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
December 31, 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 (Zip Code)
Executive Offices)
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
December 31, 1997
PART 1
Page No.
--------
Consolidated Balance Sheets:
December 31, 1997 and March 31, 1997 3
Consolidated Statements of Operations:
Three and Nine Months Ended December 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flow:
Nine Months Ended December 31, 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>
December 31 MARCH 31
1997 1997
(Unaudited) *
----------------- -----------------
<S> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash $6,135 $532,617
Cash-restricted $259,041 $435,662
Trade accounts receivable less doubtful accounts
reserve of $38,057 and $120,622 respectively 2,285,152 1,957,833
Inventory 165,929 196,238
Refundable income taxes 41,634 367,000
Deferred income taxes 64,000 64,000
Other assets 85,382 75,512
----------------- -----------------
TOTAL CURRENT ASSETS 2,907,273 3,628,862
----------------- -----------------
PROPERTY,PLANT AND EQUIPMENT:
Land,buildings and improvements 3,671,801 3,662,702
Machinery and equipment 22,217,011 21,965,186
----------------- -----------------
25,888,812 25,627,888
Less accumulated depreciation 21,038,454 19,726,772
----------------- -----------------
4,850,358 5,901,116
DEFERRED RENT 271,165 304,240
CAPITALIZED FINANCING COSTS 291,861
----------------- -----------------
563,026 304,240
----------------- -----------------
$8,320,657 $9,834,218
================= =================
LIABILITIES AND STOCKHOLDERS'EQUITY:
CURRENT LIABILITIES:
Notes payable $137,543 $1,127,199
Accounts payable 1,259,134 $1,072,820
Commissions,salaries and withholding 318,487 510,488
Miscellaneous accounts payable and accrued expenses 122,707 179,793
Other liabilities 213,475 987,877
Payments due within one year on term obligations 942,683 851,610
---------------- ----------------
TOTAL CURRENT LIABILITIES 2,994,029 4,729,787
DEFERRED INCOME TAXES 64,000 64,000
LONG TERM DEBT AND CAPITAL LEASES, less current portion 3,717,722 2,479,466
STOCKHOLDERS' EQUITY:
Common stock 13,564 13,564
Additional paid-in capital 577,123 577,123
Retained earnings 954,219 1,970,278
----------------- -----------------
1,544,906 2,560,965
----------------- -----------------
$8,320,657 $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 NINE MONTHS ENDED
DECEMBER 31 DECEMBER 31
1997 1996 1997 1996
----------------- -------------- ------------------ -----------------
<S> <C> <C> <C> <C>
NET SALES $3,022,712 $3,040,479 $9,122,083 $9,090,741
COSTS AND EXPENSES:
Costs of products and services sold 2,616,715 2,771,308 8,341,953 7,939,898
Selling,general and administrative 531,842 400,387 1,536,307 1,421,539
Interest 147,132 124,604 426,733 365,009
----------------- -------------- ------------------ -----------------
3,295,689 3,296,299 10,304,993 9,726,446
----------------- -------------- ------------------ -----------------
(272,977) (255,820) (1,182,910) (635,705)
OTHER INCOME (207) 2,069 49,851 11,606
----------------- -------------- ------------------ -----------------
EARNINGS BEFORE TAXES ON INCOME (273,184) (253,751) (1,133,059) (624,099)
TAXES ON INCOME (INCOME TAX CREDIT) (117,000) (101,501) (117,000) (249,640)
================= ============== ================== =================
NET LOSS ($156,184) ($152,250) ($1,016,059) ($374,459)
================= ============== ================== =================
BASIC EARNINGS PER COMMON SHARE ($0.12) ($0.11) ($0.75) ($0.28)
================= ============== ================== =================
AVERAGE NUMBER OF BASIC COMMON SHARES OUTSTANDING 1,356,425 1,356,425 1,356,425 1,356,425
================= ============== ================== =================
DILUTED EARNINGS PER COMMON SHARE ($0.12) ($0.11) ($0.75) ($0.28)
================= ============== ================== =================
AVERAGE NUMBER OF DILUTIVE COMMON SHARES OUTSTANDING 1,356,425 1,356,425 1,356,425 1,356,425
================= ============== ================== =================
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
NORTHWEST TELEPRODUCTIONS,INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
December 31
1997 1996
----------------- -----------------
<S> <C> <C>
CASH FLOW-OPERATING ACTIVITIES:
Net earnings (loss) ($1,016,059) ($374,460)
Adjustments:
Depreciation 1,311,682 1,440,875
Other 114,179
(Increase) Decrease in trade receivables (327,319) 95,266
Other - net (287,448) (289,998)
----------------- ------------------
Net cash provided (utilized) by operating activities (204,965) (871,683)
CASH FLOW - INVESTING ACTIVITIES:
Property, plant and equipment additions (260,924) (293,740)
CASH FLOW - FINANCING ACTIVITIES:
Advances(payments)-Short-term borrowings (989,656) 307,199
Advances(payments)-Long term borrowing 929,063 (390,113)
----------------- ------------------
Net cash provided by financing activities (60,593) (82,914)
----------------- ------------------
NET INCREASE (DECREASE) IN CASH ($526,482) $495,029
================= ==================
</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 December 31, 1997, the consolidated
statement of operations for the three and nine month periods ended December 31,
1997 and 1996, and the condensed consolidated statements of cash flow for the
nine 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
December 31, 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.
During the quarter ended December 31, 1997 the Company closed its downtown
Minneapolis based Post and Transfer facility and its Northwest Film Group due to
continued operating losses. These operations had a combined year to date
operating loss before interest and corporate expenses of $468,000.
<PAGE>
In the third quarter ended December 31, 1997 Northwest Teleproductions adopted
Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per
Share." SFAS 128 requires disclosure of Basic and Diluted Earnings Per Share
(EPS). Basic EPS is calculated using income available to common shareholders
divided by the weighted average of common shares outstanding during the year.
Diluted EPS is similar to Basic EPS except that the weighted average of common
shares outstanding is increased to include the number of additional common
shares that would have been outstanding if the dilutive potential common shares,
such as options, had been issued. The treasury stock method is used to calculate
dilutive shares which reduces the gross number of dilutive shares by the number
of shares purchasable from the proceeds of the options to be exercised. All
prior year amounts have been restated in accordance with the provisions of SFAS
128. As the inclusion of dilutive potential common shares would increase the Net
Loss per share for the three months ended December 31, 1997 and 1996 and the
nine months ended December 31, 1997 and 1996, such common shares were not
included in the calculation of diluted EPS.
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 December 31, 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 nine 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.
Subsequent to the quarter end the Company sold a portion of the equipment from
the Post and Transfer facility. The proceeds from the sale totaled $707,500
resulting in a gain of approximately $311,500. The proceeds of the sale were
used to paydown the Company's long term debt with NationsCredit.
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 - NINE MONTHS ENDED DECEMBER 31, 1997 COMPARED WITH
CORRESPONDING PERIOD OF PRIOR YEAR.
SALES
- -----
Sales for the nine months ended December 31, 1997 of $9,122,083 compare with
sales of $9,090,741 for the corresponding period of the prior year, an increase
of less than 1 percent. The change is attributable to an increase in programming
production.
COST OF PRODUCTS AND SERVICES SOLD
- ----------------------------------
Cost of products and services sold for the nine months ended December 31, 1997
equaled 91% of sales as compared to a cost of sales rate of 87% 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.
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- --------------------------------------------
Selling, general and administrative expenses for the nine months December 31,
1997 totaled $1,536,307, an increase of $114,768 or 8% from the prior year's
first nine months. The increase is related to rent, sales and marketing expenses
and payroll costs associated with an increase in the sales staff.
INTEREST EXPENSE
- ----------------
Interest expense for the nine months ended December 31, 1997 totaled $426,733
compared with expense of $365,009 in the prior year's corresponding period, an
increase of 16.9%. 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 nine months ended December
31, 1997 the Company added $475,000 to the valuation allowance. The income tax
credit realized by the Company during the quarter ended December 31, 1997
represents tax refunds received that were in excess of the amounts estimated at
March 31, 1997.
RESULTS OF OPERATIONS - THREE MONTHS ENDED DECEMBER 31, 1997 COMPARED WITH
CORRESPONDING PERIOD OF PRIOR YEAR.
SALES
- -----
Sales for the three months ended December 31, 1997 of $3,022,712 compare with
sales of $3,040,479 for the corresponding period of the prior year, a decrease
of less than 1%.
COST OF PRODUCTS AND SERVICES SOLD
- ----------------------------------
Cost of products and services sold for the three months ended December 31, 1997
equaled 87% of sales as compared to a cost of sales rate of 91% in the
corresponding period of the prior year. The lower rates in the current quarter
reflect the higher margins associated with the post-production phase of the
Cable Shows.
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- --------------------------------------------
Selling, general and administrative expenses for the three months ended December
31 1997 totaled $531,842, an increase of $131,455 or 32% over the prior year's
corresponding period. The increase is attributable to an increase in advertising
and marketing, payroll to add additional sales staff and increased rent expense
related to the Chicago operation.
INTEREST EXPENSE
- ----------------
Interest expense for the three months ended December 31, 1997 totaled $147,132
compared with expense of $124,604 in the prior year's corresponding period, an
increase of 18%. 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 three months ended December
31, 1997 the Company added $115,000 to the valuation allowance. The income tax
credit realized by the Company during the quarter ended December 31, 1997
represents tax refunds received that were in excess of the amounts estimated at
March 31, 1997.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
27. Financial Data Schedule
b) Reports on form 8-K None
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: Northwest Teleproductions, Inc.
February 17, 1998
(Registrant)
By: /s/ Phillip A. Staden
Phillip A. Staden
President and Chief Financial Officer
<PAGE>
Northwest Teleproductions, Inc.
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-QSB FOR THE QUARTER ENDED 12/31/97 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 6,135
<SECURITIES> 0
<RECEIVABLES> 2,451,081
<ALLOWANCES> 38,057
<INVENTORY> 165,929
<CURRENT-ASSETS> 2,907,273
<PP&E> 25,888,812
<DEPRECIATION> 21,038,454
<TOTAL-ASSETS> 8,320,657
<CURRENT-LIABILITIES> 2,994,029
<BONDS> 3,717,722
0
0
<COMMON> 13,564
<OTHER-SE> 577,123
<TOTAL-LIABILITY-AND-EQUITY> 8,320,657
<SALES> 9,122,083
<TOTAL-REVENUES> 9,122,083
<CGS> 8,341,953
<TOTAL-COSTS> 8,341,953
<OTHER-EXPENSES> 1,536,307
<LOSS-PROVISION> 40,000
<INTEREST-EXPENSE> 426,733
<INCOME-PRETAX> (1,133,059)
<INCOME-TAX> (117,000)
<INCOME-CONTINUING> (1,016,059)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,016,059)
<EPS-PRIMARY> (.75)
<EPS-DILUTED> (.75)
</TABLE>
