FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: August 31, 1995
Commission File Number: 0-14786
AUTOINFO, INC.
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(Exact name of registrant as specified in its charter)
Delaware 13-2867481
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) number)
1600 Route 208, Fair Lawn, New Jersey 07410
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(Address of principal executive offices)
(201) 703-0500
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(Registrant's telephone number, including area code)
n/a
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(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
--- ---
Number of shares outstanding of the registrant's common stock as of
October 9, 1995: 7,757,752 shares of common stock, $.01 par value.
<PAGE>
AUTOINFO, INC.
INDEX
Part I. Financial Information:
Item 1. Financial Statements: Page
----
Condensed Balance Sheet -
August 31, 1995 and May 31, 1995 ............... 3
Condensed Statements of Operations -
Three months ended August 31, 1995 and
August 31, 1994 ................................ 4
Condensed Statements of Changes in Financial
Position - Three months ended August 31, 1995
and August 31, 1994 ............................ 5
Notes to Unaudited Condensed Financial
Statements ..................................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ..................................... 8
Part II. Other Information .............................. 11
Signatures ....................................................... 12
Exhibit 11 ....................................................... 13
2
<PAGE>
AUTOINFO, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
August 31, May 31,
ASSETS 1995 1995
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<S> <C> <C>
Current assets:
Cash $ 286,943 $ 521,868
Short-term investments 35,058,248 38,314,489
Accounts receivable 311,545 146,908
Net book value of assets of
discontinued operations -- 3,195,103
Other current assets 107,280 120,024
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Total current assets 35,764,017 42,298,392
Property, equipment and furniture (at
cost), net of accumulated depreciation
(August 31, 1995 - $102,381; May 31,
1995 - $98,631) 36,176 29,251
Investments, at cost -- --
Other assets 38,018 29,456
------------ ------------
$ 35,838,211 $ 42,357,099
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 2,107,780 $ 160,869
Accounts payable and accrued liabilities 677,192 943,901
Income taxes payable 565,271 7,131,543
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Total current liabilities 3,350,243 8,236,313
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Long-term debt 2,000,000 4,000,000
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Stockholders' equity:
Common stock - authorized 20,000,000 shares
$.01 par value; issued and
outstanding - 7,757,752 at August 31, 1995 and
7,756,252 at May 31, 1995 77,578 77,563
Additional paid-in capital 17,727,877 17,725,267
Officer note receivable (466,797) (466,797)
Deferred compensation under stock bonus plan (410,145) (414,686)
Retained earnings 13,559,455 13,199,439
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Total stockholders' equity 30,487,958 30,120,786
------------ ------------
$ 35,838,211 $ 42,357,099
============ ============
</TABLE>
See notes to unaudited financial statements
3
<PAGE>
AUTOINFO, INC.
CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended
August 31,
---------------------------
1995 1994
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Revenues $ 199,776 $ 270,820
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Operating Expenses:
Salaries and employee benefits 174,889 196,658
Selling, general and administrative 471,700 270,582
Depreciation and amortization 3,749 6,185
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Total operating expenses 650,338 473,425
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Loss from operations (450,562) (202,605)
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Other (income) expenses:
Interest income (423,504) (76,125)
Dividend income (76,839) (28,814)
Interest expense 77,208 79,010
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Total other (income) and expenses (423,135) (25,929)
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Loss from continuing operations
before income taxes (27,427) (176,676)
Income tax benefit (158,508) (76,171)
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Net income (loss) from continuing
operations 131,081 (100,505)
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Income (loss) from discontinued
operations (42,712) 856,422
Provision for income taxes (benefit) (14,522) 317,482
----------- -----------
Income (loss) from discontinued
operations (28,190) 538,940
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Gain on sale of discontinued operations 389,583 --
Provision for income taxes 132,458 --
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Gain on sale of discontinued operations 257,125 --
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Net income $ 360,016 $ 438,435
=========== ===========
Net income (loss) per share:
Continuing operations $ .02 $ (.01)
Discontinued operations -- .07
Sale of discontinued operations .03 --
----------- -----------
Net income per share $ .05 $ .06
=========== ===========
Weighted average number of common
and common equivalent shares 7,764,045 7,372,985
----------- -----------
See notes to unaudited financial statements
4
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AUTOINFO, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
Three Months Ended
August 31,
----------------------------
1995 1994
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Cash Flows from Operating Activities:
Net income $ 360,016 $ 438,435
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation expenses 3,749 6,185
Amortization of deferred compensation 4,541 4,541
Gain on sale of discontinued operations (389,583) --
Changes in Assets and Liabilities:
Accounts receivable (164,638) (19,210)
Other current assets 12,744 23,951
Other assets (8,562) (27,285)
Income taxes payable (6,566,272) --
Accounts payable and accrued liabilities (266,709) 60,632
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Net cash provided by (used in) continuing
operations (7,014,714) 541,819
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Net cash provided by discontinued operations
and non-cash charges (165,313) (449,824)
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Cash Flows from Investing Activities:
Proceeds from the sale of discontinued
operations 3,750,000 --
Capital expenditures (10,675) (5,813)
Proceeds from redemptions short term
investments 72,284,747 4,604,228
Purchases of short term investments (69,028,506) (4,878,137)
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Net cash provided by (used in) investing
activities 6,995,566 (279,722)
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Cash Flows from Financing Activities:
Reduction of borrowings (53,089) (40,719)
Exercise of stock options 2,625 3,500
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Net cash used for financing activities (50,464) (37,219)
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Net decrease in cash (234,925) (224,946)
Cash at beginning of period 521,868 445,484
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Cash at end of period $ 286,943 $ 220,538
============ ===========
See notes to unaudited financial statements
5
<PAGE>
AUTOINFO, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - General
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions for Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments consisting
of normal recurring accruals considered necessary for a fair presentation have
been included. Operating results for the three months ended August 31, 1995 and
August 31, 1994 are not necessarily indicative of the results that may be
expected for a full fiscal year. For further information, refer to the financial
statement and footnotes thereto included in the Company's annual report on Form
10-K for the year ended May 31, 1995.
Note 2 - Marketable Securities
Effective June 1, 1994, the Company, as required, adopted Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". This pronouncement establishes the
accounting and reporting for investments in equity securities that have readily
determinable fair values and for all investments in debt securities. This
statement supersedes Statement No. 12 "Accounting for Certain Marketable
Securities".
In connection with the adoption of SFAS No. 115, debt and equity securities
used as part of the Company's investment management that may be sold in response
to cash needs, changes in interest rates, and other factors have been classified
as securities available for sale. Such securities are reported at cost which
approximates fair value and have maturities of less than one year and included
common stock and bond funds ($3,520,041 as of May 31, 1995 and $3,570,083 as of
August 31, 1995), money market instruments ($3,159,808 as of May 31, 1995 and
$6,375,446 as of August 31, 1995) and municipal bonds ($31,634,640 as of May 31,
1995 and $25,112,719 as of August 31, 1995). As of August 31, 1995 and May 31,
1995 unrealized gains and losses were not material. Unrealized gains and losses,
if material, would be excluded from earnings and reported as a separate
component of stockholders' equity. During the three month period ended August
31, 1995, there were no gains or losses arising from the disposition of
marketable securities. Gains and losses on disposition of securities are
recognized on the specific identification method in the period in which they
occur.
6
<PAGE>
Note 3 - Acquisition of Minority Interest
In September 1994, the Company acquired the minority interest in its
insurance inspection services business pursuant to a formularized valuation
which resulted in no additional consideration being due. Accordingly, there is
no provision for minority interest in net loss of partnership for any period
subsequent to August 31, 1994.
Note 4 - Sale of Assets
On July 20, 1995, the Company consummated the sale of certain assets net of
certain liabilities constituting the operating assets of its insurance
inspection division for $3,750,000 in cash.
All such assets and liabilities have been classified as "Net Book Value of
Assets of Discontinued Operations" in the restated Balance Sheet as of May 31,
1995.
The accompanying Statement of Operations for the three month period ending
August 31, 1995 reflects the results of operations classifying the results
related to the businesses sold as well as the gain on sale as discontinued
operations. The Statement of Operations for the corresponding periods of the
prior year have been restated.
Note 5 - Income Tax Benefit
The income tax benefit from continuing operations for the three month
period ending August 31, 1995 of $158,508 is the result of approximately
$440,000 of non-taxable interest and dividend income.
Note 6 - Subsequent Event
On September 10, 1995, the Company prepaid $2,000,000 of long-term notes
due in January 1998, 1999, and 2000. In connection with this prepayment,
warrants to purchase 196,296 shares at $4.00 per share were cancelled.
7
<PAGE>
AUTOINFO, INC.
Management's Discussion and Analysis of
Financial Condition
and
Results of Operations
Liquidity and Capital Resources
The Company's working capital was $32.4 million and liquid assets amounted
to $35.3 million as of August 31, 1995. The Company has sufficient liquid assets
to meet its short and long term capital requirements.
The total amount of debt outstanding as of August 31, 1995 was $4,108,000,
of which $2,107,780 is due in less than one year. This debt relates to the $4
million of 7.55% subordinates notes issued by the Company in January 1994, which
was reduced to $2 million in September 1995 (See Note 6) and to acquisitions.
The Company has adequate resources to meet these obligations.
Inflation and changing prices had no material impact on revenues or the
results of operations for the quarter ended August 31, 1995. There are no trends
or commitments which may have an impact on the Company's liquidity.
Income taxes payable decreased by $6,566,000 due to the payment of taxes
for the year ended May 31, 1995 resulting primarily from the gain on sale of
assets of discontinued operations.
Results of Operations
On April 1, 1995, the Company consummated the sale of certain assets, net
of certain liabilities, constituting the operating assets of the Orion Network,
Compass Network, Checkmate Computer Systems, and Insurance Parts Locator
businesses. On July 20, 1995, the Company consummated the sale of the operating
assets of its insurance inspection services business. The Results of Operations
of these businesses has been classified as discontinued operations. The
Company's continuing operations consist of its long distance services business.
Except as otherwise noted, the following discussion of the results of operations
is with respect to the Company's continuing operations.
Three Months Ended August 31, 1995 and 1994
Revenues
Revenues for the three months ended August 31, 1995 were $199,776, a
decrease of $71,044 over total revenues of $270,820 for the corresponding prior
year period. This decline in revenue in the Company's telephone reseller
8
<PAGE>
division was due primarily to reduced commissions levels pursuant to reseller
agreements with the Company's long distance suppliers which was offset by the
elimination of customer rebates.
Operating Expenses
Salaries and employee benefit expenses for the three months ended August
31, 1995 decreased $21,769 to $174,889 from $196,658 for the prior year period.
The decrease was primarily related to reduced employee benefit costs.
Selling and administrative expenses for the three months ended August 31,
1995 increased by $201,188 to $471,700 from $270,582 for the prior year period.
This increase was directly related to litigation and settlement costs associated
with a shareholder consent solicitation action.
Depreciation and amortization expense for the three months ended August 31,
1995 decreased to $3,749 from $6,185 for the prior year period.
Other (Income) Expenses
Interest income was $423,504, an increase of $353,379 over $70,125 for the
prior year period. This was directly attributable to the investment of the
proceeds from the sale of the Company's automotive salvage industry businesses
in April 1995 ($30,350,000) and the sale of the insurance inspection business in
July 1995 ($3,750,000).
Dividend income increased by $48,025 to $76,839 due to payments received on
Preferred Stock Dividends in arrears which are currently recorded as income when
received.
Interest expense decreased $1,802 to $77,208 from $79,010 for the prior
year period.
Loss from Continuing Operations
Loss from continuing operations for the three months ended August 31, 1995
was $27,427 compared to $176,676 in the prior year period, a decrease of
$149,249. The decrease is attributable to the increase in interest and dividend
income offset by the increase in administrative expenses directly related to
litigation and settlement costs associated with a shareholder consent
solicitation action. The tax benefit of $158,508 is the result of non-taxable
interest and dividend income of $440,000.
9
<PAGE>
Income (Loss) from Discontinued Operations
Income (loss) from discontinued operations for the three months ended
August 31, 1995 was a loss of $42,712 compared to income of $856,422 in the
prior year, a decrease of $899,134. Discontinued operations for the prior year
period included the results of operations from the Company's automotive salvage
industry businesses ($797,555) and the Company's insurance inspection services
business ($58,867).
Gain on Sale of Discontinued Operations
The gain on sale of discontinued operations is the result of the sale of
the operating assets of the Company's insurance inspection business in July 1995
for $3,750,000 in cash.
10
<PAGE>
AUTOINFO, INC.
Part II - OTHER INFORMATION
Item 1 - 5: Inapplicable
Item 6(a): The following exhibits are filed with this report.
Exhibit 11 - Calculation of Earnings Per Share.
Exhibit 27 - Financial Data Schedule.
Item 6(b): No reports on Form 8-K were filed by the Registrant during
the quarter for which this report is filed.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto authorized.
AUTOINFO, INC.
(Registrant)
/s/ Scott Zecher,
-----------------------------
Scott Zecher,
President and Chief
Operating Officer
Date: October 11, 1995
/s/ William I. Wunderlich,
-----------------------------
William I. Wunderlich,
Treasurer, Secretary and
Principal Financial Officer
12
Exhibit 11
AUTOINFO, INC.
Calculation of Earnings Per Share
Three Months Ended
August 31,
---------------------------
1995 1994
----------- -----------
Primarily and Fully Diluted Earnings (Loss):
Earnings (Loss) from Operations Applicable
to Common Stock:
From Continuing Operations $ 131,081 $ (100,505)
From Discontinued Operations (28,190) 538,940
From Sale of Discontinued Operations 257,125 --
----------- -----------
Net Income $ 360,016 $ 438,435
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Shares:
Weighted Average Number of Common Shares
Outstanding 7,757,736 7,255,003
Add Shares Issuable from Assumed Exercise
of Options and Warrant 6,304 227,993
----------- -----------
Weighted Average Number of Common Shares
as Adjusted 7,764,045 7,372,996
----------- -----------
Primary and Fully Diluted Earnings
Per Common Share:
From Continuing Operations $ .02 $ (.01)
From Discontinued Operations -- .07
From Sale of Discontinued Operations .03 --
----------- -----------
Net Income $ .05 $ .06
----------- -----------
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> AUG-31-1995
<CASH> 286,943
<SECURITIES> 35,058,248
<RECEIVABLES> 383,836
<ALLOWANCES> (72,291)
<INVENTORY> 0
<CURRENT-ASSETS> 35,764,017
<PP&E> 138,557
<DEPRECIATION> (102,381)
<TOTAL-ASSETS> 35,838,211
<CURRENT-LIABILITIES> 3,351,243
<BONDS> 2,000,000
<COMMON> 77,578
0
0
<OTHER-SE> 30,410,380
<TOTAL-LIABILITY-AND-EQUITY> 35,838,211
<SALES> 199,776
<TOTAL-REVENUES> 199,776
<CGS> 0
<TOTAL-COSTS> 650,338
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 77,208
<INCOME-PRETAX> (27,427)
<INCOME-TAX> (158,508)
<INCOME-CONTINUING> 131,081
<DISCONTINUED> 228,935
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 360,016
<EPS-PRIMARY> 0.050
<EPS-DILUTED> 0.050
</TABLE>
