SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1998
[ ] 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 0-20743
OPEN PLAN SYSTEMS, INC.
(Exact name of small business issuer as specified in its charter)
Virginia 54-1515256
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4299 Carolina Avenue, 23222
Building C, Richmond, Virginia (Zip Code)
(Address of principal executive office)
(804) 228-5600
(Issuer's telephone number)
_____________________________________________________________
(Former name,former address and former fiscal year,if changed since last report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 __.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock, no par value - 4,672,433 shares as of November 12, 1998.
Transitional Small Business Disclosure Format (check one): Yes No X
<PAGE>
OPEN PLAN SYSTEMS, INC.
Table of Contents
<TABLE>
<S> <C> <C>
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1998 (unaudited) 1
and December 31, 1997
Consolidated Statements of Operations- Three and nine months 2
ended September 30, 1998 and 1997 (unaudited)
Consolidated Statements of Cash Flows - Nine months 3
ended September 30, 1998 and 1997 (unaudited)
Notes to Consolidated Financial Statements - September 30, 1998 4
Item 2. Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of 13
Security Holders
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES
</TABLE>
<PAGE>
OPEN PLAN SYSTEMS, INC.
PART I
FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Balance Sheets
(amounts in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
-------------------------------------
(Unaudited)
<S><C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 28 $ 73
Trade accounts receivable, net 7,030 5,486
Inventories 6,670 10,780
Prepaids and other 665 686
Refundable income taxes 795 795
Deferred income taxes - 106
-------------------------------------
Total current assets 15,188 17,926
Property and equipment, net 2,686 3,493
Goodwill, net 4,250 4,427
Other 459 468
-------------------------------------
Total assets $ 22,583 $ 26,314
=====================================
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ $ 2,411
1,983
Accrued compensation 567 393
Other accrued liabilities 736 280
Customer deposits 752 841
Line of credit 2,317
2,110
Current portion of long-term debt and capital lease
obligations 38 126
-------------------------------------
Total current liabilities 6,393 6,161
Deferred income taxes - 110
-------------------------------------
Total liabilities 6,393 6,271
Stockholders' equity:
Common stock, no par value:
Authorized shares - 50,000
Issued and outstanding shares - 4,672 at Sept. 30, 1998 and 20,431 20,088
4,472 at
Dec. 31, 1997
Additional capital 137 137
Retained earnings (4,378) (182)
-------------------------------------
Total stockholders' equity 16,190 20,043
-------------------------------------
Total liabilities and stockholders' equity $ 22,583 $ 26,314
=====================================
</TABLE>
See accompanying notes.
<PAGE>
OPEN PLAN SYSTEMS, INC.
Consolidated Statements of Operations (Unaudited)
(amounts in thousands, except per share)
<TABLE>
<CAPTION>
Three Months ended Nine Months ended
September 30 June 30
1998 1997 1998 1997
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 9,600 $ 9,408 $ 25,832 $ 23,009
Cost of sales 6,843 6,864 20,242 16,850
------------------------------------------------------------------------
Gross profit 2,757 2,544 5,590 6,159
Operating expenses:
Amortization of intangibles 69 69 207 207
Selling and marketing 1,808 1,766 5,828 4,520
General and administrative 559 530 2,242 1,831
Operational restructuring - - 1,290 -
------------------------------------------------------------------------
2,436 2,365 9,567 6,558
------------------------------------------------------------------------
Operating income (loss) 321 179 (3,977) (399)
Other (income) expense:
Interest expense 75 18 207 37
Interest income (2) (2) (10) (62)
Other, net 8 (17) 22 (30)
------------------------------------------------------------------------
81 (1) 219 (55)
------------------------------------------------------------------------
Income (loss) before income taxes 240 180 (4,196) (344)
Income tax expense (benefit) - 33 - (201)
------------------------------------------------------------------------
Net income (loss) $ 240 $ 147 $ (4,196) $ (143)
========================================================================
Basic and diluted (loss) income per common share $ .05 $ .03 $ (.92) $ (.03)
=======================================================================
Weighted average common shares outstanding 4,672 4,473 4,550 4,473
=======================================================================
</TABLE>
See accompanying notes.
<PAGE>
OPEN PLAN SYSTEMS, INC.
Consolidated Statements of Cash Flows (Unaudited)
(amounts in thousands)
<TABLE>
<CAPTION>
Nine Months ended
September 30
1998 1997
----------------------------------
<S> <C> <C>
Operating activities
Net loss $ (4,196) $ (143)
Adjustments to reconcile net loss to net cash used in
operating activities:
Provision for losses on receivables 120 58
Depreciation and amortization 816 629
Operational restructuring 1,290 -
Loss on sale of property 40 4
Deferred income taxes 4 (63)
Changes in operating assets and liabilities:
Accounts receivable (1,664) (1,800)
Inventories 4,110 (2,881)
Prepaids and other (44) (755)
Trade accounts payable (428) 1,039
Customer deposits (89) (80)
Accrued and other liabilities 56 157
----------------------------------
Net cash used in operating activities 15 (3,835)
Investing activities
Purchases of property and equipment (532) (862)
Proceeds from the sale of property and equipment 7 8
----------------------------------
Net cash used in investing activities (525) (854)
Financing activities
Net borrowings on revolving line of credit 207 2,026
Issuance of common stock (net of expenses) 343 -
Principal payments on long-term debt and capital
lease obligations (88) (134)
----------------------------------
Net cash provided by (used in) financing activities 462 (1,892)
----------------------------------
Decrease in cash and cash equivalents (48) (2,797)
Cash and cash equivalents at beginning of period 73 3,066
----------------------------------
Cash and cash equivalents at end of period $ 25 $ 269
==================================
Supplemental disclosures
Interest paid $ 207 $ 37
==================================
Income taxes paid $ 12 $ 136
==================================
</TABLE>
See accompanying notes.
<PAGE>
OPEN PLAN SYSTEMS, INC.
Notes to Consolidated Financial Statements (Unaudited)
September 30, 1998
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB of the Securities
and Exchange Commission. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, these financial statements
reflect all adjustments of a normal recurring nature which the Company considers
necessary for a fair presentation. The results for the three month and nine
month periods ending September 30, 1998 are not necessarily indicative of the
results that may be achieved for the entire year ending December 31, 1998 or for
any other interim period.
2. Inventories
Inventories are in two main stages of completion and consisted of the following
(amounts in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
-------------------------------------
(Unaudited)
<S> <C> <C>
Components and fabric $4,360 $7,650
Jobs in process and finished goods 2,310 3,130
-------------------------------------
$6,670 $10,780
=====================================
</TABLE>
3. Income Taxes
As a result of recent operating losses and the uncertainty of the realization of
the potential tax benefits thereof, the Company has not recorded potential
income tax benefits of $1,408,000 related to the nine months ended September 30,
1998. The deferred income tax asset of $1,408,000 at September 30, 1998 has been
offset by a valuation allowance. The Company will reevaluate the potential
realizability of the deferred tax assets on a quarterly basis.
<PAGE>
4. Indebtedness
At September 30, 1998, the Company had outstanding borrowings of $2,317,000 on
its $3,000,000 line of credit. The Company was in violation of certain financial
covenants at September 30, 1998. On October 23, 1998, the Company and the
financial institution agreed that the non-compliance with the financial
covenants would be waived for the third quarter and the amount of the line stay
constant at $2,750,000 over the remaining term of the commitment, which expires
December 31, 1998. At November 4, 1998, the outstanding borrowings on the line
of credited totaled $750,000.
5. Common Stock
On June 15, 1998, the Company issued 200,000 shares of common stock in a private
offering pursuant to a management and investment agreement with a private
investment company. Additionally, the Company issued an option for 600,000
shares of common stock to the same party at varying strike prices. The option
carries strike prices between $3.00 and $7.50 per share.
6. Operational Restructuring
During the second quarter of 1998, the Company recorded a restructuring charge
of $1,290,000 related to warehouse consolidation, returning to a focus on
remanufacturing and a sales office consolidation plan. The operational
restructuring charge included amounts for severance pay, payouts under current
lease agreements and the estimated loss on the disposal of certain fixed assets.
In connection with this plan the Company reduced sales and administrative
staffing by approximately 30 people. During the third quarter the Company
disposed of all fixed included in the restructuring, approximately $600,000, and
incurred much of the severance and lease termination costs. Additionally, the
Company has approximately $361,000 of the reserve remaining to complete lease
termination programs and warehouse consolidations. The Company anticipates
approximately $50,000 of lease termination costs to extend into the year 2000.
7. Subsequent Events
A portion of the potential consideration for the 1996 acquisition of the
Immaculate Eagle, Inc. (d/b/a TFM Remanufactured Furniture)("TFM") was 87,500
shares of common stock of Open Plan Systems, which has been held in escrow, with
an agreed upon value of $1.3 million, as security for indemnification
obligations of the former shareholders of TFM. In addition, under the terms of
the TFM purchase agreement, if the closing sales price of Open Plan Systems
common stock on October 1, 1998 was less than $15 per share, Open Plan was to
make a cash payment to the former shareholders equal to the difference between
the closing sales price on that date and $15, multiplied times the 87,500 shares
of common stock, (subject to certain adjustments including claims by the Company
for indemnification). At October 1, 1998, this amount was approximately
$1,000,000.
Management of Open Plan Systems has reviewed the circumstances of the TFM
acquisition and has determined that the indemnification obligations of the
former TFM shareholders exceed the $1.3 million agreed value of the stock in
escrow. Open Plan Systems has requested the escrow agent to retain all of the
stock and has served notice of the indemnification claims to the former TFM
shareholders. As a result, no cash payment is due on any of the stock in escrow.
The former shareholders of TFM served notice that they disputed the
indemnification claims and the matter will now go to arbitration. If Open Plan
Systems prevails on all of its claims in arbitration, the escrowed shares will
be returned to Open Plan, which would reduce the TFM acquisition cost and
related goodwill by approximately $1.3 million. Should Open Plan Systems not
prevail on all of its claims, the Company will reduce equity and make
appropriate cash payments to the shareholders.
On November 9, 1998, two former officers of the Company filed a lawsuit in
the State of Michigan, 30th Judicial Court, asserting among other things,
non-compliance with the contractual terms of certain employment agreements. The
plaintiffs assert damages of approximately $400,000. The Company believes that
these claims are without merit. On the same day, the Company filed suit against
the two former officers in the United States District Court for the Eastern
District of Virginia, claiming among other things, improper use of Company
assets. Due to the recent nature of these actions, the Company is unable to
predict what the ultimate outcome of these actions will be.
<PAGE>
OPEN PLAN SYSTEMS, INC.
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
The following table sets forth the relationship of costs and expenses as a
percentage of the Company's sales for the periods indicated:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 71.3 73.0 78.4 73.2
----------- ---------- ---------- -----------
Gross profit 28.7 27.0 21.6 26.8
Amortization of intangibles .7 .7 0.8 0.9
Selling and marketing expenses 18.9 18.8 22.6 19.6
General and administrative expenses 5.8 5.6 8.7 8.0
Operational restructuring - - 5.0 -
----------- ---------- ---------- -----------
Operating income (loss) 3.3 1.9 (15.4) (1.7)
Other expense (income) 0.8 - 0.8 (0.2)
----------- ---------- ---------- -----------
Income (loss) before income taxes 2.5 1.9 (16.2) (1.5)
Expense (benefit) from income taxes - .3 - ( .9)
----------- ---------- ---------- -----------
Net income (loss) 2.5% 1.6% (16.2)% (.6)%
=========== ========== ========== ===========
</TABLE>
Operational Restructuring. The Company recorded a charge of $1,290,000 in
the second quarter of 1998. The restructuring charge of $1,290,000 recognizes
the costs related to three important strategic initiatives: 1) A return to a
focus on the core remanufacturing business; 2) streamlining and consolidation of
warehouse operations; and 3) consolidation of existing sales offices and
reductions in sales training staff. As noted above, the Company will refocus on
producing remanufactured product, reducing excess warehouse space, divest
certain assets associated with the new workstation manufacturing capabilities
and continue streamlining operations. In connection with the aforementioned
plan, the Company reduced sales and administrative staffing by approximately 30
people. During the third quarter the Company disposed of all fixed included in
the restructuring, approximately $600,000, and incurred much of the severance
and lease termination costs. Additionally, the Company has approximately
$361,000 of the reserve remaining to complete lease termination programs and
warehouse consolidations. The Company anticipates approximately $50,000 of lease
termination costs to extend into the year 2000. At this time management feels
that the economic impact of this plan is consistent with what was originally
estimated,
In the announced restructuring plan, the Company will be reducing its
warehousing capacity in Dallas, Atlanta, Cincinnati and Richmond as well as at
its Lansing, Michigan facility. The plan calls for the reduction of 156,000
square feet of leased warehouse space. Additionally, the Company has divested
certain metal working equipment and has written off its investment in new
software acquired to support new furniture manufacturing operations. This
supports the Company's return to its focus on remanufacturing. The Company
believes that these programs will reduce annual production costs by
approximately $450,000 and will help it to return to gross margins that are more
in line with pre-1997 levels.
As part of the sales office restructuring program implemented at the end of
the second quarter, the Company closed its sales offices in Dallas, Charlotte
and Baltimore and reduced sales training staff in certain other markets. The
thrust of this program was to reduce the number of non-producing sales offices
and personnel. The Charlotte and Baltimore markets will continue to be serviced
by company employees working from their homes while the Dallas market will be
serviced by independent sales representatives. The Company does not anticipate
that these changes will have a material impact on sales volumes in future
periods.
Sales. Sales for the three and nine months ended September 30, 1998 were
$9,600,000 and $25,832,000, increases of approximately $192,000 and $2,823,000
or 2.0% and 12.3% over the same periods in 1997. The third quarter of 1997
included a non-recurring order related to the Company's new furniture line
totaling approximately $1.5 million. When this order is excluded, sales
increased by $1.7 million and $4.3 million, or 18.1% and 18.7% over comparable
1997 periods. The increase in sales was principally due to sales from the
Company's three sales offices opened during 1997 as well as additional sales
from the Company's National Accounts group. Three sales offices were closed in
July 1998 as part of the restructuring program described above. Among the
offices open in excess of one year, five achieved increased sales during the
period and seven experienced declining sales.
During the year, the Company has implemented initiatives in the branch
office network which have included increased management and sales personnel
levels. The Company also is continuing to evaluate the impact that its various
marketing programs are having on sales in each market.
Cost of Sales. The Company's cost of sales includes costs of raw materials
(new and used workstation components, new fabric, laminate, paint, and other
materials), labor, supplies, freight, utilities, and other manufacturing related
expenses. Cost of sales decreased by $21,000 in the third quarter of 1998 from
the $6,864,000 reported in the third quarter of 1997. Cost of sales increased by
$3,392,000 for the first nine months of 1998 from the $16,850,000 reported in
the similar period for 1997. The primary reason for the decrease in the third
quarter cost of sales was due to cost reductions in production and materials.
The increase in cost of sales for the first nine months of 1998 was due to the
additional sales recorded in 1998 along with the items described in detail
below.
The gross margin increased to 28.7% in the third quarter of 1998 from 27.0%
in the third quarter of 1997. For the first nine months of 1998 the gross margin
decreased to 21.6% from 26.8% for the respective period in 1997. During the
third quarter of 1998, the Company's efforts to reduce production overhead and
streamline production processes had a positive impact on results. During 1997,
the Company used its manufacturing capacity to increase work-in-process and
finished goods inventory levels based on expected sales volumes which did not
materialize. As a result, the Company had excess levels of inventories of
certain parts. During the first three quarters of 1998, the Company reduced
inventory to levels more in line with expected market needs. As a result, the
Company had higher per unit costs as production units decreased more rapidly
than production costs. The Company's margins continued to be impacted by some
selective brokered sales with lower than normal margins.
Operating Expenses. The Company's most significant operating expense is
selling and marketing expense. These costs are primarily related to salesperson
compensation, advertising, rents and other marketing expenses and rents. The
Company compensates its salespeople through a combination of salaries and
commissions. While most of these expenses are directly related to the current
year's sales, certain other marketing expenses are incurred to build brand
recognition and generate sales leads that may contribute to sales in later
periods.
Selling and marketing expenses for the third quarter of 1998 increased to
$1,808,000 from the $1,766,000 reported in the third quarter of 1997. Selling
and marketing expenses increased to $5,828,000 for the first nine months of 1998
from the $4,520,000 reported in the first nine months of 1997. The increase in
the third quarter of 1998 was related primarily to higher levels of advertising
and promotion. The increase for the first nine months of 1998 was related
primarily to adding new management and sales people in the branch offices,
increased advertising expenses related to coordinated national marketing
programs and other expenses.
During the latter part of 1997 and early 1998, the Company increased the
level of sales representatives in branch offices at a rate faster than it was
able to effectively train and manage its new sales representatives. The Company,
as part of its sales office restructuring program noted previously, has reduced
the number of branch offices and sales training staffs to levels that are
manageable but, in management's opinion, allow for a significant level of
growth. Even though the Company reduced the number of direct sales
representatives, the number of such representatives remains 50% higher than June
30, 1997. The Company believes that this strategy will reduce the cost of
selling and marketing by $600,000 annually while having no material adverse
impact on sales levels. As a result of these programs, selling expenses
decreased by over $200,000 in the third quarter versus the second quarter of
1998.
General and administrative expenses of $559,000 in the third quarter of
1998 were comparable $530,000 reported in the third quarter of 1997. These
expenses increased to $2,242,000 for the first nine months of 1998 from the
$1,831,000 recorded in the similar period in 1997. The increase in expenses for
the nine months was primarily related to the termination of certain Company car
leases, higher levels of bad debt expense and higher legal and accounting fees
associated with the transition of management that has occurred over the past two
quarters. The Company anticipates that its restructuring program will result in
lower levels of general and administrative expenses over the next several
quarters. As a result of the restructuring of production and the refocus on
remanufacturing, the Company has elected not to implement the new management
information system it acquired in 1997. This will have the impact of reducing
consulting fees and depreciation expense over the next several years.
Other Non-Operating Income and Expense. Total other income and expense
changed from income of $1,000 for the third quarter of 1997 to expense of
$81,000 for the third quarter of 1998. Similarly, other income totaled $55,000
for the first nine months of 1997 versus expense of $219,000 for the first nine
months of 1998. The primary reason for the decrease is that the Company expended
the cash raised in its 1996 initial public offering during 1996 and 1997 and had
to borrow on its line of credit to fund operating expenses in 1998.
Income Taxes. The Company recorded no income tax benefit for the first nine
months of 1998 versus the $201,000 benefit recorded in the previous year. This
was the result of recent operating losses and the uncertainty of the realization
of the potential tax benefits. The Company will reevaluate the potential
realizability of the deferred tax assets on a quarterly basis.
Liquidity and Capital Resources Cash Flows from Operating Activities. Net
cash provided by operating activities was $15,000 for the nine months ended
September 30, 1998 as compared to cash used by operating activities of
$3,835,000 for the nine months ended September 30, 1997. The decrease in cash
used by operating activities for the first nine months of 1998 was primarily due
to increased losses offset by reductions in inventories and the operational
restructuring. The Company's inventory reductions were achieved as part of the
Company's program to reduce its stock of raw materials and finished goods to
more closely match anticipated sales volumes. Trade accounts receivable
increased during the quarter and nine months due to increases in sales and
increases in the number of days sales outstanding. The Company continues to
focus on decreasing the number of days sales outstanding and would expect that
future changes in sales volumes will not have a direct correlation to changes in
accounts receivable.
Cash Flows from Investing Activities. Net cash used in investing activities
was $525,000 for the nine months ended September 30, 1998 as compared to
$854,000 for the nine months ended September 30, 1997. The cash used during the
first nine months of 1998 was to purchase certain capital equipment related to
continuing production activities. These purchases are consistent with the
Company's focus on producing high-quality, affordable remanufactured office
systems. The Company anticipates that capital spending for 1998 will be less
than $750,000. The source of funds for anticipated capital spending will be
funds from operations. At September 30, 1998, the Company had outstanding
borrowings of $2,317,000 on its $3,000,000 line of credit. The Company was in
violation of certain financial covenants during the third quarter of 1998. On
September 23, 1998, the Company and the financial institution agreed that the
non-compliance with the financial covenants would be waived for the third
quarter and the amount of the line stay consistent at $2,750,000 over the
remaining term of the commitment, which expires December 31, 1998. At November
4, 1998, the outstanding borrowings on the line of credit totaled $750,000.
Cash Flows from Financing Activities. Net cash provided by financing
activities was $462,000 during the first three quarters of 1998 as compared to
net cash used by financing activities of $1,892,000 during the comparable period
in 1997. This increase in cash flows from financing activities for the first
half of 1998 represented reduced principal payments on outstanding long-term
debt and capital leases, reduced reliance on short-term borrowings on the
Company's line of credit, and the issuance of common stock.
Expected Future Cash Flows. The Company expects that cash flow from
operating activities will increase over the next several quarters as decreases
in inventories, along with moderation of the decreases in accounts payable
associated with the Company's reduced inventory purchases, should continue to
improve the Company's short term cash position. The Company is negotiating with
another financial institution to provide a $5,000,000 line of credit facility
for a period of 2 years which will be collateralized by substantially all the
Company's assets. The Company hopes to complete the transition to this new
facility in the fourth quarter of 1998.
Seasonality and Impact of Inflation
Because the Company recognizes revenues upon shipment and typically ships
workstations within three weeks of an order, a substantial portion of the
Company's revenues in each quarter results from orders placed by customers
during that quarter. As a result, the Company's results may vary from quarter to
quarter and may not reflect a seasonal pattern.
Inflation has not had a material impact on the Company's net sales or
income to date. However, there can be no assurances that the Company's business
will not be affected in the future by inflation.
Year 2000 Issues
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results by or in the year
2000. The potential costs and uncertainties to companies in addressing this
issue (the "Year 2000 issue") will depend on a number of factors, including
their software and hardware and the nature of their industries. Companies must
also coordinate with other entities with which they electronically interact,
including suppliers, customers, creditors, borrowers and financial service
organizations.
The Company has examined the Year 2000 issue and the potential costs and
consequences to the Company in addressing this issue. The Company has determined
that its existing systems are "Year 2000" compliant and therefore the Company
will not have to convert any existing software or hardware systems in order to
process transactions in the Year 2000. The Company also has considered the
potential impact of the Year 2000 issue on third parties with which it does
business and does not believe that further action is necessary with respect to
the Year 2000 issue. As a result, management believes that the Year 2000 issue
is not expected to have a material impact on the Company's operations and that
the cost of the Company addressing the Year 2000 issue is not a material event
or uncertainty that would cause its reported financial information not to be
necessarily indicative of future operating results or financial condition.
The Company will continue to assess it's exposure to the Year 2000 issue
with regards to new technology acquired or additional entities with which it
interacts and, if necessary, appropriate contingency plans will be developed.
Forward-Looking Statements
The foregoing discussion contains certain forward-looking statements, which
may be identified by phrases such as "the Company believes" or "the Company
expects" or words of similar effect. The Private Securities Litigation Reform
Act of 1995 provides a safe harbor for forward-looking statements. The Company
has identified certain important factors that in some cases have affected, and
in the future could affect, the Company's actual results and could cause the
Company's actual results for fiscal 1998 and any interim period to differ
materially from those expressed or implied in any forward-looking statements
made by, or on behalf of, the Company. These factors are set forth under the
caption "Forward-Looking Statements" in Item 6 of the Company's Form 10-KSB for
the fiscal year ended December 31, 1997, a copy of which is on file with the
Securities and Exchange Commission. The Company assumes no duty to update any of
the statements of this report.
<PAGE>
OPEN PLAN SYSTEMS, INC.
PART II
OTHER INFORMATION
<TABLE>
<S> <C>
Item 1. Legal Proceedings
See Note 7 to the Consolidated Financial Statements set forth elsewhere in this report.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
In the third quarter of 1998, the Company was in violation of certain financial covenants
contained in its bank line of credit. These defaults were waived by the bank on October
23, 1998. See Note 4 to the Notes to the Consolidated Financial Statements set forth
elsewhere in this report.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
<PAGE>
<CAPTION>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
The registrant has included the following exhibits pursuant to Item 601 of Regulation S-B.
Exhibit No. Description
---------------- ----------------------------------------------------------------------------
<S> <C> <C>
10.16 $2,750,000 Line of Credit Agreement with Crestar Bank
11 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule (filed electronically only)
(b) Reports on Form 8-K
None
</TABLE>
<PAGE>
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.
OPEN PLAN SYSTEMS, INC.
------------------------------------------
(Registrant)
Date: November 12, 1998 /s/ John C. Hobey
------------------------------------------
John C. Hobey
Chief Executive Officer
Date: November 12, 1998 /s/ William F. Crabtree
------------------------------------------
William F. Crabtree
Chief Financial Officer
Date: November 12, 1998 /s/ Neil F. Suffa
------------------------------------------
Neil F. Suffa
Corporate Controller
<PAGE>
OPEN PLAN SYSTEMS, INC.
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
Exhibit No. Description
----------------- ------------------------------------------------------------------------
10.16 $2,750,000 Line of Credit Agreement with Crestar Bank
11 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule (filed electronically only)
</TABLE>
OPEN PLAN SYSTEMS, INC.
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average shares outstanding during the
period 4,673 4,472 4,550 4,472
Assumed exercise of options less assumed - 1 - 1
acquisition of shares
-------------------------------------------------------------------------------
Total 4,673 4,473 4,550 4,473
===============================================================================
Net earnings (loss) used in computation $ 240 $ 147 $ (4,196) $ (143)
===============================================================================
Earnings (loss) per common share $ .05 $ .03 $ (.92) $ (.03)
===============================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF OPEN PLAN SYSTEMS, INC. AS OF SEPTEMBER 30, 1998 AND THE RELATED
STATEMENTS OF INCOME AND CASH FLOWS FOR THE NINE MONTHS THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001011738
<NAME> OPEN PLAN SYSTEMS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 28
<SECURITIES> 0
<RECEIVABLES> 7,318
<ALLOWANCES> (288)
<INVENTORY> 6,670
<CURRENT-ASSETS> 15,188
<PP&E> 6,164
<DEPRECIATION> (1,914)
<TOTAL-ASSETS> 22,583
<CURRENT-LIABILITIES> 6,393
<BONDS> 0
0
0
<COMMON> 20,568
<OTHER-SE> (4,378)
<TOTAL-LIABILITY-AND-EQUITY> 16,190
<SALES> 25,832
<TOTAL-REVENUES> 25,832
<CGS> 20,242
<TOTAL-COSTS> 20,242
<OTHER-EXPENSES> 8,277
<LOSS-PROVISION> 1,290
<INTEREST-EXPENSE> 207
<INCOME-PRETAX> (4,196)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,196)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,196)
<EPS-PRIMARY> (.92)
<EPS-DILUTED> (.92)
</TABLE>
