-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OwlxXJDui1ttKdDgvXso89Dsv2hlzEusbdJz+slfD6ChoTsMYAz+DbwJL0DUJths ZPPOQfu5NsdyzGiBFOFMgg== 0000950110-96-000371.txt : 19960411 0000950110-96-000371.hdr.sgml : 19960411 ACCESSION NUMBER: 0000950110-96-000371 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960229 FILED AS OF DATE: 19960410 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TSR INC CENTRAL INDEX KEY: 0000098338 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING SERVICES [7371] IRS NUMBER: 132635899 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-08656 FILM NUMBER: 96545772 BUSINESS ADDRESS: STREET 1: 400 OSER AVE CITY: HAUPPAUGE STATE: NY ZIP: 11788 BUSINESS PHONE: 5162310333 MAIL ADDRESS: STREET 1: 400 OSER AVENUE CITY: HAUPPAUGE STATE: NY ZIP: 11788 FORMER COMPANY: FORMER CONFORMED NAME: TIME SHARING RESOURCES INC DATE OF NAME CHANGE: 19840129 10QSB 1 QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB [X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act Of 1934 For the period ended February 29, 1996 [ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act Of 1934 For the transition period from ______ to _____ Commission File Number: 0-8656 --------------------------------------------------------- TSR, Inc. - -------------------------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Delaware 13-2635899 - ------------------------------------ ---------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 400 Oser Avenue, Hauppauge, NY 11788 - -------------------------------------------------------------------------------- (Address of principal executive offices) 516-231-0333 - -------------------------------------------------------------------------------- (Issuer's telephone number) None - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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. [X] Yes [ ] No SHARES OUTSTANDING 1,472,069 shares of common stock, par value $.01 per share, ----------------------------------------------------------- as of March 31, 1996. --------------------- Page 1 TSR, INC. AND SUBSIDIARIES INDEX Page Number ------ Part I. Financial Information: Item 1. Financial Statements: Consolidated Condensed Balance Sheet - February 29, 1996........... 3 Consolidated Condensed Statements of Earnings - For the three and nine months ended February 29, 1996 and February 28, 1995.... 4 Consolidated Condensed Statements of Cash Flows - For the nine months ended February 29, 1996 and February 28, 1995. ............................................... 5 Notes to Consolidated Condensed Financial Statements................ 6 Item 2. Management's Discussion and Analysis.......................... 7 Part II. Other Information................................................ 10 Signatures................................................................. 10 Page 2 Part I. Financial Information Item 1. Financial Statements TSR, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEET February 29, 1996 ASSETS ------------ Current Assets: Cash and cash equivalents (Note 5)....................... $ 1,638,051 Marketable securities (Note 6)........................... 2,373,358 Accounts receivable (net of allowance for doubtful accounts of $169,278)......................... 6,011,388 Other receivables........................................ 72,595 Prepaid expenses......................................... 45,822 Prepaid and recoverable income taxes..................... 14,586 Deferred income taxes.................................... 138,000 ----------- Total current assets .............................. 10,293,800 Equipment and leasehold improvements, at cost (net of accumulated depreciation and amortization of $794,689)............................... 234,177 Other assets................................................. 32,966 Deferred income taxes........................................ 25,000 ----------- $10,585,943 =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts and other payables.............................. $ 112,756 Accrued and other liabilities............................ 1,622,467 Income taxes payable..................................... 86,978 Advances from customers.................................. 368,294 ----------- Total current liabilities ......................... 2,190,495 Shareholders' Equity: Preferred stock, $1 par value, authorized 1,000,000 shares; none issued ......................... -- Common stock, $.01 par value, authorized 4,000,000 shares; issued 2,469,596 shares ............. 24,696 Additional paid-in capital............................... 1,562,973 Retained earnings........................................ 10,008,297 Less: 997,527 common shares in treasury, at cost . (3,200,518) ----------- 8,395,448 ----------- $10,585,943 =========== The accompanying notes are an integral part of these consolidated condensed financial statements. Page 3
TSR, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS For The Nine Months Ended February 29, 1996 and February 28, 1995 Three Months Ended Nine Months Ended ------------------------------ ------------------------------- February 29, February 28, February 29, February 28, 1996 1995 1996 1995 ------------ ------------ ------------ ------------- Revenues .............................................. $7,988,438 $6,609,172 $23,177,618 $19,170,467 Cost of sales ......................................... 5,884,589 4,882,011 16,915,219 13,873,044 Selling, general and administrative expenses ............................ 1,797,778 1,483,763 5,298,497 4,441,680 ---------- ---------- ----------- ----------- 7,682,367 6,365,774 22,213,716 18,314,724 ---------- ---------- ----------- ----------- Income from operations ................................ 306,071 243,398 963,902 855,743 Other income: Interest and dividend income ..................... 53,059 54,762 175,565 143,922 Gain on sale of securities ....................... 4,131 -- 12,242 443 Gain (loss) from sales of assets ................. 1,500 -- (424) -- ---------- ---------- ----------- ----------- Income before income taxes ............................ 364,761 298,160 1,151,285 1,000,108 Provision for income taxes ............................ 164,000 143,000 513,000 476,000 ---------- ---------- ----------- ----------- Net income $ 200,761 $ 155,160 $ 638,285 $ 524,108 ========== ========== =========== =========== Net income per common share ........................... $ 0.13 $ 0.10 $ 0.42 $ 0.35 ========== ========== =========== =========== Weighted average number of common shares outstanding .......................... 1,492,236 1,514,569 1,507,125 1,514,569 ========== ========== =========== ===========
The accompanying notes are an integral part of these consolidated condensed financial statements. Page 4
TSR, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS For the Nine Months Ended February 29, 1996 and February 28, 1995 Nine Months Ended ------------------------------------- February 29, February 28, 1996 1995 ------------ ------------ Cash flows from operating activities: Net income .............................................................. $ 638,285 $ 524,108 ----------- ------------ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization .......................................... 118,299 89,009 Provision for losses on accounts receivable ............................ 10,000 -- Gain on sales of securities ............................................ (12,242) (443) Loss on sales of assets ................................................ 424 -- Deferred income taxes .................................................. (7,000) (58,000) Changes in assets and liabilities: Trade accounts receivable ........................................... (976,277) (183,973) Other accounts receivable ........................................... 44,940 24,762 Prepaid expenses .................................................... (15,762) 12,806 Prepaid and recoverable income taxes ................................ 25,106 (15,645) Other assets ........................................................ (9,645) 6,297 Accounts payable and accrued expenses ............................... 49,531 30,674 Income taxes payable ................................................ (8,134) (8,864) Advances from customers ............................................. 129,703 -- ----------- ------------ Total adjustments ..................................................... (651,057) (103,377) ----------- ------------ Net cash provided by (used in) operating activities .................... (12,772) 420,731 ----------- ------------ Cash flows from investing activities: Proceeds from sales and maturities of securities ..................... 4,633,298 2,450,418 Purchase of marketable securities .................................... (2,640,233) (3,908,844) Purchase of fixed assets ............................................. (139,351) (71,523) Proceeds from sales of fixed assets .................................. 15,756 -- ----------- ------------ Net cash provided by (used in) investing activities ..................... 1,869,470 (1,529,949) ----------- ------------ Cash flows from financing activities: Purchase of Treasury Stock ........................................... (246,475) -- Cash dividends ....................................................... (605,828) -- ----------- ------------ Net cash used in financing activities ................................... (852,303) -- ----------- ------------ Net increase (decrease) in cash and cash equivalents ...................... 1,004,395 (1,109,218) Cash and cash equivalents at beginning of period .......................... 633,656 3,261,298 ----------- ------------ Cash and cash equivalents at end of period ................................ $ 1,638,051 $ 2,152,080 =========== =========== Supplemental Disclosures: Income tax payments, net ............................................. $ 503,000 $ 559,000 =========== =========== Interest paid ........................................................ $ -- $ -- =========== ===========
The accompanying notes are an integral part of these consolidated condensed financial statements. Page 5 TSR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS February 29, 1996 1. The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions of Form 10-QSB of Regulation S-B. Accordingly, they do not include all the information and notes required by generally accepted accounting principles for complete financial statements. For further information refer to the Registrant's consolidated financial statements and notes thereto included in the Registrant's Annual Report on Form 10-KSB for the year ended May 31, 1995. 2. In the opinion of the Registrant, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the consolidated financial position, the consolidated results of operations, and consolidated cash flows for the periods presented. 3. The Registrant is engaged primarily in the business of providing contract programming services. In addition, the Registrant provides maintenance and support for its conversion software and provides program updating and consulting services to American Express Bank, Ltd. (AEBL). Additionally, the Registrant provided construction specifications databases on magnetic media through March 1, 1996, and provided temporary nursing services through October 8, 1995. The results of operations for the nine month period ended February 29, 1996 are not necessarily indicative of the results to be expected for the full year. 4. The consolidated condensed financial statements include the accounts of TSR, Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. 5. Cash and cash equivalents consist primarily of United States Treasury Bills with a maturity at acquisition of 90 days or less. 6. Marketable securities consist primarily of United States Treasury Bills with a maturity at acquisition in excess of 90 days. Such investments are expected to be held to maturity and are carried at amortized cost. Included with marketable securities are the Registrant's trading securities which consist of those investments the Registrant considers short-term in nature. Such investments are carried at their fair market value. At February 29, 1996, the amortized cost approximated market value and no adjustments were made. A breakdown of the investments are as follows: Held to maturity ............... $2,174,305 Trading securities ............. 199,053 ---------- $2,373,358 ========== 7. On July 6, 1995 the Board of Directors of the Company declared a cash dividend of $0.40 per share on Common Stock payable on August 28, 1995 to shareholders of record on July 31, 1995. The Company funded such dividend from its available cash and matured marketable securities. This dividend, which amounted to $605,828 did not have a material impact on the liquidity of the Company. This dividend was declared due to the Registrant's favorable operating results achieved during fiscal 1995. The Registrant has not adopted a policy of paying dividends on a regular periodic basis. 8. In the second quarter of fiscal 1996, the Registrant determined to discontinue its health care services business. The growth and profitability experienced had not matched the Registrant's expectations when the business commenced. Small improvements in operating results notwithstanding, the Registrant had concluded that its resources were better utilized in the further development of its contract programming business. Therefore, the existing caseload was transferred to another licensed home care agency as of the close of business October 8, 1995. 9. In February 1995 the Board of Directors of the Registrant authorized the repurchase of up to 150,000 shares of the Registrant's common stock. The first transactions under this authorization occurred during the quarter ended February 29, 1996. To date 42,500 shares have been repurchased at a cost of $246,475. 10. On March 1, 1996 the Registrant's exclusive licensing agreement to market construction specifications on magnetic media expired. In anticipation of such expiration, the Registrant has accrued $240,00 which it deems adequate to cover ongoing customer support costs associated with licenses sold prior to March 1, 1996. Page 6 Part I. Financial Information Item 2. TSR, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following discussion and analysis should be read in conjunction with the consolidated condensed financial statements and the notes to the consolidated condensed financial statements. Results of Operations Nine Months Ended February 29, 1996 as compared with February 28, 1995 Income from operations as a percentage of revenues decreased to 4.2% in the current nine month period from 4.5% in the prior year comparable period. This decline occurred despite $180,000 of expenses accrued in the prior year period to cover ongoing customer support costs to be incurred after the termination of the Registrant's construction specifications business on March 1, 1996. The decline in income from operations as a percentage of revenues is attributable to compensation paid to additional contract programming sales and recruiting employees, including those hired to open a new office in Connecticut, who do not make an immediate contribution to operating results but are expected to fuel future growth. The decline was also attributable to lower margins in contract programming. For the nine months ended February 29, 1996, revenues increased $4,007,000 or 20.9% over the prior year period. Although construction specifications and health care services revenues declined from the prior year, contract programming services revenues increased $4,436,000, which resulted primarily from further penetration within existing accounts by the sales personnel. Cost of sales increased $3,042,000 or 21.9% over the prior year period. This increase included additonal costs of $3,467,000 from contract programming, which resulted primarily from the above-mentioned revenue increase. However, the increase in cost of sales was heightened, to an extent, by reduced margins in the contract programming business. Cost of sales decreased by $224,000 in the construction specifications business because of $180,000 of expenses accrued in the prior year to cover ongoing customer support costs, which will be incurred after the termination of this business on March 1, 1996. Costs associated with health care services decreased $200,000 which resulted from the termination of this business in October 1995. Selling, general, and administrative expenses increased $857,000, or 19.3% over the prior year comparable period. The contract programming business incurred increases of $1,060,000 due to additional commission based compensation on increased revenues and the hiring of additional sales and recruiting employees. The investment in new hires is consistent with the Registrant's efforts to expand the business through the acquisition of new accounts. The health care services business which terminated in October 1995, and the construction specifications business both reduced expenses for the period. Interest and dividend income increased by $32,000 for the period, primarily because of an increase in short-term interest rates paid on the Registrant's treasury bills compared to the year ago. The effective income tax rate decreased to 44.6% in the current period from 47.6% in the prior year period, mainly because of reduced state income taxes in the current period. Page 7 TSR, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, CONTINUED Three months ended February 29, 1996 as compared with February 28, 1995 Income from operations as a percentage of revenues increased to 3.8% in the current year quarter from 3.7% in the prior year comparable period. Contract programming gross margins increased slightly in the current quarter over the prior year's quarter, reversing a trend of declining spreads which began in fiscal 1995. There can be no assurances that this reversal will continue or that gross margins will increase. For the quarter ended February 29, 1996, revenues increased $1,379,000 or 20.9% over the prior year period. Contract programming services revenues contributed $1,618,000 of this increase, which resulted primarily from further penetration within existing accounts by the sales personnel. Healthcare services revenues declined $206,000 due to the cessation of operations on October 8, 1995, although the Registrant still particpates in certain revenues derived by the successor operation, which revenues are not expected to be material. Cost of sales increased $1,003,000 or 20.5% over the prior year's quarter. This increase included additional costs of $1,119,000 from contract programming, which primarily resulted from the above-mentioned revenue increase. Cost of sales also decreased by $71,000 in the construction specifications business, primarily because of $60,000 of expenses accrued in the prior year to cover costs which will be incurred after the termination of this business on March 1, 1996. Selling, general, and administrative expenses increased $314,000, or 21.1% over the prior year comparable period. The contract programming business incurred increases amounting to $426,000, due to additional commission based compensation on higher revenues and the hiring of additional sales and recruiting employees. These new hires included those assigned to the Registrant's new office in Connecticut. The health care services business reduced expenses $75,000 for the period due to the termination of the business on October 8, 1995. Interest and dividend income stayed flat for the quarter, despite an increase in short-term interest rates paid on the Registrant's treasury bills due to a lower amount available for investment. The effective income tax rate decreased to 45.0% in the current quarter from 48.0% in the prior year period mainly because of reduced state income taxes in the current quarter. Page 8 TSR, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, CONTINUED Liquidity, Capital Resources and Changes in Financial Condition Subject to continued profitability, the Registrant expects that cash flow generated from operations will be sufficient to provide the Registrant with adequate resources to meet all needs with respect to its existing business. In the event the Registrant requires additional funds, the Registrant expects to meet such needs not met by operations with its cash and short-term marketable securities as well as interest earned thereon, which the Registrant believes to be sufficient for the foreseeable future. Net cash flow used in operations resulted primarily from an increase in accounts receivable, which occurred partly because of the revenue increase and partly due to a longer collection cycle. This use of cash was mostly offset by cash provided from net income. Cash flow provided or used by investing activities is affected mostly by the Registrant's decisions to either purchase United States Treasury Bills with maturities of three months or those with longer maturities. During the current quarter, the Registrant did not roll over some of its maturing treasury securities. This resulted in the funds being reclassified to cash and cash equivalents from marketable securities for financial statement purposes. Also, in the current year , the contract programming office in New Jersey relocated to larger space to facilitate growth and an office was opened in Connecticut. This resulted in capital expenditures for new telephone equipment, computers and furniture. On July 18, 1995 the Board of Directors of the Registrant declared a cash dividend of $0.40 per share on Common Stock payable on August 28, 1995 to shareholders of record on July 31, 1995. The Registrant funded such dividend from its available cash and United States Treasury Bills. This dividend was declared due to the Registrant's favorable operating results achieved during fiscal 1995. The Registrant has not adopted a policy of paying dividends on a regular periodic basis. In February 1995, the Board of Directors of the Registrant authorized the repurchase of up to 150,000 shares of the Registrant's common stock. During the quarter ended February 29, 1996 the first transactions occurred under this authorization. A total of 42,500 shares were repurchased at a cost of $246,475. The Registrant's capital resource commitments at February 29, 1996 consisted of lease obligations on its branch and corporate locations. The Registrant intends to finance these commitments from cash provided from operations. Expiration of Licensing Agreement The Registrant's exclusive licensing agreement with the Construction Sciences Research Foundation, Inc. (CSRF) under which the Registrant marketed construction specifications on magnetic media expired March 1, 1996. In anticipation of the termination of such agreement, the Registrant has accrued $240,000 which it deems adequate to cover ongoing customer support costs to be incurred after the termination of the construction specifications business. As a consequence of the termination of the license, future results from operations will be negatively impacted on a comparative basis since this business has contributed operating income of approximately $100,000 per quarter for fiscal 1996. Termination of Health Care Services Business In the second quarter of fiscal 1996, the Registrant determined to withdraw from the health care services business. The growth and profitability experience had not matched what was expected when the business commenced. Small improvements in operating results notwithstanding, the Registrant had concluded that its resources were better utilized in the further development of the contract programming business. The existing caseload was transferred to another licensed home care agency as of the close of business October 8, 1995. Page 9 Part II. Other Information Item 6. Exhibits and Reports on Form 8k (a). Exhibit 27: Financial Data Schedule (b). Reports on Form 8k: None TSR, INC. AND SUBSIDIARIES SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TSR, INC. ---------------------------------------------- (Registrant) Date: April 09, 1996 /s/ J. F. Hughes ---------------------------------------------- J.F. Hughes, Chairman, President and Treasurer Date: April 09, 1996 /s/ John G. Sharkey ---------------------------------------------- John G. Sharkey, Vice President, Finance Page 10 EX-27 2 FINANCIAL DATA SCHEDULE
5
9-MOS MAY-31-1996 FEB-29-1996 1,638,051 2,373,358 6,180,666 169,278 0 10,293,800 1,028,866 794,689 10,585,943 2,190,495 0 0 0 24,696 8,370,752 10,585,943 0 23,177,618 0 16,915,219 5,298,487 10,000 0 1,151,285 513,000 638,285 0 0 0 638,285 0.42 0.42
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