange Act The required information is contained in the definitive Proxy Statement of the Registrant, dated March 31, 1994, under the caption "Section 16(a) Reporting" and is incorporated herein by reference. Item 11. Executive Compensation. This information is contained in the definitive Proxy Statement of the Registrant, dated March 31, 1994, under the caption "Management Compensation" and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management. This information is contained in the definitive Proxy Statement of the Registrant, dated March 31, 1994, under the caption "Principal Holders of Shares" and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions. This information is contained in the definitive Proxy Statement of the Registrant, dated March 31, 1994, under the caption "Certain Relationships and Related Transactions" and is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. Page in (a)(1) Financial Statements: this Filing The following financial statements are filed as a part of this report: Report of Independent Auditors 25 Consolidated Statements of Operations for the Years Ended December 31, 1991, 1992 and 1993 26 Consolidated Balance Sheets as of December 31, 1992 and 1993 27 Consolidated Statements of Shareholders' Investment for the Years Ended December 31, 1991, 1992 and 1993 29 Consolidated Statements of Cash Flows for the Years Ended December 31, 1991, 1992 and 1993 30 Notes to Consolidated Financial Statements 31 (a)(2) Financial Statement Schedules: The following supplemental schedules for 1991, 1992 and 1993 are filed as a part of this report: Schedule V - Property, Plant and Equipment S-1 Schedule VI - Accumulated Depreciation and Amortization of Property, Plant and Equipment S-2 Schedule VIII - Valuation and Qualifying Accounts S-3 Schedule IX - Short-Term Borrowings S-4 Schedule X - Supplemental Income Statement Information S-5 All other schedules for which provision is made in the applicable accounting regulation of the Commission have been omitted as the schedules are not required under the related instructions, or are inapplicable, or the information required thereby is set forth in the financial statements or the notes thereto. (a)(3) Exhibits The following exhibits are filed as a part of this Annual Report on Form 10-K, including certain exhibits that were previously filed as exhibits to reports or filings made pursuant to the Securities Exchange Act of 1934, as amended, which are incorporated herein by reference:
Exhibit Page in Number Exhibit Filed With this Filing 2.1 Plan of Reorganization, as supplemented, Form 10 N/A filed by the Registrant in its Chapter 11 case (Case No. 92-00846-RWV-11) in the United States Bankruptcy Court for the Southern District of Indiana, Indianapolis Division) which was confirmed on March 12, 1992 and became effective on March 24, 1992 3.1 Amended and Restated Articles of Incorporation Form 10 N/A of the Registrant 3.2 Amended and Restated By-Laws of the Registrant 1993 Form 10-K E-1 4.1 New Shareholders Agreement dated as of March 12, Form 10 N/A 1992 among Michael L. Smith, Morgan Lewis Githens & Ahn and certain institutional shareholders 4.2 Registration Rights Agreement dated as of March 12, Form 10 N/A 1992 among the Registrant and the Unofficial Committee of Holders of Debentures of the Registrant 10.01* Employment Agreement dated December 20, 1991 Form 10 N/A between Michael L. Smith and Contract Services 10.02* Form of Termination Benefits Agreement dated Form 10 N/A as of December 20, 1991, among either Transit or Contract Services and Patrick F. Carr, Robert H. Irvin, Donald K. Sears, Dennis C. Norman and Kyle E. Martin 10.03 Tax Sharing Agreement dated as of July 31, 1991 Form 10 N/A among the Registrant, Transit and Contract Services 10.04* Mayflower Group, Inc. 1992 Stock Option Plan 1992 Form 10-K N/A 10.05* Mayflower Group, Inc. 1992 Director Stock 1992 Form 10-K N/A Option Plan 1992 10.06* Mayflower Group, Inc. 1993 Restricted Stock Plan 1993 Form 10-K E-14 10.07* Mayflower Contract Services, Inc. 1993 Form 10-K E-18 Executive Retirement Plan, as amended 11 Calculation of earnings per share 1993 Form 10-K E-33 21 Subsidiaries of the Registrant 1993 Form 10-K E-34 23 Consent of Coopers & Lybrand 1993 Form 10-K E-35 _____________________________ * Represents a contract, plan or arrangement pursuant to which compensation or benefits are provided to certain Executive Officers or Directors of the Registrant.
(b) Reports on Form 8-K: The Registrant filed no reports on Form 8-K in the fourth quarter of 1993. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. MAYFLOWER GROUP, INC. By: /s/ Michael L. Smith Michael L. Smith, Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities indicated this 30th day of March, 1994. Signature Title 1. Principal Executive Officer /s/ Michael L. Smith Chairman, President, Chief Executive Officer and Director 2. Principal Financial Officer /s/ Patrick F. Carr Senior Vice President, Chief Financial Officer and Treasurer 3. Principal Accounting Officer /s/ Ronald W. Martin Vice President and Chief Accounting Officer 4. Non-employee Directors /s/ Roderick M. Hills Director /s/ Perry J. Lewis Director /s/ Lary R. Scott Director /s/ Sheldon M. Stone Director S-1
MAYFLOWER GROUP, INC. SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT - --------------------------------------------------------------------------------------------- Column A Column B Column C Column D Column E Column F -------- -------- -------- -------- -------- -------- Balance at Balance at Beginning Additions End of Classification of Period at Cost Retirements Other (A) Period - --------------------------------------------------------------------------------------------- (In thousands) Year Ended December 31, 1993 - ---------------------------- Land $ 2,155 $ 20 $ --- $ --- $ 2,175 Buildings and Improvements 15,675 649 51 --- 16,273 Revenue Equipment 102,020 27,239 2,738 (8,960) 117,561 Other Operating Equipment and Improvements 6,966 2,288 329 147 9,072 -------- -------- -------- -------- -------- $126,816 $ 30,196 $ 3,118 $ (8,813) $145,081 ======== ======== ======== ======== ======== Year Ended December 31, 1992 - ---------------------------- Land $ 2,155 $ --- $ --- $ --- $ 2,155 Buildings and Improvements 23,553 556 84 (8,350) 15,675 Revenue Equipment 128,179 7,400 1,671 (31,888) 102,020 Other Operating Equipment and Improvements 18,006 1,204 397 (11,847) 6,966 -------- -------- -------- -------- -------- $171,893 $ 9,160 $ 2,152 $(52,085) $126,816 ======== ======== ======== ======== ======== Year Ended December 31, 1991 - ---------------------------- Land $ 2,189 $ --- $ 34 $ --- $ 2,155 Buildings and Improvements 23,660 1,103 1,448 238 23,553 Revenue Equipment 105,475 24,964 6,770 4,510 128,179 Other Operating Equipment and Improvements 16,720 1,475 999 810 18,006 -------- -------- -------- -------- -------- $148,044 $ 27,542 $ 9,251 $ 5,558 $171,893 ======== ======== ======== ======== ======== (A) Amounts for 1993 represent the write-off of fully depreciated valuation accounts, which had been established in 1986 at the date of purchase of Old Mayflower in accordance with purchase accounting requirements (see Note 2 to Consolidated Financial Statements for a discussion of the Merger). Amounts for 1992 principally represent the elimination of accumulated depreciation against the related asset balances as the result of a Corporate Reorganization which asset balances were adjusted to reflect their estimated reorganization value, offset by approximately $10 million adjustments related to the Registrant's adoption of SFAS 109 (See Note 2 to Consolidated Financial Statements for a discussion of the Corporate Reorganization and Note 9 to Consolidated Financial Statements for discussion of the Registrant's adoption of SFAS 109). Amounts for 1991 principally represents adjustments as the result of retired units the asset valuation accounts established in 1986. /TABLE S-2
MAYFLOWER GROUP, INC. SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT - --------------------------------------------------------------------------------------------- Column A Column B Column C Column D Column E Column F -------- -------- -------- -------- -------- -------- Additions Balance Charged to Balance at Beginning Operating the End of Classification of Period Expenses Retirement Other (A) Period - --------------------------------------------------------------------------------------------- (In thousands) Year Ended December 31, 1993 - ---------------------------- Buildings and Improvements $ 1,142 $ 1,540 $ 21 $ --- $ 2,661 Revenue Equipment 19,662 14,616 1,116 (8,913) 24,249 Other Operating Equipment and Improvements 1,563 2,047 186 --- 3,424 -------- -------- -------- -------- -------- $ 22,367 $ 18,203 $ 1,323 $ (8,913) $ 30,334 ======== ======== ======== ======== ======== Year Ended December 31, 1992 - ---------------------------- Buildings and Improvements $ 8,022 $ 1,531 $ 60 $ (8,351) $ 1,142 Revenue Equipment 50,843 12,510 513 (43,178) 19,662 Other Operating Equipment and Improvements 11,568 2,134 344 (11,795) 1,563 -------- -------- -------- -------- -------- $ 70,433 $ 16,175 $ 917 $(63,324) $ 22,367 ======== ======== ======== ======== ======== Year Ended December 31, 1991 - ---------------------------- Buildings and Improvements $ 6,861 $ 1,566 $ 643 $ 238 $ 8,022 Revenue Equipment 46,586 11,624 6,477 (890) 50,843 Other Operating Equipment and Improvements 9,451 2,298 931 750 11,568 -------- -------- -------- -------- -------- $ 62,898 $ 15,488 $ 8,051 $ 98 $ 70,433 ======== ======== ======== ======== ======== (A) Amounts for 1993 represent the write-off of fully depreciated valuation accounts, which had been established in 1986 at the date of purchase of Old Mayflower in accordance with purchase accounting requirements (see Note 2 to Consolidated Financial Statements for a discussion of the Merger). Amounts for 1992 principally represent the elimination of accumulated depreciation against the related asset balances as the result of a Corporate Reorganization which asset balances were adjusted to reflect their estimated reorganization value. See Note 2 to Consolidated Financial Statements for a discussion of the Corporate Reorganization. Amounts for 1991 principally represents adjustments as the result of retired units to the asset valuation accounts established in 1986. S-3
MAYFLOWER GROUP, INC. SCHEDULE VIII- VALUATION AND QUALIFYING ACCOUNTS - --------------------------------------------------------------------------------------------- (In thousands) Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Additions Deductions --------- ---------- For Purposes Balance at Charged to for which Balance at Beginning Cost and Reserves End of Description of Period Expenses were created Period - --------------------------------------------------------------------------------------------- Reserve for possible collection losses- - --------------------------- Year ended December 31, 1993 $ 6,178 $ 5,920 ($ 5,924) $ 6,174 ======== ======== ======== ======== Year ended December 31, 1992 $ 5,900 $ 4,552 ($ 4,274) $ 6,178 ======== ======== ======== ======== Year ended December 31, 1991 $ 5,577 $ 5,755 ($ 5,432) $ 5,900 ======== ======== ======== ========
S-4
MAYFLOWER GROUP, INC. SCHEDULE IX- SHORT-TERM BORROWINGS - --------------------------------------------------------------------------------------------- (In thousands) Column A Column B Column C Column D Column E Column F - -------- -------- -------- -------- -------- -------- Average Weighted Weighted Maximum Amount Average Category of Average Amount Outstanding Interest Aggregate Balance at Interest Outstanding during the during the Short-term End of at End of during the Period Period Borrowings (A) Period Period Period (B) (C) - --------------------------------------------------------------------------------------------- Year ended December 31, 1993 $ --- --- $ 3,620 $ 1,953 8.0% ======== ======== ======== ======== ======== Year ended December 31, 1992 $ 9,470 8.0% $ 13,436 $ 6,947 8.2% ======== ======== ======== ======== ======== Year ended December 31, 1991 $ 11,020 8.5% $ 19,550 $ 6,030 9.8% ======== ======== ======== ======== ======== (A) All short-term borrowings were payable to banks. (B) The average amount outstanding during the period was computed by dividing the total of daily outstanding principal balances by 360. (C) The weighted average interest rate during the period was computed by dividing the actual interest expense by the average short-term debt outstanding. S-5
MAYFLOWER GROUP, INC. SCHEDULE X- SUPPLEMENTAY INCOME STATEMENT INFORMATION The amouts of maintenance and repairs included in the Consolidated Statements of Operations are as follows: Year Ended December 31, 1993 1992 1991 (In thousands) ----------------------------------------- Maintenance and Repairs $ 32,565 $ 29,060 $ 27,350 ======== ======== ======== Taxes other than payroll and income taxes, royalties, and advertising are not presented because they do not exceed one percent of consolidated revenues. Depreciation and amortization is presented in Note 12 to the Consolidated Financial Statements.
EX-3.2 2 MAYFLOWER GROUP, INC. CODE OF BY-LAWS E-1 EXHIBIT 3.2 November 3, 1993 AMENDED AND RESTATED CODE OF BY-LAWS OF MAYFLOWER GROUP, INC. ARTICLE 1 Identification Section 1.01. Name. The name of the Corporation is Mayflower Group, Inc. (the "Corporation"). Section 1.02. Place of Keeping Corporate Books and Records. The books of account, records, documents and papers of the Corporation shall be kept at any place or places within or without the State of Indiana as directed by the Board of Directors. In the absence of a direction, the books of account, records, documents and papers shall be kept at the principal office of the Corporation. Section 1.03. Seal. The Board of Directors of the Corporation may designate the design and cause the Corporation to obtain and use a corporate seal, but the failure of the Board to designate a seal or the absence of the impression of the corporate seal from any document shall not affect in any way the validity or effect of such document. Section 1.04. Fiscal Year. The fiscal year of the Corporation shall end at such time as the Board of Directors shall determine. In the event the Board of Directors shall not make such a determination, the fiscal year of the Corporation shall be the calendar year. ARTICLE 2 Capital Stock Section 2.01. Issue and Consideration for Shares. The Board of Directors shall cause the Corporation to issue the shares of the Corporation for such consideration as may be fixed by such Board pursuant to the provisions of the Articles of Incorporation. Section 2.02. Subscriptions for Shares. Subscriptions for shares of the Corporation shall be paid to the Treasurer at such time or times, in such installments or calls, and upon such terms, as shall be determined, from time to time, by the Board of Directors. Any call made by the Board of Directors for payment on subscriptions shall be uniform as to all shares of the same class or to all shares of the same series, as the case may be. Section 2.03. Consideration for Shares. Subject to the provisions of the Articles of Incorporation, the Board of Directors may authorize shares to be issued for consideration consisting of any tangible or intangible property or benefit to the Corporation, including cash, promissory notes, services performed, contracts for services to be performed or other securities of the Corporation; provided, however, that the part of the surplus of the Corporation which is transferred to stated capital upon the issuance of shares as a share dividend shall be deemed to be the consideration for the issuance of such shares. When payment of the consideration for which a share was authorized to be issued shall have been received by the Corporation, or when surplus shall have been transferred to stated capital upon the issuance of a share dividend, such share shall be declared and taken to be fully paid and not liable to any further call or assessment, and the holder thereof shall not be liable for any further payments thereon. The judgment of the Board of Directors as to the value of such property, labor, or services received as consideration or the value placed by the Board of Directors upon the corporate assets in the event of a share dividend, shall be conclusive. Section 2.04. Certificates for Shares. Each Shareholder of the Corporation shall be entitled to a certificate, signed (either originally or by facsimile) by the Chief Executive Officer or the President and the Secretary or an Assistant Secretary of the Corporation stating the name of the registered holder, the number of shares represented thereby and the kind and class thereof, the par value of each share or a statement that such shares have no par value, and whether such shares have been fully paid and are nonassessable. Such certificates shall be in such form as the Board of Directors may, from time to time, by resolution approve. Section 2.05. Transfer of Shares. The shares of the Corporation shall be transferable on the books of the Corporation only upon surrender of the certificate or certificates representing the same, provided: (a) Endorsement. The certificate is properly endorsed by the registered holder or his duly authorized attorney; (b) Witnessing. The endorsement or endorsements are witnessed by one witness unless this requirement is waived in writing upon the form of endorsement by the Chief Executive Officer, the President, a Vice President, or the Secretary of the Corporation; (c) Adverse Claims. The Corporation has no notice of any adverse claims or has discharged any duty to inquire into any such claims; (d) Collection of Taxes. All applicable laws relating to the collection of taxes have been complied with; and (e) Other Requirements. All other reasonable requirements imposed by the Corporation, not inconsistent with the relevant Indiana statutes, have been satisfied. Section 2.06. Transfer Agent. The Board of Directors shall have the power to appoint one or more Transfer Agents and Registrars for the transfer and registration of certificates of shares of any class, and may require that certificates shall be countersigned and registered by one or more of such Transfer Agents and Registrars. Section 2.07. Lost, Stolen or Destroyed Certificates. The Corporation may issue a new certificate for shares of the Corporation in the place of any certificate theretofore issued where the holder of record of the certificate: (a) Claim. Makes proof in affidavit form that the certificate has been lost, destroyed, or wrongfully taken; (b) Timely Request. Requests the issue of a new certificate before the Corporation has notice that the previously issued certificate has been acquired by a purchaser for value in good faith and without notice of any adverse claim; (c) Bond. Gives a bond with open penalty in such form, and with such surety or sureties as the Corporation may direct, to indemnify the Corporation against any claim that may be made on account of the alleged loss, destruction, or theft of the certificate; and (d) Other Requirements. Satisfies all other reasonable requirements imposed by the Corporation. When a certificate has been lost, apparently destroyed, or wrongfully taken and the holder of record fails to notify the Corporation within a reasonable time after he has notice of it, and the Corporation registers a transfer of the shares represented by this certificate before receiving such notification, the holder of record is precluded from making any claim against the Corporation for the transfer or for a new certificate. ARTICLE 3 Meetings of Shareholders Section 3.01. Place of Meetings. All meetings of Shareholders of the Corporation shall be held at such place, within or without the State of Indiana, as may be specified in the respective notices or waivers of notice thereof, or proxies to represent Shareholders thereat. Section 3.02. Annual Meeting. Unless otherwise determined by the Board of Directors, the annual meeting of the Shareholders for the election of Directors, and for the transaction of such other business as may properly come before the meeting, shall be on the last Wednesday of each April, following the close of each fiscal year, if such day is not a legal holiday, and if a legal holiday, then on the first following business day that is not a legal holiday. Failure to hold the annual meeting at the designated time shall not work any forfeiture or a dissolution of the Corporation. Section 3.03. Special Meetings. Special meetings of the Shareholders may be called by the Chairman of the Board, by the President, by a majority of the Board of Directors, or by Shareholders holding of record not less than one-fourth of all the shares outstanding and entitled by the Articles of Incorporation to vote on the business proposed to be transacted thereat; and shall be called by the President at the request in writing of a majority of the Board of Directors or Shareholders holding of record a majority of all the shares outstanding and entitled by the Articles of Incorporation to vote on the business for which the meeting is being called. Any request for a special meeting of the Shareholders shall state the purpose or purposes of the proposed meeting. Section 3.04. Record Date. The Board of Directors may fix a record date, not exceeding seventy (70) nor less than ten (10) days prior to the date of any meeting of Shareholders, for the purpose of determining the Shareholders entitled to notice of and to vote at such meeting. In the absence of action by the Board of Directors fixing a record date as herein provided, the record date shall be the fourteenth day prior to the date of the meeting. Section 3.05. Notice of Meetings. A written or printed notice, stating the place, day and hour of the meeting, and, in the case of a special meeting or when otherwise required by any provision of the Indiana Business Corporation Law, the Articles of Incorporation or this Code of By-Laws, the purpose or purposes for which the meeting is called, shall be delivered or mailed by the Secretary or by the persons calling the meeting to each holder of shares of the Corporation at the time entitled to vote, at such address as appears on the records of the Corporation, at least ten (10) days but not more than sixty (60) days before the date of the meeting. Each Shareholder who has in the manner provided below waived notice of a Shareholders' meeting, or who personally attends a Shareholders' meeting, or is represented thereat by a proxy duly authorized to appear by an instrument of proxy complying with the requirements hereinafter set forth, shall be conclusively presumed to have been given due notice of such meeting. Section 3.06. Waiver of Notice. Notice of any such meeting may be waived in writing by any Shareholder if the waiver sets forth in reasonable detail the purpose or purposes for which the meeting is called, and the time and place thereof. Attendance at any meeting, in person or by proxy, shall constitute a waiver of notice of such meeting. Section 3.07. Proxies. Shareholders entitled to vote at any meeting of Shareholders may vote either in person or by proxy executed in writing by the Shareholder or a duly authorized attorney-in-fact of such Shareholder. For purposes of this section, a proxy granted by telegram, telex, facsimile transmission or other document transmitted electronically for or by a Shareholder shall be deemed "executed in writing by the Shareholder." The general proxy of a fiduciary shall be given the same effect as the general proxy of any other Shareholder. No proxy shall be valid after eleven (11) months from the date of its execution unless a longer time is expressly provided therein. Section 3.08. Quorum. At any meeting of Shareholders, the holders of a majority of the outstanding shares that may be voted on the business to be transacted at such meeting, represented thereat in person or by proxy, shall constitute a quorum, and a plurality of the votes cast shall be necessary for the transaction of any business by the meeting, unless a greater number is required by law, the Articles of Incorporation or this Code of By-Laws. In case a quorum shall not be present at any meeting, the holders of record of a majority of such shares so present in person or by proxy may adjourn the meeting from time to time, without notice, other than announcement at the meeting, until a quorum shall be present or represented. At any such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally scheduled. Section 3.09. Voting Lists. The Secretary of the Corporation shall make, at least five (5) days before each meeting of Shareholders, a complete list of the Shareholders entitled by the Articles of Incorporation to vote at such meeting, arranged in alphabetical order, with the address and number of shares so entitled to vote held by each, which list shall be on file at the principal office of the Corporation and subject to inspection by any Shareholder at any time during usual business hours for a period of five (5) days prior to such meeting. Such list shall be produced and kept open at the time and place of the meeting and subject to the inspection of any Shareholder during the holding of such meeting. The original stock register or transfer book, or a duplicate thereof kept in the State of Indiana, shall be the only evidence as to who are the Shareholders entitled to examine such list, or the stock ledger or transfer book, or to vote at any meeting of the Shareholders. Section 3.10. Addresses of Shareholders. The address of any Shareholder appearing upon the records of the Corporation shall be deemed to be (a) the latest address of such Shareholder appearing on the records maintained by the Transfer Agent or Registrar, as the case may be, for the class of shares held by such Shareholder, if the Corporation has a Transfer Agent or Registrar for such class of shares and the Board of Directors has provided in the resolutions appointing the Transfer Agent or Registrar that notices of change of address shall be given to one of such agents by Shareholders of such class; or (b) the latest address of such Shareholder appearing on the records maintained by the Secretary for the class of shares held by such Shareholder, if the Corporation has no Transfer Agent or Registrar for such class of shares or if it has a Transfer Agent or Registrar for such class of shares but the resolutions appointing the Transfer Agent or Registrar do not provide that notice of change of address shall be given to one of such agents by Shareholders of such class of shares. Section 3.11. Voting at Meetings. (a) Common Shares. Except as otherwise provided by law or by the provisions of the Articles of Incorporation, every holder of Common Stock of the Corporation shall have the right, at every Shareholders' meeting, to one vote for each share standing in his name on the books of the Corporation. Cumulative voting shall not be permitted. (b) Voting of Shares Owned by Other Corporations. Shares of the Corporation standing in the name of another corporation may be voted by such officer, agent or proxy as the board of directors of such other corporation may appoint, or as the by-laws of such other corporation may prescribe. (c) Voting of Shares Owned by Fiduciaries. Shares held by fiduciaries may be voted by the fiduciaries in such manner as the instrument or order appointing such fiduciaries may direct. In the absence of such direction or the inability of the fiduciaries to act in accordance therewith, the following provisions shall apply: (i) Joint Fiduciaries. Where shares are held jointly by three (3) or more fiduciaries, such shares shall be voted in accordance with the will of the majority. (ii) Equally Divided Fiduciaries. Where the fiduciaries, or a majority of them, cannot agree, or where they are equally divided, upon the questions of voting such shares, any court of general equity jurisdiction may, upon petition filed by any of such fiduciaries, or by any party in interest, direct the voting of such shares as it may deem for the best interests of the beneficiaries, and such shares shall be voted in accordance with such direction. (iii) Proxy of Fiduciary. The general proxy of a fiduciary shall be given the same weight and effect as the general proxy of an individual or corporation. (d) Voting of Pledged Shares. Shares that are pledged may, unless otherwise provided in the agreement of pledge, be voted by the Shareholder pledging the same until the shares shall have been transferred to the pledgee on the books of the Corporation, and thereafter they may be voted by the pledgee. Section 3.12. Order of Business. The order of business at the annual meetings, and so far as practicable at all other meetings, of the Shareholders, shall be: Item (1). Proof of due notice of meeting. Item (2). Determination of quorum. Item (3). Reading and disposal of any unapproved minutes. Item (4). Reports of Officers and Committees. Item (5). Unfinished business. Item (6). New business. Item (7). Election of Directors. Item (8). Adjournment. Section 3.13. Action Taken without a Meeting; Consent of Shareholders. Any action required or permitted to be taken at any meeting of the Shareholders may be taken without a meeting if the action is taken by all the Shareholders entitled to vote on the action. The action must be evidenced by one (1) or more written consents describing the action taken, signed by all the Shareholders entitled to vote on the action, and delivered to the corporate records. The record date for determining Shareholders entitled to take action without a meeting is the date the first Shareholder signs the consent under the preceding sentence. Action taken under this Section 3.13 is effective when the last Shareholder signs the consent unless the consent specifies any different prior or subsequent effective date. A consent signed under this Section 3.13 has the effect of a meeting vote and may be described as such in any document. Section 3.14. Notice to Nonvoting Shareholders. If the Indiana Business Corporation Law requires that notice of any proposed action be given to nonvoting Shareholders and the action is to be taken by unanimous consent of the voting Shareholders, the Corporation must give its nonvoting Shareholders written notice of the proposed action at least ten (10) days before the action is taken. The notice must contain or be accompanied by the same material that, under the Indiana Business Corporation Law, would have been required to be sent to nonvoting Shareholders in a notice of meeting at which the proposed action would have been submitted to the Shareholders for action. Section 3.15. Introduction of Business at a Shareholders' Meeting. At an annual meeting of the Shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a Shareholder. For business to be properly brought before an annual meeting by a Shareholder, the Shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a Shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than sixty (60) days nor more than ninety (90) days prior to the meeting; provided, however, that in the even that less than seventy (70) days' notice or prior public disclosure of the date of the meeting is given or made to Shareholders, notice by the Shareholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. A Shareholder's notice to the Secretary shall set forth as to each matter the Shareholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the Corporation's books, of the Shareholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the Shareholder, and (d) any material interest of the Shareholder in such business. Notwithstanding anything in this Code of By-Laws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 3.15. The Chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 3.15, in which event such business shall not be transacted. ARTICLE 4 Board of Directors Section 4.01. Duties and Number. The business and affairs of the Corporation shall be managed under the direction of a Board of Directors consisting of five (5) persons. Directors shall be elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting in which a quorum is present and in accordance with the Articles of Incorporation. No decrease in the number of Directors at any time shall have the effect of shortening the term of any incumbent Director. Section 4.02. Designation of Director Nominees. Nominations of persons for election to the Board of Directors of the Corporation shall be made by the Board of Directors and may be made by any Shareholder of the Corporation entitled to vote for the election of Directors at the meeting who complies with the notice procedures set forth in this Section 4.02. Nominations by a Shareholder shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a Shareholder's notice shall be delivered to or mailed and received at the principal offices of the Corporation not less than sixty (60) days nor more than ninety (90) days prior to the meeting; provided, however, that in the event that less than seventy (70) days' notice or prior public disclosure of the date of the meeting is given or made to Shareholders, notice by the Shareholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such Shareholder's notice shall set forth (a) as to each person whom the Shareholder proposes to nominate for election or reelection as a Director, (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the Corporation which are beneficially owned by such person and (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including without limitation such person's written consent to being named in the proxy statement as a nominee and to serving as a Director if elected); and (b) as to the Shareholder giving the notice (i) the name and address, as they appear on the Corporation's books, of such Shareholder and (ii) the class and number of shares of the Corporation which are beneficially owned by such Shareholder. Nominations of persons for election to the Board of Directors of the Corporation shall be made by the Board of Directors no later than at the last regular meeting of the Board of Directors preceding each Annual Shareholders' Meeting. At such meeting, the Chief Executive Officer of the Corporation shall be designated for nomination and nominated for re-election to the Board of Directors at the Annual Meeting of Shareholders at which his term expires. At the request of the Board of Directors any person nominated by the Board of Directors for election as a Director shall furnish to the Secretary of the Corporation that information required to be set forth in a Shareholder's notice of nomination which pertains to the nominee. No person shall be eligible for election as a Director of the Corporation unless nominated in accordance with the procedures set forth in this Section 4.02. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by this Code of By-Laws, in which event the defective nomination shall be disregarded. In the event that a person is validly designated as a nominee in accordance with the procedures set forth in this Section 4.02 and shall thereafter become unable or unwilling to stand for election to the Board of Directors, the Board of Directions or the Shareholder who proposed such nominee, as the case may be, may designate a substitute nominee. If a Director resigns from the Board of Directors, the resigning Director may designate a person for nomination to succeed the resigning Director and the Board of Directors shall nominate such person for election to fill such vacancy. In all other cases, the Board of Directors shall designate for nomination and nominate the person to fill a vacancy on the Board of Directors. Section 4.03. Powers of Directors. The Board of Directors shall exercise all the powers of the Corporation, subject to the restrictions imposed by law, the Articles of Incorporation and this Code of By-Laws. Section 4.04. Annual Meeting. Unless otherwise determined by the President or the Board of Directors, the Board of Directors shall meet each year as soon as practicable after the annual meeting of the Shareholders, at the place where such meeting of the Shareholders has been held, for the purpose of organization, election of Officers, and consideration of any other business that may properly be brought before the meeting. No notice shall be necessary for the holding of this annual meeting. If such meeting is not held as above provided, the election of Officers may be held at any subsequent duly constituted meeting of the Board of Directors. Section 4.05. Other Meetings. At least six (6) regular meetings of the Board of Directors will be held each year, with or without notice, at such places and times as may from time to time be fixed by resolution of the Board of Directors. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board, and shall be called upon the written request of any member of the Board of Directors. Notice of such a special meeting shall be sent by the Secretary or Assistant Secretary to each Director at his residence or usual place of business by letter, telegram, or facsimile transmission at such time that, in regular course, such notice would reach such place not later than forty eight hours before such meeting; or may be delivered by the Secretary or Assistant Secretary to a Director by word of mouth or telephone received not later than two hours before such meeting. At any meeting at which all Directors are present, notice of the time, place and purpose thereof shall be deemed waived; and notice may be waived (either before or after the time of the meeting) by absent Directors, either by written instrument or telegram. Such meetings may be held at any place within or without the State of Indiana, as may be specified in the respective notices, or waivers of notice, thereof. Section 4.06. Meeting by Telephone, etc. Any or all of the members of the Board of Directors or of any committee designated by the Board of Directors may participate in a meeting of the Board of Directors or the committee by means of conference telephone or similar communications equipment by which all persons participating in the meeting can communicate with each other, and participation by these means constitutes presence in person at the meeting. Section 4.07. Quorum. A majority of the actual number of Directors elected and qualified, from time to time, shall be necessary to constitute a quorum for the transaction of any business and the act of the majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors unless the act of a greater number is required by law, the Articles of Incorporation or this Code of By-Laws. Section 4.08. Action Taken Without Meeting: Consent. Unless the Articles of Incorporation or this Code of By-Laws provide otherwise, any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if the action is taken by all members of the Board. The action must be evidenced by one (1) or more written consents describing the action taken, signed by each Director and included in the minutes or filed with the corporate records reflecting the action taken. Action taken under this Section 4.08 is effective when the last Director signs the consent, unless the consent specifies any different, prior or subsequent effective date. A consent signed under this Section 4.08 has the effect of a meeting vote and may be described as such in any document. Section 4.09. Resignations. Any Director may resign at any time by giving written notice to the Board, the Chairman or the Secretary. Such resignation shall take effect when delivered unless the notice specifies a later effective date, and unless otherwise specified in the resignation, the acceptance of the resignation shall not be necessary to make it effective. Section 4.10. Vacancies and Removal. Any vacancy occurring on the Board of Directors of the Corporation shall be filled as provided in the Articles of Incorporation. Shareholders shall be notified of any increase in the number of Directors and the name, principal occupation and other pertinent information about any Director elected by the Board to fill any vacancy in the next mailing sent to the Shareholders following any such increase or election. Any Director, or the entire Board, may be removed from office only as provided in the Articles of Incorporation. Section 4.11. Compensation of Directors. The Board of Directors is empowered and authorized to fix and determine the compensation of Directors for attendance at meetings of the Board of Directors and additional compensation for such additional services any of such Directors may perform for the Corporation. Section 4.12. Dividends. The Board of Directors shall have power, subject to any restrictions contained in the Articles of Incorporation or provided by law, to declare and pay dividends upon the outstanding shares of the Corporation. Dividends may be paid in cash, in property, or in shares of the Corporation. ARTICLE 5 Board Committees Section 5.01. No Executive Committee. The Board of Directors may not appoint an Executive Committee. Section 5.02. Other Committees. The Board of Directors shall appoint an Audit Committee, composed of Directors who are not members of the management of the Corporation, and a Compensation Committee, a majority of whom shall be Directors who are not members of the management of the Corporation, both to be chaired by Directors who are not members of the management of the Corporation. In addition, the Board of Directors may appoint additional special purpose committees from time to time. Section 5.03. Authority of Committees; Procedures. Each committee appointed by the Board of Directors in accordance with Section 5.02 of this Code of By-Laws may exercise the authority of the Board of Directors with respect to the purposes for which it was formed and subject to limitations on committee authority expressly imposed by law, the Articles of Incorporation, this Code of By-Laws and the Board of Directors. Sections 4.05 through 4.08 of this Code of By-Laws which govern meetings, action without meetings, notice, and quorum and voting requirements of the Board of Directors, apply to committees as well. ARTICLE 6 The Officers Section 6.01. Officers. The Officers of the Corporation shall consist of a Chairman of the Board, a Chief Executive Officer, a President, a Chief Financial Officer, a Secretary and a Treasurer and may include one or more Executive Vice Presidents or Senior Vice Presidents, and a Chief Accounting Officer, a Chief Operating Officer, as well as such Administrative Officers as may be elected or appointed in accordance with Section 6.03 of this Code of By-Laws and other Officers as the Board of Directors may, from time to time, determine advisable. Section 6.02. Limitation of Officer's Authority. Notwithstanding the provisions of this Article 6, no Officer of the Corporation shall have authority, without authorization from the Board of Directors, (a) to effect capital expenditures by the Corporation in an aggregate amount in excess of budgeted amounts approved by the Board of Directors, (b) to effect any merger or acquisition of the Corporation, (c) to take action affecting the compensation or benefits of executive management of the Corporation, (d) to promote any Officer, (e) to borrow any funds except (i) borrowings in an aggregate amount not in excess of budgeted amounts approved by the Board of Directors, or (ii) amounts borrowed from any subsidiary of the Corporation, (f) to make any loans or advances except to a subsidiary of the Corporation, (g) to make any primary public offering or private placement of securities of the Corporation, (h) to liquidate or sell substantially all of the assets of the Corporation, or (i) to sell shares of or substantially all of the assets of any subsidiary of the Corporation. Section 6.03. Election and Appointment. At each annual meeting of the Board of Directors each of the Officers of the Corporation shall be elected to serve until the next annual meeting of the Board of Directors and until their successors are elected and qualified. Whenever any vacancy shall occur in any office by death, resignation, an increase in the number of offices of the Corporation, or otherwise, the same shall be filled by the Board of Directors, and the Officers who are elected shall hold office until the next annual meeting of the Board of Directors and until their successors are elected and qualified. Notwithstanding the foregoing, the Chief Executive Officer shall have the authority to appoint Administrative Offices, and the Officers so appointed shall hold office at the will of the Chief Executive Officer. Section 6.04. Multiple Officers. Any person may hold two or more offices except that no person shall hold the offices of President and Secretary at the same time. Section 6.05. Resignations. Any Officer may resign at any time by giving written notice to the Board of Directors, the Chief Executive Officer, the President or the Secretary. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 6.06. Removal. Any Officer may be removed either with or without cause, at any time, by the vote of two-thirds of the number of Directors elected and qualified. Section 6.07. Vacancies. Whenever any vacancies shall occur in any office by death, resignation, removal, increase in the number of offices of the Corporation, or otherwise, the same shall be filled by the Board of Directors, and the Officer so chosen shall hold office during the remainder of the term for which his predecessor was chosen or as otherwise provided herein. Section 6.08. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Board of Directors and Shareholders and shall perform such other duties as the Board of Directors may prescribe. The Chairman shall be chosen from among the Directors. Section 6.09. Chief Executive Officer. The Chief Executive Officer, subject to the direction of the Board of Directors, shall have general and active control of the affairs and business of the Corporation and general supervision of its Officers, officials, employees and agents. In the absence of the Chairman of the Board or failing his election, the Chief Executive Officer shall preside at all meetings of the Board of Directors and Shareholders. He shall see that all orders and resolutions of the Board of Directors are carried into effect, and in addition he shall have all the powers and perform all the duties generally appertaining to the office of chief executive officer. The Chief Executive Officer shall be chosen from among the Directors. In the case of the Chief Executive Officer's absence or inability to act, he may appoint the President or any Executive Vice President, Senior Vice President or Vice President to temporarily act in his place. In the case of the death of the Chief Executive Officer, or in the case of his absence or inability to act without having designated an Officer to act temporarily in his place, the Officer to perform the duties of the Chief Executive Officer shall be designated by the Board of Directors. Section 6.10. President. The President, unless otherwise directed by the Board of Directors, shall be the chief administrative officer of the Corporation and shall manage the operations of the Corporation, subject however, to the control of the Board of Directors and Chief Executive Officer. He shall, in general, perform all duties incident to the office of the President and such other duties as, from time to time, may be assigned to him by the Board of Directors or Chief Executive Officer. The President shall be chosen from among the Board of Directors. In the case of the President's absence or inability to act, he may appoint any Executive Vice President, Senior Vice President or Vice President to temporarily act in his place. In the case of the death of the President, or in the case of his absence or inability to act without having designated an Officer to act temporarily in his place, the Officer to perform the duties of the President shall be designated by the Board of Directors. Section 6.11. Executive Vice Presidents and Senior Vice Presidents. Executive Vice President or a Senior Vice President shall have such powers and perform such duties as the Board of Directors, the Chief Executive Officer or the President may from time to time delegate to him. There may be one or more Executive Vice Presidents and Senior Vice Presidents. Section 6.12. Chief Financial Officer. The Chief Financial Officer shall keep and maintain, or cause to be kept and maintained, adequate and correct accounts of the properties and business transactions of the Corporation, including accounts of its capital, assets, liabilities, receipts, disbursements, gains and losses. The Chief Financial Officer shall send or cause to be sent to the Shareholders of the Corporation such financial statements and reports as are by law or this Code of By-Laws required to be sent to them. The Chief Financial Officer shall be responsible for all funds of the Corporation and shall deposit all monies and other valuables in the name and to the credit of the Corporation with such depositories as may be designated by the Board of Directors. He shall control the disbursement of funds of the Corporation as may be ordered by the Board of Directors, and shall render to the Chief Executive Officer, President and Directors, upon request, an account of all of his transactions as Chief Financial Officer and of the financial condition of the Corporation. The Chief Financial Officer shall, in general, perform the duties incident to the office of the Chief Financial Officer and such other duties as, from time to time, may be prescribed by the Board of Directors or Chief Executive Officer. Section 6.13. Secretary. The Secretary shall attend all meetings of the Shareholders and of the Board of Directors, and shall keep or cause to be kept in a book provided for the purpose a true and complete record of the proceedings of such meetings, and shall perform a like duty, when required, for all committees appointed by the Board of Directors. He shall perform such other duties as this Code of By-Laws, the Board of Directors, the Chief Executive Officer, the President or the Executive Vice Presidents may prescribe. He shall give all notices of the Corporation, provided, however, that in case of his absence, negligence or refusal so to do, any notice may be given by a person so directed by the President or by the requisite number of Directors or Shareholders upon whose request the meeting is called as provided by this Code of By-Laws. Section 6.14. Chief Accounting Officer. At the discretion of the Board of Directors there may be elected a Chief Accounting Officer who shall report to and assist the Chief Financial Officer. The Chief Accounting Officer shall also be responsible for maintaining adequate and correct accounts of the properties and business transactions of the Corporation, including its capital, assets, liabilities, receipts, disbursements, gains and losses, and shall perform such other duties as, from time to time, may be assigned by the Board of Directors, Chief Executive Officer, President or Chief Financial Officer. Section 6.15. Treasurer. The Treasurer shall report to and assist the Chief Financial Officer of the Corporation in such duties as the Chief Financial Officer shall direct, and unless otherwise directed, shall be responsible for depositing all monies and other valuables in the name and to the credit of the Corporation, disbursing funds of the Corporation, investing excess funds of the Corporation, and assisting the Chief Financial Officer in obtaining debt or capital financing as may be directed by the Board of Directors. The Treasurer shall also perform such other duties as, from time to time, may be assigned by the Board of Directors, Chief Executive Officer, President or Chief Financial Officer. Section 6.16. Administrative Officers. Administrative Officers may include Vice Presidents, Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers, a Controller and such other Officers as the Board of Directors or the Chief Executive Officer may designate. An Administrative Officer shall have such powers and perform such duties as the Board of Directors, the Chief Executive Officer or the President shall delegate to him, including, in the case of an Assistant Secretary or an Assistant Treasurer, the performance of the duties of the principal Officer when the incumbent is unable to act or it is impractical for him to act personally, subject to any restrictions or such authority as may be imposed by the President or the Board. The acts of Assistant Secretaries and Assistant Treasurers, within the scope of their authority, shall be the act of the Corporation to the same extent as if done by the principal Officer. Section 6.17. Delegation of Authority. In case of the absence of any Officer of the Corporation, or for any other reason that the Board of Directors may deem sufficient, the Board of Directors may delegate the powers or duties of such Officer to any other Officer or to any Director, for the time being, provided a majority of the entire Board of Directors concurs therein. ARTICLE 7 Special Corporate Acts, Negotiable Instruments, Deeds, Contracts and Stock Section 7.01. Execution of Negotiable Instruments. All checks, drafts, bills of exchange and orders for the payment of money of the Corporation shall, unless otherwise directed by the Board of Directors, or unless otherwise required by law, be signed by any two of the following Officers: Chief Executive Officer, President, Executive Vice President, Chief Financial Officer, Secretary or Treasurer. The Board of Directors may, however, authorize any one or more of such Officers to sign checks, drafts, bills of exchange and orders for the payment of money by the Corporation singly and without necessity of countersignature; and the Board of Directors may designate any employee or employees of the Corporation, in addition to those named above, who may, in the name of the Corporation, execute checks, drafts, bills of exchange and orders for the payment of money by the Corporation or in its behalf. Section 7.02. Execution of Deeds, Contracts, Etc. All deeds, notes, bonds and mortgages made by the Corporation and all other written contracts and agreements, other than those executed in the ordinary course of corporate business, to which the Corporation shall be a party shall be executed in its name by the Chief Executive Officer, the President, any Executive Vice President or by any other Officer so authorized by the Board of Directors, acting by resolution; and the Secretary or any Assistant Secretary, when necessary or required, shall attest the execution thereof. Section 7.03. Ordinary Contracts and Agreements. All written contracts and agreements into which the Corporation enters in the ordinary course of business operations shall be executed by any Officer of the Corporation or by any other employee of the Corporation designated by the Chief Executive Officer or the President to execute such contracts and agreements. Section 7.04. Endorsement of Certificates for Shares. Unless otherwise directed by the Board of Directors, any share or shares issued by any corporation and owned by the Corporation (including reacquired shares of the Corporation) may, for sale or transfer, be endorsed in the name of the Corporation by the Chief Executive Officer, President and such endorsement shall be duly attested by the Secretary or any Assistant Secretary. Section 7.05. Voting of Shares Owned by Corporation. Unless otherwise directed by the Board of Directors, any share or shares issued by any other corporation and owned by the Corporation may be voted at any shareholders' meeting of such other corporation by the Chief Executive Officer, the President or any Executive Vice President of the Corporation. Whenever, in the judgment of the Chief Executive Officer, the President or any Executive President, it is desirable for the Corporation to execute a proxy or give a shareholders' consent in respect to any share or shares issued by any other corporation and owned by the Corporation such proxy or consent shall be executed in the name of the Corporation by the Chief Executive Officer, the President or any Executive Vice President of the Corporation. Any person or persons designated in the manner above stated as the proxy or proxies of the Corporation shall have the full right, power and authority to vote the share or shares issued by such other corporation and owned by the Corporation in the same manner as such share or shares might be voted by the Corporation. Section 7.06. Merger or Acquisition, Etc.; Voting Requirements. The affirmative vote of a majority of the members of the Board of Directors of the Corporation shall be necessary to approve (i) any merger of the Corporation, (ii) any liquidation of the Corporation or sale of all or substantially all of its assets, (iii) any sale of the stock of Mayflower Transit, Inc. or Mayflower Contract Services, Inc. owned by the Corporation, or (iv) any liquidation or sale of all or substantially all of the assets of, or merger involving, Mayflower Transit, Inc. or Mayflower Contract Services, Inc. ARTICLE 8 Amendments Section 8.01. Amendment of By-Laws. The power to make, alter, amend or repeal this Code of By-Laws of the Corporation is vested in the Board of Directors. EX-10.06 3 MAYFLOWER GROUP, INC. 1993 RESTRICTED STOCK PLAN E-14 EXHIBIT 10.06 MAYFLOWER GROUP, INC. 1993 RESTRICTED STOCK PLAN 1. Establishment. Mayflower Group, Inc. ("Mayflower") hereby establishes a share incentive plan for officers and other key employees of Mayflower and its wholly-owned subsidiaries (individually a "Subsidiary" and collectively, the "Subsidiaries"), as described herein, which shall be known as the Mayflower Group, Inc. Restricted Stock Plan (the "Plan"). 2. Purpose. The purpose of the Plan is to enable Mayflower and its Subsidiaries to retain and motivate officers and other key employees who provide valuable service to Mayflower and its Subsidiaries, and to provide such officers and key employees with an opportunity to acquire shares of common stock, without par value, of Mayflower ("Common Stock"), thereby providing them with an increased incentive to work for the success of Mayflower and its Subsidiaries and better enabling such entities to attract and retain capable officers and other key employees. 3. Administration of the Plan. The Plan shall be administered, construed and interpreted by the Compensation Committee of the Board of Directors of Mayflower (the "Committee"). The Committee shall consist of at least two (2) members of the Board of Directors of Mayflower (the "Board"), who shall be designated from time to time by the Board. No member of the Committee shall, during the one year prior to his service at any time as a member of the Committee, have been granted or awarded equity securities pursuant to this Plan or any other plan of Mayflower or any of its Subsidiaries, except: (i) a formula plan meeting the conditions of Rule 16b-3(c)(2)(ii) promulgated under Section 16 of the Securities Exchange Act of 1934, as amended (the "1934 Act"); (ii) an ongoing securities acquisition plan meeting the conditions of Rule 16b-3(d)(2)(i) promulgated under Section 16 of the 1934 Act; or (iii) another plan or arrangement a grant or award under which does not, in the opinion of Mayflower's counsel, cause a member of the Committee to fail to qualify as a "disinterested person" under Rule 16b-3(c)(2)(i) promulgated under Section 16 of the 1934 Act. The decision of a majority of the members of the Committee shall constitute the decision of the Committee, and the Committee may act either at a meeting at which a majority of the members of the Committee is present or by a written consent signed by all members of the Committee. The Committee shall have the sole, final and conclusive authority to determine, consistent with and subject to the provisions of the Plan: (a) the individuals to whom restricted share awards shall be granted under the Plan (the "Grantees"); (b) the time when restricted shares of Common Stock shall be granted hereunder; (c) the number of shares of Common Stock of the Corporation to be covered under each restricted share grant; (d) the period of restrictions for restricted share grants (the "Period of Restriction"), which shall in no event be less than six (6) months; and (e) the terms and conditions of the agreements by which restricted shares granted shall be evidenced (the "Restricted Share Agreements"). The Committee shall also have authority to prescribe, amend and rescind rules and regulations relating to the Plan, and to make all other determinations necessary or advisable in the administration of the Plan. 4. Eligibility. The Committee may, consistent with the terms hereof, grant restricted shares to officers (including officers who are members of the Board of Directors) and other key employees of Mayflower or of a Subsidiary who in the opinion of the Committee from time to time provide valuable service to Mayflower or a Subsidiary. 5. Stock Subject to the Plan. The maximum number of shares with respect to which restricted share awards may be made under this Plan is 25,000 shares of Common Stock, which may be authorized but unissued shares of Mayflower. Subject to Section 6 hereof, the shares of Common Stock for which awards may be granted under the Plan shall not exceed that number. If any restricted share grant is forfeited in whole or in part, the unpurchased or forfeited shares subject thereto shall (unless the Plan shall have terminated) become available for other awards under the Plan. 6. Adjustment of Shares. In the event of any change after the effective date of the Plan in the outstanding stock of Mayflower by reason of any reorganization, recapitalization, stock split, stock dividend, combination of shares, exchange of shares, merger or consolidation, liquidation, or any other change after the effective date of the Plan in the nature of the shares of Common Stock of Mayflower, the Committee shall determine what changes, if any, are appropriate in the number and kind of shares reserved under the Plan and in the number and kind of shares covered by outstanding awards granted under the Plan. Any determination of the Committee hereunder shall be conclusive. 7. Restricted Share Awards. The Committee may grant restricted share awards of Common Stock which entitle Grantees to receive shares of Common Stock. Each restricted share award shall be evidenced by a Restricted Share Agreement between Mayflower and the Grantee, which Agreement shall set forth the terms and conditions of the award to the extent not inconsistent with the provisions of the Plan. Each restricted share award shall provide for the distribution of the awarded shares free of all restrictions at the end of the Period of Restriction, as specified in the Restricted Share Agreement. 8. Duration of the Plan. Subject to the Board's right to earlier terminate the Plan pursuant to Section 20 hereof, the Plan shall remain in effect until all shares of Common Stock subject to it shall have been acquired by Grantees pursuant to the provisions hereof and shall have been released from restrictions pursuant to Sections 9, 10, 15 or 16 hereof. Notwithstanding the foregoing, no Shares may be granted under the Plan after August 4, 2003. 9. Transferability. Except as contemplated by Sections 10, 15 and 16 hereof, the restricted shares granted hereunder may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until such conditions as were specified by the Committee, in its sole discretion, and set forth in the Restricted Share Agreement are satisfied. 10. Removal of Restrictions. Except as otherwise provided in Sections 9, 15 and 16 hereof, restricted shares covered by each restricted share grant made under this Plan shall become freely transferable by the Grantee after the last day of the Period of Restriction. 11. Other Restrictions. The Board shall impose such other restrictions on any shares of Common Stock granted pursuant to the Plan as it may deem advisable. 12. Certificate Legend. Each certificate representing restricted shares granted pursuant to this Plan shall bear the following legend: "The sale or other transfer of the shares represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer set forth in the Mayflower Group, Inc. Restricted Stock Plan and a Restricted Share Agreement dated . A copy of the Restricted Stock Plan and such Restricted Share Agreement may be obtained from the Secretary of the Corporation." Once the shares are released from the restrictions set forth in Section 9 hereof, the Grantee shall be entitled to have the legend required by this Section 12 removed from the certificate(s) representing the Common Stock obtained pursuant to a Restricted Share Agreement. 13. Voting Rights. During the Period of Restriction, Grantees holding restricted Shares granted hereunder may exercise full voting rights with respect to those Shares. 14. Dividends and Other Distributions. During the Period of Restriction, Grantees holding restricted shares granted hereunder shall be entitled to receive all dividends and other distributions paid with respect to those shares while they are so held. If any such dividends or distributions are paid in shares of Common Stock, such shares of Common Stock shall be subject to the same restrictions on transferability as the restricted shares with respect to which they were paid. 15. Effect of Termination of Employment Due to Retirement. In the event that a Grantee terminates his or her employment with Mayflower or its Subsidiaries because of Retirement (as hereinafter defined), any remaining Period of Restriction applicable to the restricted shares pursuant to Section 9 hereof shall automatically terminate and, except as otherwise provided in Section 11, the shares shall thereby be free of restrictions and freely transferable. For purposes of the Plan, "Retirement" means termination of employment due to retirement by an employee who has attained age 55 and has at least ten (10) years of service with the Company. 16. Effect of Termination of Employment without Cause or Due to Death, Disability. In the event a Grantee terminates his or her employment with Mayflower or its Subsidiaries because of death, Permanent and Total Disability (as hereinafter defined) or the Grantee's employment with Mayflower or its Subsidiaries is involuntarily terminated by Mayflower or its Subsidiaries without Cause (as hereinafter defined) during the Period of Restriction, any remaining Period of Restriction applicable to the restricted shares pursuant to Section 9 hereof shall automatically terminate and, except as otherwise provided in Section 11, the Common Stock shall thereby be free of restrictions and freely transferable. For purposes of the Plan, (i) "Permanent and Total Disability" means if an employee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months; provided, however, an employee shall not be considered to be Permanently and Totally Disabled unless he or she furnishes proof of the existence thereof in such form and manner, and at such times, as the Committee may require, and (ii) "Cause" shall mean fraud, dishonesty, theft of corporate assets or other gross misconduct by a Grantee. 17. Other Termination of Employment. In the event that a Grantee's employment with Mayflower or its Subsidiaries is terminated by Mayflower or its Subsidiaries for Cause or by the Grantee during the Period of Restriction, then any Common Stock still subject to restrictions at the date of such termination shall automatically be forfeited and returned to Mayflower. 18. No Employment Rights Created. Nothing in this Plan or in any grant of restricted shares shall interfere with or limit in any way the right of Mayflower or its Subsidiaries to terminate any Grantee's employment at any time, nor confer upon any Grantee any right to continue in the employ of Mayflower or its Subsidiaries. 19. Nontransferability of Rights or Restricted Shares. No Common Stock granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution, until the termination of the applicable Period of Restriction. All rights granted to a Grantee under the Plan shall be exercisable during the Grantee's lifetime only by the Grantee, or the guardians or legal representatives of the Grantee. Upon the death of a Grantee, the personal representative or beneficiary of the Grantee may exercise the Grantee's rights under the Plan. 20. Amendment and Termination. The Board may at any time amend, modify, alter, or terminate this Plan, except that such amendment, modification, alteration or termination may not adversely affect the rights of any existing Grantee, without the consent of such Grantee, and except that approval of the Shareholders of Mayflower must be obtained for any amendment which would: (i) materially increase the benefits accruing to participants under the Plan, (ii) materially increase the number of securities which may be issued under the Plan; or (iii) materially modify the requirements as to eligibility for participation in the Plan. 21. Tax Withholding. Mayflower or its Subsidiaries, as appropriate, shall have the right to deduct from all payments any Federal, state, or local taxes required by law to be withheld with respect to such payments and, in the case of awards paid in shares of Common Stock, the Grantee or other person receiving such shares of Common Stock may be required to pay to Mayflower or its Subsidiaries, as appropriate, the amount of any such taxes which Mayflower or its Subsidiaries is required to withhold with respect to such shares prior to delivery of any certificate or certificates for such shares. 22. Tax Benefit. The Committee may, in its sole discretion, include a provision in any Restricted Share Agreement that provides for an additional cash payment from Mayflower to the Grantee of such award equal to all or a portion of the tax benefit to be received by Mayflower attributable to its federal income tax deduction, if any, resulting from the vesting, cancellation, disposition or other transaction involving the Common Stock subject to the restricted share award. 23. Indemnification. Each person who is or shall have been a member of the Committee shall be indemnified and held harmless by Mayflower against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof with Mayflower's approval, or paid by him or her in satisfaction of a judgment in any such action, suit or proceeding against him or her, provided he or she shall give Mayflower an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive or any other rights of indemnification to which such persons may be entitled under the Mayflower's Articles of Incorporation or Code of By-Laws, as a matter of law, or otherwise, or any power that Mayflower may have to indemnify them or hold them harmless. 24. Governing Law. The Plan, and all grants and other documents delivered hereunder, shall be construed in accordance with and governed by the laws of Indiana. 25. Expenses of Plan. The expenses of administering the Plan shall be borne by Mayflower and its Subsidiaries. 26. Successors. This Plan shall be binding upon the successors and assigns of Mayflower and its Subsidiaries. 27. Effective Date. The Plan shall become effective on the date when it is approved by the Board of Mayflower. EX-10.07 4 MCSI EXECUTIVE RETIREMENT PLAN, AS AMENDED E-18 EXHIBIT 10.07 MAYFLOWER CONTRACT SERVICES, INC. EXECUTIVE RETIREMENT PLAN APRIL 1, 1993 TABLE OF CONTENTS Article 1 Definitions ................................1,2 Article 2 Eligibility.................................2 2.1 Selection...................................2 2.2 Participation Agreement.....................2 Article 3 Normal Retirement Benefit...................3 3.1 Normal Retirement Benefit...................3 3.2 Mode of Payment.............................3 3.3 Time of Payment.............................3 3.4 Calculation of Benefit......................3,4 Article 4 Early Retirement Benefit....................4 4.1 Early Retirement Benefit....................4 4.2 Mode of Payment.............................4 4.3 Time of Payment.............................4 4.4 Calculation of Benefit......................4 Article 5 Disability Benefit..........................5 5.1 Disability Benefit..........................5 5.2 Mode of Payment.............................5 5.3 Time of Payment.............................5 5.4 Calculation of Benefit......................5 5.5 Return to Employment........................5 Article 6 Death Benefit...............................6 6.1 Death Benefit...............................6 6.2 Mode of Payment.............................6 6.3 Time of Payment.............................6 6.4 Calculation of Benefit......................6 Article 7 Beneficiary Designation.....................6 7.1 Beneficiary Designation.....................6 7.2 Change of Beneficiary Designation...........7 7.3 No Beneficiary Designation..................7 7.4 Effect of Payment...........................7 Article 8 Termination, Amendment or Modification......7 8.1 Termination.................................7 8.2 Amendment...................................7 Article 9 Miscellaneous...............................7 9.1 Unsecured General Creditor .................7 9.2 Nonassignability............................8 9.3 Not a Contract of Employment................8 9.4 Protective Provisions.......................8 9.5 Terms.......................................8 9.6 Captions....................................8 9.7 Governing Law...............................8 9.8 Validity....................................8 9.9 Notice......................................9 9.10 Successors..................................9 9.11 Payment to Legal Representatives............9 Article 10 Administration............................10 10.1 Committee Duties............................10 10.2 Agents......................................10 10.3 Binding Effect of Decisions.................10 10.4 Indemnity of Committee......................10 10.5 Employer Information........................10 10.6 Change in Payments..........................10 EXECUTIVE RETIREMENT PLAN OF MAYFLOWER CONTRACT SERVICES, INC. The purpose of this Plan is to provide an Employer-paid benefit to a select group of key employees who contribute materially to the continued growth, development and future business success of Mayflower Contract Services, Inc. Article 1 Definitions For purpose hereof, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings: 1.1 "Average Final Compensation" shall mean a Participant's average annual compensation during the five (5) calendar years of his participation immediately preceding Retirement. 1.2 "Beneficiary" shall mean the person or persons, or the entity designated by the Participant to receive any benefits payable under this Plan upon the death of the Participant. Any Beneficiary designation shall be made by written instrument filed with the Committee and shall become effective only when received, accepted and acknowledged in writing by the Committee. 1.3 "Committee" shall mean the administrative committee appointed to manage and administer the Plan in accordance with its provisions pursuant to Article 10. 1.4 "Compensation" shall mean the gross fixed salary or wage of a Participant in any applicable calendar year, excluding overtime, premiums, bonuses, or other nonrecurring compensation. 1.5 "Disability" shall mean a period of time during which a Participant cannot perform his job with the Employer and said Participant has been characterized as "disabled" by the Employer's long-term disability insurance carrier. 1.6 "Early Retirement Date" shall be the date a Participant terminates his employment on or after the Participant's 55th birthday if said Participant has ten (10) or more consecutive Years of Participation. 1.7 "Employer" shall mean Mayflower Contract Services, Inc. 1.8 "Normal Retirement Date" shall be the first day of the month following the month in which the Participant attains his sixty-fifth (65) birthday if said Participant has ten (10) or more consecutive Years of Participation. 1.9 "Participant" shall mean a person in the regular full-time employ of the Employer who is a key employee selected for participation in the Plan by the Employer's Board of Directors, and who elects to participate in the Plan by completing and executing a Participation Agreement. 1.10 "Participation Agreement" shall mean the form of written agreement, as amended from time to time, which is entered into by and between the Employer and a Participant. 1.11 "Plan" shall mean the Mayflower Contract Services, Inc. Executive Retirement Plan which shall be evidenced by each Participation Agreement and by this instrument, as amended from time to time. 1.12 "Plan Year" shall mean the 12 consecutive month period commencing on April 1, and ending on the following March 31. 1.13 "Retirement" and "Retire" shall mean severance from employment with the Employer at, or after, the Participant's Normal or Early Retirement Date. 1.14 "Termination of Employment" shall mean the ceasing of employment with the Employer, voluntarily or involuntarily, for any reason. 1.15 "Years of Participation" shall mean the number of full Plan Years the Participant has participated in the plan. Article 2 Eligibility 2.1 Selection. The Employer's Board of Directors shall have the sole discretion to determine the employees who are eligible to become Participants in accordance with the purpose of the Plan and to determine the initial classification in which a Participant is categorized pursuant to Section 3.4 of this Plan. 2.2 Participation Agreement. As a condition of participation, each Participant so selected shall complete, execute and return to the Committee a Participation Agreement and comply with further conditions as may be established by the Committee. An Employee shall be deemed a Participant in this Plan upon presenting to the Committee his executed Participation Agreement. Article 3 Normal Retirement Benefit 3.1 Normal Retirement Benefit. A Participant shall be eligible for a Normal Retirement Benefit if his Termination of Employment occurs on or after his Normal Retirement Date and if he has completed at least ten (10) consecutive Years of Participation. A Normal Retirement benefit is an annual amount, regardless of the mode or time of payment. 3.2 Mode of Payment. A Participant may elect to receive his Normal Retirement Benefit, calculated pursuant to Section 3.4 of this Plan, each year for a period of fifteen (15) years or alternatively, a Participant may elect that the Committee calculate the present value of his anticipated receipt of a Normal Retirement Benefit for fifteen (15) years and pay the same to the Participant in lump sum. The discount rate used to calculate the lump sum benefit will be determined by the Committee and shall be representative of rates used for similar calculations at the time the lump sum computation is made. If a Participant elects to receive a Normal Retirement Benefit each year for a period of fifteen (15) years, the frequency of said payments (i.e., whether annually, semi-annually, quarterly or monthly) will be determined by the Committee following consultation with the Participant. 3.3 Time of Payment. If a Participant elects to receive a Normal Retirement Benefit each year for a period of fifteen (15) years, payments shall commence as soon as practicable after the Committee has determined how frequently said payments will be made. If a Participant elects to receive a lump sum payment, said payment will be made as soon as practicable after the Committee has calculated the present value of the Participant's benefit. 3.4 Calculation of Benefit. There shall be three (3) classifications of Normal Retirement Benefit within the Plan. A Participant shall be advised at the time he executes a Participation Agreement in which of the three categories he is classified. If a Participant is moved from one classification to another during the term of his employment, the Committee shall notify the Participant in writing of the reclassification and the reason(s) therefor. Any change in a Participant's classification will be subject to approval by the Employer's Board of Directors. A Participant is subject to movement by the Committee among the three classifications until his Termination of Employment or Disability. At such time, the Committee shall advise the Participant in which of the three classifications he is categorized for benefit purposes. The Normal Retirement Benefit for each of the classification is as set forth below: Category (A) - Sixty percent (60%) of the Participant's Average Final Compensation. Category (B) - Fifty percent (50%) of the Participant's Average Final Compensation. Category (C) - Forty-Five percent (45%) of the Participant's Average Final Compensation. Article 4 Early Retirement Benefit 4.1 Early Retirement Benefit. A Participant shall be eligible for an Early Retirement Benefit if his Termination of Employment occurs on or after his 55th birthday and after he has completed ten (10) or more consecutive Years of Participation. 4.2 Mode of Payment. A Participant may elect to receive his Early Retirement Benefit, calculated pursuant to Section 4.4 of this Plan, each year for a period of fifteen (15) years or alternatively, a Participant may direct the Committee to calculate the present value of his anticipated receipt of an Early Retirement Benefit for fifteen (15) years and pay the same to the Participant in lump sum. The discount rate used to calculate the lump sum benefit will be determined by the Committee and shall be representative of rates used for similar calculations at the time the lump sum computation is made. If a Participant elects to receive an Early Retirement Benefit each year for a period of fifteen (15) years, the frequency of said payments (i.e., whether annually, semi-annually, quarterly or monthly) will be determined by the Committee following consultation with the Participant and consideration of his financial need, as well as the administrative expense to the Plan. 4.3 Time of Payment. If a Participant elects to receive an Early Retirement Benefit each year for a period of fifteen (15) years, payments shall commence as soon as practicable after the Committee has determined how frequently said payments will be made. If a Participant elects to receive a lump sum payment, said payment will be made as soon as practicable after the Committee has calculated the present value of the Participant's benefit. 4.4 Calculation of Benefit. A Participant's Early Retirement Benefit is calculated by initially identifying the Participant's classification, pursuant to Section 3.4 of this Plan. Thereafter, a Participant's Normal Retirement Benefit will be reduced by two percent (2%) for each year that his Early Retirement Benefit commences before the year that the Participant would reach the age of sixty-five (65). For example, if a Participant elects to receive an Early Retirement Benefit at age sixty (60), the Early Retirement Benefit would be 10% less than his Normal Retirement Benefit calculated pursuant to Section 3.4 of this Plan. Article 5 Disability Benefit 5.1 Disability Benefit. A Participant shall be eligible for a Disability Benefit if he has been classified as "disabled" by the Employer's long-term disability insurance carrier, regardless of the number of Years of Participation he has with the Employer. 5.2 Mode of Payment. A Participant's Disability Benefit will be calculated pursuant to Section 5.4 of this Plan. Said benefit will be paid over a period of no longer than fifteen (15) years beginning no earlier than the month after the Participant attains the age of fifty-five (55). The frequency of Disability Benefit payments (i.e., whether annually, semi-annually, quarterly or monthly) will be determined by the Committee following consultation with the Participant and consideration of his financial need, as well as the administrative expense to the Plan. 5.3 Time of Payment. Disability benefit payments shall commence as soon as practicable after the Committee has determined how frequently said payments will be made, or the month after the Participant attains the age of fifty-five (55), whichever occurs later. 5.4 Calculation of Benefit. A Participant's Disability Benefit will be calculated in the same manner as his Normal Retirement Benefit, pursuant to Section 3.4 of this Plan. If a participant, at the time of disability, has not accrued five (5) years of Participation with the Employer from which an Average Final Compensation can be computed, his Disability Benefit will be calculated based upon the average Compensation received during the Participant's Year(s) of Participation. However, a Participant's Disability Benefit will be reduced by the amount of payments received by the Participant through the Employer's long-term disability insurance plan. 5.5 Return to Employment. If a Participant who is receiving a Disability Benefit is able to return to employment with the Employer, his Disability Benefit shall immediately cease. The Participant's Normal or Early Retirement Benefit will be reduced by the number of year(s) or portion of a year for which the Participant received a Disability Benefit. Said reduction will apply whether the Participant elects to receive his Retirement Benefit in lump sum or periodic payments. The term of the Participant's Disability will be included in calculating said Participant's consecutive Years of Participation. Article 6 Death Benefit 6.1 Death Benefit. If a Participant dies before he has received any of his benefit from this Plan, the Employer will pay the Participant's beneficiary a Death Benefit calculated as set forth in Section 6.4 below. If a Participant dies after receiving only a portion of either his Normal Retirement Benefit, Early Retirement Benefit or Disability Benefit, his Beneficiary will receive the remaining benefits. 6.2 Mode of Payment. A Participant's Death Benefit shall be paid to his designated Beneficiary in a lump sum if the Participant dies before receiving any benefit payments from this Plan. If a Participant had begun to receive either a Normal Retirement Benefit, Early Retirement Benefit or Disability Benefit at the time of his death, the Participant's beneficiary would receive, as the Participant's Death Benefit, the balance of the remaining payments to which the Participant was entitled to be paid, in the same manner and frequency enjoyed by the Participant unless the Committee approves a request by the Beneficiary for an alternative method of payment. 6.3 Time of Payment. If a Participant had not begun to receive a benefit under this Plan at the time of his death, said Participant's Death Benefit will be paid to the Participant's beneficiary as soon as practicable after the Committee receives required proof of death and the Beneficiary is determined. 6.4 Calculation of Benefit. The calculation for a Participant who dies before he has received any of his benefit from this Plan shall utilize the classifications set forth in Section 3.4 of this Plan. Except as provided in Section 6.2 of this Plan, (i) the Beneficiary of a Participant in Category A or B shall receive a Death benefit in the amount of 4.5 times the Participant's Compensation at the time of the Participant's death; and (ii) the Beneficiary of a Participant in Category C shall receive a Death Benefit in the amount of 2.5 times the Compensation of that Participant at the time of his death. Death Benefit payments to a Beneficiary of a Participant who had not received any benefit payments from the Plan at the time of his death, will consist of the greater of (i) the benefit calculated pursuant to Section 6.4; or (ii) the accrued benefit under the Plan. Article 7 Beneficiary Designation 7.1 Beneficiary Designation. Each Participant shall have the right, at any time, to designate any person or persons as his Beneficiary or Beneficiaries (both primary as well as contingent). 7.2 Change of Beneficiary Designation. Any beneficiary designation may be changed by a Participant at any time by filing, in writing, such change on a form prescribed by the Committee. The filing of a new Beneficiary designation form will cancel all Beneficiary designations previously filed. The Committee shall be entitled to rely on the last designation filed by the Participant prior to his death. 7.3 No Beneficiary Designation. If a Participant fails to designate a Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant's benefits, then the Participant's designated Beneficiary shall be deemed to be the Participant's surviving spouse. If the Participant has no surviving spouse, the benefits remaining under the Plan shall be payable to the Participant's personal representative (executor or administrator of the Participant's estate). 7.4 Effect of Payment. The payment of benefits under the Plan to the deemed Beneficiary shall completely discharge the Employer's obligations under this Plan. Article 8 Termination, Amendment or Modification 8.1 Termination. The Employer reserves the right to terminate the Plan at any time. Upon termination of the Plan, each Participant shall receive his accrued benefit in lump sum or in annual installments over a period of fifteen (15) years, as determined by the Committee. Payments will be made as soon as practicable after termination. However, no payment will be made at the time of termination of this Plan if the Employer immediately adopts a replacement Plan offering at least equivalent Retirement Benefits for those Participants of the terminated Plan. 8.2 Amendment. The Employer may, at any time, amend or modify the Plan in whole or in part, provided, however, that the amendment or modification of the Plan shall not affect any Participant or beneficiary who has become entitled to the payment of a benefit under the Plan as of the date of the amendment or modification. Article 9 Miscellaneous 9.1 Unsecured General Creditor. Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interest or claims in any property or assets of Employer. The Employer's obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Employer to pay money in the future. 9.2 Nonassignability. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are expressly declared to be unassignable and nontransferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owned by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency. 9.3 Not a Contract of Employment. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between the Employer and the Participant, and the Participant (or his Beneficiary) shall have no rights against the Employer except as may otherwise be specifically provided herein. Moreover, nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of the Employer or to interfere with the right of the Employer to discipline or discharge him at any time. 9.4 Protective Provisions. A Participant will cooperate with the Employer by furnishing any and all information requested by the Employer in order to facilitate the payment of benefits hereunder and by taking such physical examinations as the Employer may deem necessary and taking such other action as may be requested by the Employer. 9.5 Terms. Whenever any words are used herein in the masculine, they shall be construed as though they were used in the feminine in all cases where they would so apply; and whenever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. 9.6 Captions. The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 9.7 Governing Law. The provisions of this Plan shall be construed and interpreted according to the laws of the State of Kansas. 9.8 Validity. In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision had never been inserted herein. 9.9 Notice. Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to: Mayflower Contract Services, Inc. ATTN: Chief Executive Officer Mayflower Contract Services, Inc. Executive Retirement Plan 5360 College Boulevard, Suite 200 Overland Park, KS 66211 with copies to: Senior Vice President - Corporate Development Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or the receipt for registration or certification. 9.10 Successors. The provisions of this Plan shall bind and inure to the benefit of the Employer and its successors and assigns. The term successors as used herein shall include any corporate or other business entity which shall, whether by merger, consolidation, purchase or otherwise acquire all or substantially all of the business and assets of the Employer, and successors of any such corporation or other business entity. 9.11 Payment to Legal Representatives. If any person to whom benefit payments are due or payable under this Plan shall be unable to care for his affairs because of illness or accident, any such payment may be made, unless prior written claim thereto shall have been made by a duly qualified guardian or other legal representative, to the spouse, parent, brother, sister or other person deemed by the Committee to have incurred expense for such person and on such terms as the Committee may impose. Any such payment and any payment to a participant or to the surviving spouse or other designated beneficiary (or estate) of a deceased participant or to his legal representative made pursuant to the provisions of this plan shall, to the extent thereof, be in full satisfaction of all claims arising hereunder against this plan, the Employer, the Committee, the Trustee and any of their subsidiaries, and any and all of them. Article 10 Administration 10.1 Committee Duties. This Plan shall be administered by a Committee which shall consist of persons appointed by the Compensation Committee of the Board of Directors of Mayflower Group, Inc. Members of the Committee may be Participants under this Plan. The Committee shall also have the authority to make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan and decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with the Plan. 10.2 Agents. In the administration of this Plan, the Committee may, from time to time, employee agents and delegate to them such administrative duties as it sees fit and may from time to time consult with counsel who may be counsel to the Employer. 10.3 Binding Effect of Decisions. The decision or action of the Committee with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan. 10.4 Indemnity of Committee. The Employer shall indemnify and hold harmless the members of the Committee against any and all claims, loss, damage, expense or liability arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Committee or any of its members. 10.5 Employer Information. To enable the Committee to perform its functions, the Employer shall supply full and timely information to the Committee on all matters relating to the salary of all Participants, the date and circumstances of the Retirement, Disability, death or Termination of Employment of all Participants, and such other pertinent information as the Committee may reasonably require. 10.6 Change in Payments. The Committee shall have the power, in its sole discretion, to change the manner and time of payments to be made to a Participant or Beneficiary from that which would be otherwise payable to such person, if requested to do so by such Participant or Beneficiary. FIRST AMENDMENT TO MAYFLOWER CONTRACT SERVICES, INC. EXECUTIVE RETIREMENT PLAN Pursuant to Section 8.2 of the Mayflower Contract Services, Inc. Executive Retirement Plan (the "Plan"), Mayflower Contract Services, Inc., by its Board of Directors, hereby adopts the following amendments to the Plan as of March 17, 1994: 1. Section 3.4 of the Plan shall be amended and restated in its entirety as follows: 3.4 Calculation of Benefit. There shall be four classifications of Normal Retirement Benefit within the Plan. A Participant shall be advised at the time he executes a Participation Agreement in which of the four categories and, if appropriate, at what level in his category he is classified. If a Participant is moved to another category or to a different level within his category during the term of his employment, the Committee shall notify the Participant in writing of the reclassification and the reason(s) therefor. Any change in a Participant's classification will be subject to approval by the Employer's Board of Directors. A Participant is subject to movement within or among the categories until his termination of employment or disability, at which time the Committee shall advise the Participant in which of the four categories and, if appropriate, at what level within his category he is classified for benefit purposes. The Normal Retirement Benefits for the categories are as set forth below: Category A - sixty percent (60%) of the Participant's average final compensation Category B - fifty percent (50%) of the Participant's average final compensation Category C - forty-five percent (45%) of the Participant's average final compensation Category D - a range from twenty-five percent (25%) to thirty-five percent (35), inclusive, of the Participant's average final compensation 2. Section 6.4 is hereby amended and restated in its entirety as follows: 6.4 Calculation of Benefit. The calculation for a Participant who dies before he has received any of his benefit in this Plan shall utilize the classifications set forth in Section 3.4 of this Plan. Except as provided in Section 6.2 of this Plan, (i) the Beneficiary of a Participant in Category A or B shall receive a Death Benefit in the amount of 4.5 times the Participant's Compensation at the time of the Participant's death; and (ii) the Beneficiary of a Participant in Category C or D shall receive a Death Benefit in the amount of 2.5 times the Compensation of that Participant at the time of his death. Death Benefit payments to a Beneficiary of a Participant who had not received any benefit payments from the Plan at the time of his death will consist of the greater of (iii) the benefit calculated pursuant to Section 6.4; or (iv) the accrued benefit under this Plan. 3. Capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings ascribed to them in the Plan. EX-11 5 CALCULATION OF EARNINGS PER SHARE E-33 EXHIBIT 11 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE YEAR ENDING DECEMBER 31, 1993 (In thousands except per share data) Primary: (1) Average shares outstanding 12,650 Net effect of options to purchase common stock-based on the treasury stock method using estimated market price 90 ------ 12,740 ====== Net Income: Before extraordinary loss $ 2,435 Extraodinary loss (549) ------- $ 1,886 ======= Earnings Per Share: Income before extraordinary loss $ 0.19 Extraordinary loss (0.04) ------- $ 0.15 ======= (1) Fully diluted earnings per share do not differ from primary earnings per share. EX-21 6 SUBSIDIARIES OF MAYFLOWER GROUP, INC. E-34 EXHIBIT 21 Direct and Indirect Subsidiaries of Mayflower Group, Inc. Direct Subsidiaries of Mayflower Group, Inc.: Mayflower Transit, Inc. Mayflower Contract Services, Inc. Mayflower Group, Inc. Political Action Committee Direct Subsidiaries of Mayflower Transit, Inc.: Advantage Moving and Storage Co., Inc. Affiliated Services, Inc. American Moving & Storage Co., Inc. American Way Acquiring Corporation Bladensburg Development Company, Inc. Cares Services of Indiana, Inc. Crest-Mayflower International, Inc. Dobson Moving & Storage, Inc. Elder Moving & Storage Co. Gazda Transportation System, Inc. Gentry Insurance Agency, Inc. Hogan Transfer and Storage Corporation Janson Transfer, Inc. LTC Acquiring Corporation MacDonald Moving & Storage Co. Ltd. Mayflower Forwarders, Inc. Mayflower International, Inc. Mayflower International Forwarding, Inc. Mayflower Moving & Storage Co. of California, Inc. Mayflower Moving and Storage, Inc. Mayflower of Texas, Inc. American Transfer and Storage Company (Subsidiary of Mayflower of Texas, Inc.) Wald Moving and Storage Services, Inc. (Subsidiary of Mayflower of Texas, Inc.) Corpus Christi Transfer Company (Subsidiary of Wald Moving and Storage Services, Inc.) Mayflower Realty, Inc. (Del. Corporation) Northern Michigan Moving & Storage, Inc. Pinpoint Transportation Services, Inc. Smith's Moving and Storage Company, Inc. Total Insurance, Ltd. Transit Claims Management, Inc. Transport Service of Indiana, Inc. Direct Subsidiaries of Mayflower Contract Services, Inc.: Allied Bus Sales, Inc. EX-23 7 CONSENT OF COOPERS & LYBRAND E-35 EXHIBIT 23 CONSENT OF COOPERS & LYBRAND, INDEPENDENT AUDITORS Consent of Independent Accountants We consent to the incorporation by reference in the registration statements of Mayflower Group, Inc. on Form S-8 (File No's. 33-62340 and 33-62342) of our report dated March 29, 1994, on our audit of the consolidated financial statements and financial statement schedules of Mayflower Group, Inc. as of December 31, 1993, and for the year then ended, which report is included in this Annual Report on Form 10-K. /s/ Coopers & Lybrand Indianapolis, Indiana March 29, 1994 -----END PRIVACY-ENHANCED MESSAGE-----