-----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, MMRdgCM+ffJQ36bA2OKwmRDxM/j5BoaYCcih4/9jfGYN2i4gPQ6bVvSX17FvxgL1 deo8Qm4s46z9ggSzjzyNUg== 0000069999-94-000006.txt : 19940610 0000069999-94-000006.hdr.sgml : 19940610 ACCESSION NUMBER: 0000069999-94-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940430 FILED AS OF DATE: 19940609 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL COMPUTER SYSTEMS INC CENTRAL INDEX KEY: 0000069999 STANDARD INDUSTRIAL CLASSIFICATION: 3577 IRS NUMBER: 410850527 STATE OF INCORPORATION: MN FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-03713 FILM NUMBER: 94533615 BUSINESS ADDRESS: STREET 1: 11000 PRAIRIE LAKES DR CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 BUSINESS PHONE: 6128293000 MAIL ADDRESS: STREET 1: P O BOX 9365 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 10-Q 1 QUARTERLY REPORT ON FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: April 30, 1994 Commission File Number: 0-3713 NATIONAL COMPUTER SYSTEMS, INC. - ----------------------------------------------------------------- (Exact name of registrant as specified in its charter) Minnesota 41-0850527 - ------------------------------- -------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 11000 Prairie Lakes Drive Eden Prairie, Minnesota 55344 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (612)829-3000 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 [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the last practicable date: The number of shares of common stock, par value $.03 per share,outstanding on May 31, 1994, was 14,970,208. PART 1. FINANCIAL INFORMATION Item 1. Financial Statements NATIONAL COMPUTER SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited)
Three Months Ended April 30, ----------------- 1994 1993 ---- ---- (In thousands, except per share amounts) REVENUES Net sales $52,969 $50,641 Maintenance and support 15,781 17,873 ------- ------- Total revenues 68,750 68,514 COST OF REVENUES Cost of sales 30,122 28,178 Cost of maintenance and support 11,547 13,547 ------- ------- Gross margin 27,081 26,789 OPERATING EXPENSES Sales and marketing 11,380 11,528 Research and development 2,922 2,412 General and administrative 8,988 9,698 ------- ------- INCOME FROM OPERATIONS 3,791 3,151 Interest expense 729 554 Other (income), net (128) (197) ------- ------- INCOME BEFORE INCOME TAXES 3,190 2,794 Income tax provision 1,240 1,062 ------- ------- NET INCOME $ 1,950 $ 1,732 ======= ======= NET INCOME PER SHARE $ .13 $ .11 AVERAGE SHARES OUTSTANDING 15,062 15,954
See Notes to Consolidated Financial Statements. NATIONAL COMPUTER SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited)
April 30, January 31, 1994 1994 --------- ----------- (In thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 603 $ 1,724 Receivables: Trade 63,495 70,100 Other 1,975 5,328 -------- -------- Total receivables 65,470 75,428 Inventories: Finished products 6,061 6,348 Scoring services and work in process 9,142 6,117 Raw materials and purchased parts 4,566 4,905 -------- -------- Total inventories 19,769 17,370 Prepaid expenses and other 8,494 9,198 -------- -------- TOTAL CURRENT ASSETS 94,336 103,720 PROPERTY, PLANT AND EQUIPMENT Land, buildings and improvements 38,811 37,254 Machinery and equipment 90,770 88,950 Rotable service parts 10,901 11,085 Equipment held for lease 8,014 8,205 Accumulated depreciation (77,946) (75,988) -------- -------- Net property, plant and equipment 70,550 69,506 OTHER ASSETS Acquired and internally developed software products 20,674 20,092 Non-current receivables, investments and other assets 21,885 21,896 Goodwill 4,699 4,959 -------- -------- Total other assets 47,258 46,947 -------- -------- TOTAL ASSETS $212,144 $220,173 ======== ========
See Notes to Consolidated Financial Statements. NATIONAL COMPUTER SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited)
April 30, January 31, 1994 1994 --------- ----------- (In thousands) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term debt $ 2,172 $ 2,677 Accounts payable 14,076 18,777 Accrued expenses 23,931 27,093 Deferred income 18,388 18,956 Income taxes 551 - -------- -------- TOTAL CURRENT LIABILITIES 59,118 67,503 DEFERRED INCOME TAXES 7,849 7,849 LONG-TERM DEBT -- less current maturities 44,354 44,674 COMMITMENTS - - STOCKHOLDERS' EQUITY Preferred stock - - Common stock--issued and outstanding - 14,969 and 14,983 shares, respectively 449 449 Paid-in capital 79 - Retained earnings 107,321 106,771 Deferred compensation (7,026) (7,073) -------- -------- Total stockholders' equity 100,823 100,147 -------- -------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $212,144 $220,173 ======== ========
See Notes to Consolidated Financial Statements. NATIONAL COMPUTER SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Three Months Ended April 30, ------------------ 1994 1993 ------ ----- (In thousands) OPERATING ACTIVITIES Net income $ 1,950 $ 1,732 Depreciation, amortization and other noncash expenses 5,698 6,428 Changes in operating assets and liabilities: Decrease in accounts receivable 10,144 2,543 Increase in inventory and other current assets (1,695) (1,352) Decrease in accounts payable and accrued expenses (7,312) (7,628) Decrease in deferred income (568) (3,507) ------- ------- Net cash provided (used) by operating activities 8,217 (1,784) ------- ------- INVESTING ACTIVITIES Purchases of property, plant and equipment (4,865) (4,067) Capitalized software products (1,548) (1,920) Other - net (828) 96 ------- ------- Net cash used in investing activities (7,241) (5,891) ------- ------- FINANCING ACTIVITIES Net increase (decrease) in revolving credit borrowing (1,000) 2,400 Net proceeds of other borrowings 175 152 Issuance (repurchase) of common stock, net 79 (3,273) Dividends paid (1,351) (1,431) ------- ------- Net cash used in financing activities (2,097) (2,152) ------- ------- Decrease in cash and cash equivalents (1,121) (9,827) CASH AND CASH EQUIVALENTS - beginning of period 1,724 10,767 ------- ------- CASH AND CASH EQUIVALENTS - end of period $ 603 $ 940 ======= =======
See Notes to Consolidated Financial Statements. NATIONAL COMPUTER SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note A - The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. The results of operations for the period ended April 30, 1994, are not necessarily indicative of the operating results that may be expected for the entire fiscal year ending January 31, 1995. Note B - Earnings per share for the respective operating periods are computed based on average shares outstanding and common stock equivalents. Note C - The Company has 10,000,000 shares of $.01 par value Preferred Stock authorized of which none is outstanding. 50,000,000 shares of $.03 par value Common Stock are authorized. Common stock purchases during the quarter ended October 31, 1993, reduced the paid-in capital balance to zero. Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition National Computer Systems, Inc. is an information services company serving the business, education, assessment and financial markets. The Company's 1993 Annual Report contains a description of its activities in each of its four primary business units: Technology, Education, Assessments, and Financial. Recap of 1994 First Quarter Results The first fiscal quarter is traditionally the Company's seasonally lowest quarter in both revenues and net income. Total revenues increased modestly over first quarter of fiscal 1993. However, an improved overall gross margin percentage and lower operating expenses resulted in an increase in income from operations of $.6 million or 20%. This first quarter operating income improvement is a net result of four significant factors: (1) the discontinuation of Ultrust contributed to a significant improvement in the first quarter results of NCS Financial, (2) significantly improved performance at the Company's Iowa City service center within NCS Education, offset by (3) lower operating income from international business within NCS Technology, due to a significant one-time international scanning systems order in the first quarter of the prior year, and (4) increased research and development expenses for scanning hardware and related software. With interest expense slightly higher in the first quarter of 1994 than in the same period of 1993, the Company's first quarter net income was $2.0 million ($.13 per share) in 1994, a 13% increase over the prior year. A more detailed discussion of the various income statement items follows. Revenues by Primary Business Total revenues for the quarter ended April 30, 1994, were up slightly to $68.8 million from $68.5 million in the prior year. Total first-quarter revenues in the Company's four major business units compared to the prior year's first quarter were as follows: Technology - 13% Education + 15% Assessments - 11% Financial + 4% Total revenues for Technology were down principally due to lower sales of scanning systems internationally. In addition, Technology revenues were negatively impacted by lower third-party maintenance revenues. Total revenues for Education were up primarily due to significantly higher volumes of student financial aid processing at the Company's Iowa City service center. Assessments revenue declined by 11% as a result of a lower volume of clinical assessment revenues. Software licensing revenues increased in the Financial business resulting in a 4% increase in revenues over the prior year. These revenue changes for the period ended April 30, 1994, are not necessarily indicative of the revenue changes expected for the entire fiscal year ended January 31, 1995. Cost of Revenues and Gross Margins For the quarter ended April 30, 1994, the Company's overall gross margin was up slightly to 39.4% from 39.1% for the same period in the prior year. The gross margin on net sales revenue, declined by 1.2 percentage points from the same period in fiscal 1993. Higher processing margins in Education's Iowa City service center were offset by lower margins in Technology, primarily due to lower levels of international hardware sales. Gross margins on maintenance and support revenues improved by 2.6 percentage points in the first quarter as compared to the prior year first quarter principally due to improved hardware maintenance margins in Technology. Operating Expenses Sales and marketing expenses declined modestly in the quarter ended April 30, 1994, from the comparable prior year quarter. In fiscal 1994, these expenses should continue to be below prior year levels, as efforts continue to control them to fully productive levels. Research and development costs increased by $.5 million in the quarter ended April 30, 1994, over the year earlier quarter. The increase came principally in Technology and was related to enhancement of scanning hardware and related software. These expenses are likely to continue at levels higher than the previous year. General and administrative expenses decreased by $.7 million or 7.3% in the first quarter from the prior year first quarter, resulting from lower expense levels in all the primary businesses. This favorable comparison to the prior year should continue throughout fiscal 1994. Non-operating Expenses Interest expense for the quarter ended April 30, 1994, was up $.2 million as a result of higher aggregate day-to-day borrowing levels as compared to the same period in the prior year. Other income, net, was essentially flat year to year. Provision for Income Taxes The effective income tax rate of 38.9% for the quarter ended April 30, 1994, was greater than the 38.0% effective rate for the first quarter of the prior year. This quarter-to-quarter increase in the effective income tax rate is due to a number of factors, including the result of new Federal tax legislation enacted in the third quarter of 1993. Liquidity and Capital Resources For the three-month period ended April 30, 1994, the Company generated $8.2 million of cash from operating activities. This compares favorably to the corresponding prior-year period, principally due to the improved collection of trade receivables in the first quarter of fiscal 1994. Cash from operations and cash on hand was principally used to fund $6.4 million of investment in property, plant and equipment and product software. In addition, the funds were used to reduce the Company's revolving credit borrowings by $1.0 million and pay cash dividends of $1.4 million. It is anticipated that the Company's revolving credit borrowings will increase over the remainder of fiscal 1994 to fund seasonal operating needs and increased investments in property, plant, and equipment over the prior year. Funds to be generated from operations and funds available from the Company's existing revolving credit facility are expected to be adequate to meet current cash requirements. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) The registrant held its Annual Meeting of Stockholders on May 26, 1994. (c) Briefly described below are the only matters voted on at the Annual Meeting and the number of votes with respect to each matter. (i) Election of Board of Directors.
Withheld Nominee For Authority ------------------- ---------- --------- Charles W. Oswald 13,121,621 256,395 David P. Campbell 13,288,046 89,970 David C. Cox 13,299,470 78,546 Jean B. Keffeler 13,311,246 66,770 Stephen G. Shank 13,308,567 69,449 John E. Steuri 13,310,633 67,383 Jeffrey E. Stiefler 13,312,584 65,432 John W. Vessey 13,302,901 75,115
(ii) Approval of the appointment of Ernst & Young as auditors for the year ending January 31, 1995. FOR - 13,289,068 AGAINST - 60,556 ABSTAIN - 28,392 BROKER NON-VOTE - 0 Item 6. Exhibits and Reports on Form 8K (b) There were no reports on Form 8-K filed for the three months ended April 30, 1994. 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. NATIONAL COMPUTER SYSTEMS, INC. /s/ Jeffrey W. Taylor --------------------------- Jeffrey W. Taylor Vice President and Chief Financial Officer Dated: June 9, 1994 -----END PRIVACY-ENHANCED MESSAGE-----