<PAGE>
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number
0-9403
NBI, INC.
State of Incorporation IRS Employer I. D. Number
Delaware 84-0645110
1880 Industrial Circle, Suite F
Longmont, Colorado 80501
(303) 684-2700
Check whether the issuer (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.
[X] YES [ ] NO
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan of reorganization confirmed by a court.
[X] YES [ ] 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 January 31, 1996
- -------------------------------------- -------------------------------
Common Stock, par value $.01 per share 6,497,234
<PAGE>
PAGE 2
NBI, INC.
INDEX TO FORM 10-QSB
For Quarter Ended December 31, 1995
<TABLE>
<CAPTION>
PAGE
----
PART I - FINANCIAL INFORMATION
<S> <C>
Consolidated Financial Statements (Unaudited)............... 3 - 6
Supplementary Notes to Consolidated Financial
Statements (Unaudited).................................... 7 - 11
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 12 - 14
PART II - OTHER INFORMATION.................................. 15
</TABLE>
<PAGE>
PAGE 3
NBI, INC.
CONSOLIDATED BALANCE SHEET
(Amounts in Thousands Except Share Data)
<TABLE>
<CAPTION>
December 31, June 30,
1995 1995
------------ --------
(Unaudited)
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents............................. $ 546 $1,931
Trading securities.................................... 1,343 4,324
Receivables, net...................................... 1,420 371
Inventories........................................... 2,180 196
Other current assets.................................. 286 391
------- ------
Total current assets............................... 5,775 7,213
Property and equipment, net............................. 4,381 55
Other assets............................................ 280 289
------- ------
$10,436 $7,557
======= ======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current liabilities:
Short-term borrowings and current portion
of notes payable................................... $ 1,977 $ 925
Accounts payable...................................... 544 384
Current portion of income taxes payable............... 301 864
Accrued liabilities................................... 1,577 544
------- ------
Total current liabilities.......................... 4,399 2,717
Long-term liabilities:
Income taxes payable.................................. 5,404 5,404
Notes payable......................................... 308 56
Deferred tax liability (net).......................... 251 --
Postemployment disability benefits.................... 224 234
------- ------
Total liabilities.................................. 10,586 8,411
------- ------
Stockholders' equity:
Common stock - $.01 par value; 20,000,000 shares
authorized; 10,001,270 shares issued................ 100 100
Capital in excess of par value........................ 6,011 5,769
Accumulated deficit................................... (5,060) (5,517)
Foreign currency translation adjustment............... 316 311
------- -------
1,367 663
Less treasury stock, at cost (3,504,036 shares)....... (1,517) (1,517)
------- ------
Total stockholders' equity (deficit).................. (150) (854)
------- ------
$10,436 $7,557
======= ======
</TABLE>
See accompanying notes.
<PAGE>
PAGE 4
NBI, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1995 1994 1995 1994
----- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Sales............................................. $2,800 $ 606 $5,271 $ 1,242
Service and rental................................ 611 250 989 514
------ ------- ------ -------
3,411 856 6,260 1,756
Costs and expenses:
Cost of sales...................................... 2,038 398 3,778 869
Cost of service and rental......................... 463 203 767 416
Product development and engineering................ -- 82 -- 162
Marketing, general and administrative.............. 726 761 1,321 1,523
------ ------- ------ -------
3,227 1,444 5,866 2,970
------- ------- ------ -------
Income (loss) from operations........................ 184 (588) 394 (1,214)
Other income (expense):
Interest income.................................... 1 61 15 118
Net gain (loss) on investments..................... 38 (1,385) 681 (553)
Other income (expense)............................. 34 (16) 42 (31)
Interest expense................................... (157) (181) (344) (362)
------ ------- ------ -------
(84) (1,521) 394 (828)
------- ------- ------ -------
Income (loss) before income taxes and cumulative
effect of change in accounting method.............. 100 (2,109) 788 (2,042)
Income tax provision................................. (38) -- (331) --
------ ------- ------ -------
Net income (loss) before cumulative effect of change
in accounting method............................... 62 (2,109) 457 (2,042)
Cumulative effect of change in accounting method..... -- (271) -- (271)
------ ------- ------ -------
Net income (loss).................................... $ 62 $(2,380) $ 457 $(2,313)
====== ======= ====== =======
Income (loss) per common share:
Pre-tax income (loss).............................. $ .02 $ (.31) $ .12 $ (.29)
Income tax provision............................... (.01) -- (.05) --
------ ------- ------ -------
Net income (loss) before cumulative effect of
change in accounting method...................... $ .01 $ (.31) $ .07 $ (.29)
Cumulative effect of change in accounting
method........................................... -- (.04) -- (.04)
------ ------- ------ -------
Net income (loss).................................. $ .01 $ (.35) $ .07 $ (.33)
====== ======= ====== =======
Weighted average number of common
and common equivalent shares outstanding........... 6,497 6,794 6,497 6,923
====== ======= ====== =======
</TABLE>
See accompanying notes.
<PAGE>
PAGE 5
NBI, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1995 1994
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss).............................................. $ 457 $(2,313)
Adjustments to reconcile net income (loss) to net cash
flow provided by operating activities:
Utilization of net operating loss carryforwards........... 242 --
Depreciation and amortization............................. 220 82
Provision for bad debts................................... 18
Provision for writedown of inventory...................... 25 21
Loss (gain) on sales of property and equipment............ (2) 25
Net unrealized loss (gain) on investments................. (79) 303
Cumulative effect of accounting change.................... -- 271
Other..................................................... (5) 14
Changes in assets -- decrease (increase):
Accounts receivable..................................... 102 226
Inventory............................................... 94 (24)
Trading securities...................................... 3,060 (3,926)
Marketable securities................................... -- 5,086
Other current assets.................................... (44) 239
Changes in liabilities -- (decrease) increase:
Accounts payable and accrued liabilities................ (468) 26
Income tax related accounts............................. (563) --
------ -------
Net cash flow provided by operating activities....... 3,057 30
Cash flows from investing activities:
Payments for business acquisitions, net of cash acquired..... (3,514) --
Proceeds from sales of property and equipment................ 2 33
Purchases of property and equipment.......................... (206) (18)
------ -------
Net cash flow provided by (used in) investing activities.. (3,718) 15
Cash flows from financing activities:
Purchases of treasury stock.................................. -- (115)
Payments on notes payable.................................... (240) (2,815)
Net-short-term borrowings (payments)......................... (484) 1,400
------ -------
Net cash flow used in financing activities................ (724) (1,530)
Effects of exchange rates on cash.............................. -- 3
------ -------
Net decrease in cash and cash equivalents...................... (1,385) (1,482)
Cash and cash equivalents at beginning of period............... 1,931 2,708
------ -------
Cash and cash equivalents at end of period..................... $ 546 $ 1,226
====== =======
</TABLE>
See accompanying notes.
<PAGE>
PAGE 6
NBI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Six Months Ended
December 31,
1995 1994
---- ----
Supplemental disclosures of cash flow information:
Interest paid...................................... $244 $360
==== ====
Income taxes paid.................................. $651 $ --
===== ====
See accompanying notes.
<PAGE>
PAGE 7
NBI, INC.
Supplementary Notes to Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Preparation
- -----------------------------
The accompanying financial statements have been prepared in accordance with the
requirements of Form 10-QSB. In the opinion of Management, the statements
reflect all adjustments necessary for a fair statement of the results of
operations for the interim periods. Certain items in the fiscal 1995 financial
statements have been reclassified to conform to the fiscal 1996 manner of
presentation. The consolidated financial statements include the accounts of the
Company and its wholly owned and majority owned subsidiaries. All significant
intercompany accounts and profits have been eliminated.
Note 2 - Business Acquisitions
- -------------------------------
On August 4, 1995, NBI, Inc. acquired 100% of the outstanding capital stock of
the Belle Vernon Motel Corporation for $2,430,000 in cash pursuant to a stock
purchase agreement. The Belle Vernon Motel Corporation owns and operates an 81
room Holiday Inn in Southwestern Pennsylvania. The primary assets held by the
acquired corporation consist of cash, accounts receivable, property and
equipment. The Company received approval as an authorized Holiday Inn
franchisee prior to the purchase transaction. The property and equipment
acquired continues to be operated as a Holiday Inn Hotel.
On August 14, 1995, with an effective date of close of business on July 31,
1995, American Glass, Inc., a recently formed, wholly-owned subsidiary of NBI,
Inc. closed on its purchase of a majority of the assets of L.E. Smith Glass
Company of Mount Pleasant, Pennsylvania, pursuant to an asset purchase and sale
agreement. L.E. Smith Glass Company is a manufacturer of handmade fine glass
giftware and lighting fixtures and has been in business since 1907. The assets
purchased consist primarily of accounts receivable, inventory and property,
plant and equipment. The property, plant and equipment acquired continues to be
used in the manufacture of handmade fine glass giftware and lighting fixtures.
The purchase price of $5,875,745 was paid through the assumption of $3,508,190
of certain liabilities at July 31, 1995, cash and cash proceeds from the
liquidation of other current assets held by the Company.
Both acquisitions have been accounted for under the purchase method of
accounting. The results of operations of these acquired businesses have been
included in the accompanying Statements of Operations since the effective date
of acquisition. The total purchase price, including acquisition costs, for the
Belle Vernon Motel Corporation and the L.E. Smith Glass Company was $2,496,000
and $6,004,000, respectively. The fair market value of the net assets acquired
of the Belle Vernon Motel Corporation, after final purchase price adjustments,
exceeded the purchase price by $864,000. Accordingly, the noncurrent assets
consisting of property and equipment have been reduced by this amount under the
purchase method of accounting. Similarly, the fair market value of the net
assets acquired of the L.E. Smith Glass Company exceeded the purchase price by
$771,000; therefore, the noncurrent assets consisting of property, plant and
equipment were reduced by this amount.
Proforma consolidated results of operations of the Company is shown in the
following table as if these businesses were acquired as of the first day of the
periods presented, July 1, 1995 and 1994. This proforma information is based on
the Company's accompanying statements of operations and the historical financial
information of the acquired companies, and includes adjustments to income taxes,
interest expense and depreciation, giving effect of the terms of the transaction
as if the acquisitions had occurred on the first day presented.
<PAGE>
PAGE 8
NBI, INC.
Supplementary Notes to Consolidated Financial Statements
(Unaudited)
Proforma consolidated results of operations:
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1995 1994
------- -------
(Amounts in thousands,
except per share data)
<S> <C> <C>
Revenue............................................................. $7,084 $ 6,982
====== =======
Net income (loss) before extraordinary items and cumulative
effect of accounting change.................................... $ 490 $(1,563)
====== =======
Net income (loss)................................................... $ 490 $(1,834)
====== =======
Net income (loss) per common share.................................. $ .08 $ (.26)
====== =======
</TABLE>
Note 3 - Cash and Cash Equivalents
- -----------------------------------
The Company's cash and cash equivalents of $546,000 at December 31, 1995
included $92,000 of restricted cash. This represents the amount held in trust
for payments under self insurance plans.
Note 4 - Investments in Securities
- ----------------------------------
During the six months ended December 31, 1995 and 1994, all of the Company's
securities were classified as trading securities; no securities were classified
as held-to-maturity or available-for-sale. For the quarter ended December 31,
1995, the Company recorded a net realized loss of $225,000 and a net unrealized
gain of $263,000 compared to a net realized gain of $115,000 and a net
unrealized loss of $1,500,000 in the same quarter of the prior fiscal year. The
Company recorded a net realized gain of $602,000 and a net unrealized gain of
$79,000 for the six months ended December 31, 1995, compared to a net realized
loss of $250,000 and a net unrealized loss of $303,000 recorded in the same
period of the prior fiscal year.
During the first quarter of the current fiscal year, the Company sold a
significant portion of its securities to fund the Company's two business
acquisitions.
The Company's investment portfolio may, at any point in time, include a
concentrated position in one security. As a result of this, the financial
results have and may continue to fluctuate significantly and have larger
fluctuations than with a more diversified portfolio. At December 31, 1995,
marketable securities do include a concentrated position in one equity security,
a majority of which was sold subsequent to quarter-end at slightly less than its
carrying value at December 31, 1995.
Note 5 - Inventories
- --------------------
Inventories are comprised of the following:
<TABLE>
<CAPTION>
December 31,
1995
-----------
(Amounts in thousands)
<S> <C>
Raw materials $ 679
Work in process 317
Finished goods 1,168
Food and beverage inventory 16
------
$2,180
======
</TABLE>
<PAGE>
PAGE 9
NBI, INC.
Supplementary Notes to Consolidated Financial Statements
(Unaudited)
Note 6 - Property and Equipment
- -------------------------------
Capital assets are depreciated on a straight-line basis over their useful lives
shown below:
<TABLE>
<CAPTION>
Asset December 31,
Lives 1995
----- ------------
(Amounts in thousands)
<S> <C> <C>
Land N/A $ 90
Buildings 20-25 yrs 1,793
Machinery and equipment 3-10 yrs 2,730
Office and hotel furniture, fixtures 5-7 yrs 493
Construction-in-progress N/A 97
------
5,203
Accumulated depreciation (822)
------
$4,381
======
</TABLE>
Note 7 - Income Taxes
- ---------------------
IRS Debt:
- ---------
On October 13, 1995, the Company entered into an agreement in principle with the
IRS, effective October 1, 1995, revising the payment terms provided in its
settlement agreement with the IRS dated June 12, 1991. The new agreement
provides for a principal payment of $250,000, plus accrued interest for the
period July 1, 1995 through September 30, 1995, at the original stated rate, and
accrued interest for the period October 1, 1995 through December 31, 1995, at
the rate of 7.5% per annum, to be paid upon execution of the definitive
agreement, which has not yet been finalized. Thereafter, quarterly interest
payments are due from April 1, 1996 through October 1, 1997. Interest will
accrue on the outstanding principal balance at the rate of 7.5% for the period
October 1, 1995 through March 31, 1996. The interest rate for April 1, 1996
through October 1, 1997 will be reevaluated in April 1996 based upon NBI's
ability to pay the statutory rate, but in no event will the interest rate for
this period exceed the lesser of the statutory rate or 10%. The remaining
principal balance is due in full on October 1, 1997. The balance sheets at
December 31, 1995 and June 30, 1995 reflect these revised payments terms.
In conjunction with the new agreement, the Company has agreed to grant the IRS a
security interest in all of the capital stock of American Glass, Inc., as well
as all of the capital stock of the Belle Vernon Motel Corporation. The security
interest will automatically terminate upon full payment by NBI of all principal
and interest owed to the IRS under the agreement. The agreement also provides
for accelerated principal payments to be made within forty-five days after the
end of any fiscal quarter in which NBI Inc.'s unconsolidated cash and cash
equivalents, excluding restricted cash, exceed $1.3 million. The Company is
required to pay to the IRS fifty percent of the amount by which such cash and
cash equivalents exceed $1.3 million. Any such payment shall be applied to and
shall reduce the outstanding principal balance.
There is no accelerated principal amount payable in accordance with the revised
agreement based upon the Company's cash, cash equivalents and treasury
investments at December 31, 1995. Furthermore, any other accelerated principal
payments due within the next twelve months, based upon subsequent quarter-end
cash and cash equivalent positions under the new agreement, are not determinable
at December 31, 1995. Therefore, only the scheduled principal payments due
within the next twelve months have been classified as current at December 31,
1995.
<PAGE>
PAGE 10
NBI, INC.
Supplementary Notes to Consolidated Financial Statements
(Unaudited)
Tax effect of acquisitions:
- ---------------------------
In conjunction with the Belle Vernon Motel Corporation acquisition (See Note 2),
a deferred tax liability of $466,000 was recorded for the temporary differences
between the acquired tax basis and the book basis of the property, plant and
equipment acquired. This liability was partially offset by a deferred tax asset
of $215,000 related to the availability of the Company's net operating losses
through their expiration in the year 2010, to offset the temporary book versus
tax differences arising from the acquisition. There was no tax effect from the
L.E. Smith Glass Company acquisition.
Income tax provision:
- ---------------------
Provisions for income taxes totaling $39,000 and $331,000 were recorded for the
three and six months ended December 31, 1995, respectively, based upon book
income using year-to-date effective tax rates of 30% for federal and 13% for
state. Included in the tax provisions was $28,000 and $242,000 for the three
and six months ended December 31, 1995, respectively, which were non-cash
charges for the utilization of the Company's pre-reorganization net operating
losses. In accordance with fresh start accounting, which was adopted as of
April 30, 1992, and as a result of the Company's reorganization under Chapter 11
of the U.S. Bankruptcy Code, utilization of any income tax benefit from pre-
reorganization net operating losses are not credited to the income tax
provision, but rather, reported as an addition to capital in excess of par
value.
Note 8 - Notes Payable and Short-term Borrowings
- ------------------------------------------------
In conjunction with the acquisition of the L.E. Smith Glass Company, the Company
assumed certain notes payable. The following summarizes the notes payable and
short-term borrowings outstanding at December 31, 1995.
<TABLE>
<CAPTION>
December 31,
1995
------------
(Amounts in thousands)
<S> <C>
Short-term borrowings collateralized by the Company's trading securities;
interest charged is equal to our broker's call rate plus 1/2%; these borrowings
were repaid in full in January 1996 $ 520
Revolving bank credit note of $2,000,000, interest at bank's prime rate
plus 1 1/4% or less, depending upon attainment of certain financial ratios
as defined in the agreement; collateralized by a first security interest in all
accounts receivable, inventories and personal property of the glass company 1,114
8.75% bank note payable; payable in monthly installments of $8,333 through
July 1999; cross collateralized with the revolving credit note above 342
Promissory note with interest at prime; payable in varying monthly principal
installments not exceeding $30,000 through August 1996; collateralized
by a second security interest in all inventory and receivables of the glass company 108
Promissory note with no stated interest rate; payable in monthly installments of
$9,444 through December 1996 104
Other 97
-------
Total notes payable and short-term borrowings 2,285
Less current portion (1,977)
-------
Long-term portion of notes payable $ 308
=======
</TABLE>
<PAGE>
PAGE 11
NBI, INC.
Supplementary Notes to Consolidated Financial Statements
(Unaudited)
Note 9 - Segment Information
- ----------------------------
Due to its acquisitions during the first quarter of fiscal 1996, the Company now
has operations in two additional industries, hotel operations and glass
manufacturing. Previously, the Company operated primarily in the computer sales
and services industry. The Company has no revenues from affiliated customers in
fiscal 1996 or 1995.
On April 28, 1995, NBI, Ltd., a wholly-owned international subsidiary of NBI,
Inc., completed a sale of its certain assets, including its customer base. Under
the terms of the sale agreement, NBI, Ltd. retained certain assets and
liabilities. Therefore, the Company has no revenues from foreign operations in
fiscal 1996 but does have identifiable assets from its foreign subsidiary at
December 31, 1995. NBI, Ltd. is managing the disposition of these assets and
liabilities until such time as it can complete an orderly disposition of this
entity. Because the liabilities of the subsidiary exceed its assets, the
subsidiary will be required to file for a voluntary liquidation during third
quarter of fiscal 1996.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue from operations:
Glass manufacturing..................... $2,539 $ -- $4,867 $ --
====== ====== ====== =====
Hotel operations........................ $ 507 $ -- $ 857 $ --
====== ====== ====== =====
Computer sales and service - foreign
operations............................. $ -- $ 552 $ -- $ 945
====== ====== ====== =====
Computer sales and service and other -
domestic operations................... $ 365 $ 304 $ 536 $ 811
====== ===== ====== =====
Operating income (loss):
Glass manufacturing..................... $ 368 $ -- $ 845 $ --
====== ===== ====== =====
Hotel operations........................ $ 42 $ -- $ 91 $ --
====== ===== ====== =====
Computer sales and service - foreign
operations............................ $ (2) $(181) $ (3) $(305)
====== ===== ====== =====
Computer sales and service and other -
domestic operations.................... $ (53) $(147) $ (186) $(423)
====== ===== ====== =====
December 31, June 30,
1995 1995
---- ----
Identifiable assets:
Glass manufacturing ............................................. $6,018 $ --
====== ====
Hotel operations................................................. $1,972 $ --
====== ====
Computer sales and service - foreign
operations...................................................... $ 98 $264
====== ====
Computer sales and service and other -
domestic operations............................................. $ 805 $779
====== ====
</TABLE>
<PAGE>
PAGE 12
NBI, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SECOND QUARTER, FISCAL YEAR 1996
RESULTS OF OPERATIONS
The Company reported pretax income of $100,000 and $788,000 for the three and
six months ended December 31, 1995, compared to net losses before income taxes
and cumulative effect of an accounting change of $2.1 million and $2.0 million
for the same periods in fiscal year 1995. The improved performance was
primarily related to the business acquisitions completed by the Company during
the first quarter of fiscal 1996, the absence of a loss from the Company's
international subsidiary most of whose assets were sold in fiscal 1995, expense
savings resulting from cost control measures implemented during fiscal 1995 as
well as the discontinuance of software development activities, and favorable
investment performance in fiscal 1996 as compared to fiscal 1995.
Revenues for the second quarter of fiscal year 1996 increased $2.6 million, or
298.5%, to $3.4 million from $856,000 in the second quarter of the prior fiscal
year. Year-to-date, revenues totaled $6.3 million for the six months ended
December 31, 1995, an increase of $4.5 million, or 256.5%, compared to revenues
of $1.8 million for the same period of fiscal 1995.
Sales revenue of $2.8 million for the quarter ended December 31, 1995 increased
$2.2 million from the same period of the prior fiscal year. For the six months
ended December 31, 1995, sales revenue totaled $5.3 million, an increase of $4.0
million as compared to the same period in fiscal 1995. The increase in sales
revenue was primarily related to the L.E. Smith Glass Company acquired effective
August 1, 1995, which generated $2.5 million and $4.9 million of sales revenue
during the three and six months ended December 31, 1995, respectively. However,
this improvement was partially offset by a decrease from the absence of sales
revenue from the Company's international subsidiary.
Service and rental revenue increased $361,000 to $611,000, and $475,000 to
$989,000 for the three and six months ended December 31, 1995, respectively, as
compared to the same periods in fiscal 1995. The increased revenues resulted
primarily from the inclusion of $507,000 and $857,000 of revenues during the
three and six months ended December 31, 1995, respectively, from the Belle
Vernon Holiday Inn, acquired on August 4, 1995. This increase was partially
offset by a decline caused by the absence of international services revenues in
fiscal 1996.
Revenues are expected to increase significantly for the three months ended March
31, 1996, as compared to the same period in the prior fiscal year, due to the
Company's fiscal 1996 acquisitions. However, revenues for the third quarter of
fiscal 1996 are expected to decrease moderately, compared to the second quarter
of fiscal 1996, due to an expected decline in revenues from the new businesses
resulting from seasonal variations in these businesses.
Cost of sales, service and rental was $2.5 million, or 73.3% of total revenue,
and $4.5 million, or 72.6% of total revenue, for the three and six months ended
December 31, 1995, respectively. Comparable figures for the same periods in
fiscal 1995 were $601,000 and $1.3 million, or 70.2% and 73.2% of total
revenues, respectively.
Cost of sales as a percentage of sales revenue for the three and six months
ended December 31, 1995 was 72.8% and 71.7%, respectively, compared to 65.7% and
70.0% for the same periods in fiscal 1995. The decline in the related gross
margin was primarily related to variances in the revenue mix.
Cost of service as a percentage of service and rental revenue was 75.8% and
77.6% for the three and six months ended December 31, 1995, respectively,
compared to 81.2% and 80.9% for the same periods in the prior fiscal year,
respectively. The related improved gross margin was primarily due to the
inclusion of a larger volume of service and rental revenues from the Belle
Vernon Holiday Inn at a higher gross margin rate than experienced for total
service and rental revenues in the same period of the prior fiscal year,
partially offset by a decline in the gross margin rate caused by the absence of
international services revenues at a higher gross margin rate.
<PAGE>
PAGE 13
NBI, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SECOND QUARTER, FISCAL YEAR 1996 - CONTINUED
Cost of sales, service and rental as a percentage of total revenue is expected
to be higher in the third quarter of fiscal 1996, as compared to the third
quarter of fiscal 1995, due to variances in the revenue mix, and as compared to
the second quarter of fiscal 1996, primarily due to the lower anticipated
revenue volume.
The Company had no product development and engineering expenses for the three
and six months ended December 31, 1995, compared to expenses of $82,000 and
$162,000, respectively, for the same periods of the prior fiscal year, because
the Company discontinued all software development activity as of June 30, 1995.
Marketing, general and administrative expenses totaled $726,000 and $761,000 for
the three months ended December 31, 1995 and 1994, respectively. Year-to-date,
marketing, general and administrative expenses totaled $1.3 million for the six
months ended December 31, 1995, a decrease of $202,000 compared to expenses of
$1.5 million for the same period of fiscal 1995. The decline was related to
significant savings resulting from the absence of expenses from the Company's
international subsidiary in fiscal 1996 and various expense control measures
implemented during fiscal 1995, significantly offset by the inclusion of three
and five months of marketing, general and administrative expenses, during the
three and six months ended December 31, 1995, related to the businesses acquired
in August 1995.
Marketing, general and administrative expenses are expected to increase
moderately for the three months ended December 31, 1995, as compared to the same
period in the prior fiscal year, as expenses from the Company's fiscal 1996
acquisitions are expected to exceed savings resulting from the absence of
expenses associated with its international subsidiary. Marketing, general and
administrative expenses are also expected to increase for the third quarter of
fiscal 1996, compared to the second quarter of fiscal 1996, due to increased
sales and marketing activity.
Interest income totaled $1,000 and $15,000 for the three and six months ended
December 31, 1995, respectively, compared to $61,000 and $118,000 for the three
and six months ended December 31, 1994. The decrease was primarily related a
lower level of average outstanding cash and investments during fiscal 1996, as
well as variances in the mix of debt and equity securities held by the Company.
The Company recorded a net gain on investments totaling $38,000 in the second
quarter of fiscal 1996 compared to a net loss of $1.4 million for the three
months ended December 31, 1994. The improvement was primarily related to the
absence of an unrealized loss on investments of $1.5 million as recorded in the
second quarter of fiscal 1995. For the six months ended December 31, 1995, the
Company recorded a net gain on investments of $681,000 compared to a net loss on
investments of $553,000 recorded in the same period of the prior fiscal year.
During the six months ended December 31, 1995, the Company sold a majority of
its trading securities and recorded a net realized gain on the sale of
investments of $602,000. In addition, a net unrealized gain on investments of
$79,000 was recorded during the same period. This compares to a net realized
loss on the sale of investments of $250,000 and a net unrealized loss on
investments of $303,000 recorded in the same period of the prior fiscal year.
Income tax provisions totaling $38,000 and $331,000 were recorded for the three
and six months ended December 31, 1995, respectively, based upon book income
using year-to-date effective tax rates of 30% for federal and 13% for state.
The income tax provisions for the three and six months ended December 31, 1995,
included non-cash charges of $28,000 and $242,000, respectively, due to the
utilization of the Company's pre-reorganization net operating loss
carryforwards. In accordance with fresh start accounting, which was adopted as
of April 30, 1992, and as a result of the Company's reorganization under Chapter
11 of the U.S. Bankruptcy Code, utilization of any income tax benefit from pre-
reorganization net operating loss carryforwards are not credited to the income
tax provision, but rather, reported as an addition to capital in excess of par
value.
<PAGE>
PAGE 14
NBI, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SECOND QUARTER, FISCAL YEAR 1996 - CONTINUED
A charge of $271,000 for the cumulative effect of an accounting change was
recorded during the six months ended December 31, 1994. This related to the
Company's adoption of Financial Accounting Standards Board Statement No. 112,
"Employers' Accounting For Postemployment Benefits".
Net income totaled $62,000 and $457,000 for the three and six months ended
December 31, 1995, compared to net losses of $2.4 million and $2.3 million
recorded during the same periods in the prior fiscal year.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's total assets increased $2.8 million from $7.6 million at June 30,
1995, to $10.4 million at December 31, 1995. The increase was primarily related
to the two business acquisitions completed by the Company in August 1995,
partially offset by a decline from cash used to reduce liabilities. Working
capital decreased $3.1 million from $4.5 million at June 30, 1995, to $1.4
million at December 31, 1995. The decline was primarily related to cash and
trading securities used to fund the business acquisitions and is offset by a
significant increase in property, plant and equipment arising from the
acquisitions. Management anticipates that working capital needs for the next
year will be met by currently available working capital and internally generated
funds. During the next year, the Company expects to perform renovations on the
Belle Vernon Holiday Inn which are anticipated to cost at least $1.0 million.
The Company plans on funding these renovations by obtaining a hotel mortgage on
the property.
<PAGE>
PAGE 15
NBI, INC.
PART II - OTHER INFORMATION
Item 4 Results of Votes of Security Holders
- ------ ------------------------------------
The Company's annual meeting was held on December 11, 1995. At this
meeting, Jay H. Lustig and Martin J. Noonan were elected to serve as
directors. In addition, certain amendments to the Company's Employee and
Director Stock Option Plan were proposed at the meeting. The voting
results were as follows:
<TABLE>
<CAPTION>
Votes
Affirmative Withheld Broker
Votes or Against Abstentions Non-votes
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
1. To elect the nominee for the
Board of Directors:
Jay H. Lustig 5,648,039 61,645 -- --
Martin J. Noonan 5,658,908 50,776 -- --
2. To allow the grant of stock options
at fair market value under the
Employee and Director Stock
Option Plan 5,709,684 -- -- --
3. To allow the grant of incentive stock
options under the Employee and
Director Stock Option Plan 5,709,684 -- -- --
</TABLE>
Item 6 Exhibits and Reports on Form 8-K
- ------ ---------------------------------
(a) Exhibits
27. Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended December 31,
1995.
<PAGE>
PAGE 16
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.
NBI, INC.
February 12, 1996 By: /s/Marjorie A. Cogan
- ----------------------------- ---------------------------------
(Date) Marjorie A. Cogan
As a duly authorized officer
Corporate Controller, Secretary
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 546
<SECURITIES> 1,343
<RECEIVABLES> 1,420
<ALLOWANCES> 0
<INVENTORY> 2,180
<CURRENT-ASSETS> 5,775
<PP&E> 4,381
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,436
<CURRENT-LIABILITIES> 4,399
<BONDS> 5,936
<COMMON> 100
0
0
<OTHER-SE> (250)
<TOTAL-LIABILITY-AND-EQUITY> 10,436
<SALES> 5,271
<TOTAL-REVENUES> 6,260
<CGS> 3,778
<TOTAL-COSTS> 4,545
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 344
<INCOME-PRETAX> 788
<INCOME-TAX> 331
<INCOME-CONTINUING> 457
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 457
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
