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
June 30, 1999
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)
4455 West 77th Street
Minneapolis, MN 55435
Address of Principal (Zip Code)
Executive Offices)
Issuer's telephone number including Area Code: 612-835-4455
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 August 13,
1999.
Transitional Small Business Disclosure Format (Check One):
Yes____ No___X___
<PAGE>
NORTHWEST TELEPRODUCTIONS, INC.
AND SUBSIDIARIES
INDEX
FORM 10-QSB
June 30, 1999
PART I Financial Information
Item 1. Financial Statements Page No.
Condensed Consolidated Balance Sheets:
June 30, 1999 and March 31, 1999 3
Condensed Consolidated Statement of Operations:
Three Months Ended June 30, 1999 and 1998 4
Condensed Consolidated Statement of Cash Flow:
Three Months Ended June 30, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management Discussion and Analysis 7 & 8
PART II Other Information
Item 6. Exhibits and Reports on Form 8K
<PAGE>
PART I
NORTHWEST TELEPRODUCTIONS,INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30 March 31
1999 1999
(Unaudited) *
----------- -----------
<S> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash $ 1,359,749 $ 316,153
Cash-restricted $ 14,305 $ 124,116
Trade accounts receivable less doubtful accounts
reserve of $65,658 and $58,663 respectively 2,267,825 2,248,691
Refundable income taxes 18,216 18,217
Other assets 413,964 262,641
----------- -----------
TOTAL CURRENT ASSETS 4,074,059 2,969,818
----------- -----------
PROPERTY,PLANT AND EQUIPMENT:
Land,buildings and improvements 1,520,428 1,471,093
Machinery and equipment 19,161,643 19,055,026
----------- -----------
20,682,071 20,526,119
Less accumulated depreciation 17,906,062 17,649,003
----------- -----------
2,776,009 2,877,116
OTHER ASSETS 157,010 263,361
----------- -----------
$ 7,007,078 $ 6,110,295
=========== ===========
LIABILITIES AND STOCKHOLDERS'EQUITY:
CURRENT LIABILITIES:
Notes payable $ 802,354 $ 515,806
Accounts payable 681,694 $ 725,515
Commissions,salaries and withholding 337,341 423,420
Miscellaneous accounts payable and accrued expenses 248,788 202,572
Deferred Gain-Short Term 123,996 123,996
Other liabilities 1,230,080 395,101
Payments due within one year on term obligations 1,473,943 670,026
----------- -----------
TOTAL CURRENT LIABILITIES 4,898,196 3,056,436
DEFERRED GAIN-LONG TERM 93,596 122,528
LONG TERM DEBT AND CAPITAL LEASES, less current portion 904,881 1,881,525
STOCKHOLDERS' EQUITY:
Common stock 13,564 13,564
Additional paid-in capital 577,123 577,123
Retained earnings 519,718 459,119
----------- -----------
1,110,405 1,049,806
----------- -----------
$ 7,007,078 $ 6,110,295
=========== ===========
</TABLE>
*The balance sheet at March 31,1999 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
JUNE 30
1999 1998
----------- -----------
<S> <C> <C>
Net Sales $ 2,693,369 $ 2,388,350
Costs of products and services sold $ 2,119,702 $ 1,928,932
----------- -----------
Gross Profit $ 573,667 $ 459,418
Selling,general and administrative 375,376 410,601
----------- -----------
Operating Income 198,291 48,817
Other Income(Expense)
Miscellaneous income(expense) 4,617 55,097
Interest (142,309) (162,565)
----------- -----------
Total other expenses, net (137,692) (107,468)
Income(Loss) Before Income Taxes 60,599 (58,651)
Income tax benefit(expense)
----------- -----------
Net Income (Loss) $ 60,599 ($ 58,651)
=========== ===========
=========== ===========
BASIC AND DILUTIVE LOSS PER SHARE $ 0.04 ($ 0.04)
=========== ===========
</TABLE>
(1) Net earnings(loss) per share are based on the weighted average number of
common shares outstanding during the periods as follows:
June 30, 1999 1,356,425
June 30, 1998 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>
THREE MONTHS ENDED
JUNE 30
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOW-OPERATING ACTIVITIES:
Net Income (Loss) $ 60,599 ($ 58,651)
Adjustments:
Depreciation 257,058 262,792
Other 63,446 55,544
Gain on sale of assets (28,932) (37,000)
(Increase) Decrease in trade receivables (19,067) 358,374
Other-net 770,317 (505,637)
----------- -----------
Net cash provided (utilized) by operating activities 1,103,421 75,422
CASH FLOW - INVESTING ACTIVITIES:
Property,plant and equipment additions (131,147) (29,929)
Net Proceeds from Sale of Building and other assets 0 1,637,000
----------- -----------
Net cash provided(used) by investing activities (131,147) 1,607,071
CASH FLOW - FINANCING ACTIVITIES:
Advances(payments)-Line of credit 286,548 (386,723)
Advances(payments)-Long term borrowing (172,726) (991,179)
Other (42,500)
----------- -----------
Net cash provided(used) by financing activities 71,322 (1,377,902)
=========== ===========
NET INCREASE (DECREASE) IN CASH 1,043,596 304,591
CASH AT BEGINNING OF PERIOD 316,153 330,055
----------- -----------
CASH AT END OF PERIOD $ 1,359,749 $ 634,646
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
NORTHWEST TELEPRODUCTIONS, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Interim Financial Statements
The consolidated balance sheet as of June 30, 1999, the consolidated
statement of operations for the three month periods ended June 30, 1999 and
1998, and the condensed consolidated statements of cash flow for the three
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 June 30, 1999 and for all periods presented have been made.
2. Sales - Leaseback
On June 24, 1998, the Company closed a three-year sale-leaseback transaction
involving the two parcels of land and buildings located at 4000 West 76th
Street and 4455 West 77th Street. After a three-year period, the Company has
the option of renewing the lease for an additional five years. The monthly
rental expense for the first three years will be as follows: $16,615 in year
1, $17,030 in year 2 and $17,456 in year 3.
The land and buildings were sold for $1.6 million in cash. The proceeds
from sale were used as follows:
Pay off mortgage $ 560,000
Pay down term debt 275,000
Reserve for building improvements 230,000
Reduce other liabilities 427,000
Payment of fees and security deposits 108,000
--------------
Total $ 1,600,000
==============
The transaction has been accounted for as an operating lease, wherein the
property and related mortgage are no longer on the Company's books, and of
which no additional depreciation will be taken.
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, 1999 annual report to
shareholders. The results of operations for the period ended June 30, 1999
are not necessarily indicative of the results for the full year.
<PAGE>
3. Reclassifications
Certain reclassifications have been made to the June 30, 1998 consolidated
financial statements to conform to the classifications used at June 30,
1999. These reclassifications had no effect on the operations or
stockholders' equity as previously reported.
4. Debt Restructuring
In July 1998, the Company did not make the first of its originally
scheduled annual principal and interest payments on its subordinated debt.
On June 28, 1999, the Company restructured the principal and interest
payment terms of its subordinated notes payable. The principal payment terms
were changed from being made over a three-year period beginning in July 1998
to a five-year period beginning in July 2000. Interest payments were also
changed from annual payments to quarterly payments beginning in October
1999. The subordinated notes are presented in the accompanying financial
statements in accordance with the restructured terms since those terms more
properly reflect the commitments of the Company. Other terms of the
subordinated notes remained unchanged as a result of this restructuring.
<PAGE>
NORTHWEST TELEPRODUCTIONS, INC.
AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL REQUIREMENTS
Operating cash requirements for the first three months of fiscal 2000 were met
from cash flow from operations, utilization of the cash reserves from March 31,
1999, and borrowing from the Company's line of credit.
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 - THREE MONTHS ENDED JUNE 30, 1999 COMPARED WITH
CORRESPONDING PERIOD OF PRIOR YEAR.
SALES
Sales for the three months ended June 30, 1999 of $2,693,369 compare with sales
of $2,388,350 for the corresponding period of the prior year, a 12.8 % increase.
Increases in Show production along with increases in our traditional video and
film services account for the increase.
COST OF PRODUCTS AND SERVICES SOLD
Cost of products and services sold for the three months ended June 30, 1999
equaled 78.7% of sales as compared to a cost of sales rate of 80.7% in the
corresponding period of the prior year. This reduction in cost of sales reflects
the improvements in project budgeting, reductions in payroll, depreciation and
general overhead.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the first quarter of fiscal
1999 totaled $375,376, a decrease of $35,225, or 8.6% over the prior year's
first quarter. Decreased salary and related expenses, attributable mainly to the
consolidation of administrative functions, account for a majority of the
decrease.
INTEREST EXPENSE
Interest expense for the first quarter, totaled $142,309 compared with expense
of $162,565 in the prior year's first quarter, a decrease of 12.5%. The decrease
in interest expense from June 1999 to June 1998 is the result of a reduction in
the amount of outstanding term debt.
<PAGE>
INCOME TAX CREDIT
During the year ended March 31, 1999, the Company had a valuation allowance of
$1,168,000 on the deferred tax assets. No changes to the valuation allowance
were made during the current quarter. Tax expense for the quarter ended June 30,
1999 reflects minimum tax amounts due for State income taxes.
Year-2000 COMPLIANCE:
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. When the year 2000 begins,
these computers may interpret "00" as the year 1900 and could stop processing
date related computations or could process them incorrectly. Beginning in the
year 2000, these date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates to be year compliant.
The Company has performed an assessment of its internal information systems and
has determined that its application software and internal information systems
either: (1) are year 2000 compliant; (2) can be upgraded to be year 2000
compliant without significant cost or effort; or (3) do not pose a significant
issue to the Company if left uncorrected. Total costs are expected to be less
than $5,000 and are not material to the operation of the Company.
The Company has assessed non-IT systems within the Company and has determined
that the systems either: (1) are year 2000 compliant; or (2) can be upgraded to
be year 2000 compliant without significant cost or effort. Although the Company
is not aware of any material operational issues or costs associated with
preparing its internal systems for the year 2000, there can be no assurance that
the Company will not experience serious unanticipated negative consequences and
or material costs caused by undetected errors or defects in the technology used
in its internal operating systems, which are composed predominately of third
party software and hardware technology.
The Company is in the process of determining the impact those parties that are
not year 2000 compliant may have on the operations of the Company.
Non-compliance by any of the major vendors, suppliers, customers or financial
organizations could result in business disruptions that could have a material
adverse effect on the Company's results of operations, liquidity and financial
condition.
PART II OTHER INFORMATION
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 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: August 13, 1999 Northwest Teleproductions, Inc.
(Registrant)
By: /s/ Phillip A. Staden
Phillip A. Staden
President
<PAGE>
EXHIBIT INDEX
NORTHWEST TELEPRODUCTIONS, INC.
FORM 10-QSB
FOR QUARTER ENDED
JUNE 30, 1999
Exhibit No. Description
27 Financial Data Schedule (filed in electronic format only)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
10-QSB FOR THE QUARTER ENDED 6/30/99 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 1,374,054
<SECURITIES> 0
<RECEIVABLES> 2,333,483
<ALLOWANCES> 65,658
<INVENTORY> 0
<CURRENT-ASSETS> 4,074,059
<PP&E> 20,682,071
<DEPRECIATION> 17,906,062
<TOTAL-ASSETS> 7,007,078
<CURRENT-LIABILITIES> 4,898,196
<BONDS> 0
0
0
<COMMON> 13,564
<OTHER-SE> 577,123
<TOTAL-LIABILITY-AND-EQUITY> 7,007,078
<SALES> 2,693,369
<TOTAL-REVENUES> 2,693,369
<CGS> 2,119,702
<TOTAL-COSTS> 2,119,702
<OTHER-EXPENSES> 375,376
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 142,309
<INCOME-PRETAX> 60,599
<INCOME-TAX> 0
<INCOME-CONTINUING> 60,599
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60,599
<EPS-BASIC> .04
<EPS-DILUTED> .04
</TABLE>
