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: November 30, 1995
Commission File Number: 0-14786
AUTOINFO, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-2867481
(State or other (I.R.S. Employer
jurisdiction of incorporation Identification number)
or organization)
1600 Route 208, Fair Lawn, New Jersey 07410
(Address of principal executive offices)
(201) 703-0500
(Registrant's telephone number, including area code)
N/A
(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 January
10, 1996: 7,777,752 shares of common stock, $.01 par value.
<PAGE>
AUTOINFO, INC.
INDEX
Page
Part I. Financial Information:
Item 1. Financial Statements:
Condensed Balance Sheet -
November 30, 1995 and May 31, 1995 ..................... 3
Condensed Statements of Operations -
Three and Six months ended
November 30, 1995 and November 30, 1994 ................ 4
Condensed Statement of Changes in
Financial Position - Six months ended
November 30, 1995 and November 30, 1994 ................ 5
Notes to Unaudited Condensed
Financial Statements ................................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .......... 7
Part II. Other Information 12
Signatures ............................................................... 13
Exhibit 11 ............................................................... 14
2
<PAGE>
AUTOINFO, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
November 30, May 31,
1995 1995
------------ ------------
ASSETS
Current assets:
Cash $ 185,913 $ 521,868
Short-Term Investments 33,413,474 38,314,489
Accounts receivables 54,744 146,908
Net Book Value of Assets of
discontinued operations -- 3,195,103
Other current assets 261,345 120,024
------------ ------------
Total current assets 33,915,476 42,298,392
Property, equipment and furniture (at cost),
net of accumulated depreciation
(November 30, 1995 - $106,131;
May 31, 1995 - $98,631) 39,893 29,251
Investment, at cost -- --
Other assets -- 29,456
------------ ------------
$ 33,955,369 $ 42,357,099
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 54,159 $ 160,869
Accounts payable and accrued liabilities 507,670 943,901
Income taxes payable 565,271 7,131,543
------------ ------------
Total current liabilities 1,127,100 8,236,313
------------ ------------
Long-term debt 2,000,000 4,000,000
------------ ------------
Stockholders' Equity:
Common stock - authorized 20,000,000 shares
$.01 par value; issued and outstanding -
7,777,752 at November 30, 1995
7,756,252 at May 31, 1995 77,778 77,563
Additional paid-in capital 17,782,677 17,725,267
Officer note receivable (466,797) (466,797)
Retained earnings 13,840,216 13,199,439
------------ ------------
Total stockholders' equity 30,828,269 30,120,786
------------ ------------
$ 33,955,369 $ 42,357,099
============ ============
See notes to condensed unaudited financial statements
3
<PAGE>
AUTOINFO, INC.
CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
---------------------------- ----------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 183,067 $ 277,014 $ 382,843 $ 547,834
----------- ----------- ----------- -----------
Operating Expenses:
Salaries & Employee Benefits 201,705 181,744 376,594 378,402
Selling, General & Administrative 177,112 186,056 648,812 456,638
Depreciation & Amortization 3,750 6,181 7,499 12,366
----------- ----------- ----------- -----------
Total Operating Expenses 382,567 373,981 1,032,905 847,406
----------- ----------- ----------- -----------
Loss from Operations (199,500) (96,967) (650,062) (299,572)
Other (Income) Expenses:
Interest Income (349,698) (76,542) (773,202) (152,667)
Dividend Income (52,628) (28,815) (134,467) (57,629)
Interest Expense 41,756 80,324 118,964 159,334
----------- ----------- ----------- -----------
Total other (Income) and Expenses (365,570) (25,033) (788,705) (50,962)
----------- ----------- ----------- -----------
Income (loss) from continuing operations
before income taxes 166,070 (71,934) 138,643 (248,610)
Income Tax Benefit (74,977) (32,744) (233,485) (108,945)
----------- ----------- ----------- -----------
Net income (loss) from continuing operations 241,047 (39,160) 372,128 (139,665)
----------- ----------- ----------- -----------
Income (loss) from discontinued operations -- 600,251 (42,712) 1,456,673
Provision for income taxes (Benefit) -- 215,004 (14,522) 532,486
Net income (loss) from discontinued operations -- 385,247 (28,190) 924,187
----------- ----------- ----------- -----------
Gain on sale of discontinued operations 60,173 -- 449,756 --
Provision for income taxes 20,459 -- 152,917 --
----------- ----------- ----------- -----------
Net gain on sale of discontinued operations 39,714 -- 296,939 --
----------- ----------- ----------- -----------
Net Income $ 280,761 $ 346,087 $ 640,777 $ 784,522
=========== =========== =========== ===========
Net Income (loss) Per Share:
Continuing operations $ .03 $ -- $ .05 ($ .02)
Discontinued operations -- .05 -- .13
Sale of discontinued operations .01 -- .03 --
----------- ----------- ----------- -----------
Net income per share $ .04 $ .05 $ .08 $ .11
=========== =========== =========== ===========
Weighted average number of common
and common equivalent shares 7,773,861 7,346,952 7,768,953 7,359,730
</TABLE>
See notes to condensed unaudited financial statements
4
<PAGE>
AUTOINFO, INC.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
November 30,
------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 640,777 $ 784,522
Adjustments to reconcile net income to net cash
provided by (used in) operations activities:
Depreciation expenses 7,500 12,366
Amortization of deferred compensation 9,081 9,080
Gain on sale of discontinued operations (449,756) --
Changes in Assets and Liabilities:
Accounts receivables 92,164 (38,420)
Other current assets (141,321) (27,962)
Other assets 29,456 (43,431)
Income taxes payable (6,566,272) --
Accounts payable and accrued liabilities (436,231) (162,743)
------------ ------------
Net cash provided by (used in) continuing operations (6,814,602) 533,412
------------ ------------
Net cash provided by discontinued operations
and non-cash charges (105,141) (102,192)
------------ ------------
Cash flows from Investing Activities:
Proceeds from the sale of discontinued operations 3,750,000 --
Capital expenditures (18,142) (13,381)
Proceeds from redemptions short term investments 87,475,054 8,429,748
Purchases of short term investments (82,574,039) 8,921,508
------------ ------------
Net cash provided by (used in) investing activities 8,632,873 (505,141)
------------ ------------
Cash flows from Financing Activities:
Reduction of burrowing (2,106,710) (276,547)
Exercise of stock options 57,625 3,500
Net cash used for financing Activities (2,049,085) (273,047)
Net decrease in cash (335,955) (346,968)
Cash at beginning of period 521,868 445,484
------------ ------------
Cash at end of period $ 185,913 $ 98,516
------------ ------------
</TABLE>
See notes to condensed 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 and six months ended November 30,
1995 and November 30, 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 $3,582,220 as of
November 30, 1995), money market instruments ($3,159,808 as of May 31, 1995 and
$6,328,739 as of November 30, 1995) and municipal bonds ($31,634,640 as of May
31, 1995 and $23,502,515 as of November 30, 1995). As of November 30, 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 and six month period ended
November 30, 1995, there were no material 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 and six month
periods ending November 30, 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 and six
month periods ending November 30, 1995 of $74,977 and $233,485 are the results
of approximately $385,000 and $825,000 of non-taxable interest and dividend
income.
Note 6 - Long Term Debt
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 canceled.
Note 7 - Subsequent Event - Acquisition of Assets
On December 6, 1995 the Company acquired substantially all of the assets of
Falk Finance Company, Inc., a consumer finance company primarily engaged in the
business of purchasing retail installment sales contracts which are secured by
late model automobiles. The aggregate consideration paid for the assets acquired
included a payment of $5,125,000 plus the assumption of approximately $33
million of debt, including $22 million of senior debt.
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 $32.8 million and liquid assets amounted
to $33.6 million as of November 30, 1995. The Company has sufficient liquid
assets to meet its short and long term capital requirements.
The total amount of debt outstanding as of November 30, 1995 was $2,054,000
of which $54,000 is due in less than one year. This debt primarily relates to
the 7.55% subordinated notes issued by the Company in January 1994 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 three and six month periods ended November 30,
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 have 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 November 30, 1995 and 1994
Revenues
Revenues for the three months ended November 30, 1995 were $183,067, a
decrease of $93,947 over total revenue of $277,014 for the corresponding prior
year period. This decline in revenue in the Company's telephone reseller
division is due primarily to reduced network usage levels.
8
<PAGE>
Operating Expenses
Salaries and employee benefit expenses for the three months ended November
30, 1995, increased $19,961 to $201,705 from $181,744 for the prior year period.
Selling and administrative expenses for the three months ended November 30,
1995 decreased $8,944 to $177,112 from $186,056 for the prior year period.
Depreciation and amortization expense for the three months ended November
30, 1995 decreased to $3,750 from $6,181 for the prior year period.
Other (Income) Expenses
Interest income was $349,698, an increase of $273,156 over $76,542 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 $28,813 to $57,628 due to the payments
received on Preferred Stock dividends in arrears currently recorded as income
when received.
Interest expense decreased $38,568 to $41,756 from $80,324 for the prior
year period. This is a result of the pre-payment of $2,000,000 of the Company's
long-term debt in September, 1995.
Income (Loss) from Continuing Operations
Income from continuing operations for the three months ended November 30,
1995 was $166,070 compared to a loss of $71,934 in the prior year period, an
increase of $238,004. This is attributable to the increase in interest and
dividend income offset by reduced revenues in the Company's telephone reseller
division and the increase in administrative expenses. The tax benefit of $74,977
is the result of non-taxable interest and dividend income of $385,000.
Income (Loss) from Discontinued Operations
Discontinued operations for the prior year period includes the results of
operations from the Company's automotive salvage industry businesses ($671,125)
and the Company's insurance inspection services business (a loss of $70,874).
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.
9
<PAGE>
Six Months Ended November 30, 1995 and 1994
Revenues
Revenues for the six months ended November 30, 1995 were $382,843, a
decrease of $164,991 over total revenues of $547,834 for the corresponding prior
year period. This decline in revenue in the Company's telephone reseller
division is due primarily to reduced network usage levels.
Operating Expenses
Salaries and employee benefit expenses for the six months ended November
30, 1995 decreased by $1,808 to $376,594 from $378,402 for the prior year
period.
Selling and administrative expenses for the six months ended November 30,
1995 increased by $292,174 to $648,812 from $456,638 for the prior year period.
This increase is primarily related to litigation and settlement costs associated
with a shareholder consent solicitation action.
Depreciation and amortization expense for the six months ended November 30,
1995 decreased to $7,499 from $12,366 for the prior year period.
Other (Income) Expenses
Interest income was $773,202, an increase of $620,535 over $152,667 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 $76,838 to $134,467 due to payments received
on Preferred Stock Dividends in arrears currently recorded as income when
received.
Interest expense decreased $40,370 to $118,964 from $159,334 for the prior
year period. This is a result of the pre-payment of $2,000,000 of the Company's
long-term debt in September 1995.
Income (loss) from Continuing Operations
Income from continuing operations for the six months ended November 30,
1995 was $138,643 compared to a loss of $198,610 in the prior year period, an
increase of $337,253. This is attributable to the increase in interest and
dividend income offset by reduced revenues in the Company's telephone reseller
division and the increase in administrative expenses. The tax benefit of
$233,485 is the result of non-taxable interest and dividend income of $825,000.
10
<PAGE>
Income (Loss) from Discontinued Operations
Income (loss) from discontinued operations for the six months ended
November 30, 1995 was a loss of $42,712 compared to income of $1,456,673 in the
prior year, an increase of $1,449,385. Discontinued operations for the prior
year period includes the results of operations from the Company's automotive
salvage industry businesses (income of $1,468,680) and the Company's
insurance inspection services business (a loss of $12,007).
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.
11
<PAGE>
AUTOINFO, INC.
Part II - OTHER INFORMATION
Item 1 - 3: Inapplicable
Item 4: Submission of Matters to a Vote of Security Holders
Pursuant to a Notice of Annual Meeting of Stockholders and Proxy
Statement dated December 18, 1995, the 1995 Annual Meeting of
Stockholders of the Company was held on January 12, 1996. At the
Annual Meeting, the following individuals were elected by an
affirmative vote of approximately 82% of the common shares
eligible to vote in person or by Proxy as directors of the
Company: Mr. Jason Bacher, Mr. Robert Fagenson, Mr. Andrew
Gaspar, Mr. Howard Nusbaum, Mr. Jerome Stengel, and Mr. Scott
Zecher.
Item 5: Inapplicable
Item 6 (a): The following exhibits are filed with this report.
Exhibit 11 - Calculation of Earnings Per Share.
Item 6 (b): No reports on Form 8-K were filed by the Registrant during the
quarter for which this report is filed.
A Form 8-K was filed on December 21, 1995 to report the
acquisition of operating assets of FALK Finance Corp., a Consumer
Finance Company engaged in the business of purchasing retail
installment sales contracts which are secured by late model
automobiles.
12
<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 & Chief Operating Officer
Date: January 12, 1996
/s/ William I. Wunderlich
-----------------------------------
William I. Wunderlich
Treasurer, Secretary And
Principal Financial Officer
13
Exhibit 11
AUTOINFO, INC.
Calculation of Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
--------------------------- ----------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Primarily and Fully Diluted Earnings (Loss):
Earnings (Loss) from Operations Applicable
to Common Stock:
From Continuing Operations $ 241,047 ($ 7,437) $ 372,128 ($ 107,942)
From Discontinued Operations -- 353,524 (28,190) 892,464
From Sale of Discontinued Operations 39,714 -- 296,839 --
----------- ----------- ----------- -----------
Net Income $ 280,761 $ 346,087 $ 640,777 $ 784,532
Shares:
Weighed Average Number of Common
Shares Outstanding 7,768,622 7,255,286 7,768,953 7,255,145
Add Shares Issuable from Assumed
Exercise of Options and Warrants 5,239 91,666 5,774 104,585
----------- ----------- ----------- -----------
Weighted Average Number of Common
Shares as Adjusted 7,773,861 7,346,952 7 ,768,953 7,359,730
Primary and Fully Diluted Earnings
Per Common Share:
From Continuing Operations $ .03 $ -- $ .05 ($ .01)
From Discontinued Operations -- .05 -- .12
From Sale of Discontinued Operations .01 -- .03 --
----------- ----------- ----------- -----------
Net Income $ .04 $ .05 $ .08 $ .11
----------- ----------- ----------- -----------
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> NOV-30-1995
<EXCHANGE-RATE> 1
<CASH> 185,913
<SECURITIES> 33,413,474
<RECEIVABLES> 106,497
<ALLOWANCES> (51,753)
<INVENTORY> 0
<CURRENT-ASSETS> 33,915,476
<PP&E> 146,024
<DEPRECIATION> (106,131)
<TOTAL-ASSETS> 33,955,369
<CURRENT-LIABILITIES> 1,127,100
<BONDS> 2,000,000
0
0
<COMMON> 77,578
<OTHER-SE> 30,750,491
<TOTAL-LIABILITY-AND-EQUITY> 33,955,369
<SALES> 382,843
<TOTAL-REVENUES> 382,843
<CGS> 0
<TOTAL-COSTS> 1,032,905
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 118,964
<INCOME-PRETAX> 138,643
<INCOME-TAX> (233,485)
<INCOME-CONTINUING> 372,128
<DISCONTINUED> 268,749
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 640,777
<EPS-PRIMARY> 0.080
<EPS-DILUTED> 0.080
</TABLE>
