-----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, N+Te2P7bGSBTIUK7eQQLE+Oa830AAlj4S/grzjQMJjc5NfhUe6Vwh3TB3KBCfs/X rQ3uMhUz3S5aQcIU1vpFxA== 0000910662-95-000006.txt : 19950516 0000910662-95-000006.hdr.sgml : 19950516 ACCESSION NUMBER: 0000910662-95-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SQUARE INDUSTRIES INC CENTRAL INDEX KEY: 0000093134 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AUTOMOTIVE REPAIR, SERVICES & PARKING [7500] IRS NUMBER: 132610905 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-04979 FILM NUMBER: 95538344 BUSINESS ADDRESS: STREET 1: 921 BERGEN AVE CITY: JERSEY CITY STATE: NJ ZIP: 07306 BUSINESS PHONE: 2017980090 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________________________ FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 Commission file number 0-4979 SQUARE INDUSTRIES, INC. ______________________________________________________________________ (Exact name of Registrant as specified in its Charter) NEW YORK 13-2610905 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 921 Bergen Avenue, Jersey City, New Jersey 07306 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (201) 798-0090 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 issuer was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes [X] No [ ] Shares of Common Stock outstanding at March 31, 1995: 1,166,356 SQUARE INDUSTRIES, INC. AND SUBSIDIARIES INDEX PART I. Page No. Consolidated Balance Sheets - March 31, 1995 (unaudited) and December 31, 1994 (audited) 2-3 Consolidated Statements of Operations - for the three months ended March 31, 1995 and 1994 (unaudited) 4 Consolidated Statements of Cash Flows for the three months ended March 31, 1995 and 1994 (unaudited) 5-6 Notes to Consolidated Financial Statements 7-10 Management's Discussion and Analysis of Results of Operations and Financial Condition 11-13 PART II. Other Information 14 SIGNATURES 15 SQUARE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 31, 1995 December 31, 1994 (Unaudited) (Audited) ASSETS Current Assets: Cash $ 1,945,000 $ 1,226,000 Trade and other receivables 560,000 781,000 Prepaid expenses 1,872,000 1,660,000 Other current assets 412,000 555,000 Prepaid and refundable income tax 486,000 353,000 --------- --------- Total current assets 5,275,000 4,575,000 --------- --------- Property, Equipment and Improvements, Net 25,038,000 25,067,000 ---------- ---------- Other Assets: Deferred expenses 1,887,000 890,000 Security deposits and other assets 2,009,000 1,932,000 --------- --------- 3,896,000 2,822,000 --------- --------- $34,209,000 $32,464,000 =========== =========== See accompanying notes to consolidated financial statements
SQUARE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 31, 1995 December 31, 1994 (Unaudited) (Audited) LIABILITIES AND STOCKHOLDERS EQUITY Current Liabilities: Accounts payable $ 718,000 $ 830,000 Accrued expenses 4,738,000 4,400,000 Accrued local rent tax (Note 4) 1,202,000 1,189,000 Current portion of long-term debt (Note 2) 1,145,000 1,210,000 Other liabilities 413,000 479,000 --------- --------- Total current liabilities 8,216,000 8,108,000 --------- --------- Deferred Rent 2,574,000 2,433,000 --------- --------- Long-Term Debt-less current portion (Note 2) 18,496,000 17,059,000 ---------- ---------- Deferred Taxes 174,000 174,000 ------- ------- Security Deposits - Customers 266,000 257,000 ------- ------- Stockholders Equity: Common stock, $.01 par value; authorized 2,000,000 shares; issued 1,218,389 shares and 1,205,689 shares 12,000 12,000 Common stock, subscribed 12,500 shares as of December 31, 1994 -0- 119,000 Additional paid-in capital 3,278,000 3,158,000 Retained earnings 1,635,000 1,529,000 Less: Treasury stock at cost, 52,033 shares as of March 31, 1995 and 12,837 shares as of December 31, 1994 (236,000) (59,000) Notes receivable for common stock subscribed -0- (119,000) Cumulative translation adjustment (206,000) (207,000) --------- --------- 4,483,000 4,433,000 --------- --------- $34,209,000 $32,464,000 =========== =========== See accompanying notes to consolidated financial statements
SQUARE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For The Three Months Ended March 31, 1995 1994 ---- ---- Revenues: Parking $15,332,000 $14,072,000 Gasoline station 959,000 916,000 ---------- ---------- 16,291,000 14,988,000 ---------- ---------- Cost and Expenses: Operating Costs - parking 12,712,000 13,203,000 - gasoline station 975,000 934,000 Provision for local rent tax (Note 4) 15,000 15,000 General and administrative expenses 1,849,000 1,796,000 Interest - net 488,000 377,000 Write-off of assets -0- 478,000 --------- --------- 16,039,000 16,803,000 ---------- ---------- Earnings (loss) from parking and service station operations 252,000 (1,815,000) Provision (Benefit) for Income Taxes (Note 6) 146,000 (610,000) ------- --------- Net Income (Loss) $ 106,000 $ (1,205,000) =========== ============= Earnings (Loss) per share (Note 5): $ 0.09 $ (1.01) ========= =========== Computation of Shares - Weighted average of common stock outstanding and subscribed (Note 5) 1,188,175 1,192,721 ========= ========= See accompanying notes to consolidated financial statements
SQUARE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For The Three Months Ended March 31, 1995 1994 ---- ---- Cash Flows From Operating Activities: Net income (loss) $ 106,000 (1,205,000) Adjustments to reconcile net income (loss) to net cash used in operating activities: Amortization of: Deferred expenses 9,000 9,000 Lease acquisition costs 4,000 34,000 Excess of cost over fair market value of net assets acquired -0- 53,000 Depreciation and amortization 417,000 437,000 Write-off of assets -0- 478,000 Equity adjustment for foreign currency translations 1,000 (22,000) Increase (decrease) in cash from changes in assets and liabilities: Trade and other receivables 221,000 (243,000) Prepaid expenses and other current assets (127,000) (299,000) Prepaid and refundable income taxes (133,000) (828,000) Deferred expenses, net (1,006,000) 25,000 Security deposits and other assets (81,000) 225,000 Accounts payable, accrued expenses, accrued local rent tax and other liabilities 173,000 642,000 Deferred rent 141,000 (309,000) Security deposits - customers 9,000 33,000 ------- ------- Net cash used in operating activities (266,000) (970,000) --------- ---------
SQUARE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For The Three Months Ended March 31, 1995 1994 ---- ---- Cash Flows From Investing Activities: Additions to land, buildings, equipment and improvements $ (388,000) $(206,000) ----------- ---------- Net cash used in investing activities (388,000) (206,000) --------- --------- Cash Flows From Financing Activities: Proceeds from borrowings 1,700,000 2,450,000 Payments and current maturities on long-term debt (328,000) (243,000) Proceeds from exercise of stock options 1,000 1,000 ------ ------ Net cash provided by financing activities 1,373,000 2,208,000 --------- --------- Net Increase in Cash 719,000 1,032,000 Cash, Beginning of Period 1,226,000 623,000 --------- ------- Cash, End of Period $1,945,000 $1,655.000 ========== ========== Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest 495,000 404,000 Income taxes, net of refunds received 255,000 (75,000) Supplemental Schedule of Noncash Financing Activities: In March 1995, an officer/stockholder agreed to satisfy the balance of his note receivable to the Company including accrued interest of $57,637 by transferring as of March 16, 1995, 39,196 shares of common stock to the Company. The market value of the stock at the date of the transfer was $176,382. As a result of this payment, the Company issued to the officer/stockholder 12,500 shares of common stock. See accompanying notes to financial statements
SQUARE INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1995 NOTE 1 - The accompanying consolidated balance sheet as of March 31, 1995 and the consolidated statements of operations for the three months ended March 31, 1995 and 1994 and the consolidated statements of cash flows for the three months ended March 31, 1995 and 1994, respectively, are unaudited, but in the opinion of the Company, all adjustments (consisting of normal recurring accruals) necessary to present fairly the results of operations for such periods have been made. The financial statements should be read in conjunction with the Annual Report on Form 10K of the Company, for the year ended December 31, 1994. The Company changed its fiscal year end from the last day in February to December 31st. As a result, the comparative 1994 financial statements have been restated to conform to current period presentation. The accompanying consolidated financial statements include the accounts of a foreign subsidiary and all domestic subsidiaries. All significant intercompany accounts and transactions have been eliminated. The results of operations for the three months ended March 31, 1995 and March 31, 1994 respectively, (unaudited) are not necessarily indicative of the results to be expected for the full year. NOTE 2 - Long-term debt consisted of the following: Interest Rate March 31, 1995 ------------- -------------- Notes Payable 7.25% - 10% $ 1,358,000 Mortgages payable 7% - 11% 4,189,000 Bank Loan: Facility I Prime + 2% 12,180,000 Facility II 11.35% 1,914,000 ---------- 19,641,000 Less current portion 1,145,000 ---------- $18,496,000 ===========
NOTE 2 - (continued) Facility I, as last amended on October 11, 1994, provides for a line of credit of $12,800,000, and is subject to the aggregate face amount of outstanding letters of credit plus unpaid drawings not exceeding $1,500,000. All outstanding amounts under Facility I, mature May 31, 1997. On October 11, 1994, the Facility I interest rate was adjusted to prime + 2%, a 1/2% increase in the rate which was effective as of July 1, 1994, an increase from the previous rate of prime + 1%. The prime rate was 9% at March 31, 1995. Facility II is a term loan to be paid in consecutive quarterly payments. The amount of the quarterly payments is $225,425, with the last payment to be made on May 31, 1997. The Company may elect, with the consent of the bank, to convert all or part (but not less than $1,000,000) of the Facility II term loan into a Designated Rate Loan, meaning a term loan for a period chosen by the Company in excess of one year and bearing interest at a fixed-rate then designated by the bank. Certain subsidiaries of the Company periodically acquire land/or buildings with a view to their future use in whole or in part as parking facilities. The properties are generally purchased subject to long-term mortgages. The mortgages vary in their payment terms and interest rates, some requiring only the payment of interest during the first five years. The mortgages payable are collateralized by the underlying assets which have a book value of $5,807,400. The two facility loans are collateralized by the stock of subsidiaries of the Company, except those whose stock may not be pledged because of prohibitions in leases and mortgages. Debt covenants, under the Credit Agreement as amended, include a limitation on indebtedness under mortgage obligations and financial covenants as to maintenance of minimum net worth, total liabilities to net worth and operating cash flow ratios. The covenants were amended as of October 11, 1994. Prior modifications of the covenants had been made as of June 14, 1994, June 14, 1993, and June 4, 1992. The modifications were made effective respectively as of August 31, 1994, February 28, 1994, February 28, 1993, and May 31, 1992 and thereby cured the prior defaults by the Company and permitted the Company to be in compliance with the financial covenants as of the effective date and for the period through the date hereof. Aggregate maturities on long-term debt are as follows: Year Ending March 31, --------------------- 1996 $ 1,145,000 1997 991,000 1998 12,318,000 1999 1,063,000 2000 3,837,000 Remainder 287,000 --------- $19,641,000 ===========
NOTE 3 - FOREIGN OPERATIONS (CANADA) Summarized information relating to the Canadian operation is as follows: March 31, 1995 December 31, 1994 Total assets $603,000 $589,000 Total liabilities 1,301,000 1,231,000 Deficiency in assets (698,000) (642,000)
For the three month periods ended March 31, 1995 and March 31, 1994, net loss for the Canadian operation was 55,000 and 81,000, respectively. NOTE 4 - LOCAL RENT TAX The Company received notices of determination from a municipal local authority for commercial rent tax which relate to the period June 1, 1978 through May 31, 1987 assessing the Company, net of payments, an aggregate of $907,005. The Company believes that the provision, which covers these assessments, possible future assessments, and related expenses through March 31, 1995, is adequate. NOTE 5 - EARNINGS PER SHARE For the three month periods ended March 31, 1995 and March 31, 1994, earnings per share has been computed using the weighted average number of shares of common stock outstanding and the dilative effect of common stock equivalents. Common stock equivalents were not included in the computation of loss per share for the three months ended March 31, 1994 since their effect was antidilutive. NOTE 6 - INCOME TAXES The provision for income taxes of $146,000 for the three month period ended March 31, 1995 is based on the effective tax rate expected for the year and includes (I) federal income taxes, (ii) income taxes of state and local jurisdictions for which the Company s operations were profitable and for which no net operating loss benefit is available and (iii) minimum corporate taxes for certain subsidiaries. No changes have been made to the deferred tax asset valuation allowances since management is not able to conclude that realization of these deferred tax assets is more likely than not as a result of the Company s earnings history. Reductions to the valuation allowance will be recorded when, in the opinion of management, the Company s ability to generate taxable income for a period of time is more certain. The income tax benefit of $610,000 for the three month period ended March 31, 1994 was primarily the result of the recognition of refunds of prior years state taxes which were not previously recorded in the amount of $249,000. NOTE 7 - CONTINGENCIES Litigation: Various lawsuits against the Company have arisen in the course of the Company's business. In certain of these matters, large and/or indeterminate amounts are sought. In the opinion of the Company, any uninsured ultimate liability which could result from such litigation would not have a material adverse effect on the Company's financial position or the results of its operations. Letters of Credit: As of March 31, 1995, the Company's contingent debt amounted to approximately $613,000 under standby Letters of Credit issued pursuant to terms of its line of credit (Facility I). NOTE 8 WRITE-OFF OF ASSETS During the quarter ended March 31, 1994, the Company wrote off leasehold acquisition costs, deferred expenses, and other miscellaneous charges relating to certain locations. SQUARE INDUSTRIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations - --------------------- The improved operating results recorded for the 1994 fiscal year (the 10 months ended December 31, 1994) continued into the current year. Parking service revenues for the three months ended March 31, 1995 (the "First 1995 Quarter") were greater by $1,260,000 (9.0%) than those for the three months ended March 31, 1994 (the "1994 Three-Month Period"). The principal reason for the continued improvement was the mild winter weather in the regions in which the Company operates as compared with one of the most severe winters in the Company's history in 1994, causing a sharp curtailment of traffic near the Company's parking locations. Also contributing to the increase was an increase in the aggregate capacity of the parking locations operated by the Company (55,583 cars as of March 31, 1995 as compared to 49,830 cars as of March 31, 1994) despite a net reduction of five locations as compared with the 1994 Three-Month Period. The increase in revenues was achieved while parking operating costs were reduced by $491,000, or 3.7%. As a result, such costs, as a percentage of parking revenues, was reduced to 82.9% for the First 1995 Quarter from 93.8% for the 1994 Three-Month Period. The lower costs were principally the result of a net reduction of five in the number of parking locations operated by the Company. Since the close of the 1994 Three-Month Period, the Company has entered into two labor agreements and anticipates the execution of a third agreement which has resulted, and will result, in modest increases in labor costs. The Company's gasoline station operation remained marginal due to the intense competition which adversely affects the industry and the area in which the Company's station is located. Operation of the station produced losses of ($16,000) and ($18,000), respectively, for the First 1995 Quarter and the 1994 Three-Month Period. The increase in revenues and operating costs of $43,000 and $41,000 between the comparative three-month periods was the result of higher gasoline and oil prices. General and administrative expenses increased by $53,000, or 3.0%, but decreased to 12.1% from 12.8% as a percentage of parking revenues (gasoline station operations require insignificant amounts of such expenses) for the First 1995 Quarter as compared with those for the 1994 Three-Month Period. The slight increase reflects principally modest increases in salaries and professional fees, partially offset by reductions due to the fewer locations under supervision and operating economies. The increase of $111,000 in interest expense between the two three-month comparative periods was primarily the result of the higher interest rates caused by both increases in the rate provided by the amendments effected in June and October 1994 to the Company's credit facility and increases in the prime rate. As a result, there was a swing of $2,067,000 in earnings before provision for income taxes-- earnings of $252,000 for the First 1995 Quarter as compared to a loss of ($1,815,000) before benefit for income taxes for the 1994 Three-Month Period.. The comparatively large provision of $146,000 for income taxes for the First 1995 Quarter, a rate of 57.9%, is the result of (i) the exclusion of the approximately $55,000 loss from the Company's Canadian operations in the determination of the provision for federal income taxes, and (ii) minimum corporate taxes imposed by the States of New York, Pennsylvania and New Jersey and the City of New York. The income benefit of ($610,000 ) for the three months ended March 31, 1994 was attributable to the loss for the period partially offset by the foregoing minimum corporate taxes. Liquidity and Capital Resources As of March 31, 1995, the Company had a working capital deficit of ($2,941,000) as compared to the working capital deficit of ($3,533,000) as of December 31, 1994. The reduction of $592,000 in the deficit was primarily due to a $719,000 increase in cash funds primarily derived from a net increase of $1,372,000 in long-term debt under the credit facility, partially offset by a $338,000 increase in accrued expenses partially due to provisions for increased labor costs which may arise under collective bargaining agreements currently being negotiated and for an increase in payroll taxes arising primarily from increases in unemployment tax rates of all the states in which the Company operates. The Company's Credit Agreement with its bank lender was amended on June 14, 1993, as of February 28, 1993, to modify the financial covenants as of and for the period ended the latter date and through February 28, 1994 as to the maintenance of minimum net worth, total liabilities to net worth and operating cash flow. A June 13, 1994 amendment, effective as of February 28, 1994, extended the maturity of the credit facility from June 30, 1994 to June 30, 1995, increased the interest rate as of July 31, 1994 by 1/2% per annum, modified the financial covenants retroactive to December 1, 1993 and provided for the payment to the lender of a $50,000 fee. The retroactive modification of the covenants permitted the Company to be in compliance with the covenants as of February 28, 1994 and through June 13, 1994. On October 11, 1994, the agreement was further amended to, among other things, extend the maturity of the facility to May 31, 1997, increase the interest rate as of October 11, 1994 to prime plus 2%, modify certain financial covenants retroactive to August 31, 1994, and provide for the payment of an additional $50,000 fee to the lender. The covenant modifications permitted the Company to comply with the covenants as of August 31, 1994 through the date hereof. Net cash used in operating activities was $266,000 for the First 1995 Quarter as compared to net cash of $970,000 used in the 1994 Three-Month Period for such activities. The principal causes for the difference are the materially better operating results, faster payment of receivables, and the much greater amounts of prepaid and refundable income taxes for the 1994 Three-Month Period due to consolidation of certain subsidiaries and overpayment of taxes in prior periods, partially offset by a material increase for the First 1995 Quarter in deferred expenses (net), primarily due to adjustments of rents. Cash used in investing activities, consisting of additions to land, buildings, equipment and improvements amounted to $388,000 for the First 1995 Quarter--$182,000 more than amounts expended or accrued during the 1994 Three-Month Period for this purpose. The Company anticipates capital expenditures of not more than $1,500,000 for the year ended December 31, 1995 to be financed from the Company's operations, borrowings and joint ventures with equity co-venturers. The Company derived net cash from financing activities of $1,373,000 and $2,208,000, respectively, during the First 1995 Quarter and the 1994 Three-Month Period, with the difference resulting from greater borrowings under the credit facility during the year earlier period and larger loan payments during the current year period. As a result of the foregoing, the Company increased its cash balances by $719,000 and $1,032,000, respectively, for the First 1995 Quarter and the 1994 Three-Month Period. As of May 1, 1995, the Company had borrowed the full amount under its line of credit. It believes that the funds which are available from time to time under its bank loan facility, additional mortgage loans with respect to properties acquired or developed and funds generated from its operations will be sufficient to finance its capital and operational requirements for the 12 months ended March 31, 1996. PART II--OTHER INFORMATION Item 6. --Exhibits and Report on Form 8-K (a) None (b) No reports on Form 8-K have been filed during the quarter ended March 31, 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. SQUARE INDUSTRIES, INC. /s/Sanford Harwood Sanford Harwood Assistant Chairman /s/Marvin Fruchtman Marvin Fruchtman Treasurer and Chief Financial Officer Dated: May 11, 1995 -----END PRIVACY-ENHANCED MESSAGE-----