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 September 30, 1999
[ ] 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 registrant 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
(Telephone number of registrant)
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
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No __.
As of the close of business on November 11, 1999, Open Plan Systems, Inc.
had 4,402,891 shares of Common Stock, no par value, outstanding.
<PAGE>
OPEN PLAN SYSTEMS, INC.
Table of Contents
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1999 (unaudited) 1
and December 31, 1998
Consolidated Statements of Operations - Three and nine months 2
ended September 30, 1999 and 1998 (unaudited)
Consolidated Statements of Cash Flows - Nine months 3
ended September 30, 1999 and 1998 (unaudited)
Notes to Consolidated Financial Statements - September 30, 1999 5
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of 16
Security Holders
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
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,
1999 1998
-----------------------------------------
(unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 5 $ 2
Accounts receivable, net 7,067 6,289
Inventories 7,171 6,908
Prepaids and other 922 672
Refundable income taxes 305 305
--------------------------------
Total current assets 15,470 14,176
Property and equipment, net 2,356 2,288
Goodwill, net 2,946 3,075
Other 470 466
--------------------------------
Total assets $ 21,242 $ 20,005
================================
Liabilities and shareholders' equity
Current liabilities:
Revolving line of credit $ 1,412 $ 952
Trade accounts payable 2,698 1,995
Accrued compensation 378 263
Other accrued liabilities 469 429
Customer deposits 1,079 1,000
Current portion of long-term debt 67 20
--------------------------------
Total current liabilities 6,103 4,659
Long-term debt 154 -
--------------------------------
Total liabilities 6,257 4,659
Shareholders' equity:
Preferred stock, no par value:
Authorized shares - 5,000
Issued and outstanding shares - none - -
Common stock, no par value:
Authorized shares - 50,000
Issued and outstanding shares - 4,403 at 9/30/99; 18,651 19,324
-4,672 at 12/31/98
Additional capital 137 137
Accumulated deficit (3,803) (4,115)
--------------------------------
Total shareholders' equity 14,985 15,346
--------------------------------
Total liabilities and shareholders' equity $ 21,242 $20,005
================================
See accompanying notes.
</TABLE>
<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, September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales $ 8,945 $ 9,600 $ 25,332 $ 25,832
Cost of sales 6,071 6,843 17,488 20,242
--------------------------------------------------------------------------
Gross profit 2,874 2,757 7,844 5,590
Operating expenses:
Amortization of intangibles 53 69 160 207
Selling and marketing 1,925 1,808 5,344 5,828
General and administrative 759 559 1,914 2,242
Operational restructuring - - - 1,290
--------------------------------------------------------------------------
2,737 2,436 7,418 9,567
--------------------------------------------------------------------------
Operating income (loss) 137 321 426 (3,977)
Other (income) expense:
Interest expense 41 75 130 207
Interest income (4) (2) (16) (10)
Other, net (1) 8 - 22
--------------------------------------------------------------------------
36 81 114 219
--------------------------------------------------------------------------
Income (loss) before income taxes 101 240 312 (4,196)
Income taxes - - - -
Net income (loss) $ 101 $ 240 $ 312 $ (4,196)
==========================================================================
Basic and diluted income (loss) per common share $ .02 $ .05 $ .07 $ (.92)
==========================================================================
Weighted average common shares outstanding 4,628 4,672 4,658 4,550
==========================================================================
</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,
1999 1998
---------------------------------------
<S> <C> <C>
Operating activities
Net income (loss) $ 312 $(4,196)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Provision for losses on receivables 26 120
Depreciation and amortization 728 816
Operational restructuring - 1,290
Loss on sale of property 3 40
Deferred income taxes - 4
Changes in operating assets and liabilities:
Accounts receivable (804) (1,664)
Inventories (263) 4,110
Prepaids and other (283) (44)
Trade accounts payable 703 (428)
Customer deposits 79 (89)
Accrued and other liabilities 155 56
------------------------------
Net cash provided by operating activities 656 15
Investing activities
Purchases of property and equipment (641) (532)
Proceeds from the sale of property and equipment - 7
------------------------------
Net cash used in investing activities (641) (525)
Financing activities
Net borrowings on revolving line of credit 460 207
Notes payable issued 225 -
Purchase of common stock (1,073) -
Issuance of common stock (net of expenses) 400 343
Principal payments on long-term debt, and
capital lease obligations (24) (88)
------------------------------
Net cash (used in) provided by financing activities (12) 462
------------------------------
Increase (decrease) in cash and cash equivalents 3 (48)
Cash and cash equivalents at beginning of period 2 73
------------------------------
Cash and cash equivalents at end of period $ 5 $ 25
==============================
Supplemental disclosures
Interest paid $ 130 $ 207
==============================
Income taxes paid $ - $ 12
==============================
See accompanying notes.
</TABLE>
<PAGE>
OPEN PLAN SYSTEMS, INC.
Notes to Consolidated Financial Statements (Unaudited)
September 30, 1999
1. Principles of Presentation
The accompanying unaudited consolidated financial statements of Open Plan
Systems, Inc. and subsidiaries (the Company) have been prepared in accordance
with generally accepted accounting principles for interim financial information.
The interim financial statements included herein are unaudited. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. All
significant intercompany balances and transactions are eliminated in
consolidation. 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 ended September 30, 1999 are not necessarily indicative of the
results that may be achieved for the entire year ending December 31, 1999 or for
any other interim period. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Form 10-KSB
for the year ended December 31, 1998.
2. Inventories
Inventories were in two main stages of completion and consisted of the following
(amounts in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-------------------------------
(Unaudited)
<S> <C> <C>
Components and fabric $4,457 $4,221
Jobs in process and finished goods 2,714 2,687
-------------------------------
$7,171 $6,908
===============================
</TABLE>
3. Income Taxes
The Company recorded no income tax benefit for the first three quarters of 1998
due to the uncertainty of realization of potential tax benefits associated with
previous operating losses. Utilization of net operating loss carryforwards
resulted in no income tax expense for the first three quarters of 1999. Related
deferred income tax assets have been offset by a valuation allowance. The
Company will reevaluate the potential realizability of the deferred tax assets
on a quarterly basis.
<PAGE>
OPEN PLAN SYSTEMS, INC.
Notes to Consolidated Financial Statements (Unaudited)
September 30, 1999
4. Indebtedness
At September 30, 1999, the Company had outstanding borrowings of $1,412,000 on
its $5,000,000 line of credit. Total available borrowings under the facility
were $2.9 million. The Company also entered into loan agreements to replace
certain vehicles. These loans have maturities of between three and five years
and bear annual interest at between 0.9% and 8.9%. These loans are secured by
the financed vehicles.
5. Equity
On September 15, 1999, the Company and certain investors purchased 993,542
shares of Common Stock held by the Company's founder at a price of $2.50 per
share. The transaction resulted in the Company purchasing approximately 430,000
shares of stock. In an event related to this transaction, the Company then
immediately resold 160,000 shares of Common Stock to affiliates of Great Lakes
Capital LLC. This resulted in a net redemption by the Company of approximately
270,000 shares. The redemption was funded by borrowings totaling approximately
$350,000 from the Company's line of credit, and by the termination of several
life insurance policies the Company has maintained under an agreement with Mr.
Fischer to purchase the shares at his death.
6. Commitments and Contingencies
A portion of the potential consideration for the 1996 acquisition of Immaculate
Eagle, Inc. (d/b/a TFM Remanufactured Office Furniture)("TFM") was 87,500 shares
of common stock of the Company, 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 the Company's common stock on October
1, 1998 was less than $15 per share, the Company was to make a cash payment to
the former shareholders of TFM equal to the difference between the closing sales
price on that date and $15, multiplied by the 87,500 shares of common stock
(subject to certain adjustments, including claims by the Company for
indemnification). The Company's stock traded at $2.25 per share on October 1,
1998 and accordingly the amount potentially payable to the former TFM
shareholders would be $1,115,625.
Management of the Company has reviewed the circumstances of the TFM acquisition
and determined that the indemnification obligations of the former TFM
shareholders exceed the $1.3 million agreed value of the stock in escrow. The
Company has requested the escrow agent retain all of the stock and served notice
of the indemnification claims to the former TFM shareholders. As a result, no
cash payment is currently due on any of the stock in escrow. The former
shareholders of TFM have disputed the indemnification claims and pursuant to the
purchase agreement, the matter has gone to arbitration. The Company expects to
learn the results of this arbitration during the fourth quarter of 1999.
If the Company prevails on all of its claims in arbitration, the escrowed shares
will be returned to the Company. Should the Company not prevail on all its
claims, the Company may be required to make cash payments to the shareholders in
amounts designated by the arbitrators. The aggregate $1,115,625 difference
between the stock's market price on October 1, 1998 and the $15 value assumed in
the TFM purchase agreement has been recorded as a reduction in goodwill and
shareholders' equity.
Two former officers of the Company have filed suit against the Company
asserting, among other things, non-compliance with the contractual terms of
certain employment agreements, claiming damages of approximately $400,000. The
Company believes these claims are without merit and is contesting them. The
Company filed suit against the two former officers claiming, among other things,
improper use of Company assets. The Company has reached a settlement with the
former officers of the Corporation related to the improper use of Company
assets. One officer is to repay the Company for an immaterial amount of these
expenses. Payment of such settlement has been deferred until the former
officers' lawsuit for non-compliance with the contractual terms of certain
employment agreements has been resolved.
<PAGE>
OPEN PLAN SYSTEMS, INC.
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH 1998
Results of Operations
Sales. Sales for the three months ended September 30, 1999 were $8,945,000,
a decrease of approximately $655,000 or 6.8% versus the same period in 1998.
Sales for the nine months ended September 30, 1999 were $25,332,000, a decrease
of $500,000 or 1.9% versus the first nine months of 1998. The decrease in third
quarter 1999 sales was due primarily to certain customers deferring receipt of
their product until the fourth quarter. The sales changes segmented by Sales
Offices and National Accounts are as follows:
<TABLE>
<CAPTION>
3rd Q Change YTD Change
from 1998 from 1998
---------------------------------------
<S> <C> <C>
Branch Offices $(265,000) $ 750,000
National Accounts (390,000) (1,250,000)
---------------------------------------
Total $ (655,000) $ (500,000)
</TABLE>
The year to date sales increases at the branch offices occurred due to the
positive impact that the Company's new marketing and sales initiatives are
having on sales office performance. The National Account sales have decreased in
the quarter and the year from comparable 1998 periods due to lower sales to the
Company's dealer network and certain other large customers.
The Company received orders of $27.1 million in the first three quarters of
1999, an increase of 4.2% over the $26 million in orders booked during the first
three quarters of 1998. Additionally, the Company's order backlog at the end of
September 1999 of $4.3 million is 65% higher than at September 30, 1998. The
Company's backlog increased by approximately $1 million during the third
quarter.
The Company has implemented marketing initiatives around its traditional
core customer market of small to medium-size end users to continue to build and
strengthen its' branch office network. The results of this effort contributed to
the continued strong sales performance by the branch offices. The Company has
also increased its National Accounts Group sales force to strengthen this group
and increase its contribution to future results.
Cost of Sales. The Company's cost of sales includes costs of materials,
labor, supplies, freight, utilities, and other manufacturing related expenses.
Cost of sales decreased by $772,000 in the third quarter of 1999 to $6,071,000
from the $6,843,000 reported in the third quarter of 1998. Additionally, the
Company's cost of sales decreased by $2,754,000 for the first three quarters of
1999 from the $20,242,000 reported in the first three quarters of 1998. The
decrease in cost of sales is primarily attributable to reduced manufacturing and
installation costs, while the slightly reduced sales volume had a lesser impact
on these expenses.
The gross margin continued at 32.1% during the third quarter of 1999
compared to 32.1% and 28.2% in the second and first quarters of 1999,
respectively. The Company reported a gross margin of 28.7% in the third quarter
of 1998. The margin for the first three quarters of 1999 of 31.0% compares
favorably to the 21.6% reported in the first three quarters of 1998. The
Company's gross margin during the third quarter and first nine months of 1999
benefited from the operational restructuring which occurred in the second
quarter of 1998 and reduced the amount of warehouse space and eliminated certain
inefficient production capacity. It was further improved by the quality
management and continuous improvement programs that have been implemented over
the past year. During the first half of 1998, the Company began reducing
inventory levels and reduced production volumes which resulted in higher per
unit production costs due to spreading fixed costs over fewer production units
and also incurred lower margins related to certain brokered product sales.
Finally, the Company streamlined its Lansing, Michigan production facility
during the third quarter of 1999 which should assist the Company in maintaining
and increasing it's gross margins in future periods.
The gross margin levels for the first three quarters and first nine months
of 1999 reached the Company's near-term goal of 30%+ margins. The Company
believes that it has positioned itself to gain further improvements in these
levels as its' sales volume increases and operational improvement programs
continue to produce their desired results.
Operating Expenses. The Company's most significant operating expense is
selling and marketing expense. These costs are primarily related to salesperson
compensation, advertising and other marketing expenses and rent. 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 1999 increased to
$1,925,000 from the $1,808,000 reported in the third quarter of 1998. These
expenses decreased to $5,344,000 for the first three quarters of 1999 from the
$5,828,000 reported for the comparable period in 1998. The increase in the third
quarter of 1999 related to increased marketing expenditures associated with the
Company's new marketing programs. The decreased costs for the nine months were
primarily related to the reduction in sales offices and sales trainee staffing
that occurred in the second quarter of 1998 as well as increased focus on cost
controls and reductions in marketing overhead.
The Company anticipates that it will continue to add salespeople in certain
branch offices consistent with its plan to manage sales growth and productivity.
The Company additionally anticipates that it will add two new sales offices in
the next six months.
General and administrative expenses increased to $759,000 in the third
quarter of 1999 from the $559,000 reported in the third quarter of 1998. These
expenses decreased to $1,914,000 for the first nine months of 1999 from the
$2,242,000 reported for the first three quarters of 1998. The primary reasons
for that decrease were reduced expenses resulting from the operational
restructuring that occurred in the second quarter of 1998 as well as
efficiencies gained during the succeeding periods. Offsetting these improvements
to a degree were legal fees associated with certain pending legal proceedings.
The Company anticipates that these expenses may remain higher than normal during
the fourth quarter due to these proceedings. The Company anticipates the results
of these proceedings will be known in the fourth quarter of this year. For a
discussion of such proceedings, see Part II, Item 1 of this report.
Other Non-Operating Income and Expense. Total net other expense decreased
from $81,000 and $219,000 for the third quarter and first nine months of 1998 to
$36,000 and $114,000 for the third quarter and first nine months of 1999. The
primary reason for the decrease is due to the Company reducing its borrowings on
the line of credit facility.
Income Taxes. The Company recorded no income tax benefit for the third
quarter and first nine months of 1998 due to the uncertainty of realization of
potential tax benefits associated with previous operating losses. Utilization of
net operating loss carryforwards resulted in no income tax expense for the third
quarter and first nine months of 1999. Related deferred income tax assets have
been offset by a valuation allowance. 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 $656,000 for the nine months ended
September 30, 1999 as compared to $15,000 for the nine months ended September
30, 1998. The increase in cash provided by operating activities for the first
nine months of 1999 was primarily due to an increase in the Company's net income
for the period. The Company's inventory increased during the third quarter of
1999 due to some selected purchasing to meet customer needs for orders shipping
in the fourth quarter. In 1998, the Company decreased inventories as part of its
program to reduce its stock of raw materials and finished goods to more closely
match sales volumes. Trade accounts receivable increased in the third quarter of
1999 as the Company's days sales outstanding increased slightly. The Company
continues to focus on decreasing the number of days sales outstanding and would
expect that future changes in sales volume will not have a direct correlation to
changes in accounts receivable.
Cash Flows from Investing Activities. Net cash used in investing activities
was $641,000 for the nine months ended September 30, 1999 as compared to
$525,000 for the nine months ended September 30, 1998. The cash used during the
three quarters of 1999 was due to the purchase of certain capital equipment
related to improving the productivity of its remanufacturing activities and the
purchase of certain installation vehicles intended to replace leased and older
vehicles. These purchases are consistent with the Company's focus on producing
high-quality, affordable office systems and reducing overall operational costs.
The Company anticipates that capital spending for 1999 will be less than
$750,000. The source of funds for anticipated capital spending will be funds
from operations as well as borrowings on the Company's line of credit. At
September 30, 1999, the Company had borrowings of $1,412,000 under its line of
credit.
Cash Flows from Financing Activities. Net cash (used in) provided by
financing activities was ($12,000) during the first three quarters of 1999 as
compared to $462,000 in the first nine months of 1998. This decrease in cash
flows from financing activities for the first nine months of 1999 represented a
reduced need for borrowings on the Company's line of credit and other facilities
as a result of the increase in cash flow from operating activities. The Company
repurchased approximately 430,000 shares of stock from the Company's founder in
the third quarter of 1999 and sold 160,000 shares of this stock to affiliates of
Great Lakes Capital, LLC. The Company funded its purchase with borrowings on its
line of credit but expects to offset approximately $350,000 of the purchase
price with the proceeds from the surrender of certain life insurance policies
maintained in accordance with a buy-sell agreement with its founder. The Company
also issued 200,000 shares of stock in the second quarter of 1998 related to an
investment made by Great Lakes Capital, LLC.
Expected Future Cash Flows. The Company expects that cash flow from
operating activities will continue to increase over the next several quarters as
the Company continues to reduce its past due receivables and improves its
financial performance.
Year 2000
As disclosed in the Company's annual report, 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, hardware and telephone systems or manufacturing equipment, in
order to process transactions in the Year 2000. As a result, management believes
the Year 2000 issue is not expected to have a material impact on the Company's
operations.
In assessing the material risks to the Company's business from the Year
2000 problem, the Company has considered the Year 2000 readiness of suppliers,
customers (including the federal government), financial service providers,
public utilities, telecommunication service providers and other third parties
with which it does business. Although the Company has taken, and will continue
to take, reasonable efforts to gather information to determine the Year 2000
readiness of third parties, such information may not be provided voluntarily,
may be otherwise unavailable, or may not be reliable. The Year 2000 compliance
of third parties is substantially beyond the Company's knowledge and control,
and there can be no assurances that the Company will not be adversely affected
by the failure of a third party to adequately address the Year 2000 problem.
The Company will continue to assess its 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.
Amounts expended to date associated with the Company's Year 2000 efforts have
not been material. There can be no assurance that the Company's systems or the
systems of other companies on which the Company relies will not be adversely
affected by the Year 2000 issue.
Seasonality and Impact of Inflation
In prior years, the Company noted a seasonal trend of lower sales volumes
in the second and third quarters, but for the past two years the Company has had
no discernable pattern of seasonality. Because the Company recognizes revenues
upon shipment and typically ships Work Stations within four 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 sales
may vary from quarter to quarter.
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 by inflation in the future.
Forward-Looking Statements
The foregoing discussion contains certain forward-looking statements, which
may be identified by phrases such as "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 1999 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, 1998, a copy of which is on file with the Securities and Exchange
Commission. The Company assumes no duty to update any of the forward-looking
statements of this report.
Item 3: Quantitative and Qualitative Disclosures about Market Risk
The Company believes that its exposure to market risk associated with
transactions involving derivative and other financial instruments is not
material.
<PAGE>
OPEN PLAN SYSTEMS, INC.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
A portion of the potential consideration for the 1996 acquisition of
Immaculate Eagle, Inc. (d/b/a TFM Remanufactured Office
Furniture)("TFM") was 87,500 shares of common stock of the Company,
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 the Company's common stock on
October 1, 1998 was less than $15 per share, the Company was to make a
cash payment to the former shareholders of TFM equal to the difference
between the closing sales price on that date and $15, multiplied by
the 87,500 shares of common stock, (subject to certain adjustments,
including claims by the Company for indemnification). The Company's
stock traded at $2.25 per share on October 1, 1998 and accordingly the
amount potentially payable to the former TFM shareholders would be
$1,115,625.
Management of the Company has reviewed the circumstances of the TFM
acquisition and determined that the indemnification obligations of the
former TFM shareholders exceed the $1.3 million agreed value of the
stock in escrow. The Company has requested the escrow agent retain all
of the stock and 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 have disputed the
indemnification claims and pursuant to the purchase agreement, the
matter has gone to arbitration. The Company anticipates that the
results of the arbitration will be known during the fourth quarter of
1999.
If the Company prevails on all of its claims in arbitration, the
escrowed shares will be returned to the Company. Should the Company
not prevail on all its claims, the Company may be required to make
cash payments to the shareholders in amounts designated by the
arbitrator. The aggregate $1,115,625 difference between the stock's
market price on October 1, 1998 and the $15 value assumed in the TFM
purchase agreement has been recorded as a reduction in goodwill and
shareholders' equity.
On November 6, 1998, two former officers of the Company filed a
lawsuit against the Company 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 in the aggregate. The Company
believes that these claims are without merit. On November 9, 1998, 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. In May 1999, the
Company settled its lawsuit with the former officers of the Company
for an immaterial monetary settlement. Payment of such settlement has
been deferred until the former officers' lawsuit for non-compliance
with the contractual terms of certain employment agreements has been
resolved.
<PAGE>
Item 2. Changes in Securities and Use of Proceeds
On September 15, 1999, the Company and certain investors purchased
993,542 shares of Common Stock held by the Company's founder at a
price of $2.50 per share. The transaction resulted in the Company
purchasing approximately 430,000 shares of stock. In an event related
to this transaction, the Company then immediately resold 160,000
shares of Common Stock to affiliates of Great Lakes Capital LLC. The
160,000 shares were issued pursuant to the exemption provided by
Section 4(2) of the Securities Act of 1933.
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
The registrant has included the following exhibits pursuant to Item 601 of Regulation S-K.
Exhibit No. Description
------------------ --------------------------------------------------------------
<S> <C> <C>
11 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule (filed electronically only)
</TABLE>
(b) Reports on Form 8-K
The Company filed a Form 8-K on October 1, 1999, as amended on October
5, 1999, reporting under Item 5 the purchase by the Company and
certain investors of 993,542 shares of Common Stock from the Company's
founder.
<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, 1999 /s/ John L. Hobey
------------------------------------------------
John L. Hobey
Chief Executive Officer
Date: November 12, 1999 /s/ William F. Crabtree
------------------------------------------------
William F. Crabtree
Chief Financial Officer
Date: November 12, 1999 /s/ Neil F. Suffa
------------------------------------------------
Neil F. Suffa
Corporate Controller
<PAGE>
OPEN PLAN SYSTEMS, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
------------------- ------------------------------------------------------------------------
<S> <C> <C>
11 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule (filed electronically only)
</TABLE>
<PAGE>
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,
1999 1998 1999 1998
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average shares outstanding
during the period 4,627 4,673 4,657 4,550
Assumed exercise of options less assumed 1 - 1 -
acquisition of shares
-------------------------------------------------------------------------------
Total 4,628 4,673 4,658 4,550
===============================================================================
Net income (loss) used in computation $ 101 $ 240 $ 312 $ (4,196)
===============================================================================
Income (loss) per common share $ .02 $ .05 $ .07 $ (.94)
===============================================================================
</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, 1999 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
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 5
<SECURITIES> 0
<RECEIVABLES> 7,308
<ALLOWANCES> (241)
<INVENTORY> 7,171
<CURRENT-ASSETS> 15,470
<PP&E> 4,056
<DEPRECIATION> (1,700)
<TOTAL-ASSETS> 21,242
<CURRENT-LIABILITIES> 6,103
<BONDS> 0
0
0
<COMMON> 18,651
<OTHER-SE> (3,666)
<TOTAL-LIABILITY-AND-EQUITY> 21,242
<SALES> 25,332
<TOTAL-REVENUES> 25,332
<CGS> 17,488
<TOTAL-COSTS> 17,488
<OTHER-EXPENSES> 7,418
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 130
<INCOME-PRETAX> 312
<INCOME-TAX> 0
<INCOME-CONTINUING> 312
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 312
<EPS-BASIC> .07
<EPS-DILUTED> .07
</TABLE>
