SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1995
Commission File Number 0-8615
BUSINESS RECORDS CORPORATION HOLDING COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 75-1533071
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1111 West Mockingbird Lane, Suite 1400
Dallas, Texas 75247
(Address of principal executive) (Zip Code)
(214) 688-1800
Registrant's telephone number, including area code
None
Former name, former address and former fiscal year, if changed since last report
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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 1995
Common Stock 6,228,929
$.10 Par Value
<PAGE> BUSINESS RECORDS CORPORATION HOLDING COMPANY
INDEX
PAGE
Part I. Financial Information
Consolidated Condensed Balance
Sheets - March 31, 1995 and
December 31, 1994 1
Consolidated Condensed Statements of
Income - Three Months Ended March 31,
1995 and 1994 2
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1995 and 1994 3
Notes to Consolidated Condensed Financial
Statements 4
Management's Discussion and Analysis 5
Part II. Other Information 7
<PAGE> PART I. FINANCIAL INFORMATION
BUSINESS RECORDS CORPORATION HOLDING COMPANY
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1995 1994
ASSETS
Current assets:
Cash and cash equivalents. . . . . . . . . $ 751,000 $ 21,921,000
Short-term marketable securities . . . . . 32,527,000 14,688,000
Accounts and notes receivable, net . . . . 25,517,000 26,108,000
Inventories (Note 4) . . . . . . . . . . . 8,353,000 5,953,000
Deferred tax asset . . . . . . . . . . . . 6,756,000 6,856,000
Other current assets . . . . . . . . . . . 1,002,000 938,000
Total current assets . . . . . . . . . . 74,906,000 76,464,000
Property, plant & equipment. . . . . . . . 60,252,000 59,279,000
Less accumulated depreciation
& amortization. . . . . . . . . . . . . 42,825,000 41,228,000
17,427,000 18,051,000
Long-term marketable securities. . . . . . 15,918,000 8,278,000
Long-term installment receivables. . . . . 6,248,000 6,815,000
Purchased software and data bases, net . . 2,763,000 2,883,000
Goodwill and related intangibles, net. . . 35,841,000 36,399,000
Other assets . . . . . . . . . . . . . . . 1,753,000 2,059,000
Total assets . . . . . . . . . . . . . . . $154,856,000 $150,949,000
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . $ 3,162,000 $ 3,100,000
Accrued liabilities. . . . . . . . . . . . 22,808,000 24,463,000
Current portion of
notes and capital leases. . . . . . . . . 1,326,000 1,523,000
Convertible exchangeable notes to
officer/director (Note 6) . . . . . . . . --- 1,333,000
Total current liabilities. . . . . . . . 27,296,000 30,419,000
Long-term notes and capital leases . . . . 992,000 1,361,000
Deferred tax liability . . . . . . . . . . 4,449,000 4,574,000
Noncurrent liabilities . . . . . . . . . . 28,000 29,000
Shareholders' Equity:
Common stock . . . . . . . . . . . . . . . 621,000 606,000
Additional paid-in capital . . . . . . . . 51,993,000 50,075,000
Retained earnings. . . . . . . . . . . . . 69,477,000 66,765,000
Treasury stock . . . . . . . . . . . . . . --- (2,880,000)
Total shareholders' equity . . . . . . . 122,091,000 114,566,000
Total liabilities and
shareholders' equity. . . . . . . . . . . $154,856,000 $150,949,000
See accompanying Notes to the Consolidated Condensed Financial Statements.
<PAGE> BUSINESS RECORDS CORPORATION HOLDING COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended March 31,
1995 1994
Revenues . . . . . . . . . . . . . . . . $ 32,456,000 $ 32,354,000
Cost of products and services. . . . . . 23,227,000 22,206,000
Selling, general and administrative. . . 5,436,000 5,397,000
28,663,000 27,603,000
Operating profit . . . . . . . . . . . . 3,793,000 4,751,000
Interest income (expense), net . . . . . 726,000 (54,000)
Income before income tax . . . . . . . . 4,519,000 4,697,000
Income tax provision . . . . . . . . . . 1,807,000 1,973,000
Net income . . . . . . . . . . . . . . . $ 2,712,000 $ 2,724,000
Earnings per common and
common equivalent share:
Net income. . . . . . . . . . . . . . $ .43 $ .49
Average shares. . . . . . . . . . . . 6,244,000 5,570,000
Earnings per share
assuming full dilution:
Net income . . . . . . . . . . . . . $ .43 $ .46
Average shares (Note 5). . . . . . . 6,339,000 6,212,000
Cash dividends per share . . . . . . . . $ --- $ ---
See accompanying Notes to the Consolidated Condensed Financial Statements.
<PAGE> BUSINESS RECORDS CORPORATION HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
1995 1994
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . $ 2,712,000 $ 2,724,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization. . . . . . 2,800,000 2,552,000
Loss (gain) on sale of assets. . . . . . --- 3,000
Changes in assets and liabilities:
(Increase) decrease in
accounts receivable . . . . . . . . . 851,000 1,956,000
(Increase) decrease in inventories. . . (2,400,000) 4,000
(Increase) decrease in other assets . . 293,000 (2,787,000)
Increase (decrease) in
accounts payable . . . . . . . . . . . 62,000 259,000
Increase (decrease) in
other liabilities. . . . . . . . . . . (764,000) 1,907,000
Total adjustments. . . . . . . . . . . . 842,000 3,894,000
Net cash provided by
operating activities. . . . . . . . . . . . 3,554,000 6,618,000
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . (1,325,000) (1,236,000)
Marketable securities. . . . . . . . . . . (25,605,000) 4,314,000
Proceeds from sale of assets . . . . . . . --- ---
Additions to installment receivables . . . (641,000) (1,357,000)
Proceeds from installment receivables. . . 949,000 369,000
Net cash (used in) provided by
investing activities. . . . . . . . . . . . (26,622,000) 2,090,000
Cash flows from financing activities:
Principal payments on
notes and capital leases. . . . . . . . . (566,000) (364,000)
Issuance of common stock . . . . . . . . . 2,949,000 5,503,000
Repurchases of stock and other . . . . . . (485,000) (6,952,000)
Net cash provided by
financing activities. . . . . . . . . . . . 1,898,000 (1,813,000)
Increase (decrease) in cash
and cash equivalents. . . . . . . . . . . . (21,170,000) 6,895,000
Cash and cash equivalents at
beginning of period . . . . . . . . . . . . $21,921,000 $18,006,000
Cash and cash equivalents at
end of period . . . . . . . . . . . . . . . $ 751,000 $24,901,000
Supplemental disclosures -- Cash payments during the first three months of 1995
for income taxes and interest were $1,535,000 and $122,000, respectively. Cash
payments during the first three months of 1994 for income taxes and interest
were $95,000 and $402,000, respectively.
In the first three months of 1995 and 1994, 95,238 and 71,428 additional shares
of common stock were issued upon the conversion of $1,333,000 and $1,000,000,
respectively, of the Company's $10,000,000 10% Convertible Exchangeable Notes.
See accompanying Notes to Consolidated Condensed Financial Statements.
<PAGE> BUSINESS RECORDS CORPORATION HOLDING COMPANY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The interim consolidated condensed financial statements included herein
have been prepared by Business Records Corporation Holding Company (the
"Company"), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements have been condensed
or omitted pursuant to such rules and regulations. These consolidated
condensed financial statements should be read in conjunction with the
consolidated financial statements and related notes contained in the
Company's 1994 annual report on Form 10-K. In the opinion of management,
the consolidated condensed financial statements contain all adjustments
necessary to present fairly the financial position as of March 31, 1995
and the results of operations and cash flows for the three months ended
March 31, 1995 and 1994. These adjustments include recurring accruals and
a pro rata portion of certain estimated expenses. Management believes
that the procedures followed in preparing these consolidated condensed
financial statements are reasonable under the circumstances, but the
accuracy of the amounts in the financial statements are in some respects
dependent upon facts that will exist and procedures that will be performed
by the Company later in the fiscal year. The significant area that could
be affected by future developments is as follows:
Physical Inventories - The Company takes physical inventory at interim
times during the fiscal year. Management believes that the costs of
taking a physical inventory more frequently would considerably exceed the
benefit. Accordingly, the amounts shown for inventories at March 31, 1995
have been determined from the Company's regular accounting system.
However, the Company expects no significant quarterly adjustments will
arise when the next physical inventory is taken.
2. The provision for income tax is based on the estimated annual rate.
Certain reclassifications between current income tax and deferred income
tax may be necessary at December 31, 1995 to reflect the annual
computation of differences between book and tax income.
3. The results of operations for the three months ended March 31, 1995 are
not necessarily indicative of the results to be expected for the full
year.
4. Inventories consist of the following:
March 31, December 31,
1995 1994
Finished goods . . . . . . . . . . $ 2,436,000 $ 2,779,000
Work in progress . . . . . . . . . 2,520,000 1,355,000
Raw materials and supplies . . . . 3,397,000 1,819,000
Net inventories. . . . . . . . . . $ 8,353,000 $ 5,953,000
5. Earnings per share, assuming full dilution, for the three months ended
March 31, 1995 is computed based on shares issuable upon conversion of a
note to a officer/director and the weighted average number of common and
common equivalent shares outstanding for a total of 6,339,000 shares. In
addition, for purposes of computing earnings per share, interest expense
on the convertible note is added back to income, net of tax, in the amount
of $20,000.
6. On March 31,1995, pursuant to the terms of the Company's $10,000,000 10%
Convertible Exchangeable Notes (the "Notes"), the holder of the Notes, an
officer/director of the Company, converted $1.3 million of the Notes into
95,238 shares of the Company's common stock.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Revenues during the first quarter of 1995 were $32.5 million as compared to
$32.4 million reported during the same period last year. While the Company
experienced a decrease in sales of election products, due primarily to 1995
being a "non-election" year, revenues from technology outsourcing services
increased and represent a larger percent of the total revenues of the Company
as compared to the same period last year.
Revenues from technology outsourcing services were $16.2 million for the first
quarter, an 11% increase from the first quarter of 1994. Technology
outsourcing services comprised 50% of the Company's revenues during the first
quarter of 1995 as compared to 45% during the same period last year. Technology
outsourcing services revenues include the Company's outsourcing revenues from
its healthcare and government clients acquired as a part of its acquisition of
CMSI, Inc. in May of 1993 as well as other outsourcing contracts and revenues
from specialized governmental software products developed and sold by the
Company independent of the acquisition.
The Company's revenues associated with governmental records management were
down $845,000, or 14%, as compared to the same period last year. This decrease
was due largely to decreased volumes of nationwide real estate transactions as
compared to the first quarter of 1994. Low nationwide interest rates during
1993 and early 1994 contributed to a significant increase in home purchases and
refinancing of home mortgages during 1993 and 1994. In recent months, new
housing sales and construction permits have decreased, affecting overall real
estate transaction levels. Based on current trends, and absent significant
changes in nationwide interest rates, the Company currently believes that it
will continue to be adversely affected by lower volumes of real estate
transactions during 1995.
Sales of election products and services are significantly affected by a
two-year election cycle. Due to a lower amount of public election activity
during odd-numbered years, such as 1995, as compared to even-numbered
years, the Company usually experiences corresponding decreases in revenues
associated with its election business during odd numbered years. Revenues from
election products and services decreased by 20% compared to the first quarter
of 1994, but increased by 44% over the first quarter of 1993, the previous
non-election year. Due primarily to this election cycle, it is anticipated
that the Company will continue to experience decreases in sales of election
products and services over the next several quarters as compared to the
previous year, particularly in its ballots and supplies product lines. However,
absent other unforeseen events and circumstances, the Company currently
anticipates increases in sales of election systems during the later part of the
year in 1995, as election jurisdictions start their preparations for the 1996
presidential election year. The Company's inventories increased by $2.4 million
during the quarter ended March 31, 1995, due to its assembly of election
equipment to meet this anticipated demand.
Primarily due to lower utilization of its election facilities and related
overheads during the first quarter of 1995, the Company's gross margin
decreased from 31% to 28% when compared to the same period of the previous
year. Selling, general and administrative expenses as a percent of revenues
remained consistent with the previous year.
The balance of the convertible exchangeable notes issued to an officer/director
of the Company in 1988 were exchanged into 95,238 shares of common stock during
the quarter. This had a positive impact on the reduction of interest expense
(See Note 6 to the Consolidated Condensed Financial Statements).
A significant amount of the cash balances held by the Company at year end
have been invested in short term investments during the first quarter due to
more favorable interest rates.
Liquidity and Capital Resources
At March 31, 1995, the Company had net working capital (total
current assets minus total current liabilities) of $47.6 million. This
represents an increase of $1.6 million as compared to the Company's working
capital as of December 31, 1994. The Company's total current assets were 2.75
times total current liabilities. Additionally, the Company currently
anticipates continuing positive cash flows from operations and additions to
capital associated with stock option exercises. As such, the Company believes
its cash and investment balances are sufficient to meet currently foreseeable
working capital commitments. The Company currently does not maintain an active
line of credit.
<PAGE> PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
11. Computation of earnings per share for the Three Months Ended
March 31, 1995 and 1994
27. Financial Data Schedule for the Three Months Ended March 31, 1995.
(Pursuant to Item 601(c)(iv) of Regulation S-X, the Financial Data
Schedule is not deemed to be "filed" for purpose of Section 11 of
the Securities Act of 1933, as amended, or Section 18 of the
Securities Act of 1934, as amended.)
B. Reports on Form 8-K
During the three months ended March 31, 1995, the Company did not file a
Current Report on Form 8-K.
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.
BUSINESS RECORDS CORPORATION
HOLDING COMPANY
(Registrant)
By
Date: May 12, 1995 /s/ P. E. Esping
P. E. Esping
Chairman, Chief Executive Officer
and Director (Principal Executive
Officer)
Date: May 12, 1995 /s/ Thomas E. Kiraly
Thomas E. Kiraly
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
BUSINESS RECORDS CORPORATION HOLDING COMPANY
COMPUTATION OF EARNINGS PER SHARE
EXHIBIT 11
Three Months Ended March 31,
1995 1994
Primary:
Net income . . . . . . . . . . . . . . . $2,712,000 $2,724,000
Weighted average number of shares
outstanding . . . . . . . . . . . . . . 6,058,000 5,205,000
Additional weighted average
shares from assumed exercise of
dilutive stock options, net of
shares assumed to be repurchased
with proceeds at average market
price during the period . . . . . . . . 186,000 365,000
6,244,000 5,570,000
Primary earnings per share . . . . . . . $ .43 $ .49
Assuming full dilution:
Net income . . . . . . . . . . . . . . . $2,712,000 $2,724,000
Add interest expense on
convertible notes and
debentures, net of tax. . . . . . . . . 20,000 131,000
Adjusted net income . . . . . . . . $2,732,000 $2,855,000
Weighted average number of
shares outstanding. . . . . . . . . . . 6,058,000 5,205,000
Additional weighted average
shares from assumed exercise of
dilutive stock options, net of
shares assumed to be repurchased
with proceeds at the greater of
average market price during the
period or period end market price . . . 186,000 365,000
Additional weighted average shares
from assumed conversion of notes
and conversion of debentures. . . . . . 95,000 642,000
6,339,000 6,212,000
Fully diluted earnings per share . . . . $ .43 $ .46
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Form 10Q financial statements filed for the period ending March 31, 1995 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> MAR-31-1995
<CASH> 751
<SECURITIES> 32527
<RECEIVABLES> 25517
<ALLOWANCES> 0
<INVENTORY> 8353
<CURRENT-ASSETS> 74906
<PP&E> 17427
<DEPRECIATION> 0
<TOTAL-ASSETS> 154856
<CURRENT-LIABILITIES> 27275
<BONDS> 992
<COMMON> 621
0
0
<OTHER-SE> 121491
<TOTAL-LIABILITY-AND-EQUITY> 154856
<SALES> 0
<TOTAL-REVENUES> 32456
<CGS> 0
<TOTAL-COSTS> 23227
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4519
<INCOME-TAX> 1807
<INCOME-CONTINUING> 2712
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2712
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
</TABLE>
