<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
[ ] 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: 000-21407
LASON, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 38-3214743
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification number)
1305 Stephenson Highway
Troy, Michigan 48083
(Address of principal executive offices including zip code)
Telephone: (810) 597-5800
(Registrant's telephone number, including area code)
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 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 [ ] No [X]
As of November 20, 1996, 8,599,246 shares of Common Stock, $.01 par value were
outstanding.
<PAGE> 2
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page No.
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of
September 30, 1996 (Unaudited) and December 31, 1995 2
Condensed Consolidated Statements of Income (Unaudited),
Three Months and Nine Months Ended September 30, 1996 and 1995 3
Condensed Consolidated Statements of Cash Flows (Unaudited),
Nine Months Ended September 30, 1996 and 1995 4
Notes to Condensed Consolidated Financial Statements (Unaudited) 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 7
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13
SIGNATURES 14
1
<PAGE> 3
Lason, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except for shares)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash $ 578 $ 103
Accounts receivable 18,916 11,739
Supplies 1,860 1,245
Prepaid expenses and other 1,159 1,372
------------- ------------
TOTAL CURRENT ASSETS 22,513 14,459
Property, plant and equipment (net) 5,406 2,508
Deferred income taxes 2,697 2,817
Intangible assets (net) 37,599 17,525
------------- ------------
Total assets $ 68,215 37,309
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 2,000 $ 2,000
Short-term debt 17,712 -
Other current liabilities 12,789 7,548
------------- ------------
Total current liabilities 32,501 9,548
Long-term debt, less current portion 10,336 11,500
Revolving credit line borrowings 10,819 7,047
Minority interests 254 -
------------- ------------
TOTAL LIABILITIES AND MINORITY INTERESTS 53,910 28,095
------------- ------------
Common stock with a put option 1,060 -
STOCKHOLDERS' EQUITY
Class A-1 common stock, $.01 par value; none authorized, issued
and outstanding at September 30, 1996; 13,000,000 shares
authorized, 999,998 issued and outstanding - 10
at December 31, 1995
Class A-2 common stock, $.01 par value; none authorized, issued
and outstanding at September 30, 1996; 4,000,000 shares
authorized, none issued and outstanding at December 31, 1995 - -
Class B common stock, $.01 par value; none authorized, issued
and outstanding at September 30, 1996; 1,000,001 shares
authorized, issued and outstanding at December 31, 1995 - 10
Common Stock, $.01 par value; 20,000,000 shares authorized,
5,841,293 issued and outstanding at September 30, 1996;
none authorized, issued and outstanding at December 31, 1995 51 -
Preferred stock, $.01 par value, 5,000,000 shares authorized,
none issued and outstanding at September 30, 1996;
1,000,000 shares authorized, none issued and outstanding - -
at December 31, 1995
Additional paid-in capital 9,997 8,480
Loans to stockholders (628) (1,256)
Retained earnings 3,825 1,970
------------- ------------
TOTAL STOCKHOLDERS' EQUITY 13,245 9,214
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 68,215 $ 37,309
============= ============
</TABLE>
The accompanying Notes are an integral part of the condensed consolidated
financial statements.
2
<PAGE> 4
Lason, Inc.
Condensed Consolidated Statements of Income
(In thousands, except for per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1996 1995 1996 1995
------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues, net of postage $ 20,659 $ 11,525 $ 47,748 $ 35,220
Cost of revenues 14,754 7,927 32,450 23,244
------------- ----------- ------------ ------------
Gross profit 5,905 3,598 15,298 11,976
Selling, general and administrative expenses 3,482 2,205 8,738 6,800
Compensatory stock option expense 123 16 283 48
Amortization of intangibles 363 188 743 564
------------- ----------- ------------ ------------
Income from operations 1,937 1,189 5,534 4,564
Interest expense 700 464 1,550 1,194
------------- ----------- ------------ ------------
Income before income taxes
and minority interest in net income of subsidiaries 1,237 725 3,984 3,370
Provision for income taxes 469 262 1,433 1,218
------------- ----------- ------------ ------------
Income before minority interest in net income of subsidiaries 768 463 2,551 2,152
Minority interest in net income of subsidiaries 40 - 68 -
------------- ----------- ------------ ------------
Net Income $ 728 $ 463 $ 2,483 $ 2,152
============= =========== ============ ============
Pro Forma Primary and fully diluted earnings per share $ 0.12 $ 0.07 $ 0.40 $ 0.35
============= =========== ============ ============
</TABLE>
The accompanying Notes are an integral part of the condensed consolidated
financial statements.
3
<PAGE> 5
Lason, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,483 $ 2,152
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,557 1,222
Compensatiory stock option expense 283 48
(Gain) loss on disposal of fixed assets (20) 7
Changes in operating assets and liabilities
net of effects from acquisitions:
Accounts receivable (3,004) (1,408)
Supplies (305) (305)
Prepaid expenses and other (518) (285)
Accrued expenses and other liabilities (454) 775
Minority interests 68 -
-------- --------
Net cash provided by operating activities 90 2,206
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for net assets of acquired businesses,
net of cash acquired (17,137) (1,430)
Proceeds from sales of fixed assets 60 13
Purchase of fixed assets (1,854) (814)
-------- --------
Net cash used in investing activities (18,931) (2,231)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on revolving line of credit 48,650 22,739
Repayments on revolving line of credit (44,878) (22,227)
Borrowings on acquisition facility 17,312 -
Principal payments on long-term debt (1,773) (1,125)
Proceeds from exercise of employee stock options 5 -
-------- --------
Net cash provided by (used in) financing activities 19,613 (613)
-------- --------
Net increase (decrease) in cash 475 (638)
Cash at beginning of period 103 915
-------- --------
Cash at end of period $ 578 $ 277
======== ========
</TABLE>
The accompanying Notes are an integral part of the condensed consolidated
financial statements.
4
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In Thousands)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Lason, Inc. (together with its subsidiaries, the "Company") have been prepared
in conformity with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, such interim financial statements do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
In the opinion of management, all necessary adjustments (consisting of
normal recurring adjustments) considered necessary for a fair presentation have
been included. The operating results for the nine month period ended September
30, 1996 are not necessarily indicative of the results to be expected for the
year ending December 31, 1996.
NOTE 2. ACQUISITIONS
Since June 1995, Lason Systems, Inc., a wholly-owned subsidiary of Lason,
Inc., completed the acquisitions of either substantially all of the assets or a
controlling stock ownership interest in several companies. The stock
acquisitions included acquiring 65% of the outstanding common stock of Delaware
Legal Copy, Inc. in April 1996, 100% of the outstanding common stock of
Information & Image Technology of America, Inc. in July 1996, 80% of the
outstanding common stock of Micro-Pro, Inc. and MP Services, Inc. (two
affiliated companies) in July 1996, 100% of the outstanding common stock of
Great Lakes Micrographics Corporation in July 1996, and 100% of the outstanding
common stock of National Reproductions Corp. in August 1996. Each of the
acquisitions was accounted for as a purchase. Accordingly, the results of
operations of the acquired companies are included in the consolidated results
of operations from the respective date of acquisition.
The aggregate purchase price for the acquisitions completed during the
nine months ended September 30, 1996, excluding liabilities assumed, was
approximately $19,857. The purchase price was allocated to the assets acquired
and liabilities assumed based on the related fair values at the date of
acquisition. The excess of the aggregate purchase price over the fair values
of assets acquired and liabilities assumed has been allocated to goodwill and
is being amortized on a straight-line method over 30 years.
In conjunction with these acquisitions, liabilities assumed and other
non-cash consideration was as follows:
<TABLE>
<S> <C>
Fair value of assets acquired $ 6,566
Goodwill 19,781
Cash paid in consideration for companies acquired (17,137)
Stock issued in consideration for companies acquired ( 2,320)
Promissory note issued in consideration for companies acquired ( 400)
-------
Liabilities assumed $ 6,490
=======
</TABLE>
5
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
NOTE 2. ACQUISITIONS (CONCLUDED)
The following table summarizes pro forma unaudited results of operations
as if each of the acquisitions completed during the first nine months of 1996
had occurred at the beginning of the periods presented:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1996 1995
---- ----
<S> <C> <C>
Revenues $62,336 $56,014
Income before income taxes 4,781 4,471
Net income 2,943 2,808
Net income per share $ 0.48 $ 0.45
</TABLE>
NOTE 3. PRO FORMA NET INCOME PER SHARE
Pro Forma net income per share amounts were computed based on the weighted
average number of common share and common share equivalents outstanding.
Weighted average common shares outstanding, after giving effect to a 2.5 for 1
stock split approved by the Company's Board of Directors in the fourth quarter
of 1996, were 6,230,010 and 6,192,292 for the three months ended September 30,
1996 and 1995, respectively, and 6,146,525 and 6,192,292 for the nine months
ended September 30, 1996 and 1995, respectively.
NOTE 4. SUBSEQUENT EVENTS
On October 15, 1996, the Company completed an initial public offering
("IPO") of 3,000,000 shares of common stock at $17.00 per share for net
proceeds to the Company of approximately $46,130, after deducting underwriting
discounts and other offering expenses. A registration statement relating to
these securities was filed with the Securities and Exchange Commission and was
declared effective on October 9, 1996. Approximately $34,363 of the net
proceeds was used to repay a portion of outstanding debt under the Company's
credit agreement and approximately $11,767 was used to redeem 692,047
outstanding shares of common stock held by the Company's largest stockholder.
In connection with the IPO, the underwriters were granted an
over-allotment option to purchase up to an additional 450,000 shares of
common stock at the initial public offering price of $17.00 per share. On
November 14, 1996 the underwriters completed the exercise of the
over-allotment option and purchased 450,000 shares of common stock for net
proceeds to the Company of approximately $7,115, after deducting underwriting
discounts and commissions. The additional net proceeds were used to repay
amounts outstanding under the Company's credit agreement.
In connection with and immediately prior to the consummation of the
IPO, each share of Class A common stock was converted into one share of
common stock , each share of Class B common stock was converted into
approximately 1.3 shares of common stock, and the Company's Board of Directors
approved a 2.5 for 1 stock split. The authorized capital stock of the Company
now consists of 20,000, 000 shares of common stock, par value $.01 per share
and 5,000,000 shares of preferred stock, par value $0.01 per share. The
condensed consolidated balance sheet has been restated as of September 30,
1996 to give retroactive effect to the 2.5 for 1 stock split and the
recapitalization which was effective October 15, 1996, but does not include the
redemption of the 692,047 shares of common stock.
6
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements of the Company and the related notes
and the other related financial information included elsewhere in this Form
10-Q. The discussion in this section contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed elsewhere
in this Form 10-Q and identified from time to time in the Company's reports and
registration statements filed with the Securities and Exchange Commission.
OVERVIEW
Since June 1995, Lason Systems, Inc., a wholly-owned subsidiary of Lason,
Inc., completed the acquisitions of either substantially all of the assets or a
controlling stock ownership interest in several companies. The stock
acquisitions included acquiring 65% of the outstanding common stock of Delaware
Legal Copy, Inc. in April 1996, 100% of the outstanding common stock of
Information & Image Technology of America, Inc. in July 1996, 80% of the
outstanding common stock of Micro-Pro, Inc. and MP Services, Inc. (two
affiliated companies) in July 1996, 100% of the outstanding common stock of
Great Lakes Micrographics Corporation in July 1996, and 100% of the outstanding
common stock of National Reproductions Corp. in August 1996. Each of the
acquisitions was accounted for as a purchase. Accordingly, the results of
operations of the acquired companies are included in the consolidated results
of operations from the respective date of acquisition. The excess of the
aggregate purchase price over the fair value of the net assets acquired has been
allocated to goodwill.
The consolidated results of operations for the three and nine month
periods ended September 30, 1996 include the results of operations of the
acquisitions since the date of acquisition and, therefore, are not directly
comparable to the results of operations for the same periods of 1995.
One of the Company's principal strategies is to increase its revenues and
the markets it serves through the continued acquisition of complementary
businesses. There can be no assurance that the Company will be able to
identify and acquire attractive acquisition candidates in the future,
profitably manage such acquired companies or successfully integrate such
acquired companies into the Company without substantial costs, delays or other
problems. In addition, there can be no assurance that any companies acquired
in the future will be profitable at the time of acquisition or will achieve
sales and profitability justifying the Company's investment therein or that the
Company will recognize the synergies expected from such acquisitions.
On October 15, 1996, the Company completed an initial public offering
("IPO") of 3,000,000 shares of common stock at $17.00 per share for net
proceeds to the Company of approximately $46.1 million after deducting
underwriting discounts and other offering expenses. A registration statement
relating to these securities was filed with the Securities and Exchange
Commission and was declared effective on October 9, 1996. Approximately $34.4
million of the net proceeds was used to repay a portion of outstanding debt
under the Company's credit agreement and approximately $11.8 million was used
to redeem 692,047 outstanding shares of common stock held by the Company's
largest stockholder.
In connection with the IPO, the underwriters were granted an
over-allotment option to purchase up to an additional 450,000 shares of
common stock at the initial public offering price of $17.00 per share. On
November 14, 1996 the underwriters completed the exercise of the
over-allotment option and purchased 450,000 shares of common stock for net
proceeds to the Company of approximately $7.1 million, after deducting
underwriting discounts and commissions. The additional net proceeds were used
to repay amounts outstanding under the Company's credit agreement.
7
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE
MONTHS ENDED SEPTEMBER 30, 1995.
Net revenues increased 79% to $20.7 million for the third quarter of 1996
from $11.5 million for the comparable 1995 period. The approximate $9.2
million increase in net revenues includes approximately $6.9 million of
revenues related to recently acquired businesses and approximately $2.3 million
principally due to sales growth in the Company's direct mail, collection
letter processing and digital imaging revenues of approximately $800,000,
$300,000 and $900,000, respectively.
Gross profit increased $2.3 million to $5.9 million for the three months
ended September 30, 1996 versus $3.6 million for the comparable 1995 period.
The increase is primarily due to increases in revenues partially offset by
lower gross profit margins of recently acquired businesses. Gross profit as a
percentage of net revenues was 28.6% for the third quarter of 1996 versus 31.2%
for the comparable 1995 quarter.
Selling, general and administrative expenses increased $1.3 million for
the third quarter of 1996, versus the comparable 1995 quarter. Approximately
$900,000 of the increase was associated with recently acquired businesses and
approximately $300,000 was due to higher administrative expenses resulting
from the hiring of several key executives in late 1995 and in the first nine
months of 1996.
Compensatory stock option expense increased to $123,000 for the third
quarter of 1996 from $16,000 for the comparable 1995 quarter due to the
granting of additional stock options in the fourth quarter of 1995 and the
first nine months of 1996. The provisions of certain stock option agreements
provide for immediate vesting of those options upon the completion of an IPO.
Accordingly, the Company will record a pretax charge to income of approximately
$653,000 in the fourth quarter of 1996 to record the compensation expense
associated with the immediate vesting provisions due to the completion of the
IPO on October 15, 1996.
Amortization of intangibles increased to $363,000 for the three months
ended September 30, 1996 from $188,000 for the comparable three month period of
1995 primarily due to the amortization of goodwill recorded as a result of
recent acquisitions.
Interest expense increased to $700,000 for the third quarter of 1996 from
$464,000 for the comparable 1995 quarter primarily due to an increase in
average borrowings related to the Company's growth and acquisitions.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30, 1995.
Net revenues increased 36% to $47.7 million for the nine months ended
September 30, 1996 compared to $35.2 million for the comparable period of 1995.
Net revenues increased approximately $7.3 million due to recently acquired
businesses and approximately $4.4 million primarily due to sales growth in the
Company's direct mail, collection letter processing and digital imaging
revenues of approximately $2.0 million, $900,000 and $1.6 million, respectively.
Gross profit increased $3.3 million to $15.3 million for the nine months
ended September 30, 1996 compared to $12.0 million for the comparable 1995
period. The increase in gross profit is primarily due to higher net revenues
partially offset by lower gross margins of recently acquired businesses.
Gross profit as a percentage of net revenues was 32% for the first nine months
of 1996 versus 34% for the same period of 1995.
8
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Selling, general and administrative expenses increased $1.9 million to
$8.7 million for the nine months ended September 30, 1996 from $6.8 million for
the comparable period of 1995. Approximately $1.1 million of the increase
related to selling, general and administrative expenses of recently acquired
businesses and approximately $900,000 related to an increase in administrative
expenses primarily due to the hiring of several key executives in late 1995 and
in the first nine months of 1996.
Compensatory stock option expense was $283,000 for the nine months ended
September 30, 1996 versus $48,000 for the comparable 1995 period. The increase
is primarily due to the granting of additional stock options in the fourth
quarter of 1995 and the first nine months of 1996.
Amortization of intangibles was $743,000 for the nine months ended
September 30, 1996 compared to $564,000 for the comparable 1995 period.
Primarily due to amortization expense associated with goodwill recorded as a
result of recent acquisitions.
Interest expense increased to $1.6 million for the nine months ended
September 30, 1996 from $1.2 million for the comparable period of 1995.
The increase is primarily due to an increase in average borrowings related to
the Company's growth and recent acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations and acquisitions through a
combination of cash flow from operations, bank borrowings and the issuance of
shares of common stock.
Cash flows from operating activities decreased to $90,000 for the nine
months ended September 30, 1996 from $2.2 million for the comparable period of
1995. The decrease is primarily due a net increase in accounts receivables
and a net decrease in accrued expenses and other liabilities as of September
30, 1996 compared with the 1995 period.
Cash flows used in investing activities increased to $18.9 million for the
nine months ended September 30, 1996 compared to $2.2 million for the same
period in 1995 primarily due to payments for the net assets of acquired
businesses. Cash used to acquire businesses during the first nine months of 1996
was $17.1 million compared to $1.4 million in 1995.
Cash flows provided by financing activities of $19.3 million for the nine
months ended September 30, 1996 were primarily from borrowings on the Company's
acquisition credit facility which were used to fund the payments for the stock
purchases related to acquired businesses.
Credit Agreement and Borrowings
On January 17, 1995 the Company and First Union National Bank of North
Carolina (the "Bank") entered into a Credit Agreement, pursuant to which the
Bank provided for an aggregate of $15 million of term loans payable in 26
quarterly installments ending June 30, 2001 and a $10 million revolving credit
facility, subject to a borrowing base limitation, expiring on June 30, 2001.
In July 1996, the Credit Agreement was amended to include an additional $10
million acquisition credit facility, expiring on the earlier of June 30, 2001
or an initial public offering by the Company. In addition, in August 1996, the
Company amended the Credit Agreement to provide for up to an additional $8.5
million of interim term loans, payable upon the earlier of March 31, 1997 or an
initial public offering by the Company, and borrowed approximately $8.2 million
under the interim term loan facility in connection
9
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
with the acquisition of NRC. In August 1996, the Company also amended the
Credit Agreement to increase the existing $10 million revolving credit facility
to $13 million. As of September 30, 1996, the Company had approximately $40.9
million of total indebtedness.
After application of the net proceeds from the IPO and the exercise of the
underwriters over allotment option, the Company had no amounts outstanding
under its Credit Agreement as of November 15, 1996.
In the fourth quarter of 1996, the Company expects to terminate the
Credit Agreement and enter into a new credit agreement (the "New Credit
Agreement") with a bank providing for a revolving line of credit of up to $30
million to be used to repay the remaining portion of the indebtedness
outstanding under the Credit Agreement, if any, and to finance additional
acquisitions, working capital, capital expenditures and other general corporate
purposes. The New Credit Agreement would expire on June 30, 1999. Interest on
amounts outstanding, if any, under the New Credit Agreement will be calculated
using rates determined at the time of borrowing. Borrowings would bear
interest at rates ranging from a base percentage rate plus 1.25% (10.25% as of
September 30, 1996) to LIBOR plus 1.0% (6.68% as of September 30, 1996),
depending upon the Company's leverage ratio. The Company would pay a monthly
fee at an annual rate of 0.25% of the unused balance on the New Credit
Agreement. The Company would not be required to make principal payments prior
to the end of the term of the proposed loan. Borrowings, if any, under the New
Credit Agreement would be collateralized by substantially all of the Company's
assets. The New Credit Agreement would contain restrictions on the acquisition
of stock or assets, disposal of assets, incurrence of other liabilities,
minimum requirements for cash flow and certain financial ratios. There can be
no assurance, however, that such New Credit Agreement will be obtained or that,
if obtained, it will be on terms that are favorable to the Company or
sufficient for the Company's needs.
The Company expects that amounts available under the New Credit Agreement
will be used to continue its acquisition program. The Company also expects to
use shares of its common stock in the future to continue its acquisition
program. Accordingly, the Company expects to register up to 2,500,000 shares of
common stock in the fourth quarter of 1996 for use as consideration in future
acquisitions.
The Company also expects to file in the fourth quarter of 1996, a
registration statement on Form S-8 covering up to 1,000,000 shares of common
stock with respect to the Company's 1995 Stock Option Plan.
Capital Expenditures
The Company continues to invest in capital equipment, principally to
improve its reprographic capability and capacity. The Company has expended
approximately $1.9 million and $800,000 for capital equipment for the nine
months ended September 30, 1996 and 1995, respectively.
Recent Acquisitions
The Company's liquidity and capital resources have been significantly
affected by acquisitions of businesses and, given the Company's acquisition
strategy, may be significantly affected for the foreseeable future. To date,
the Company has financed its acquisitions with borrowings under the Credit
10
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONCLUDED)
LIQUIDITY AND CAPITAL RESOURCES (CONCLUDED)
Agreement, with shares of its common stock and with cash from operations.
Borrowings for acquisitions for the nine months ended September 30, 1996 and
the year ended December 31, 1995 totaled approximately $17.3 million and $1.4
million, respectively.
INFLATION
Certain of the Company's expenses, such as wages and benefits, occupancy
costs and equipment repair and replacement, are subject to normal inflationary
pressures. Although the Company to date has been able to offset inflationary
cost increases through increased operating efficiencies, there can be no
assurance that the Company will be able to offset any future inflationary cost
increases through similar efficiencies or increased charges for its products
and services.
LITIGATION
The Company is, from time to time, a party to legal proceedings arising in
the normal course of its business. Management believes that none of the legal
proceedings currently outstanding will have a material adverse effect on the
Company's business, financial condition or results of operations.
11
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were submitted to a vote of security
holders by written consent in lieu of a special meeting of the
voting shareholders.
On July 29, 1996, the Company's shareholders holding more than a
majority of the outstanding shares accepted the resignation of
Elliot W. Maluth from the Company's Board of Directors and
elected Joseph P. Nolan to the Company's Board of Directors to
fill the vacancy created by Mr. Maluth's resignation. Following
the election, the current directors of the Company consist of
Joseph P. Nolan, Donald M. Gleklen, Gary L. Monroe, Allen J.
Nesbitt, Bruce V. Rauner and Robert A. Yanover.
On August 26, 1996, the Company's shareholders holding more than
a majority of the outstanding shares approved an amendment to
the Company's Certificate of Incorporation changing the name of
the Company from Lason Holdings, Inc. to Lason, Inc..
On October 4, 1996, the Company's shareholders holding more than
a majority of the outstanding shares approved the adoption of an
Amended and Restated Certificate of Incorporation, an Amended
and Restated Bylaws, and a Plan of Recapitalization which,
generally, provide that prior to the consummation of the
Company's offering of Common Stock (pursuant to that certain
Registration Statement filed with the Securities and Exchange
Commission, File No. 333-09799) (the "Registration Statement")
each outstanding share of Class A Common Stock would be converted
into one share of Common Stock and each share of Class B Common
Stock would be converted into approximately 1.3 shares of Common
Stock. Each share of Common Stock would then be split into 2.5
shares of Common Stock. A portion of the Company's proceeds
from the offering pursuant the Registration Statement would then
be used to redeem approximately 692,047 shares of stock owned by
the former holder of the Class B Common Stock.
The Amended and Restated Certificate of Incorporation, among
other things, provides that the Board of Directors will be
divided into three classes and that such provision for a
classified board may only be amended, altered or repealed upon
the affirmative vote of the holders of at least 80% of the
outstanding shares of the voting stock of the Company. The
Amended and Restated Certificate of Incorporation also requires
that any action required or permitted to be taken by the
Company's shareholders must be effected at a duly called annual
or special meeting of shareholders and may not be effected by
consent in writing. In addition, the Amended and Restated
Certificate of Incorporation and Amended and Restated Bylaws
require that special meetings of the shareholders of the
Company be called only upon the affirmative vote of two members
of the Board or by certain officers. The Amended and Restated
Bylaws contain restrictions on the timing of when shareholders
can seek to bring business before or to nominate directors at
any annual meeting of shareholders. These provisions also may
not be amended, altered or appealed by the shareholders without
the affirmative vote of at least 80% of the outstanding shares
of the voting stock of the Company. The Board of Directors may
also, without further action by the Company's shareholders, from
time to time, direct the issuance of shares of Preferred Stock
in series and may, at the time of issuance, determine the rights,
preferences and limitations of each series.
12
<PAGE> 14
PART II. OTHER INFORMATION (CONCLUDED)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (CONCLUDED)
The foregoing summary describes certain material provisions
with respect to the matters voted but does not purport to be complete
and is subject to, and qualified in its entirety by, the Amended and
Restated Certificate of Incorporation and the Amended and Restated
Bylaws of the Company that were included as exhibits to the Company's
Registration Statement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
11 Statements re Computation of Per Share Earnings
27 Financial Data Schedule
</TABLE>
b. Reports on Form 8-K
None
13
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LASON, INC.
(Registrant)
November 21, 1996 /s/ William J. Rauwerdink
(Date) ----------------------------
Executive Vice President and
Chief Financial Officer
14
<PAGE> 16
LASON, INC
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
11 Computation of Earnings per Share
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 11
Lason, Inc.
Computation of Consolidated Net Income Per Share
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- -------------------------
1996 1995 1996 1995
----- ----- ------ ------
<S> <C> <C> <C> <C>
Net income $728 $463 $2,483 $2,152
===== ===== ====== ======
Primary and Fully Diluted
Weighted average common shares outstanding 5,149 5,000 5,055 5,000
Assumed exercise of stock options using
the treasury stock method 389 500 400 500
Common shares redeemed on October 15, 1996 692 692 692 692
Weighted average common shares outstanding
and common share equivalents for primary ----- ----- ------ ------
and fully diluted earnings per share 6,230 6,192 6,147 6,192
Primary and fully diluted earnings per share $0.12 $0.07 $0.40 $0.35
===== ===== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 578
<SECURITIES> 0
<RECEIVABLES> 18,916
<ALLOWANCES> 0
<INVENTORY> 1,860
<CURRENT-ASSETS> 22,513
<PP&E> 5,406
<DEPRECIATION> 0
<TOTAL-ASSETS> 68,215
<CURRENT-LIABILITIES> 32,501
<BONDS> 21,155
0
0
<COMMON> 51
<OTHER-SE> 13,194
<TOTAL-LIABILITY-AND-EQUITY> 68,215
<SALES> 0
<TOTAL-REVENUES> 47,748
<CGS> 0
<TOTAL-COSTS> 32,450
<OTHER-EXPENSES> 9,764
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,550
<INCOME-PRETAX> 3,984
<INCOME-TAX> 1,433
<INCOME-CONTINUING> 2,551
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,483
<EPS-PRIMARY> 0
<EPS-DILUTED> 0.40
</TABLE>
