SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission file number 0-12329
LCS INDUSTRIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-2648333
- ------------------------ ------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
120 Brighton Road, Clifton, New Jersey 07012-1694
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 778-5588
-----------------------------
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes ( X ) No ( )
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the registrant's Common Stock, par
value of $.01 per share, as of August 2, 1996, was 4,420,558.
<PAGE>
LCS INDUSTRIES, INC.
AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
As of June 30, 1996 (Unaudited) and
September 30, 1995
Consolidated Statements of Income
For the Three Months and Nine Months Ended
June 30, 1996 and 1995 (Unaudited)
Consolidated Statements of Cash Flows
For the Nine Months Ended
June 30, 1996 and 1995 (Unaudited)
Notes to Consolidated Financial Statements
(Unaudited)
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
LCS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................................... $ 18,426,513 $ 8,630,831
Investments - held-to-maturity .............................................. 2,354,624 199,859
Accounts receivable (less allowance
for doubtful accounts: June 30 - $702,000
and September 30 - $624,000) ............................................ 20,390,004 23,815,919
Prepaid expenses and other current assets ................................... 1,295,622 1,891,837
Deferred taxes .............................................................. 341,000 263,250
------------ ------------
Total current assets ...................................................... 42,807,763 34,801,696
------------ ------------
Investments - available-for-sale, net .......................................... 835,574 797,583
Property and equipment, net .................................................... 6,788,824 5,222,513
Goodwill (net of accumulated amortization: June 30 -
$448,300 and September 30, - $233,500) ..................................... 7,638,912 7,853,675
Other assets ................................................................... 1,482,346 1,061,166
------------ ------------
$ 59,553,419 $ 49,736,633
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................................ $ 11,003,701 $ 15,105,009
Accrued salaries and commissions ............................................ 1,542,936 2,076,999
Other accrued expenses ...................................................... 3,181,942 2,352,477
Income taxes payable ........................................................ 706,531 --
Current portion of long-term debt ........................................... 996,176 567,294
Current portion of capital lease obligations ................................ 406,333 516,989
Deferred revenue ............................................................ 8,022,041 3,614,331
------------ ------------
Total current liabilities ................................................. 25,859,660 24,233,099
Continued on next page.
<PAGE>
<CAPTION>
LCS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(continued)
June 30, September 30,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
Long-term debt, net of current portion ......................................... 4,262,240 2,804,790
Capital lease obligations, net of current portion .............................. 355,835 631,475
Deferred taxes ................................................................. 20,500 19,750
Stockholders' equity:
Preferred stock $.01 par value; authorized
1,000,000 shares; issued - none
Common stock $.01 par value; authorized
15,000,000 shares; issued June 30 - 4,603,576
shares and September 30 - 4,347,886 shares .............................. 46,036 43,479
Common stock issuable ....................................................... 1,945,983 2,407,521
Additional paid-in capital .................................................. 7,131,518 5,431,455
Retained earnings ........................................................... 20,195,446 14,451,854
------------ ------------
29,318,983 22,334,309
Less: treasury stock, at cost, 187,766 shares .............................. (207,953) (207,953)
marketable securities valuation adjustment,
net of deferred income taxes ......................................... (55,846) (78,837)
------------ ------------
Total stockholders' equity ................................................ 29,055,184 22,047,519
------------ ------------
$ 59,553,419 $ 49,736,633
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
LCS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three and Nine Months Ended June 30,
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
-------------------------------- --------------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales .......................................... $ 22,398,255 $ 18,153,573 $ 70,400,069 $ 55,274,715
Cost of sales ...................................... 15,232,522 12,531,909 48,153,116 38,242,836
------------ ------------ ------------ ------------
Gross profit .................................... 7,165,733 5,621,664 22,246,953 17,031,879
Selling and administrative expenses ................ 4,345,799 3,260,028 12,381,306 9,933,823
Other (income) expense:
Dividend and interest income .................... (283,804) (92,304) (676,485) (188,890)
Interest expense ................................ 115,043 44,588 308,342 141,512
------------ ------------ ------------ ------------
Income before income taxes ......................... 2,988,695 2,409,352 10,233,790 7,145,434
Provision for income taxes ......................... 1,236,000 965,000 4,198,000 2,904,000
------------ ------------ ------------ ------------
Net income ......................................... $ 1,752,695 $ 1,444,352 $ 6,035,790 $ 4,241,434
============ ============ ============ ============
Per common and common equivalent share:
Primary earnings ................................... $ .34 $ .30 $ 1.17 $ .92
============ ============ ============ ============
Fully diluted earnings ............................. $ .34 $ .29 $ 1.17 $ .86
============ ============ ============ ============
Dividends .......................................... $ .025 $ .019 $ .069 $ .047
============ ============ ============ ============
</TABLE>
<PAGE>
LCS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended June 30,
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Increase (Decrease) in cash and cash equivalents
Cash flows from operating activities:
Net income ....................................................................... $ 6,035,790 $ 4,241,434
------------ ------------
Adjustments to reconcile net income to net cash
provided by operating
activities:
Depreciation and amortization ................................................. 1,734,428 1,364,534
Deferred income taxes ......................................................... (92,000) (60,000)
Provision for doubtful accounts receivable .................................... 90,000 91,625
Gain on sales of equipment .................................................... -- (9,650)
------------ ------------
Total adjustments ............................................................. 1,732,428 1,386,509
Changes in operating assets and liabilities:
Accounts receivable ........................................................... 3,335,915 1,026,396
Prepaid expenses and other current assets ..................................... 596,215 1,285
Accounts payable and accrued expenses ......................................... (3,805,906) (2,434,575)
Income taxes payable .......................................................... 1,225,531 214,358
Deferred revenue .............................................................. 4,407,710 --
Other, net .................................................................... (421,180) (148,543)
------------ ------------
Total adjustments and changes ................................................. 7,070,713 45,430
------------ ------------
Net cash provided by operating activities ..................................... 13,106,503 4,286,864
------------ ------------
Cash flows from financing activities:
Changes in long-term debt and capital
leases (including current portion):
Borrowings ................................................................ 2,500,000 --
Repayments ................................................................ (999,964) (958,671)
Dividends paid ................................................................ (291,943) (184,534)
Exercise of stock options ..................................................... 604,162 455,011
Employee stock purchase plan proceeds ......................................... 117,665 49,940
------------ ------------
Net cash provided (used in) financing activities .............................. 1,929,920 (638,254)
------------ ------------
</TABLE>
Continued on next page.
<PAGE>
LCS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended June 30,
(Unaudited)
Continued from previous page.
<TABLE>
<CAPTION>
<S> <C> <C>
Cash flows from investing activities:
Additions to property and equipment ........................................... (3,085,976) (769,018)
Proceeds from sales of equipment .............................................. -- 195,095
Net (purchases) sales of investments - held-to-maturity ....................... (2,154,765) 100,588
------------ ------------
Net cash used in investing activities ......................................... (5,240,741) (473,335)
------------ ------------
Cash and cash equivalents:
Net increase in cash and cash equivalents ..................................... 9,795,682 3,175,275
Cash and cash equivalents at beginning of period .............................. 8,630,831 1,679,489
------------ ------------
Cash and cash equivalents at end of period .................................... $ 18,426,513 $ 4,854,764
============ ============
Supplementary disclosures of cash flow information:
Cash paid during the period for:
Interest .................................................................. $ 155,185 $ 109,879
Income taxes .............................................................. $ 2,589,611 $ 2,740,883
</TABLE>
Supplemental disclosures of non-cash investing
and financing activities:
Capital lease obligations:
For the nine months ended June 30, 1995 capital lease obligations of
$216,053 were incurred for the leasing of equipment. There were no capital
lease obligations entered into during the nine months ended June 30, 1996.
Valuation adjustment:
For the nine months ended June 30, 1996, the account was adjusted to
reflect an increase in market values of $22,991, net of deferred income
taxes. During the nine month period ended June 30, 1995, $4,958, net of
taxes, was added to the marketable securities valuation adjustment. This
represents the additional net unrealized losses on the investments -
available-for-sale, net, during the period.
Acquisition of business:
During the nine month periods ended June 30, 1996 and 1995, $ 461,538 and
$506,250 of common stock issuable was converted into 34,621 and 63,613
issued shares of the Company's common stock, in accordance with the terms
of the Catalog Resources, Inc.
purchase agreement, as amended.
Stock dividends:
The June 30, 1995 financial statements reflect the 2 for 1 stock split
(2,061,087 shares) paid as a stock dividend on October 24, 1995. On January
5, 1996, 360 shares of common stock were paid as dividends upon exchange of
150 shares of the Company's "old" common stock.
See Notes to Consolidated Financial Statements.
<PAGE>
LCS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1) In the opinion of management, the accompanying unaudited financial statements
include all adjustments (consisting only of normal recurring accruals) which are
necessary for a fair presentation of results for the periods indicated. Certain
information and footnote disclosures normally included in complete financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. Therefore, these financial statements should be read in
conjunction with the financial statements and the footnotes included in the
Company's Annual Report on Form 10-K for the year ended September 30, 1995. The
results of operations for the nine months ended June 30, 1996 and 1995 are not
necessarily indicative of the results for the full year. The September 30, 1995
Balance Sheet was derived from the audited Balance Sheet at that date.
2) Certain reclassifications have been made to the 1995 financial statements in
order to conform to the fiscal 1996 presentations.
3) For the three and nine month periods ended June 30, 1996 and 1995, earnings
per share have been calculated based on the weighted average shares outstanding
using the treasury stock method for stock options, which are considered common
stock equivalents, and the number of shares currently issuable in connection
with the acquisition of Catalog Resources, Inc. Earnings per share and the
weighted average number of shares outstanding for the three and nine month
periods ended June 30, 1995 have been restated to reflect the 2 for 1 stock
split paid as a 100% stock dividend on October 24, 1995.
4) At the Company's annual meeting held on January 23, 1996, shareholders
approved an increase of 9,000,000 shares in the authorized number of shares of
Common Stock, par value $.01, to 15,000,000 shares.
5) In March, 1996, Catalog Resources, Inc. entered into a $2.5 million five year
term loan to substantially fund the expansion of its warehouse and office
facilities. Initial proceeds of $1.785 million were received at the closing. The
remainder was received in June, 1996.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Three Months ended June 30, 1996
Sales increased 23% in the quarter ended June 30, 1996 to
$22,398,000 from $18,154,000 for the comparable quarter of the prior year. This
improvement is accounted for by a 101% increase in computer services, a 14%
increase in list marketing services and a 12% increase in fulfillment services.
Computer services' increase reflects the revenues related to the $40 million
contract to provide computer services through the building of a marketing
database for a major non-U.S. communications company. The contract extends
through June, 1998, subject to termination under certain circumstances. Revenue
is recognized on the percentage- of-completion method of accounting measured by
the percentage of labor hours incurred to date to the total labor hours required
for the contract. The list marketing revenue increase resulted generally from an
expanded customer base and increased volumes with continuing customers.
Fulfillment services' increase reflects a 77% increase in outbound telemarketing
services, a 25% increase in continuity fulfillment services partially offset by
decreases of 11% in inbound telemarketing services and 5% in the catalog
fulfillment operation. The increases in outbound telemarketing and continuity
services primarily reflect increased revenues from continuing customers. The
decline in inbound telemarketing services is part of the Company's strategic
plan to de-emphasize this service while the catalog fulfillment operation
decrease includes a 17% decrease in revenues from an existing customer.
Gross profit increased 27% to $7,166,000 for the current quarter
from $5,622,000 in the comparable quarter of 1995. Gross profit margin was 32%
in the current quarter compared to 31% in 1995. The increase in gross profit
amount resulted primarily from the increased sales volumes. The improvement in
gross margin resulted primarily from the margin associated with the increased
computer services' revenues, as described above, offset by the lower margins
derived from the catalog fulfillment operations.
Selling and administrative expenses increased 33% to $4,346,000
in the current quarter from $3,277,000 in the comparable quarter of 1995.
Selling and administrative expenses, as a percentage of sales, were 19% for the
current quarter and 18% for the comparable period in 1995. The increase in
amount of selling and administrative expenses reflect increased expenses
associated with the facility expansion at the catalog fulfillment operation, the
expenses associated with both the continuity fulfillment and list marketing
services' incremental revenues partially offset by the minimal incremental
selling and administrative costs associated with the increase in computer
services' revenues.
Net dividend and interest income of $169,000 was realized in the
current quarter compared to $65,000 in the comparable 1995 quarter. Dividend and
interest income increased $175,000 in the current fiscal quarter as a result of
a higher level of funds available for short-term investment partially offset by
lower interest rates. The increase in interest expense quarter over quarter of
$175,000 resulted from the $2,532,000 in long-term debt recorded at September
30, 1995 for the future payments required in connection with the acquisition of
Catalog Resources, Inc. (CRI) and the $1,785,000 received in conjunction with a
five year term loan entered into by CRI in March, 1996 to fund the expansion of
its warehouse and office facilities. Additional proceeds of $715,000 were
received under the term loan in June, 1996. The unsecured line of credit
available to the Company was not utilized in either quarter.
<PAGE>
Net income was $1,753,000 ($.34 per share-fully diluted) in the
current quarter compared to $1,444,000 ($.29 per share-fully diluted) in the
comparable 1995 quarter.
Nine Months ended June 30, 1996
Sales increased 27% for the nine months ended June 30, 1996 to
$70,400,000 from $55,275,000 for the comparable period of the prior year. This
improvement is represented by a 114% increase in computer services, a 20%
increase in fulfillment services and a 13% increase in list marketing services.
The increase in computer services' sales reflects the revenues related to the
$40 million contract with a non-U.S. communications company, as described in the
section above. The fulfillment services' increase includes a 112% increase in
outbound telemarketing, a 51% increase in continuity fulfillment partially
offset by decreases of 46% in inbound telemarketing and 5% at the catalog
fulfillment operation. Explanations of these fluctuations are the same as
described in the current quarter section above with the catalog fulfillment
operations' decline from an existing customer amounting to 29% for the full nine
month period of the current fiscal year.
Gross profit increased 31% to $22,247,000 for the nine month
period from $17,032,000 in the comparable period of 1995. Gross profit margin
was 32% compared to 31% in the prior year. The increase in gross profit amount
resulted primarily from the increased sales volumes. The higher gross profit
margin derived from the incremental computer services' revenues was partially
offset by a lower gross profit margin derived from the catalog fulfillment
operation.
Selling and administrative expenses increased 25% to $12,381,000
from $9,987,000. Selling and administrative expenses, as a percentage of sales,
were 18% for both nine month periods. The increase in the amount of selling and
administrative expenses reflects the costs associated with the incremental
fulfillment and list marketing sales and the administrative salaries and related
expenses associated with the facility expansion at the catalog fulfillment
operation. These expenses remained constant, as a percentage of sales, due to
the minimal incremental selling and administrative expenses associated with the
additional computer services' revenue.
Net dividend and interest income of $368,000 was realized in the
current period compared to $100,000 in 1995. Dividend and interest income
increased $435,000 in the current nine month period as a result of a higher
level of funds available for short-term investment partially offset by lower
interest rates. The increase in interest expense period over period of $167,000
resulted from the CRI acquisition debt recorded at September 30, 1995 and the
new CRI term loan, as described above. The unsecured line of credit available to
the Company was not utilized in either period.
Net income was $6,036,000 ($1.17 per share-fully diluted) in the
current period compared to $4,241,000 ($.86 per share-fully diluted) in the
comparable 1995 period.
Financial Condition, Liquidity and Capital Resources
Working capital was $16,948,000 at June 30, 1996. Fluctuations in
the components of working capital resulted primarily from the increases in cash
and cash equivalents and investments held-to-maturity and a decrease in accounts
payable partially offset by a decrease in accounts receivable and an increase in
deferred revenues, income taxes payable and other accrued expenses.
<PAGE>
For the nine month period, cash generated by operations increased
$8,820,000 over such amounts generated in the comparable period of the prior
year. This increase was primarily the result of increases in net income of
$1,794,000, deferred revenue of $4,408,000 and income taxes payable of
$1,011,000 and a decrease in accounts receivable of $595,000 partially offset by
a decrease in accounts payable of $1,371,000.
In the nine month period ended June 30, 1996, financing
activities provided funds of $1,930,000 compared to a use of funds of $638,000
in 1995. In both periods, the repayment of debt was the primary use of funds and
amounted to $1,000,000 in 1996 and $959,000 in 1995. In 1996, $2,500,000 was
borrowed under the terms of a five year term loan to substantially fund the
expansion of warehouse and office facilities at CRI. Cash used for investing
activities, in the current period, increased $4,767,000 compared to 1995 due to
additions to property and equipment, primarily for the CRI expansion, described
above, and for additional short-term investments held-to-maturity.
Pursuant to the purchase agreement, as amended, with CRI, the
Company is obligated to pay to CRI's selling shareholders, in cash or stock, up
to an aggregate of $10,000,000. Under such purchase agreement, the Company paid
$1,012,500 (one-half in cash and one-half in stock) on January 1, 1996. Further,
such amounts will be payable each January 1 through 2002 totaling a maximum of
$6,075,000. The discounted value of these future payments was recorded at
September 30, 1995 since it is probable that the future earnings levels will be
attained which will require the maximum payments to be made.
Management believes cash generated from current operations and
other liquid assets combined with the available bank credit line and the five
year term loan mentioned above will be sufficient to meet cash flow needed
during the fiscal year.
<PAGE>
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 10.12 - Employment agreement between Arnold J.
Scheine and LCS Industries, Inc.
(b) Exhibit 10.13 - Employment agreement between Arnold J.
Scheine and LCS Industries, XXX. (a group company).
(c) Exhibit 11 - Computation of earnings per share.
(d) Reports on Form 8-K - LCS Industries, Inc. did not file any
Form 8-K during the quarter ended June 30, 1996.
<PAGE>
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.
Date: Clifton, New Jersey
August 8, 1996
LCS INDUSTRIES, INC.
(Registrant)
By: /s/ Arnold J. Scheine
Arnold J. Scheine
President
(Chief Executive Officer)
By: /s/ Pat R. Frustaci
Pat R. Frustaci
Vice President-Finance
(Chief Financial Officer)
<PAGE>
LCS INDUSTRIES, INC.
Commission File No. 0-12329
------
Quarterly Report on Form 10-Q
for the
Nine Months Ended June 30, 1996
EXHIBITS
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
10.12 Employment agreement between
Arnold J. Scheine and LCS Industries, Inc.
10.13 Employment agreement between
Arnold J. Scheine and LCS Industries, XXX.
(a group company)
11 Statement re Computation of Per Share Earnings
10.12
<PAGE>
AGREEMENT dated as of October 1, 1995 between ARNOLD J.
SCHEINE ("Scheine"), residing at 47 Lyncrest Drive, Monsey, New York, and LCS
Industries, Inc., having an office at 120 Brighton Road, Clifton, New Jersey, a
corporation organized under the laws of the State of Delaware ("the Company").
WHEREAS, the Company desires to employ Scheine as its chief
executive officer and obtain his special skills and experience upon the terms
and conditions hereinafter set forth, and Scheine is willing to accept such
employment;
NOW, THEREFORE, for good and valuable consideration, the
receipt of which is hereby acknowledged, and the mutual covenants herein
contained, the parties agree as follows:
1. The Company has employed and shall continue to employ
Scheine for a period of three (3) years commencing October 1, 1995 and
terminating September 30, 1998.
2. Scheine shall be the president and chief executive
officer of the Company and shall perform for the Company the services and duties
associated with such position and such other duties as shall be designated by
the Board of Directors of the Company consistent therewith.
3. Scheine shall devote his best efforts in the performance
of his duties so as to promote the profit, benefit and advantage of the business
of the Company.
4. As compensation for his services as set forth hereunder,
the Company shall pay as wages to Scheine annually ("Wages") (a) a base salary
of $370,000, (b) a bonus equal to (i) two percent (2%) of the first five million
dollars ($5,000,000) of pretax income and (ii) three percent (3%) of the pre-tax
income of the Company in excess of five million dollars ($5,000,000) as
determined by the Company's auditors (the "Bonus"), (c) the continued use of a
car provided by the Company, and (d) all other medical, hospital, dental,
savings, stock purchase, life insurance, disability insurance, pension and other
benefits as are customarily given by the Company to executives of the Company.
Additionally, and as an inducement for Scheine to enter into this Agreement, the
Company shall forgive the repayment of principal and interest on an automobile
loan of six thousand dollars ($6,000) previously made to him. In the event the
Bonus reaches the sum of $500,000, the parties shall negotiate a new and
different formula for all sums in excess thereof.
5. Scheine may be discharged by the Board of Directors of
the Company for just cause, in which event all of the rights and obligations of
the parties shall forthwith terminate, except where this Agreement expressly
provides that provisions shall survive termination of this Agreement. Just cause
shall include (a) the willful and continued failure by Scheine to substantially
perform his duties hereunder (other than any such failure resulting from his
incapacity due to physical or mental illness), after written demand for
substantial service is delivered by the Company that specifically identifies the
manner in which the Company believes Scheine has not substantially performed his
duties, or (b) the willful engaging by Scheine in misconduct which is materially
injurious to the Company, monetarily or otherwise, including acts of dishonesty
constituting a felony under the laws of the jurisdiction where such acts were
performed and resulting or intended to result directly or indirectly in gain or
personal enrichment at the expense of the Company, or (c) the willful and
continued violation by Scheine of the provisions of this Agreement after written
notice is delivered by the Company or its Board of Directors that specifies that
the continuation or repetition of any specifically identified conduct will be
the basis for the Company having just cause under this clause.
<PAGE>
6. The Company shall have the right to terminate this
Agreement in the event of (a) the death of Scheine, or (b) the disability of
Scheine for a continuous period of ninety (90) days, or for one hundred twenty
(120) days during a period of six (6) months. The Company's right to terminate
shall accrue upon thirty (30) days written notice to Scheine, his legal
representative, or his estate as the case may be. Upon the exercise of such
right to terminate, the Company shall pay to Scheine, his legal representative,
or his estate, as the case may be, Wages, less any sum received by Scheine as
disability benefits pursuant to a policy of insurance provided by the Company,
for a period of twelve (12) months or the remainder of the term of this
Agreement, which ever is shorter, and upon the payment of the aforesaid, all
liability of the company to Scheine and his successors and legal representatives
shall terminate. That portion of Wages as defined in paragraph 4 (b) hereof
shall be calculated on a pro rata basis to the point of death or disability.
7. Scheine covenants that while he is employed by the
Company pursuant to the terms of this Agreement and for a period of one (1) year
thereafter, he shall not, directly or indirectly, own, operate, join, control,
or participate in or be connected with as an officer, employee, partner,
stockholder, consultant, or otherwise, any entity, which is at the time in
competition with the business of the Company as now or hereafter conducted.
8. Notwithstanding anything to the contrary contained
herein, Scheine may accept employment with a subsidiary of the Company.
9. Scheine acknowledges that his services to the Company are
unique and that any breach of the foregoing will cause the Company irreparable
harm entitling it to obtain injunctive relief, in addition to any and all other
remedies available to it. The provisions of paragraph 7 and 8 shall survive the
termination of this Agreement.
10. All notices directed to any party hereto shall be in
writing, mailed by certified or registered mail, to the party at the address of
said partner as set forth above, unless the address for notices is changed by
giving written notice thereof.
11. This agreement shall be binding upon the parties hereto,
and their respective estates, heirs, legal representatives and assigns.
12. This agreement and the rights of the parties hereto
shall be interpreted in accordance with the laws of the State of New York and
any dispute arising out of or related to this Agreement shall be litigated in
the federal or state courts of the State of New York.
13. This agreement contains the entire agreement of the
parties and it may not be changed or modified except by a writing duly executed
by all of the parties hereto.
IN WITNESS WHEREOF, the undersigned have hereunto set their
hands and seals as of the day and year first above written.
/s/ Arnold J. Scheine
- ----------------- LCS Industries, Inc.
Arnold J. Scheine
By: /s/ Pat R. Frustaci
4/2/96
Vice President-Finance
10.13
<PAGE>
"CONFIDENTIAL TREATMENT REQUESTED BY LCS INDUSTRIES, INC."
AGREEMENT
AGREEMENT dated as of April 2, 1996 between
ARNOLD J. SCHEINE, residing at XXX XXX, XXX, XXX, and
LCS INDUSTRIES XXX., a company incorporated under the laws of XXX XXX XXX ("the
Company"), whose registered office is at XXX, XXX, XXX, XXX.
WHEREAS, the Company desires to employ Mr. Scheine as its chief executive
officer and obtain his special skills and experience upon the terms and
conditions hereinafter set forth, and Mr. Scheine is willing to accept such
employment;
NOW, THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, and the mutual covenants herein contained, the parties
agree as follows:
1 In this agreement (and any schedules to it):
1.1 "XXX XXX" means a company which is treated as such for the purposes
of XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX;
"Board" means the board of directors of the Company from time to
time or anyone/any person or committee nominated by the board of
directors as its representative for the purposes of this agreement;
"disability" means where Mr. Scheine is unable to perform his duties
and functions under this agreement;
"Employment" means the employment governed by this agreement;
"Group" means the Company, its ultimate holding company for the time
being and any subsidiaries and associated companies for the time
being of such companies;
"Group Company" means a member of the Group and "Group Companies"
will be interpreted accordingly;
"holding company" and "subsidiary" have the same meanings as in XXX
XXX XXX XXX XXX;
1.2 references to any statutory provisions include any modifications or
re-enactments of those provisions.
2 The Company has employed and shall continue to employ Mr. Scheine
for a period of three (3) years commencing October 1, 1995 until
September 30, 1988.
3 Mr. Scheine shall be the Chairman and chief executive officer of the
Company and shall perform for the Company the services and duties
associated with such position and such other duties as shall be
designated by the Board consistent therewith.
4 Mr. Scheine shall use his best endeavors in the performance of his
duties so as to promote the profit, benefit and advantage of the
business of the Company.
<PAGE>
"CONFIDENTIAL TREATMENT REQUESTED BY LCS INDUSTRIES, INC."
5 Mr. Scheine shall be required to work whatever hours are necessary
for him to satisfactorily perform the duties of his office.
6 As and for his compensation for the performance of his duties as
herein provided, the Company shall pay Mr. Scheine the sum of
$175,000 U.S. per annum, and reimburse him for all ordinary and
customary out-of-pocket living expenses incurred by him, including,
without limitation, all travel expenses incurred in the performance
of his duties hereunder. The salary of $175,000 U.S. per annum
includes director's fees from the Group Companies. To achieve this
either:
6.1 Mr. Scheine will repay any fees he receives to the Company; or
6.2 his salary will be reduced by the amount of those fees; or
6.3 a combination of the methods set out in Clauses 6.1 and 6.2 will be
applied.
7 Mr. Scheine may be discharged by the Board for just cause, in which
event all of the rights and obligations of the parties shall
forthwith terminate, except where this Agreement expressly provides
that provisions shall survive termination of this Agreement. Just
cause shall include:
7.1 the wilful and continued failure by Mr. Scheine to substantially
perform his duties hereunder (other than any such failure resulting
from his incapacity due to physical or mental illness), after
written demand for substantial service is delivered by the Company
that specifically identifies the manner in which the Company
believes Mr. Scheine has not substantially performed his duties, or
7.2 the wilful engaging by Mr. Scheine in misconduct which is materially
injurious to the Company, monetarily or otherwise, including acts of
dishonesty constituting a criminal offense under the laws of the
jurisdiction, or
7.3 the wilful and continued violation by Mr. Scheine of the provisions
of this Agreement after written notice is delivered by the Company
or its board that specifies that the continuation or repetition of
any specifically identified conduct will be the basis for the
Company having just cause under this clause, or
7.4 where Mr. Scheine is bankrupted or has a receiving order made
against him or makes any general composition with his creditors or
takes advantage of any statute affording relief for solvent debtors.
8 Mr. Scheine will have no claim against the Company if the Employment
is terminated:
8.1 by reason of the liquidation of the Company in order to XXX XXX the
Company;
8.2 by reason of any reorganization of the Company; and
<PAGE>
"CONFIDENTIAL TREATMENT REQUESTED BY LCS INDUSTRIES, INC."
8.3 Mr. Scheine is offered employment with the company succeeding to the
Company upon such liquidation (or reorganization); and
8.4 the new terms of employment offered to Mr. Scheine are no less
favorable to him than the terms of this agreement.
9 The Company shall have the right to terminate this Agreement in the
event of:
9.1 the death of Mr. Scheine, or
9.2 the disability of Mr. Scheine for a continuous period of ninety (90)
days, or for one hundred twenty (120) days during a period of six
(6) months.
The Company's right to terminate shall accrue upon thirty (30) days
written notice to Mr. Scheine, his legal representative, or his
estate, as the case may be. Upon the exercise of such right to
terminate, the Company shall pay to Mr. Scheine, his legal
representative, or his estate, as the case may be, wages, less any
sum received by Mr. Scheine as disability benefits pursuant to a
policy of insurance provided by the Company, for a period of twelve
(12) months or the remainder of the term of this Agreement, which
ever is shorter, and upon the payment of the aforesaid, all
liability of the Company to Mr. Scheine and his successors and legal
representatives shall terminate.
10 Mr. Scheine will have no claim for damages or any other remedy
against the Company if the Employment is terminated for any of the
reasons set out in clauses 7 and 8.
11 The following events shall occur upon termination:
11.1 if the Employment terminated (under any circumstances) Mr. Scheine
will immediately return to the Company all documents and materials
which belong or relate to the Company and the Group Companies and
which Mr. Scheine has in his possession or which are under his
control; and all other property belonging to the Company and the
Group Companies.
11.2 If the Employment terminates the Company may deduct from any money
due to Mr. Scheine (including remuneration) any amount which he owes
the Company or any other Group Company.
12 Mr. Scheine covenants that while he is employed by the Company
pursuant to the terms of this Agreement and for a period of one (1)
year thereafter, he shall not, directly or indirectly own, operate,
join, control, or participate in or be connected with as an officer,
employee, partner, stockholder, consultant or otherwise, any
business, individual, partnership, firm, corporation, or other
entity which is at the time in competition with the business of the
Company as now or hereafter conducted.
13 The following provisions apply in respect of Mr. Scheine's
directorships:
<PAGE>
"CONFIDENTIAL TREATMENT REQUESTED BY LCS INDUSTRIES, INC."
13.1 Mr. Scheine's office as a director of the Company or any other Group
Company is subject to the XXX XXX of the relevant company (as
amended from time to time).
13.2 Mr. Scheine must resign from any office held in any Group Company if
he is asked to do so by the Company. If he fails to resign the
Company is irrevocably authorized by this agreement to appoint
someone on Mr. Scheine's behalf to do everything necessary to effect
his resignation (including signing documents in his name).
13.3 The termination of any directorship held by Mr. Scheine will not
terminate Mr. Scheine's employment or amount to a breach of terms of
this agreement by the Company.
13.4 During the Employment Mr. Scheine will not do anything which could
cause him to be disqualified from continuing to act as a director of
any Group Company.
13.5 Mr. Scheine must not resign his office as a director of any Group
Company without the agreement of the Company.
14 Mr. Scheine acknowledges that his services to the Company are unique
and that any breach of the foregoing will cause the company
irreparable harm entitling it to obtain injunctive relief, in
addition to any and all other remedies available to it. The
provisions of paragraphs 12 and 13 shall survive the termination of
this Agreement.
15 All notices directed to any party hereto shall be in writing mailed
by certified or registered mail, to the party at the address of said
party as set forth above, unless the address for notices is changed
by giving written notice thereof.
16 This agreement shall be binding upon the parties hereto, and their
respective estates, heirs, legal representatives and assigns.
17 This Agreement is governed by and will be interpreted in accordance
with the XXX XXX. Each of the parties submits to the jurisdiction of
the XXX XXX as regards any claim or matter arising under this
Agreement.
18 This agreement contains the entire agreement of the parties and it
may not be changed or modified except by writing duly executed by
all of the parties hereto. It supersedes any previous written or
oral agreement between the parties in relation to the matters dealt
with in it. Mr. Scheine acknowledges that he has not been induced to
enter into this agreement by any representation, warranty or
undertaking not expressly incorporated into it. Mr. Scheine agrees
and acknowledges that his only rights and remedies in relation to
any representation, warranty or undertaking made or given in
connection with this agreement (unless such representation, warranty
or undertaking was made fraudulently) will be for breach of the
terms of this agreement, to the exclusion of all other rights and
remedies (including those in tort or arising under statute).
<PAGE>
"CONFIDENTIAL TREATMENT REQUESTED BY LCS INDUSTRIES, INC."
IN WITNESS WHEREOF, the undersigned have hereunto set their hands
and seals as of the day and year first before written.
SIGNED XXX by } EXECUTED XXX by }
Arnold J. Scheine LCS Industries XXX.
in the presence of: in the presence of:
/s/ Arnold J. Scheine
Director /s/ Arnold J. Scheine
Name /s/ Pat R. Frustaci Director/Secretary /s/ Marvin Cohen
Address LCS Industries, Inc.
120 Brighton Road
Clifton, NJ 07012
Occupation Vice President
11
<PAGE>
EXHIBIT 11
LCS INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE AND
COMMON EQUIVALENT SHARE
For the Three and Nine Months Ended June 30,
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Primary earnings per share:
Weighted average shares outstanding ........................ 4,399,717 4,049,652 4,299,128 3,995,024
Weighted average - dilutive stock options .................. 636,540 630,530 681,877 467,158
Shares issuable in connection with the
acquisition of Catalog Resources, Inc. .................. 160,475 160,475 160,475 160,475
---------- ---------- ---------- ----------
5,196,732 4,840,657 5,141,480 4,622,657
========== ========== ========== ==========
Net income ................................................. $1,752,695 $1,444,352 $6,035,790 $4,241,434
Primary earnings per share and common
equivalent share ........................................ $ .34 $ .30 $ 1.17 $ .92
========== ========== ========== ==========
Fully diluted earnings per share:
Weighted average shares outstanding ........................ 4,399,717 4,049,652 4,299,128 3,995,024
Weighted average - dilutive stock options .................. 636,540 706,674 681,877 754,380
Shares issuable in connection with the
acquisition of Catalog Resources, Inc. .................. 160,475 160,475 160,475 160,475
---------- ---------- ---------- ----------
5,196,732 4,916,801 5,141,480 4,909,879
========== ========== ========== ==========
Net income ................................................. $1,752,695 $1,444,352 $6,035,790 $4,241,434
Fully diluted earnings per share and common
equivalent share ........................................ $ .34 $ .29 $ 1.17 $ .86
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 18,426,513
<SECURITIES> 2,354,624
<RECEIVABLES> 21,092,004
<ALLOWANCES> 702,000
<INVENTORY> 203,943
<CURRENT-ASSETS> 42,807,763
<PP&E> 16,023,208
<DEPRECIATION> 9,234,384
<TOTAL-ASSETS> 59,553,419
<CURRENT-LIABILITIES> 25,859,660
<BONDS> 0
0
0
<COMMON> 46,036
<OTHER-SE> 29,009,148
<TOTAL-LIABILITY-AND-EQUITY> 59,553,419
<SALES> 0
<TOTAL-REVENUES> 70,400,069
<CGS> 0
<TOTAL-COSTS> 48,153,116
<OTHER-EXPENSES> 12,381,306
<LOSS-PROVISION> 90,000
<INTEREST-EXPENSE> 308,342
<INCOME-PRETAX> 10,233,790
<INCOME-TAX> 4,198,000
<INCOME-CONTINUING> 6,035,790
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,035,790
<EPS-PRIMARY> 1.17
<EPS-DILUTED> 1.17
</TABLE>
