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, 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 Executive Offices) (Zip Code)
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 November 12,
1999.
Transitional Small Business Disclosure Format (Check One):
Yes____ No___X___
<PAGE>
NORTHWEST TELEPRODUCTIONS, INC.
AND SUBSIDIARIES
INDEX
FORM 10-QSB
September 30, 1999
PART I Financial Information
Item 1. Financial Statements Page No.
Condensed Consolidated Balance Sheets:
September 30, 1999 and March 31, 1999 3
Condensed Consolidated Statements of Operations:
Three and Six Months Ended September 30, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flow:
Six Months Ended September 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 4. Submission of Matters to a vote of security holders 9 & 10
Item 6. Exhibits and Reports on Form 8K 11
<PAGE>
Part I
Northwest Teleproductions, Inc. and Subsidiaries
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
September 30 March 31
1999 1999
Assets (Unaudited) *
<S> <C> <C>
Current Assets
Cash 647,798 316,153
Cash Restricted 52,652 124,117
Trade accounts receivable less doubtful accounts
reserve of $65,162 and $58,663, respectively 1,857,276 2,248,691
Inventory 20,287 24,571
Refundable income taxes 18,216 18,217
Deferred rent 60,180 60,180
Other assets 293,200 177,889
Land and building held for sale 264,059
---------- ----------
Total Current Assets 3,213,668 2,969,818
Property, Plant and Equipment
Land, building and improvements 699,815 1,471,093
Machinery and equipment 19,228,348 19,055,026
---------- ----------
19,928,164 20,526,119
Less: accumulated depreciation 17,554,542 17,649,003
---------- ----------
2,373,622 2,877,116
Deposits 37,137 37,137
Deferred Rent 103,987 135,760
Building Escrow 90,464
---------- ----------
141,124 263,361
---------- ----------
5,728,414 6,110,295
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable 69,259 515,806
Current maturities of long term debt 1,342,763 670,026
Trade accounts payable 501,768 725,515
Commissions, salaries and withholding 372,494 423,420
Miscellaneous payables and accrued expenses 130,533 202,572
Deferred Gain-Short Term 123,996 123,996
Customer deposits 1,150,750 395,101
Other liabilities 27,798
---------- ----------
Total Current Liabilities 3,719,361 3,056,436
Deferred Gain-Long Term 64,664 122,528
Long Term Debt and Capital Leases, less current portion 870,632 1,881,525
Stockholders' Equity
Common stock 13,564 13,564
Additional paid-in capital 577,123 577,123
Retained earnings 483,070 459,119
---------- ----------
1,073,757 1,049,806
---------- ----------
5,728,414 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 unaudited condensed consolidated financial
statements.
<PAGE>
Northwest Teleproductions, Inc. and Subsidiaries
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30 September 30
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 2,550,181 $ 2,642,902 $ 5,243,550 $ 5,031,252
Cost of products and services sold 2,043,705 2,193,422 4,163,407 4,122,354
----------- ----------- ----------- -----------
Gross Profit 506,476 449,480 1,080,143 908,898
Selling, general and administrative 374,627 419,233 750,003 819.680
----------- ----------- ----------- -----------
Operating Income 131,849 30,247 330,140 89,218
Other income(expense)
Miscellaneous income (expense) 9,640 31,512 15,508 76,456
Severance charge (43,772) (43,772)
Interest expense (133,117) (123,251) (275,426) (285,817)
----------- ----------- ----------- -----------
Total other expense, net (167,249) (91,739) (303,690) (209,361)
Income (Loss) Before Income Taxes (35,400) (61,492) 26,450 (120,143)
Income tax benefit (expense) (1,250) (10,000) (2,500) (10,000)
----------- ----------- ----------- -----------
Net Income (Loss) (36,650) (71,492) 23,950 (130,143)
=========== =========== =========== ===========
BASIC AND DILUTIVE INCOME (LOSS) PER SHARE $ (0.03) $ (0.05) $ .02 $ (0.10)
=========== =========== =========== ===========
</TABLE>
(1) Net earnings(loss) per share data are based on the weighted average
number of common shares outstanding during the periods as follows:
Six months ended September 30, 1999 1,356,425
Six months ended September 30, 1998 1,356,425
Three months ended September 30, 1999 1,356,425
Three months ended September 30, 1998 1,356,425
See notes to unaudited condensed consolidated financial statements.
<PAGE>
Northwest Teleproductions, Inc. and Subsidiaries
Condensed Consolidated Statement of Cashflows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
September 30
1999 1998
----------- -----------
<S> <C> <C>
CASHFLOW-OPERATING ACTIVITIES
Net Income (Loss) $ 23,950 ($ 130,143)
Adjustments
Depreciation 513,017 531,396
Other 89,515 50,091
(Increase) Decrease in trade receivables 71,465 676,520
Other-net 686,191 (723,564)
----------- -----------
Net cash provided(utilized) by operating activities 1,384,138 404,300
CASHFLOW-INVESTING ACTIVITIES
Property, plant and equipment additions (225,288) (414,190)
Net proceeds from Sale of building and other assets 1,582,035
----------- -----------
Net cash provided(used) by investing activities (225,288) 1,167,845
CASHFLOW-FINANCING ACTIVITIES
Advances (payments)-Line of credit (446,547) (577,177)
Advances (payments)-Long term borrowing (380,655) (1,166,772)
----------- -----------
Net cash provided (used) by financing activities (827,202) (1,743,949)
----------- -----------
NET INCREASE (DECREASE) IN CASH 331,648 (171,804)
=========== ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
<PAGE>
NORTHWEST TELEPRODUCTIONS, INC.AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Interim Financial Statements
The consolidated balance sheet as of September 30, 1999, the
consolidated statement of operations for the three and six month
periods ended September 30, 1999 and 1998, 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, 1999 and for all periods presented have been
made.
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 September 30, 1999 are not necessarily indicative
of the results for the full year.
2. Reclassifications
Certain reclassifications have been made to the March 31, 1999
consolidated financial statements to conform to the classifications
used at September 30, 1999. These reclassifications had no effect on
the operations or stockholders' equity as previously reported.
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 1999 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.
Sale of Land and Building
Subsequent to the quarter ending September 30, 1999 the Company signed a
contract to sell its building in Dallas, TX. Management tentatively expects the
sale to close in mid-November, 1999. The Company also announced that in
conjunction with the sale of its building in Dallas, the Company has decided to
close its Dallas television production operation. The decision to close the
Dallas operation was influenced by significant operating losses incurred by this
operation during the last two and a half years.
For the fiscal year ended March 31, 1999, the Dallas subsidiary had sales of
$574,00 and a loss from operations of $442,000. For the six month period ended
September 30, 1999, the Dallas subsidiary had sales of $279,000 and a loss from
operations of $194,000.
The Company will redistribute some of the equipment of the Dallas operation to
its other facilities, and some equipment will be sold. The expected proceeds
from the building and equipment sales will be used to pay down the Company's
bank debt .
<PAGE>
RESULTS OF OPERATIONS - SIX MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH
CORRESPONDING PERIOD OF PRIOR YEAR.
SALES
Sales for the six months ended September 30, 1999 of $5,243,550 compare with
sales of $5,031,252 for the corresponding period of the prior year, a 4.2 %
increase. The increase in sales is attributable to an increase Show Production
revenue and an increase in the Company's traditional core business which
includes spot production, corporate communication programs and creative
services.
COST OF PRODUCTS AND SERVICES SOLD
Cost of products and services sold for the six months ended September 30, 1999
equaled 79.4% of sales as compared to a cost of sales rate of 81.9% in the
corresponding period of the prior year. This reduction in cost of sales as a
percentage of sales reflects increased revenues along with improvements in
project budgeting and reductions in payroll, depreciation and general overhead.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the six months ended September
30, 1999 totaled $750,003, as compared to $819,680 in the corresponding period
of the prior year, a decrease of $69,677, or 8.5%. Decreased salary and related
expenses, attributable mainly to the consolidation of administrative functions,
along with reduced occupancy expenses in the Chicago and Minneapolis operations,
account for a majority of the decrease.
OTHER INCOME (EXPENSE)
During the second quarter ended September 30, 1999, the Company accrued a charge
of $43,772 to cover severance related expenses in conjunction with a reduction
in workforce due to the completion of its five-year Department of Defense
contract.
INTEREST EXPENSE
Interest expense for the six months ended September 30, 1999 totaled $275,426
compared with expense of $285,817 in the corresponding period of the prior year,
a decrease of $10,391, or 3.6%. The decrease in interest expense is the result
of a reduction in the amount of outstanding debt.
INCOME TAX EXPENSE (CREDIT)
During the year ended March 31, 1999, the Company had a valuation allowance of
$957,000 on the deferred tax assets. For the six months ended September 30, 1999
the Company made no adjustment to the valuation allowance. Income tax expense of
$2,500 for the period reflects minimum tax fees imposed by the State of
Minnesota.
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH
CORRESPONDING PERIOD OF PRIOR YEAR.
SALES
Sales for the three months ended September 30, 1999 of $2,550,181 compare with
sales of $2,642,902 for the corresponding period of the prior year, a 3.5 %
decrease. The net reduction in sales for the quarter is attributable to
decreased billings associated with the Department of Defense contract. The
requirements of this contract were substantially completed in August of 1999.
COST OF PRODUCTS AND SERVICES SOLD
Cost of products and services sold for the three months ended September 30, 1999
equaled 80.2% of sales as compared to a cost of sales rate of 82.9% 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.
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the three months ended
September 30, 1999 totaled $374,627 as compared to $419,233 in the corresponding
period of the prior year, a decrease of $44,606, or 10.7%. Decreased salary and
related expenses, attributable mainly to the consolidation of administrative
functions, along with reduced occupancy expenses in the Chicago and Minneapolis
operations, account for a majority of the decrease.
INTEREST EXPENSE
Interest expense for the three months ended September 30, 1999 totaled $133,117
compared with expense of $123,252 in the corresponding period of the prior year,
an increase of $9,865, or 8%. The increase in interest expense on a comparative
basis is attributable to an increase in interest rates and an increase in line
of credit borrowings.
OTHER INCOME (EXPENSE)
During the quarter ended September 30, 1999, the Company accrued a charge of
$43,772 to cover severance related expenses in conjunction with a reduction in
workforce due to the completion of its five-year Department of Defense contract.
INCOME TAX EXPENSE (CREDIT)
During the year ended March 31, 1999, the Company had a valuation allowance of
$957,000 on the deferred tax assets. For the three months ended September 30,
1999 the Company made no adjustment to the valuation allowance. Income tax
expense of $2,500 for the period reflects minimum tax fees imposed by the State
of Minnesota.
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:
(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.
The Company has assessed non-IT systems within the Company and has determined
that the systems: (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 affect on the Company's results of operations, liquidity and financial
condition.
FORWARD LOOKING INFORMATION
This section contains disclosures which are forward-looking statements.
Forward-looking statements include all statements that do not relate solely to
historical or current facts, and can be identified by the use of words such as
"may," "will," "expect," "project," "estimate," "anticipate," "envision,"
"plan," or "continue." These forward-looking statements are based upon the
Company's current plans or expectations and are subject to a number of
uncertainties and risks that could significantly affect current plans and
anticipated actions and the Company's future financial condition and results.
The uncertainties and risks include, but are not limited to, general economic
and business conditions; loss of significant customers; changes in levels of
client advertising; and the impact of competition. As a consequence, current
plans, anticipated actions and future financial condition and results may differ
from those expressed in any forward-looking statements made by or on behalf of
the Company.
<PAGE>
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 Friday September 17, 1999.
(b) At the Annual Meeting a proposal to set the number of
directors at five was adopted by a vote of 1,015,228 for and
6,764 against, 2,343 shares abstaining and no shares
represented by broker non-votes.
(c) Proxies for the annual meeting were solicited pursuant to
Regulation 14A under the Securities and 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:
Number of Number of
Nominee Votes For Votes Withheld
Ronald V. Kelly 965,070 59,265
Steven Lose 965,070 59,265
John McGrath 964,968 59,377
Gerald W. Simonson 965,070 59,265
Phillip A. Staden 965,070 59,265
(d) At the Annual meeting the shareholders approved an increase in
the number of shares of Common Stock reserved for issuance
pursuant to the Company's 1993 Stock Option Plan from 260,000
shares to 385,000 shares by a vote of 363,229 shares for,
124,072 shares against, 4,341 shares abstaining, and 539,962
shares represented by broker non-vote.
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 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: November 15, 1999 Northwest Teleproductions, Inc.
(Registrant)
By: /s/ Phillip A. Staden
Phillip A. Staden
President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S.Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 647,798
<SECURITIES> 0
<RECEIVABLES> 1,922,438
<ALLOWANCES> (65,162)
<INVENTORY> 20,287
<CURRENT-ASSETS> 3,213,668
<PP&E> 19,928,164
<DEPRECIATION> (17,554,542)
<TOTAL-ASSETS> 5,728,414
<CURRENT-LIABILITIES> 3,719,361
<BONDS> 870,632
0
0
<COMMON> 13,564
<OTHER-SE> 1,060,193
<TOTAL-LIABILITY-AND-EQUITY> 1,073,757
<SALES> 5,243,550
<TOTAL-REVENUES> 5,243,550
<CGS> 4,163,407
<TOTAL-COSTS> 4,913,410
<OTHER-EXPENSES> 28,264
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 275,426
<INCOME-PRETAX> 26,450
<INCOME-TAX> 2,500
<INCOME-CONTINUING> 23,950
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,950
<EPS-BASIC> .02
<EPS-DILUTED> .02
</TABLE>
