0000914317-95-000069.txt : 19950809 0000914317-95-000069.hdr.sgml : 19950809 ACCESSION NUMBER: 0000914317-95-000069 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950808 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LCS INDUSTRIES INC CENTRAL INDEX KEY: 0000058151 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-DIRECT MAIL ADVERTISING SERVICES [7331] IRS NUMBER: 132648333 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12329 FILM NUMBER: 95559612 BUSINESS ADDRESS: STREET 1: 120 BRIGHTON RD CITY: CLIFTON STATE: NJ ZIP: 07012 BUSINESS PHONE: 2017785588 MAIL ADDRESS: STREET 1: 120 BRIGHTON RD STREET 2: 120 BRIGHTON RD CITY: CLIFTON STATE: NJ ZIP: 07012-1694 FORMER COMPANY: FORMER CONFORMED NAME: LISTFAX COMPUTER SERVICES INC DATE OF NAME CHANGE: 19711013 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ___________ Form 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to _________________ Commission file number 0-12329 LCS INDUSTRIES, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 13-2648333 ------------------------ ------------------------------------ (State of incorporation) (I.R.S. Employer Identification No.) 120 Brighton Road, Clifton, New Jersey 07012-1694 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (201) 778-5588 ----------------------------- N/A -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report 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, and (2) has been subject to such filing requirements for the past 90 days. Yes ( X ) No ( ) APPLICABLE ONLY TO CORPORATE ISSUERS: The number of shares outstanding of the registrant's Common Stock, par value of $.01 per share, as of August 3, 1995, was 2,058,825. LCS INDUSTRIES, INC. AND SUBSIDIARIES INDEX PART I FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets As of June 30, 1995 (Unaudited) and September 30, 1994 Consolidated Statements of Operations For the Three Months and Nine Months Ended June 30, 1995 and 1994 (Unaudited) Consolidated Statements of Cash Flows For the Nine Months Ended June 30, 1995 and 1994 (Unaudited) Notes to Consolidated Financial Statements (Unaudited) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II OTHER INFORMATION Item 1. Legal Proceedings Item 6. Exhibits and Reports on Form 8-K LCS INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
June 30, September 30, 1995 1994 ------------ ------------ (Unaudited) ASSETS Current assets: Cash and cash equivalents ........................... $ 4,854,764 $ 1,679,489 Investments - held-to-maturity ...................... 539,832 535,068 Accounts receivable (less allowance for doubtful accounts: June 30 - $624,000 and September 30 - $585,000) .................... 16,798,518 17,916,539 Prepaid expenses and other current assets ........... 1,229,936 1,231,221 Deferred taxes ...................................... 299,200 327,595 ------------ ------------ Total current assets .............................. 23,722,250 21,689,912 ------------ ------------ Investments - available-for-sale, net .................. 774,493 782,451 Investments - held-to-maturity ......................... -- 199,859 Property and equipment, net ............................ 4,868,604 5,246,373 Goodwill (net of accumulated amortization: June 30 - $202,630 and September 30, - $100,000) ............. 3,406,460 3,499,092 Deferred taxes ......................................... 61,700 148,158 Other assets ........................................... 568,887 420,344 ------------ ------------ $ 33,402,394 $ 31,986,189 ============ ============
Continued on next page. LCS INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued)
June 30, September 30, 1995 1994 ------------ ------------ (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable .................................... $ 10,223,999 $ 12,060,895 Accrued salaries and commissions .................... 1,027,464 1,237,878 Other accrued expenses .............................. 2,070,043 2,457,307 Income taxes payable ................................ 368,161 153,803 Deferred taxes ...................................... 33,400 22,552 Current portion of long-term debt ................... 561,997 606,709 Current portion of capital lease obligations ........ 486,464 478,259 ------------ ------------ Total current liabilities ......................... 14,771,528 17,017,403 ------------ ------------ Long-term debt, net of current portion ................. 303,058 837,446 Capital lease obligations, net of current portion ...... 795,524 967,247 Deferred taxes ......................................... 110,000 298,701 Stockholders' equity: Preferred stock $.01 par value; authorized 1,000,000 shares; issued - none Common stock $.01 par value; authorized 6,000,000 shares; issued June 30 - 2,245,491 shares and September 30 - 1,909,337 shares ...... 22,455 19,093 Common stock issuable ............................... 461,538 967,788 Additional paid-in capital .......................... 4,798,733 2,261,497 Retained earnings ................................... 12,440,438 9,912,936 ------------ ------------ 17,723,164 13,161,314 Less: treasury stock, at cost, 187,766 shares ...... (207,953) (207,953) marketable securities valuation adjustment ... (92,927) (87,969) ------------ ------------ Total stockholders' equity ........................ 17,422,284 12,865,392 ------------ ------------ $ 33,402,394 $ 31,986,189 ============ ============
See Notes to Consolidated Financial Statements. LCS INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Three and Nine Months Ended June 30, (Unaudited)
Three Months Nine Months ---------------------------- ---------------------------- 1995 1994 1995 1994 ------------ ------------ ------------ ------------ Net sales ............................ $ 18,153,573 $ 14,094,912 $ 55,274,715 $ 45,887,876 Cost of sales ........................ 12,531,909 10,923,540 38,242,836 34,383,241 ------------ ------------ ------------ ------------ Gross profit ..................... 5,621,664 3,171,372 17,031,879 11,504,635 Selling and administrative expenses .. 3,260,028 3,074,183 9,933,823 9,847,602 Other (income) expense: Interest income .................. (92,304) (23,772) (188,890) (67,424) Interest expense ................. 44,588 66,728 141,512 243,974 ------------ ------------ ------------ ------------ Income before income taxes ....... 2,409,352 54,233 7,145,434 1,480,483 Provision for income taxes ........... 965,000 38,000 2,904,000 613,000 ------------ ------------ ------------ ------------ Net income ........................... $ 1,444,352 $ 16,233 $ 4,241,434 $ 867,483 ============ ============ ============ ============ Per common and common equivalent share Net income ........................... $ .60 $ .01 $ 1.86 $ .41 ============ ============ ============ ============ Weighted average number of shares outstanding ............... 2,394,056 2,134,258 2,276,207 2,108,222 ============ ============ ============ ============ Dividends ............................ $ .038 $ .023 $ .094 $ .068 ============ ============ ============ ============
See Notes to Consolidated Financial Statements. LCS INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended June 30, (Unaudited)
1995 1994 ----------- ----------- Increase (Decrease) in cash and cash equivalents Cash flows from operating activities: Net income ............................................ $ 4,241,434 $ 867,483 ----------- ----------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ...................... 1,364,534 1,212,732 Deferred income taxes .............................. (60,000) 119,000 Provision for doubtful accounts receivable ......... 91,625 112,777 Gain on sale of fixed assets ....................... (9,650) -- ----------- ----------- Total adjustments .................................. 1,386,509 1,444,509 Changes in operating assets and liabilities: Accounts receivable ................................ 1,026,396 (241,932) Prepaid expenses and other current assets .......... 1,285 178,325 Accounts payable and accrued expenses .............. (2,434,575) 921,387 Income taxes payable ............................... 214,358 (6,066) Other, net ......................................... (148,543) 50,210 ----------- ----------- Total adjustments and changes ...................... 45,430 2,346,433 ----------- ----------- Net cash provided by operating activities .......... 4,286,864 3,213,916 ----------- ----------- Cash flows from financing activities: Changes in note payable, long-term debt and capital leases (including current portion): Borrowings ..................................... -- 1,350,000 Repayments ..................................... (958,671) (3,674,973) Dividends paid ..................................... (184,534) (124,773) Exercise of stock options .......................... 455,011 80,063 Employee stock purchase plan proceeds .............. 49,940 -- ----------- ----------- Net cash used in financing activities .............. (638,254) (2,369,683) ----------- ----------- Cash flows from investing activities: Additions to property and equipment ................ (769,018) (949,897) Proceeds from sales of equipment ................... 195,095 -- Net sales (purchases) of marketable securities ..... 100,588 (21,109) ----------- ----------- Net cash used in investing activities .............. (473,335) (971,006) ----------- ----------- Cash and cash equivalents: Net increase (decrease) in cash and cash equivalents 3,175,275 (126,773) Cash and cash equivalents at beginning of period ... 1,679,489 1,054,538 ----------- ----------- Cash and cash equivalents at end of period ......... $ 4,854,764 $ 927,765 =========== ===========
Continued on next page. LCS INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended June 30, (Unaudited) Continued from previous page.
1995 1994 ---------- ------- Supplementary disclosures of cash flow information: Cash paid during the period for: Interest ........................................... $ 109,879 $215,144 Income taxes ....................................... $2,740,883 $562,865
Supplemental disclosures of non-cash investing and financing activities: Capital lease obligations: For the nine months ended June 30, 1995 and June 30, 1994, capital lease obligations of $216,053 and $162,465, respectively, were incurred for the leasing of equipment. Marketable securities valuation adjustment: For the nine months ended June 30, 1995 and June 30, 1994, $4,958 and $132,219, net of tax, was added to the marketable securities valuation adjustment. This represents the net unrealized losses on the investments - available-for-sale, net, during the period. Acquisition of business: During the nine months ended June 30, 1995 and June 30, 1994, $506,250 and $187,793 of common stock issuable was converted into 63,613 and 26,172 issued shares of the Company's common stock in accordance with the terms of the Catalog Resources, Inc. purchase agreement. Stock dividend: On January 31, 1995, 179,929 shares of the Company's common stock were distributed as a 10% stock dividend. See Notes to Consolidated Financial Statements. LCS INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1) In the opinion of management, the accompanying unaudited financial statements include all adjustments (consisting only of normal recurring accruals) which are necessary for a fair presentation of results for the periods indicated. Certain information and footnote disclosures normally included in complete financial statements prepared in accordance with generally accepted accounting principles have been omitted. Therefore, these financial statements should be read in conjunction with the financial statements and the footnotes included in the Company's Annual Report on Form 10-K for the year ended September 30, 1994. The results of operations for the nine months ended June 30, 1995 and 1994 are not necessarily indicative of the results for the full year. The September 30, 1994 Balance Sheet was derived from the audited Balance Sheet at that date. 2) Certain reclassifications have been made to the 1994 financial statements in order to conform to the fiscal 1995 presentations. 3) For the three and nine month periods ended June 30, 1995 and 1994, earnings per share have been calculated based on the weighted average shares outstanding using the treasury stock method for stock options which are considered common stock equivalents. Earnings per share and the weighted average number of shares outstanding for all periods include the effect of the ten percent stock dividend distributed January 31, 1995 to stockholders of record on January 20, 1995 and the shares computed to be currently issuable in connection with the acquisition of Catalog Resources, Inc. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations --------------------- Three Months ended June 30, 1995 -------------------------------- Sales increased 29% in the quarter ended June 30, 1995 to $18,154,000 from $14,095,000 for the comparable quarter of the prior year. This improvement is accounted for by a 91% increase in fulfillment services, a 4% increase in list marketing services, partially offset by a 1% decrease in computer services. Fulfillment services' increase reflects a 123% increase in the catalog fulfillment operation, a 81% increase in continuity fulfillment partially offset by a 65% reduction in inbound telemarketing revenues. Increases in transaction volume from an existing customer, although at a reduced rate from the quarter ended March 31, 1995, was the primary reason for the catalog fulfillment increase. Initial billings to new customers were the primary reason for the continuity fulfillment increase. The decrease in inbound telemarketing is part of the Company's strategic plan to de-emphasize this service. The list marketing revenue increase resulted generally from an expanded customer base and increased volumes with continuing customers. Gross profit increased 77% to $5,622,000 for the current quarter from $3,171,000 in the comparable quarter of 1994. Gross profit margin was 31% in the current quarter compared to 23% in 1994. The increase in gross profit amount resulted primarily from the increased sales volumes and a continued improvement in overall profit margins. The improvement in gross margin resulted primarily from the increased catalog fulfillment revenues which have a higher gross profit margin than the margins derived from the other operations of the Company along with improved profit margins in the continuity fulfillment operation. Selling and administrative expenses increased 6% to $3,260,000 in the current quarter from $3,074,000 in the comparable quarter of 1994. Selling and administrative expenses, as a percentage of sales, were 18% for the current quarter and 22% for the comparable period in 1994. The increase in amount of selling and administrative expenses, when compared to the sales increase of 29%, and the decrease in these costs as a percentage of sales are due primarily to lower selling and administrative expenses associated with the incremental revenues at both the catalog and continuity fulfillment operations and reduced selling and management personnel and their related expenses. Net interest income of $48,000 was realized in the current quarter compared to net interest expense of $43,000 in the comparable 1994 quarter. Net interest income resulted from increased amounts of funds available for investment at higher rates. The line of credit was not used during the quarter. In the prior year, a portion of the unsecured line of credit was utilized for part of the quarter and there were higher levels of long-term debt, associated with the Catalog Resources, Inc. acquisition, and capital lease obligations outstanding. Net income was $1,444,000 ($.60 per share) in the current quarter compared to $16,000 ($.01 per share) in the comparable 1994 quarter. Nine Months ended June 30, 1995 ------------------------------- Sales increased 20% for the nine months ended June 30, 1995 to $55,275,000 from $45,888,000 for the comparable period of the prior year. This improvement is accounted for by a 57% increase in fulfillment services, a 10% increase in list marketing services partially offset by a 16% decrease in computer services' sales. The increase in fulfillment services' sales reflects a 179% increase in the catalog fulfillment operation, a 45% increase in the continuity fulfillment operation partially offset by a 65% decline in inbound telemarketing revenues. Increased transaction volume from an existing customer was the primary reason for the catalog fulfillment increase. Initial billings to new customers were the primary reason for the continuity fulfillment increase. The decrease in inbound telemarketing is part of the Company's plan to de-emphasize this service. The list marketing increase resulted generally from an expanded customer base and increased volumes with continuing customers. The computer services' decrease reflected lower revenues in all areas, including revenues from a contract with a major non-U.S. telecommunications company. Gross profit increased 48% to $17,032,000 for the nine month period from $11,505,000 in the comparable period of 1994. Gross profit margin was 31% compared to 25% in the prior year. The increase in gross profit amount resulted primarily from the increased sales volumes and improvement in overall profit margins. The improvement in gross profit margin resulted primarily from the increased catalog fulfillment revenues, described above, which have a higher gross profit margin than the margins derived from the other operations of the Company and the increased revenues and improved profit margins of the continuity fulfillment operation. Selling and administrative expenses increased 1% to $9,934,000 from $9,848,000. Selling and administrative expenses, as a percentage of sales, were 18% for the current nine month period and 21% in the prior year. The increase in the amount of selling and administrative expenses, when compared to the 20% revenue gain for the nine month period, and the increase in these costs, as a percentage of sales, are due primarily to lower selling and administrative expenses associated with the incremental revenues at the catalog fulfillment operation, reduced selling and management personnel and their related expenses. Net interest income of $47,000 was realized in the current period compared to net interest expense of $177,000 in 1994. During the current nine month period, interest earned on invested funds coupled with higher interest rates more than offset interest expense incurred on both long-term debt and capital lease obligations. The line of credit was not used during the entire period. In the comparable period of 1994, net interest expense was incurred due to utilizing the line of credit for varying amounts and periods and higher levels of long-term debt and capital lease obligations outstanding. Net income was $4,241,000 ($1.86 per share) in the current period compared to $867,000 ($.41 per share) in the comparable 1994 period. Financial Condition, Liquidity and Capital Resources ---------------------------------------------------- Working capital was $8,951,000 at June 30, 1995 compared to $4,673,000 at September 30, 1994. Fluctuations in the components of working capital resulted primarily from the increase in cash and decreases in accounts payable and other accrued expenses partially offset by a decrease in accounts receivable. For the nine month period, cash generated by operations increased $1,073,000 over such amounts generated in the comparable period of the prior year. This increase was primarily the result of increases in net income of $3,374,000 and a decrease in accounts receivable of $1,268,000 offset by a decrease in accounts payable and accrued expenses of $3,356,000. In the period ended June 30, 1995, financing activities resulted in a net use of funds of $638,000 compared to a use of funds of $2,370,000 in 1994. In both periods, the repayment of debt was the primary use of funds and amounted to $959,000 in 1995 and $3,675,000 in 1994. In 1994, $1,350,000 was borrowed primarily to fund capital improvements at Catalog Resources, Inc. (CRI) and for temporary working capital requirements. In 1995, cash received from the exercise of employee stock options increased $375,000. Cash used for investing activities, in the current period, decreased $498,000 compared to 1994 due to proceeds received from the sales of equipment and the maturity of a marketable security investment. Pursuant to the purchase agreement, as amended, with CRI, the Company is obligated to pay to CRI's selling shareholders, in cash or stock, up to an aggregate of $10,000,000. Under such purchase agreement, the Company paid $1,012,500 (one-half in cash and one-half in stock) on January 1, 1995. Further, assuming stated CRI earnings are achieved, such amounts will be payable each January 1 through 2002 totalling a maximum of $7,875,000. Management believes cash generated from current operations and other liquid assets combined with the available bank credit line will be sufficient to meet cash flow needs during the 1995 fiscal year. PART II OTHER INFORMATION Item 1. Legal Proceedings The Company filed a Form 8-K dated January 25, 1995 in which it reported that a subsidiary of the Company was a co-defendant in an action filed in Supreme Court of the State of New York. Effective June 29, 1995, the parties agreed to a Stipulation of Discontinuance which settled and discontinued the litigation with prejudice and without costs to any party. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibit 11 - Computation of earnings per share (b) Report on Form 8-K. - LCS Industries, Inc. did not file any reports on Form 8-K during the quarter ended June 30, 1995. SIGNATURES Pursuant to the requirements 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. Date: Clifton, New Jersey August 8, 1995 LCS INDUSTRIES, INC. ---------------------------- (Registrant) By: /s/ Arnold J. Scheine ---------------------------- Arnold J. Scheine President (Chief Executive Officer) By: /s/ Pat R. Frustaci ---------------------------- Pat R. Frustaci Vice President-Finance (Chief Financial Officer) EX-11 2 EXHIBIT 11 LCS INDUSTRIES, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE AND COMMON EQUIVALENT SHARE For the Three and Nine Months Ended June 30, (Unaudited)
Three Months Nine Months -------------------------- -------------------------- 1995 1994 1995 1994 ---------- ---------- ---------- ---------- Weighted average shares outstanding .......... 2,043,799 1,990,089 2,016,485 1,960,631 Weighted average - dilutive stock options .... 328,538 122,450 238,003 125,872 Shares issuable in connection with the acquisition of Catalog Resources, Inc. ...... 21,719 21,719 21,719 21,719 ---------- ---------- ---------- ---------- 2,394,056 2,134,258 2,276,207 2,108,222 ========== ========== ========== ========== Net income ................................... $1,444,352 $ 16,233 $4,241,434 $ 867,483 Earnings per share and common equivalent share $ .60 $ .01 $ 1.86 $ .41 ========== ========== ========== ==========
EX-27 3
5 9-MOS SEP-30-1995 JUN-30-1995 4,854,764 539,832 17,422,518 624,000 209,436 23,722,250 12,105,479 7,236,875 33,402,394 14,771,528 0 22,455 0 0 17,399,829 33,402,394 0 55,274,715 0 38,242,836 9,986,523 91,625 141,512 7,145,434 2,904,000 4,241,434 0 0 0 4,241,434 1.86 0