SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended
September 30, 1997
Commission File Number
0-8508
NORTHWEST TELEPRODUCTIONS, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Minnesota 41-0641789
(State or other Jurisdiction of (IRS Employer Identification
Incorporation or Organization) Number)
4000 West 76th Street
Minneapolis, MN 55435
Address of Principal Executive Offices (Zip Code)
Issuer's telephone number including Area Code: 612-835-6450
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 of Exchange Act during the past twelve months (or for such
shorter period that the issuer was required to file such reports) and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
1,356,425 shares of $.01 par value common stock were outstanding at October 31,
1997.
Transitional Small Business Disclosure Format (Check One):
Yes [ ] No [X]
<PAGE>
NORTHWEST TELEPRODUCTIONS, INC
AND SUBSIDIARIES
INDEX
FORM 10-QSB
September 30, 1997
PART 1 Page No.
Consolidated Balance Sheets:
September 30, 1997 and March 31, 1997 3
Consolidated Statements of Operations:
Three and Six Months Ended September 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flow:
Six Months Ended September 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Management Discussion and Analysis 7 & 8
Other Information 9 & 10
Exhibit Index 11
<PAGE>
PART I
NORTHWEST TELEPRODUCTIONS,INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30 March 31
1997 1997
(Unaudited) *
---------------- ----------------
<S> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash $0 $532,617
Cash-restricted $74,533 $435,662
Trade accounts receivable less doubtful accounts
reserve$139,963 and $120,622 respectively 2,273,135 1,957,833
Inventory 177,166 196,238
Refundable income taxes 309,791 367,000
Deferred income taxes 64,000 64,000
Other assets 151,535 75,512
---------------- ----------------
TOTAL CURRENT ASSETS 3,050,160 3,628,862
---------------- ----------------
PROPERTY,PLANT AND EQUIPMENT:
Land,buildings and improvements 3,662,701 3,662,702
Machinery and equipment 22,171,501 21,965,186
---------------- ----------------
25,834,202 25,627,888
Less accumulated depreciation 20,600,582 19,726,772
---------------- ----------------
5,233,620 5,901,116
DEFERRED RENT 286,210 304,240
CAPITALIZED FINANCING COSTS 318,885
---------------- ----------------
605,095 304,240
---------------- ----------------
$8,888,875 $9,834,218
================ ================
LIABILITIES AND STOCKHOLDERS'EQUITY:
CURRENT LIABILITIES:
Notes payable $252,590 $1,127,199
Accounts payable 1,334,016 $1,072,820
Commissions,salaries and withholding 479,242 510,488
Miscellaneous accounts payable and accrued expenses 220,981 179,793
Other liabilities 91,083 987,877
Payments due within one year on term obligations 924,838 851,610
--------------- ---------------
TOTAL CURRENT LIABILITIES 3,302,750 4,729,787
DEFERRED INCOME TAXES 64,000 64,000
LONG TERM DEBT AND CAPITAL LEASES, less current portion 3,821,035 2,479,466
STOCKHOLDERS' EQUITY:
Common stock 13,564 13,564
Additional paid-in capital 577,123 577,123
Retained earnings 1,110,403 1,970,278
---------------- ----------------
1,701,090 2,560,965
---------------- ----------------
$8,888,875 $9,834,218
================ ================
</TABLE>
*The balance sheet at March 31,1997 has been taken from the audited financial
statements at that date. See notes to condensed consolidated financial
statements.
<PAGE>
NORTHWEST TELEPRODUCTIONS,INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1997 1996 1997 1996
---------------- ---------------- ------------------ -------------------
<S> <C> <C> <C> <C>
NET SALES $3,212,531 $3,469,747 $6,099,371 $6,050,262
COSTS AND EXPENSES:
Costs of products and services sold 2,943,192 2,710,142 5,725,238 5,168,590
Selling,general and administrative 511,159 502,323 1,004,465 1,021,152
Interest 143,622 125,783 279,601 240,405
---------------- ---------------- ------------------ -------------------
3,597,973 3,338,248 7,009,304 6,430,147
---------------- ---------------- ------------------ -------------------
(385,442) 131,499 (909,933) (379,885)
OTHER INCOME 1,396 8,898 50,058 9,537
---------------- ---------------- ------------------ -------------------
EARNINGS BEFORE TAXES ON INCOME (384,046) 140,397 (859,875) (370,348)
TAXES ON INCOME (INCOME TAX CREDIT) (48,139) (148,139)
================ ================ ================== ===================
NET EARNINGS ($384,046) $188,536 ($859,875) ($222,209)
================ ================ ================== ===================
NET EARNINGS PER SHARE (1) ($0.28) $0.14 ($0.63) ($0.16)
================ ================ ================== ===================
</TABLE>
(1) Net earnings per share are based on the weighted average number of
common shares outstanding during the periods as follows:
Three months: September 30, 1997 1,356,425
September 30, 1996 1,356,425
Six months: September 30, 1997 1,356,425
September 30, 1996 1,356,425
See notes to condensed consolidated financial statements.
<PAGE>
NORTHWEST TELEPRODUCTIONS,INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
September 30
1997 1996
---------------- ----------------
<S> <C> <C>
CASH FLOW-OPERATING ACTIVITIES:
Net earnings (loss) ($859,876) ($222,209)
Adjustments:
Depreciation 873,810 960,580
Other 54,048
(Increase) Decrease in trade receivables (315,302) (288,130)
Other - net (214,869) (183,091)
--------------- ----------------
Net cash provided (utilized) by operating activities (462,180) (267,150)
CASH FLOW - INVESTING ACTIVITIES:
Property,plant and equipment additions (206,314) (121,770)
CASH FLOW - FINANCING ACTIVITIES:
Advances(payments)-Line of credit (874,609) 330,000
Advances(payments)-Long term borrowing 984,531 (248,996)
--------------- ---------------
Net cash provided by financing activities 109,922 81,004
--------------- ---------------
NET INCREASE (DECREASE) IN CASH (558,581) ($226,384)
=============== ===============
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
NORTHWEST TELEPRODUCTIONS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of September 30, 1997, the consolidated
statement of operations for the three and six month periods ended September 30,
1997 and 1996, and the condensed consolidated statements of cash flow for the
six month periods then ended have been prepared by the Company without audit. In
the opinion of management, all adjustments necessary to present fairly the
financial position, results of operations and changes in financial position at
September 30, 1997 and for all periods presented have been made.
On April 24, 1997, the Company and NationsCredit entered into a credit
agreement, which consists of a $8,500,000 revolving credit facility with a
three-year term expiring in April 2000. This credit facility includes a
$3,750,000 term note that is to be repaid in 36 monthly installments, based on a
five-year amortization, with the balance due April 2000. Interest on loans
outstanding under the credit agreement is based on prime plus 2.25%. The
agreement includes certain non-financial covenants. Proceeds from the new credit
agreement were used to pay off the line of credit and the term note payable
outstanding at March 31, 1997.
On June 27, 1997 the Company obtained mortgage financing on its two facilities
in Edina, Minnesota. The Company borrowed $700,000 using the facilities as
collateral. The mortgage financing has an interest rate of prime plus 2.25%,
amortization over 60 months with a three-year term.
Certain information and footnotes normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. It is suggested that these condensed consolidated
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company's March 31, 1997 annual report to
shareholders. The results of operations for the period ended September 30, 1997
are not necessarily indicative of the results for the full year.
On October 24, 1997 the President of the Company, John McGrath, announced his
resignation, effective immediately, due to personal and family reasons. Mr.
McGrath was elected Chairman of the Board. The Board appointed Phillip A. Staden
to the position of President. Mr. Staden had previously served and continues to
serve as the Company's Chief Financial Officer.
<PAGE>
NORTHWEST TELEPRODUCTIONS, INC.
AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL REQUIREMENTS
Operating cash requirements for the first six months of fiscal 1998 were met
from cash flow from operations, utilization of the cash reserves from March 31,
1997, borrowing from the Company's line of credit and $700,000 from a mortgage
secured by the Company's Edina, MN facilities.
On April 24, 1997, the Company and NationsCredit entered into a credit
agreement, which consists of a $8,500,000 revolving credit facility with a
three-year term expiring in April 2000. This credit facility includes a
$3,750,000 term note that is to be repaid in 36 monthly installments, based on a
five-year amortization, with the balance due April 2000. Interest on loans
outstanding under the credit agreement is based on prime plus 2.25%. The
agreement includes certain non-financial covenants. Proceeds from the new credit
agreement were used to pay off the line of credit and the term note payable
outstanding at March 31, 1997.
It is suggested that the Company's annual report to shareholders be read for
more detail as to the Company's overall financial position.
RESULTS OF OPERATIONS - SIX MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH
CORRESPONDING PERIOD OF PRIOR YEAR.
SALES
Sales for the six months ended September 30, 1997 of $6,099,371 compare with
sales of $6,050,262 for the corresponding period of the prior year, a 0.8%
increase. The increase is attributable to increases in programming production.
COST OF PRODUCTS AND SERVICES SOLD
Cost of products and services sold for the six months ended September 30, 1997
equaled 94% of sales as compared to a cost of sales rate of 85% in the
corresponding period of the prior year. These higher rates reflect the lower
margins associated with the production phase of the Cable Shows produced by the
Company's Show Group. Additionally, the decline in sales of the Company's
traditional corporate and industrial markets continued to put pressure on the
Company's margins.
As discussed in the Company's annual report, the Company has made reductions in
fixed overhead and is continuing with its cost reduction program. Management
believes these changes will be reflected in the Company's fourth fiscal quarter.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the first six months of fiscal
1998 totaled $1,004,465, a decrease of $16,687 or 1.6% over the prior years
first six months. The decrease, while not significant, is related to payroll
costs.
<PAGE>
INTEREST EXPENSE
Interest expense for the six months ended September 30, 1997 totaled $279,601
compared with expense of $240,405 in the prior year's corresponding period, an
increase of 16%. The increase in interest expense is the result of increased
borrowings from the line of credit facility, issuance in August 1996 of
subordinated debt and an increase in the interest rate on outstanding
indebtedness.
INCOME TAX CREDIT
During the year ended March 31, 1997 the Company established a valuation
allowance of $97,000 on deferred tax assets. For the six months ended September
30, 1997 the Company added $360,000 to the valuation allowance.
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH
CORRESPONDING PERIOD OF PRIOR YEAR.
SALES
Sales for the three months ended September 30, 1997 of $3,212,531 compare with
sales of $3,469,747 for the corresponding period of the prior year, a 7.4%
decrease. A significant portion of the decrease results from a decrease in
non-contract revenues such as business TV services provided to the corporate
marketplace and services provided to the advertising marketplace.
COST OF PRODUCTS AND SERVICES SOLD
Cost of products and services sold for the three months ended September 30, 1997
equaled 91% of sales as compared to a cost of sales rate of 78% in the
corresponding period of the prior year. These higher rates reflect the lower
margins associated with the production phase of the Cable Shows. Additionally,
the decline in sales of the Company's traditional corporate and industrial
markets continued to put pressure on the Company's margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the three months ended
September 30, 1997 totaled $511,159, an increase of $8,836 or 1.7% over the
prior years first three months. The increase, while not significant, is payroll
related.
INTEREST EXPENSE
Interest expense for the three months ended September 30, 1997 totaled $143,622
compared with expense of $125,783 in the prior year's corresponding period, an
increase of 14%. The increase in interest expense is the result of increased
borrowings from the line of credit facility, issuance in August 1996 of
subordinated debt and an increase in the interest rate on outstanding
indebtedness.
<PAGE>
INCOME TAX CREDIT
During the year ended March 31, 1997 the Company established a valuation
allowance of $97,000 on deferred tax assets. For the three months ended
September 30, 1997 the Company added $157,750 to the valuation.
PART II
Item 4. Submission of Matters to a vote of Security Holders
(a) The annual meeting of the Registrant's shareholders was held on
Wednesday September 10, 1997.
(b) At the Annual Meeting a proposal to set the number of directors at
seven was adopted by a vote of 991,290 for and 9,417 against, no shares
abstaining and no shares represented by broker nonvotes.
(c) Proxies for the Annual Meeting were solicited pursuant to Regulation 14A
under the Securities Exchange Act of 1934, there was no solicitation in
opposition to management's nominees, and the following persons were elected
directors of the Registrant to serve until the next annual meeting of
shareholders and until their successors shall have been duly elected and
qualified:
Nominee Number of Votes For Number of Votes Withheld
------- ------------------- ------------------------
James S. Fish 985,396 15,311
C. Dale Haworth 997,769 2,938
Ronald V. Kelly 997,119 3,588
John G. Lindell 997,146 3,561
Steven Lose 997,544 3,163
Gerald W. Simonson 997,796 2,911
(d) At the Annual Meeting the shareholders approved the appointment of
Deloitte and Touche LLP as independent auditors for the current fiscal year by a
vote 989,018 in favor, with 1,301 against, 112 abstaining and no shares
represented by broker nonvotes.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
27 Financial Data Schedule
b) Reports on form 8-K
None
<PAGE>
Signatures
Pursuant to the requirements of he 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: Northwest Teleproductions, Inc.
November 19, 1997
(Registrant)
By: /s/ Phillip A. Staden
Phillip A. Staden
President and Chief Financial Officer
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBIT INDEX TO FORM 10-Q
Commission File No.: 0-8508
For the quarter ended
September 30, 1997
NORTHWEST TELEPRODUCTIONS, INC.
Exhibit Number Description
- -------------- -----------
27 Financial Data Schedule (in electronic version only)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FINANCIAL STATEMENTS CONTAINED IN REGISTRANT'S FORM 10QSB FOR THE QUARTER
ENDED 9/30/97 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 48,569
<SECURITIES> 0
<RECEIVABLES> 2,413,098
<ALLOWANCES> 139,963
<INVENTORY> 177,166
<CURRENT-ASSETS> 2,998,950
<PP&E> 25,834,202
<DEPRECIATION> 20,600,582
<TOTAL-ASSETS> 8,862,911
<CURRENT-LIABILITIES> 3,276,786
<BONDS> 3,821,035
0
0
<COMMON> 13,564
<OTHER-SE> 577,123
<TOTAL-LIABILITY-AND-EQUITY> 8,862,911
<SALES> 6,099,371
<TOTAL-REVENUES> 6,099,371
<CGS> 5,725,238
<TOTAL-COSTS> 6,729,703
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 279,601
<INCOME-PRETAX> (859,875)
<INCOME-TAX> 0
<INCOME-CONTINUING> (859,875)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (859,875)
<EPS-PRIMARY> (.63)
<EPS-DILUTED> (.63)
</TABLE>
