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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934.
(Mark One)
/X/ Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee Required)
For the fiscal year ended June 30, 1995
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from _________________ to _________________
Commission file number: 0-14315
NRP INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 75-2050538
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5950 BERKSHIRE LANE, SUITE 1650, DALLAS, TEXAS 75225
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(Address of principal executive offices, Zip Code)
Registrant's telephone number, including area code: (214) 361-9870
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
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(Title of Class)
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
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The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of August 31, 1995 was approximately $43 million.
Shares of Common Stock outstanding as of August 31, 1995: 13,563,361
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1995 Proxy Statement of NRP Inc. are incorporated by
reference in Part III of this report.
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ITEM 1. BUSINESS
INTRODUCTION
NRP Inc., operating under its trade name, ATC Communications Group
(hereinafter "ATC" or the "Company"), is a provider of outsourced
telecommunications-based marketing and information services to major
corporations in the United States.
The Company has shifted its strategic focus to building upon and
enhancing this core business, and away from its previous plan to assemble an
integrated direct marketing company comprised of direct mail marketing and
mailing list services in addition to telecommunications-based marketing
services. In the year ended June 30, 1993 ("fiscal 1993"), management examined
the Company's overall business plan and each operating segment's operating
performance and concluded that (i) the integrated company strategy had not
achieved the expected synergies and economies of scale to management's
satisfaction, and (ii) the telecommunications-based marketing business
possessed significantly greater growth potential than the other two segments.
Accordingly, in the year ended June 30, 1994 ("fiscal 1994"), the Company
divested of its direct mail publishing subsidiary, and in the year ended June
30, 1995 ("fiscal 1995"), divested of its mailing list services business,
thereby enabling the Company to concentrate on growing and creating long-term
value in its telecommunications-based subsidiary. Management believes this
shift in strategy has enabled the Company to grow revenues and improve
operating results, while positioning the Company to compete effectively as a
provider of telecommunications-based marketing and information services.
The Company's headquarters are located at 5950 Berkshire Lane, Suite
1650, Dallas, Texas 75225, and its telephone number is (214) 361-9870. The
Company was incorporated in Delaware on August 2, 1985 under the name of
Kenneth Resources, Inc. and changed its name to NRP Inc. on July 12, 1988. The
Company recently began using the tradename ATC Communications Group to reflect
its new operating focus and plans to seek shareholder approval at the next
annual meeting to change its legal name to ATC Communications Group, Inc.
TELECOMMUNICATIONS-BASED SERVICES
Description of Services
The Company, through its subsidiary, Advanced Telemarketing
Corporation ("Advanced"), designs, manages, and conducts large-scale, complex
telecommunications-based marketing and customer services programs on an
outsourced basis to a broad range of companies and organizations in a variety
of industries. Advanced performs its services through two distinct divisions.
Through its ATC Marketing division, Advanced offers clients
customized, large-volume inbound and outbound call processing services
featuring "live" operators to interact with clients' customers and prospects.
Additionally, through its ATC Call Management division, Advanced manages call
center facilities for clients under multi-year contracts which usually require
the development of proprietary software systems. Both divisions also provide
clients with high speed analysis and delivery of marketing and other analytical
information valuable to the client which Advanced captures while performing its
services.
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Overall, during fiscal 1995, approximately 46.4% of Advanced's
revenues were generated by inbound call volume and 53.6% by outbound call
volume. Advanced does not engage in any form of outbound calling which uses
computerized voice presentations or requires unsolicited financial requests
(i.e. fundraising) and is not involved in the "900" number business.
Description of Operations
The Company operates and manages six fully-automated call centers with
a capacity of more than 2,900 workstations located in the Dallas area, in
Chicago and in San Francisco. These call centers operate six Rockwell
automatic call distributors. The data system itself is based on an open
architecture which permits real-time interface of the Company's data processing
systems with the client's host systems to provide a seamless, rapid flow of
data to the client. Outbound calling is enhanced by a Rockwell predictive
dialing system which escalates dialing activity in advance of workstation
availability and automatically eliminates calls not answered by a human
respondent. This predictive dialing system enhances efficiency and
productivity by minimizing operator non-productive time. Advanced also
maintains a substantial information systems staff which permits flexibility by
creating customized software applications for its clients as well as the
capability to react quickly to its clients' changing needs.
Because Advanced's marketing and service representatives deal directly
with its clients' customers and sales prospects, the Company places a heavy
emphasis on its training and quality control process. System-wide, Advanced
has in excess of 30,000 square feet dedicated to these functions. At the
subsidiary's headquarters, Advanced has built a 14,000 square foot education
center adjacent to a 14,700 square foot call center which is equipped for live
role playing when not in use as a client call center. Advanced employs 15 full
and part-time trainers dedicated to conducting both primary and recurrent
training for all representatives. Depending on the complexity of the clients'
applications, training can require up to six weeks to complete. Quality
control is measured by various organizations within the Company on both a
quantitative and qualitative basis through multiple processes. This
attentiveness to training and customer service enables Advanced's
representatives to perform a variety of highly complex and proprietary
functions for its clients in both inbound and outbound calling programs.
Marketing and Clients
The business of providing call handling services is highly
competitive, although very fragmented, consisting of a few large outsourcing
companies, a significant number of small independent providers and numerous
"in-house" operations. In 1992 alone, it is estimated that over $300 billion
in goods and services were sold via telecommunications. This figure does not
include the substantial costs incurred by businesses in processing incoming
customer service calls. Increasingly, companies are outsourcing these call
handling services in an effort to focus their resources on their core
competencies, improve operating quality and efficiencies, and reduce costs.
Advanced targets its marketing efforts towards large corporations in
selected industries that utilize telecommunications as an integral, ongoing
element in their core marketing and/or customer service strategy. These
corporations' call handling requirements demand the sophistication, volume and
quality requirements to capitalize effectively on Advanced's technology and
client support infrastructure in addition to having the greatest potential for
growth. Advanced seeks to produce recurring revenue and develop long-term
alliances with its clients by concentrating on service, quality and flexibility
and by integrating its technological capabilities with its clients' internal
systems.
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Advanced believes its competitive advantages include its capacity, its
emphasis on quality and service to the client, its technological capabilities,
and its flexibility, allowing Advanced to respond to the clients' changing
requirements. These advantages have enabled ATC to grow rapidly in the last
two fiscal years by attracting a variety of new clients in various industries
and by expanding the services provided to its existing clients. The following
entities accounted for ten percent or more of the gross revenues of the Company
in 1994: AT&T, Chemical Bank, GTE Service Corporation and AT&T Universal Card,
while AT&T and AT&T Universal Card accounted for ten percent or more of the
gross revenues of the Company in fiscal 1995.
Governmental Regulations
During the past five years the industry in which the Company operates
has been impacted by state and federal government regulations directed
specifically at the industry. In addition, certain state and federal
governmental bodies have proposed legislation to further regulate the industry.
While the Company cannot predict what any governmental body may do, management
does not believe the currently existing or proposed legislation will alter the
Company's operating procedures or increase its compliance cost because the
Company adheres to self-imposed standards that management believes are more
restrictive than such currently existing and proposed regulations.
Revenues and Seasonal Nature of Business
The Company's revenues are affected by the timing and magnitude of its
clients' marketing programs and the commencement of new programs; thus the
Company experiences and expects to continue to experience quarterly variations
in revenues. Although the business is not seasonal in nature, historically
Advanced has generated a slightly larger percentage of its annual revenues in
the second and fourth quarters of its fiscal year. Revenues generated by
Advanced accounted for approximately 100%, 68% and 48% of the Company's
consolidated revenues of both continuing and discontinued operations for the
years ended June 30, 1995, 1994, and 1993, respectively.
EMPLOYEES
As of August 31, 1995, the Company employed approximately 2,617
persons in the following areas: 130 in management and general administration,
3 in marketing and sales, 168 in direct supervision of marketing agents and
2,316 marketing agents. The Company has not experienced any material
difficulty in attracting and retaining qualified personnel in the geographic
regions where it currently conducts business.
INDUSTRY SEGMENT INFORMATION
As a result of the divestitures of the direct mail marketing and mail
list businesses, the Company discontinued the operations of the two business
segments. The financial results of the operations of the Company's remaining
business segment, outsourced telecommunications-based services, are included in
Item 8. - "Financial Statements and Supplementary Data". Summary financial
information related to the discontinued business segments is included in Note
14. Disposition of Assets of Item 8. - "Financial Statements and Supplementary
Data".
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ITEM 2. PROPERTIES.
The Company's operating subsidiary, Advanced, currently performs its
services in six call centers with a total capacity of 2,946 workstations
(compared to approximately 1,400 workstations reported in the prior year): (i)
686 positions located in Las Colinas, Texas in a 52,866 square foot facility,
(ii) 240 positions located in Garland, Texas occupying 12,963 square feet,
(iii) an Irving, Texas facility comprised of a 14,069 square foot education
center and a 20,209 square foot call center housing 460 positions, (iv) a
90,000 square foot call center in Dallas, Texas with a capacity of 1,270
positions, (v) a 60 position call center in Chicago, Illinois dedicated to a
single client and (vi) a 32,616 square foot call center with 230 positions in
San Francisco, California which also serves a single client. All of Advanced's
facilities are occupied pursuant to various lease arrangements, except the
Chicago facility, which is owned by Advanced's client and is occupied by
Advanced at the client's expense. While Advanced's current capacity is
sufficient to handle its current production demands, as Advanced's growth
continues additional call center facilities may be needed.
The Company's principal executive offices in Dallas, Texas are
occupied pursuant to a lease expiring November 30, 1996 and contain
approximately 4,170 square feet. The lease calls for a monthly rental of
approximately $5,386 per month.
ITEM 3. LEGAL PROCEEDINGS.
Other than ordinary routine litigation incidental to its and its
subsidiaries' businesses, neither the Company nor its subsidiaries are parties
to, nor are their properties the subject of, any material pending legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION
The Company's Common Stock, $.01 par value, trades on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") under
the symbol "ATCT". As of August 31, 1995 there were approximately 13,563,361
shares of Common Stock outstanding held by approximately 655 holders of record.
The table below lists the range of high and low bids for the Company's
Common Stock as reported by NASDAQ for the two-year period ended June 30, 1995
and the subsequent interim period.
<TABLE>
<CAPTION>
F.Y. 1994 High Low
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<S> <C> <C>
First Quarter 1 1/16 13/16
Second Quarter 1 1/4 3/4
Third Quarter 2 1/8 1 1/8
Fourth Quarter 2 5/8 1
</TABLE>
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<TABLE>
<CAPTION>
F.Y. 1995 High Low
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<S> <C> <C>
First Quarter 2 1/2 1 11/16
Second Quarter 1 13/16 13/16
Third Quarter 1 5/16 17/32
Fourth Quarter 2 5/16 13/16
</TABLE>
<TABLE>
<CAPTION>
F.Y. 1996 High Low
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<S> <C> <C>
First Quarter 3 7/8 2 1/4
(through September 22, 1995)
</TABLE>
The above quotations represent prices between dealers and do not
include retail mark-up, mark-down or commissions and may not represent actual
transactions.
DIVIDENDS
Since its inception the Company has not declared a cash dividend on
its Common Stock and does not anticipate doing so in the foreseeable future.
The Company pays an annual dividend of $.36 per share on its 29,778 outstanding
shares of Series B Preferred Stock and the Company pays an annual dividend of
$.11 per share on its 840,000 outstanding shares of Series C Preferred Stock.
Pursuant to Advanced's working capital line of credit and equipment term loan
credit agreements, Advanced is restricted in its ability to pay dividends to
ATC.
ITEM 6. SELECTED FINANCIAL DATA.
The table on the following page sets forth certain selected
consolidated financial data for the Company and its subsidiaries for the last
five years. This information should be read in conjunction with Item 7. - "
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Consolidated Financial Statements and related
notes included elsewhere herein.
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SELECTED FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
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1995 1994 1993 1992 1991
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<S> <C> <C> <C> <C> <C>
Sales (1) $61,353,999 $37,447,381 $17,828,764 $18,430,193 $15,281,438
Income (loss) from continuing operations 2,647,273 1,338,588 (938,686) 277,208 (876,690)
Net income (2) 1,335,383 2,995,604 1,182,219(3) 801,115 275,030
Net income (loss) from continuing operations
per weighted common share 0.06 0.02 (0.07)(4) (0.05) (0.14)
Total assets 25,356,630 24,261,190 13,833,669 9,238,453 8,418,043
Long-term obligations (including
capitalized leases) 3,578,584 3,141,558 1,337,534 1,551,719 1,236,000
Total liabilities $13,119,896 $13,249,271 $8,883,925 $5,414,472 $5,338,721
Primary weighted average number of
common shares outstanding 18,441,214 13,685,286 13,294,442 13,294,442 10,867,066
</TABLE>
(1) Includes sales of the telecommunications-based services
subsidiary only; sales of discontinued operations are omitted.
(2) Includes (i) income from operations of discontinued business
segments, net of applicable taxes, and (ii) in fiscal 1994, the
gain on the disposition of the assets of a discontinued business
segment, net of applicable taxes.
(3) Includes an income tax benefit of $819,166 resulting from a
change in the accounting method used to record deferred income
taxes.
(4) Includes an income tax benefit of $420,838 resulting from a
change in the accounting method used to record deferred income
taxes.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
As discussed previously, in fiscal 1993 management determined that its
Advanced subsidiary possessed a greater potential for growth than the Company's
other lines of business. Accordingly, the Company consummated several
transactions which resulted in the strengthening of the Company's balance
sheet, increasing the Company's liquidity and focusing the Company's efforts on
Advanced. These transactions included: (i) the sale of the assets and the
discontinuation of the M/B Ltd. business segment, (ii) the issuance of 840,000
shares of Series C Convertible Preferred Stock upon the conversion of
approximately $3.1 million in 15% short-term debt, and (iii) the sale of the
assets and discontinuation of the NRL business segment.
With these transactions completed, management then focused on securing
adequate working capital and equipment financing to fund Advanced's near-term
growth. Advanced is a labor intensive business, incurring multiple payrolls
before clients are invoiced and remittances are received. During times of
growth it is virtually impossible for Advanced to fund its working capital
needs solely via operating cash flow due to its labor intensive nature and the
timing of its receipts. Therefore, to meet its growth related working capital
needs, in May 1994, Advanced secured a three year $15 million working capital
facility with a major commercial bank to replace its previous receivable
financing arrangement. Availability under this new facility is based on
Advanced's accounts receivable balance. In addition to increasing Advanced's
availability from $5 million to $15 million, the new working capital facility
also decreased the rate Advanced pays for working capital borrowings.
In addition to the new working capital facility, Advanced also secured
a $1.5 million equipment term loan from the same commercial bank which was
utilized to partially fund the acquisition of additional telecommunications and
computer equipment and furniture necessary to support the doubling of
Advanced's production capacity in the 1995 fiscal year. Additionally, Advanced
secured operating leases to acquire approximately $4.0 million in equipment,
secured capital lease arrangements of approximately $1.6 million, and utilized
operating cash flow to fund this increase in production capacity.
Management believes the transactions described above have provided the
liquidity and access to sufficient working capital financing to fund Advanced
near-term growth and have reduced borrowing costs, strengthened the balance
sheet, and have allowed Advanced to increase its production capacity. While
Advanced's current capacity is sufficient to handle its current production
demands, as Advanced's growth continues, management believes that additional
call centers will be needed to facilitate the increased business and that
furniture and equipment, as well as certain technological upgrades to
Advanced's existing equipment, will be needed for such call centers. Advanced
may have to secure additional financing for these capital needs as its current
commitments may be inadequate. Although no assurances can be made in this
regard, management anticipates that, based on ATC's ability to secure such
financing to date, the Company will be able to secure funding for such future
capital equipment needs.
The $15 million receivable credit facility and the $1.5 million term
loan secured by Advanced from a major commercial bank, mentioned above, contain
various covenants which limit, among other things, Advanced's indebtedness,
capital expenditures, investments, payments and dividends to the Company and
requires Advanced to meet certain financial tests. Similarly, under the terms
of the guaranty
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arrangement, the Company is subject to certain covenants limiting, among other
things, its ability to incur indebtedness, enter into guaranties, and acquire
other companies. These credit facilities are secured by liens on Advanced's
accounts receivables, furniture, and equipment and are guaranteed by ATC. See
Notes 3 and 4 to Item 8. - "Financial Statements and Supplementary Data".
At June 30, 1995 Advanced owed Merrill Lynch Private Capital Inc.
("MLPC") approximately $770,000 pursuant to an unsecured note payable. This
note contains a provision requiring semi-annual prepayments of principal if
Advanced achieves certain net income levels. As of June 30, 1995, the entire
principal balance under the note was due and payable as a result of the
cumulative effect of the achievement of such net income levels by Advanced.
The note also contains certain discounts which can be utilized by Advanced in
the event the note is paid in full prior to September 18, 1996. Currently,
management is in discussions with MLPC regarding the possible restructuring of
the payment terms of the note. Management believes that the Company has
sufficient liquidity and working capital and can produce sufficient cash flow
to fund the repayment of the note.
RESULTS OF OPERATIONS
As discussed above, the Company sold substantially all of the assets
relating to two of its three business segments and as a result of such
dispositions, discontinued the operations of the two business segments.
Accordingly, in order for the financial data to be comparable, the net
financial results of the two discontinued business segments are reflected as a
single line item, "Income (loss) from operations of discontinued business
segments, net of applicable taxes." The following narrative discusses only the
operations of the Company's remaining business segment which provides
outsourced telecommunications-based services through its Advanced subsidiary.
Fiscal 1995 vs. Fiscal 1994
For the fiscal year ended June 30, 1995, the Company earned net income
from continuing operations of $1,444,612 (2.35%) on revenues of $61,353,999 as
compared to net income from continuing operations of $339,901 (.91%) on
revenues of $37,447,381 earned in fiscal 1994.
Revenues generated during fiscal 1995 by the Company's Advanced
subsidiary increased $23,906,618 (63.8%) to $61,353,999 over revenues earned in
fiscal 1994 of $37,447,381. This increase resulted from both the addition of
new clients and additional business from certain existing customers. Advanced
has one customer which represented approximately 53.1% of the revenues
generated in the 1995 fiscal year. Although the loss of this customer could
have a material, adverse effect on the Company, in management's opinion, the
potential risk associated with any concentration of business with the client is
mitigated by the fact that Advanced performs services for various autonomous
business units within that customer's organization. Advanced's long-term
strategy is to capitalize on its quality, technology, capacity, speed and
flexibility to generate recurring revenues by securing long-term relationships
with targeted large corporate clients which use telecommunications as an
integral, ongoing element in their core marketing and/or customer service
strategies. However, ATC does continue to perform project-based business for
certain of its customers for which there can be no assurance that the clients
who generate this project-oriented revenue will repeat or continue their
projects.
During the fiscal year ended June 30, 1995, the gross margin earned on
revenues increased 72.3% to $18,238,646 versus the $10,585,565 earned in the
1994 fiscal year due primarily to the increases in revenues mentioned above.
However, a portion of the gross margin improvement was attributable to
increased operating efficiency which resulted in an increase in the gross
margin earned as a percentage of revenues to 29.7% in fiscal 1995 from 28.3% in
fiscal 1994. Growth in revenues places pressure on
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gross margins because the Company (i) expenses the majority of the start-up
costs on its new projects and (ii) must often expand based on less than 100%
absorption of its new capacity. As the Company's business plan has been and
continues to be focused on obtaining market share, management continues to
counter growth driven pressures on gross margins by innovatively applying its
technology and by placing an emphasis on its recruiting, training and quality
control processes to improve operating efficiencies. Such efforts allowed
Advanced to achieve an improved gross margin as a percentage of revenues in
fiscal 1995 despite its revenue growth.
The Company's revenue growth in fiscal 1995 and the addition of
personnel necessary to support its growth resulted in an increase in selling,
general and administrative expenses of $5,219,394 (64.2%) to $13,353,518 in the
fiscal year ended June 30, 1995 over the previous fiscal year. During fiscal
1995, the Company increased its production capacity from approximately 1,470
positions in fiscal 1994 to 2,946 positions at June 30, 1995. The facilities
necessary to house this growth in positions require substantial investments in
technology, infrastructure and quality personnel to attract and retain the
large corporate users of the Company's services that management has targeted.
Such facilities are often utilized at less than 100% capacity initially which
places pressure on selling, general and administrative expenses as a percentage
of revenues. In light of the pressures created by expansion, management is
focused on this expense area and has managed to maintain such expenses at 21.7%
of revenues in both fiscal 1995 and fiscal 1994 despite the Company's growth.
The increase in production capacity mentioned above also requires
substantial expansion of data processing and telecommunications equipment,
furniture and other capital items to support Advanced's facilities. These
additional capital items resulted in an increase in depreciation and
amortization expense in fiscal 1995 of $1,125,002 (101.1%) as compared to the
fiscal 1994. As a percentage of revenue, non-cash charges increased from 3.0%
in fiscal 1994 to 3.6% in fiscal 1995; however, management believes, as
utilization of its long-term investments increases, these expenses as a
percentage of revenues should decrease unless further expansions are mandated
by additional business.
Net interest expense for the fiscal year ended June 30, 1995 increased
$39,129 (4.78%) versus the previous fiscal year. However, as a percentage of
revenues, net interest expense decreased to 1.4% in fiscal 1995 versus 2.2% in
fiscal 1994 despite the increased working capital demands created by Advanced's
revenue growth and the increase in long-term debt and capital lease
arrangements utilized to finance the capacity expansion discussed above. In
May 1994, the Company significantly lowered the rate Advanced paid for working
capital borrowings from an annualized rate of approximately 12% in fiscal 1994
to approximately 10% in fiscal 1995 by securing a $15 million working capital
credit facility with a major commercial bank to replace its previous working
capital financing arrangement. Additionally in June 1994 the Company finalized
the conversion of approximately $3.1 million in 15% short-term debt into shares
of its Series C Convertible Preferred Stock. Interest on this short-term debt,
now converted, was approximately $320,000 in fiscal 1994.
In the fiscal year ended June 30, 1995, the Company's effective income
tax rate was approximately 19.3%. This rate is less than the statutory federal
income tax rate of 34% due to certain targeted jobs tax credits earned by
Advanced during fiscal 1995. The federal programs which created these tax
credits expired on December 31, 1994 and unless such programs are renewed or
similar federal programs are enacted Advanced will not realize the benefits of
such tax credits in years subsequent to fiscal 1995.
Management knows of no trends or uncertainties other than those
mentioned above that will have a material favorable or unfavorable impact on
operating results.
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Fiscal 1994 vs. Fiscal 1993
During fiscal 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." As a result, the
Company recognized certain one-time income tax benefits relating to the future
utilization of the Company's net operating loss carryforward position. In
fiscal 1994 the Company corrected its consolidated net operating loss
carryforwards recognized in fiscal 1993 and corrected its fiscal 1993
classification of certain of its net operating loss carryforwards by reducing
costs in excess of net assets acquired. Accordingly, the one-time income tax
benefits and net income recognized in fiscal 1993 were reduced by approximately
$700,000. The corrected one-time income tax benefit recognized in fiscal 1993
($819,166) was allocated between continuing and discontinued operations thus
increasing net income from discontinued operations, net of applicable taxes by
$398,328 and increasing net income from continuing operations by $420,838.
The portion of the income tax benefit which was reclassified in fiscal 1993 to
costs in excess of net assets acquired will be recognized through the reduction
of amortization expense.
For the fiscal year ended June 30, 1994 the Company earned net income
from continuing operations before income taxes of $519,664 on revenues of
$37,447,381 as compared to a loss of $1,237,758 on revenues of $17,828,764 in
fiscal 1993. After the inclusion of income from operations of discontinued
business segments and a gain on the disposition of the assets of a business
segment, net income for fiscal 1994 was $2,995,604.
Revenues generated during fiscal 1994 by the Company's Advanced
subsidiary increased $19,618,617 (110.0%) to $37,447,381 over fiscal 1993's
$17,828,764. The increase resulted from both the addition of various new
clients and additional business generated by certain existing customers.
Gross margin earned on revenues increased $5,072,917 (92.0%) in fiscal
1994 compared to fiscal 1993 while gross margin as a percentage of revenue
decreased from fiscal 1993's 30.9% to 28.3% in fiscal 1994. The 92.0% increase
in gross margin is directly related to the 110% revenue increase in fiscal 1994
whereas the decreased gross margin percentage is, in large part, due to a
strategic operational restructuring undertaken in fiscal 1993 at ATC. That
strategic restructuring included, among other things, a concentrated effort to
improve the quality of ATC's services in part by improving the quality of ATC's
workforce. This strategy has resulted in higher operating costs primarily due
to increased payroll costs and increased start-up costs such as recruiting,
training and data processing.
The $2,174,626 (36.5%) increase in selling, general and administrative
expenses to $8,134,124 in fiscal 1994 from $5,959,498 in fiscal 1993 emanates
from the addition of personnel necessary to support the ATC revenue growth in a
manner consistent with its quality emphasis and from increased sales
commissions on that revenue growth. As a percentage of revenues however,
selling, general and administrative expenses decreased from 33.4% in the fiscal
year ending June 30, 1993 to 21.7% for fiscal 1994. This is primarily due to
increased efficiencies created by the increased volume of business at ATC and
management's ongoing effort to reduce such costs.
Depreciation and amortization expense increased $621,017 (126.3%) in
fiscal 1994 to a total of $1,112,853. This increase was the result of ATC's
substantial expansion for data processing, telecommunications, facilities and
other capital items needed to implement properly its operating strategy and
support its revenue growth. For example, at June 30, 1994 ATC's fixed assets
totalled $8,425,702 (at cost) versus $3,169,345 (at cost) on June 30, 1993.
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Net interest expense for the current fiscal year increased to $818,924
from $346,628 in the 1993 fiscal year, or 136.3%. The increase is due in large
part to the greater short-term borrowing by ATC to fund its increased working
capital requirements and in part to interest expense related to the capitalized
leases and other equipment financing obtained by ATC during the 1994 fiscal
year. Finally, in fiscal 1993 the Company also recognized a certain one-time
credit of approximately $100,000 which resulted in a reduced net interest
expense.
As the Company previously redeemed its Swiss Franc denominated
debentures on the stated April 1993 due date, the Company did not experience
any foreign currency transaction gain or loss from exchange rate fluctuations
in fiscal 1994.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See pages F-1 through F-17 of this Form 10-K Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On June 2, 1995 the Audit Committee of the Board of Directors of the
Company unanimously approved the dismissal of Grant Thornton as the independent
certified public accountants and auditors for the Company. Grant Thornton
performed the audit for the Company for the fiscal years ended June 30, 1992,
1993 and 1994. Grant Thornton's reports on the financial statements of the
Company for those years did not contain an adverse opinion, nor a disclaimer of
opinion, nor were qualified or modified as to uncertainty, audit scope or
accounting principles. Except as described below, there were no disagreements
with Grant Thornton on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Grant Thornton, would
have caused it to make reference to the subject matter of the disagreements in
connection with its report during the Company's two most recent fiscal years
and any subsequent interim period preceding this dismissal.
With regard to the financial statements of the Company for the year
ended June 30, 1993, there was an initial disagreement as to the amount of the
deferred taxes to be recognized for net operating losses carried forward. With
regard to the financial statements of the Company for the year ended June 30,
1994, there was an initial disagreement as to the accounting treatment for the
recognition of a deferred tax asset for net operating loss carryforwards
acquired in a business combination for which goodwill was recorded. Both
disagreements, however, were resolved to the mutual satisfaction of Grant
Thornton and the Company.
Neither the Company's Audit Committee nor its Board of Directors
discussed the subject matter of the above described disagreements with Grant
Thornton. The Company has authorized Grant Thornton to respond fully to the
inquiries of the successor accountant concerning the subject matter of such
disagreements. The Audit Committee's decision to dismiss Grant Thornton was
unrelated to the initial disagreements described above.
Also on June 2, 1995, the Audit Committee of the Board of Directors
unanimously approved the appointment of the firm of Price Waterhouse LLP to
serve as the independent accountants for the Company for the fiscal year ending
June 30, 1995.
On June 9, 1995 the Company filed a report on Form 8-K related to the
dismissal of Grant Thornton as independent accountants for the Company.
12
<PAGE> 13
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
This information will be contained in the definitive proxy statement
of the Company for the 1995 Annual Meeting of Stockholders under the captions
"Election of Directors" and "Executive Officers" and is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION.
This information will be contained in the definitive proxy statement
of the Company for the 1995 Annual Meeting of Stockholders under the caption
"Compensation of Directors and Executive Officers" and is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
This information will be contained in the definitive proxy statement
of the Company for the 1995 Annual Meeting of Stockholders under the caption
"Beneficial Ownership of Common Stock" and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
This information will be contained in the definitive proxy statement
of the Company for the 1995 Annual Meeting of Stockholders under the captions
"Certain Relationships and Related Transactions" and is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.
FINANCIAL STATEMENTS
See "Index to Consolidated Financial Statements" included on page F-1
of this Form 10-K Annual Report for a listing of the financial statements and
schedules filed as a part of this Form 10-K Annual Report.
EXHIBITS
The following exhibits are filed as a part of this Form 10-K Annual
Report:
3.1 Certificate of Incorporation of Kenneth Resources, Inc. (Incorporated
by reference from Company's Amendment No. 1 to Form S-1 Registration
Statement - File No. 33-6268).
3.2 Certificate of Amendment of Kenneth Resources, Inc. to reflect change
of name to National Reference Publishing, Inc. (Incorporated by
reference from Company's Amendment No. 1 to Form S-1 Registration
Statement - File No. 33-6268).
13
<PAGE> 14
3.3 Certificate of Amendment of National Reference Publishing, Inc. to
reflect change of name to NRP Inc. (Incorporated by reference from
Company's Form 10-K Annual Report for the year ended June 30, 1994).
3.4 Bylaws of Kenneth Resources, Inc. (Incorporated by reference from
Company's Amendment No. 1 to Form S-1 Registration Statement - File
No. 33-6268).
3.5 Amendment to Bylaws of Kenneth Resources, Inc. (Incorporated by
reference from Company's Amendment No. 1 to Form S-1 Registration
Statement - File No. 33-6268).
4.1 Specimen of Share Certificate of Company's Common Stock.
(Incorporated by reference from Company's Form 10-K Annual Report for
the year ended June 30, 1994).
4.2 Form of Series B Preferred Stock, as amended. (Incorporated by
reference from Company's Form 10-K Annual Report for the year ended
June 30, 1994).
4.3 NRP Inc. Series C Preferred Stock certificate issued to Codinvest
Limited with attached designations. (Incorporated by reference from
Company's Form 8-K Current Report dated June 16, 1994).
10.8 Lease Agreement dated January 1, 1991 by and between Royal Tech
Properties, Ltd. and Advanced Telemarketing Corporation. (Incorporated
by reference from Company's Form 10-K Annual Report for the year ended
June 30, 1991).
10.9 Settlement Agreement and Promissory Note dated September 18, 1992 by
and between Advanced Telemarketing Corporation and Merrill Lynch
Private Capital Inc. (Incorporated by reference from Company's Form
10-K Annual Report for the year ended June 30, 1992).
10.10 Asset Purchase Agreement by and between Advanced Telemarketing
Corporation and GTE Market Resources, Inc. dated December 31, 1992.
(Incorporated by reference from Company's Form 10-Q Quarterly Report
for the quarter ended December 31, 1992).
10.11 Asset Purchase Agreement by and among M/B Ltd. Services, Inc., NRP
Inc., and United Communications Group executed July 26, 1993.
(Incorporated by reference from Company's Form 8-K Current Report
dated August 13, 1993).
10.12 Non-Competition Agreement by and among M/B Ltd. Services, Inc., NRP
Inc., and United Communications Group executed July 26, 1993.
(Incorporated by reference from Company's Form 8-K Current Report
dated August 13, 1993).
10.13 Loan and Security Agreement dated May 17, 1994 among Continental Bank
N.A., Advanced Telemarketing Corporation and American Telesales
Corporation. (Incorporated by reference from Company's Form 8-K
Current Report dated June 16, 1994).
10.14 Guaranty dated May 17, 1994 by NRP Inc. in favor of Continental Bank,
N.A. (Incorporated by reference from Company's Form 8-K Current
Report dated June 16, 1994).
10.15 Investment Letter dated June 16, 1994 by Codinvest Limited.
(Incorporated by reference from Company's Form 8-K Current Report
dated June 16, 1994).
14
<PAGE> 15
10.16 Asset Purchase Agreement by and among NRL Brokerage, Inc., NRL
Management, Inc., S.D. Bogner, Inc., NRP Inc., and Stephen D. Bogner
executed August 30, 1994 (including promissory notes and guaranties).
(Incorporated by reference from Company's Form 8-K Current Report
dated August 30, 1994).
21 Subsidiaries of Company:
The Company as of June 30, 1995 had the following operating subsidiary:
27 Financial Data Schedule.
<TABLE>
<S> <C> <C>
Name State of Incorporation Percentage Ownership
- ---------------------------------- ---------------------- --------------------
Advanced Telemarketing Corporation Nevada 99.03%
</TABLE>
During fiscal 1994 the Company conducted its telecommunications-based
operations through two subsidiaries, Advanced and American Telesales
Corporation ("American"). Effective January 1, 1995, the Company merged the
wholly owned American subsidiary into Advanced. As a result of the merger, all
of the Company's telecommunications-based operations are currently conducted by
Advanced.
Copies of the above Exhibits are available to stockholders of record
at a charge of $.50 per page, minimum of $5.00 each. Direct requests to:
NRP Inc.
Attention: Secretary
5950 Berkshire Lane, Suite 1650
Dallas, Texas 75225
REPORTS ON FORM 8-K
On June 9, 1995 the Company filed a report on Form 8-K reporting,
under "Item 4. - Changes in Registrant's Certifying Accountant", the dismissal
of Grant Thornton as independent certified public accountants and auditors for
the Company. See "Item 9. - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure".
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NRP INC.
(The Registrant)
Dated: September 27, 1995 By: /s/ Michael G. Santry
--------------------------------------
Michael G. Santry
Chief Executive Officer and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
Dated: September 27, 1995 By: /s/ Michael G. Santry
----------------------------------------
Michael G. Santry, Director
Dated: September 27, 1995 By: /s/ Patrick V. Stark
----------------------------------------
Patrick V. Stark, Director
Dated: September 27, 1995 By: /s/ Thomas Bijou
----------------------------------------
Thomas Bijou, Director
Dated: September 27, 1995 By: /s/ Jerry L. Sims, Jr.
----------------------------------------
Jerry L. Sims, Jr., Controller and
Director
Dated: September 27, 1995 By:
----------------------------------------
J. Michael Allred, Director
Dated: September 27, 1995 By:
----------------------------------------
J. Frank Mermoud, Director
16
<PAGE> 17
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES (ITEM 14(A))
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Price Waterhouse LLP, Independent Accountants F-2
Report of Grant Thornton, Independent Accountants F-3
Consolidated Statements of Income for the Years Ended
June 30, 1995, 1994, and 1993 F-4
Consolidated Balance Sheets at June 30, 1995 and 1994 F-5
Consolidated Statements of Shareholders' Equity for the Years
Ended June 30, 1995, 1994, and 1993 F-6
Consolidated Statements of Cash Flows for the Years Ended
June 30, 1995, 1994, and 1993 F-7
Notes to Consolidated Financial Statements F-8
Schedule II - Valuation and Qualifying Accounts F-17
</TABLE>
All other schedules are omitted since the required information is not
applicable or is not material or because the information required is included
in the consolidated financial statements and notes thereto.
F-1
<PAGE> 18
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of NRP Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of NRP Inc. and its subsidiary at June 30, 1995, and the results of
their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audit. We
conducted our audit of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Dallas, Texas
August 29, 1995
F-2
<PAGE> 19
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders
NRP Inc.
We have audited the accompanying consolidated balance sheet of NRP Inc. and
Subsidiaries as of June 30, 1994 and the related consolidated statements of
income, shareholders' equity and cash flows for each of the two years in the
period then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of NRP Inc. and
Subsidiaries as of June 30, 1994 and the consolidated results of their
operations and cash flows for each of the two years in the period then ended,
in conformity with generally accepted accounting principles.
We have also audited Schedule II of NRP Inc. and Subsidiaries for each of the
two years in the period ended June 30, 1994. In our opinion, this schedule
presents fairly, in all material respects, the information required to set
forth therein.
As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for income taxes in 1993.
GRANT THORNTON
Dallas, Texas
September 7, 1994
F-3
<PAGE> 20
NRP INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JUNE 30, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Sales $61,353,999 $37,447,381 $17,828,764
Cost of sales 43,115,353 26,861,816 12,316,116
----------- ----------- -----------
Gross margin 18,238,646 10,585,565 5,512,648
Selling, general and administrative expenses 13,353,518 8,134,124 5,959,498
Depreciation and amortization 2,237,855 1,112,853 491,836
----------- ----------- -----------
Total expenses 15,591,373 9,246,977 6,451,334
----------- ----------- -----------
Income (loss) from continuing operations 2,647,273 1,338,588 (938,686)
Interest expense (Notes 3, 4, and 5) 945,501 903,048 379,482
Interest income (Note 8) 87,448 84,124 32,854
Foreign currency transaction gain -- -- 47,556
----------- ----------- -----------
Income (loss) from continuing
operations before income taxes 1,789,220 519,664 (1,237,758)
Income tax benefit (expense) (Note 9) (344,608) (179,763) 420,838
----------- ----------- -----------
Income (loss) from continuing operations 1,444,612 339,901 (816,920)
Income (loss) from operations of discontinued business segments,
net of applicable taxes (Notes 8 and 14) (109,229) 108,854 1,999,139
Gain on disposition of assets of discontinued business
segment, net of applicable taxes (Note 14) -- 2,546,849 --
----------- ----------- -----------
Net income $ 1,335,383 $ 2,995,604 $ 1,182,219
=========== =========== ===========
Earnings per common share and common share
equivalents (Note 7):
Income (loss) from continuing operations $ 0.06 $ 0.02 $ (0.07)
Income (loss) from discontinued operations (0.01) 0.01 0.15
Income from disposition of assets of discontinued operations -- 0.18 --
----------- ----------- -----------
Net income $ 0.05 $ 0.21 $ 0.08
=========== =========== ===========
Weighted average common and common equivalent
shares outstanding (Note 7) 18,441,214 13,685,286 13,294,442
=========== =========== ===========
</TABLE>
See accompanying notes
F-4
<PAGE> 21
NRP INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $2,481,170 $5,166,074
Accounts receivable - trade
Less allowance for doubtful accounts of
$90,846 in 1995 and $118,317 in 1994 7,908,402 8,664,201
Notes receivable:
Related parties (Note 8) 1,007,470 377,011
Other 136,970 128,937
Assets held for sale, net (Note 14) -- 773,485
Prepaid expenses 254,363 338,660
Deferred income tax benefit (Note 9) 390,981 95,046
----------- -----------
Total current assets 12,179,356 15,543,414
Property and equipment (Note 5):
Equipment 11,107,523 7,011,651
Furniture and fixtures 3,294,348 1,180,779
Purchased software 879,632 313,716
----------- -----------
15,281,503 8,506,146
Less accumulated depreciation and amortization 4,420,052 2,305,938
----------- -----------
10,861,451 6,200,208
Cost in excess of net assets acquired, net of accumulated
amortization of $894,864 in 1995 and $801,328 in
1994 (Notes 2 and 9) 1,345,545 2,009,358
Other assets 970,278 508,210
----------- -----------
$25,356,630 $24,261,190
=========== ===========
<CAPTION>
LIABILITIES AND
SHAREHOLDERS' EQUITY 1995 1994
-------------------- ------------- -----------
<C> <C> <C>
Current liabilities:
Notes payable (Note 3) $ -- $3,551,278
Accounts payable - trade 3,023,716 2,028,946
Unearned revenues and customer deposits 999,969 219,655
Other accrued liabilities 2,127,033 1,547,975
Accrued compensation expense 953,217 1,715,716
Accrued telephone expense 653,731 477,925
Accrued interest 51,027 25,585
Current portion of long-term debt 1,732,619 540,633
Total current liabilities 9,541,312 10,107,713
Long-term debt (Note 4) 3,578,584 3,141,558
Commitments and contingencies (Notes 5 and 10) -- --
Shareholders' equity (Note 6):
Preferred stock, $.01 par value, 1,000,000 shares
authorized; 29,778 convertible, $.36
cumulative Series B shares ($107,200 aggregate
liquidation preference) and 840,000
convertible, $.11 cumulative Series C shares
($3,074,400 aggregate liquidation preference)
issued and outstanding in 1995 and 1994. 8,698 8,698
Common stock, $.01 par value, 27,500,000 shares
authorized; 13,563,361 shares issued and
outstanding in 1995 and 1994 135,634 135,634
Additional paid-in capital 8,649,610 8,657,058
Retained earnings 3,442,792 2,210,529
------------- -----------
Total shareholders' equity 12,236,734 11,011,919
------------- -----------
$ 25,356,630 $24,261,190
============= ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 22
NRP INC.
CONSOLIDATED STATEMENTS OF SHAREH0LDERS' EQUITY
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Preferred Stock
-------------------------------------------------
Series B Series C Common Stock
---------------------- -------------------- ------------------------
Shares Par Value Shares Par Value Shares Par Value
--------- --------- ------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1992 156,822 $ 1,569 -- $ -- 13,294,442 $ 132,944
Cash dividend paid on preferred stock -- -- -- -- -- --
Net Income - as restated (Note 9) -- -- -- -- -- --
--------- --------- ------- ---------- ---------- ---------
BALANCE AT JUNE 30, 1993 156,822 1,569 -- -- 13,294,442 132,944
Conversion of preferred stock to
common stock (127,044) (1,271) -- -- 254,088 2,542
Issuance of preferred stock pursuant
to debt conversion -- -- 840,000 8,400 -- --
Cash dividend paid on preferred stock -- -- -- -- -- --
Common shares issued -- -- -- -- 14,831 148
Net Income -- -- -- -- -- --
--------- --------- ------- ---------- ---------- ---------
BALANCE AT JUNE 30, 1994 29,778 298 840,000 8,400 13,563,361 135,634
Cash dividend paid on preferred stock -- -- -- -- -- --
Net Income -- -- -- -- -- --
Treasury stock purchased -- -- -- -- -- --
--------- --------- ------- ---------- ---------- ---------
BALANCE AT JUNE 30, 1995 29,778 $ 298 840,000 $ 8,400 13,563,361 $ 135,634
========= ========= ======= ========== ========== =========
<CAPTION>
Additional Retained Total
Paid-In Earnings Shareholders'
Capital (Deficit) Equity
----------- ------------ --------------
<S> <C> <C> <C>
BALANCE AT JUNE 30, 1992 $ 5,589,586 $ (1,900,118) $ 3,823,981
Cash dividend paid on preferred stock -- (56,456) (56,456)
Net Income - as restated (Note 9) -- 1,182,219 1,182,219
----------- ------------ --------------
BALANCE AT JUNE 30, 1993 5,589,586 (774,355) 4,949,744
Conversion of preferred stock to
common stock (1,271) -- --
Issuance of preferred stock pursuant
to debt conversion 3,058,956 -- 3,067,356
Cash dividend paid on preferred stock -- (10,720) (10,720)
Common shares issued 9,787 -- 9,935
Net Income -- 2,995,604 2,995,604
----------- ------------ --------------
BALANCE AT JUNE 30, 1994 8,657,058 2,210,529 11,011,919
Cash dividend paid on preferred stock -- (103,120) (103,120)
Net Income -- 1,335,383 1,335,383
Treasury stock purchased (7,448) -- (7,448)
----------- ------------ --------------
BALANCE AT JUNE 30, 1995 $ 8,649,610 $ 3,442,792 $ 12,236,734
=========== ============ ==============
</TABLE>
See accompanying notes.
F-6
<PAGE> 23
NRP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $1,335,383 $2,995,604 $1,182,219
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,237,855 1,112,853 491,836
Foreign exchange gain -- -- (47,556)
Gain on disposition of assets -- (3,887,140) --
Other 46,912 (50,989) --
Changes in operating assets and liabilities:
Accounts and notes receivable 117,307 (3,900,414) (3,829,997)
Prepaid expenses 84,297 (107,697) (22,176)
Deferred income tax benefit - current 274,342 1,423,986 (819,166)
Assets held for sale 27,867 (522,301) 218,528
Other assets (534,457) (394,096) (12,299)
Accounts payable 994,770 1,185,627 (275,432)
Unearned revenues 780,314 63,940 77,470
Accrued liabilities (110,755) 1,607,125 890,032
Accrued interest 25,442 384,747 43,660
Other liabilities -- (102,892) 38,272
----------- ----------- -----------
Net cash provided by (used in) operating activities 5,279,277 (191,647) (2,064,609)
Cash flows from investing activities:
Capital expenditures (5,201,466) (3,126,194) (636,102)
Proceeds from sale of assets held for sale 745,618 4,715,421 --
----------- ----------- -----------
Net cash provided by (used in) investing activities (4,455,848) 1,589,227 (636,102)
Cash flows from financing activities:
Proceeds from short-term debt -- -- 3,159,446
Proceeds (payments) from line of credit, net (3,551,278) 2,274,286 1,276,992
Proceeds from long-term debt 841,073 1,049,585 --
Payments on short-term debt -- -- (561,107)
Payments on long-term debt (150,401) (953,807) (1,199,226)
Payments on capital lease obligations (647,727) (491,828) (61,136)
----------- ----------- -----------
Net cash provided by (used in) financing activities (3,508,333) 1,878,236 2,614,969
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (2,684,904) 3,275,816 (85,742)
Cash and cash equivalents at beginning of year 5,166,074 1,890,258 1,976,000
----------- ----------- -----------
Cash and cash equivalents at end of year $ 2,481,170 $ 5,166,074 $ 1,890,258
=========== =========== ===========
Supplemental information on non-cash transactions
is as follows:
Capital lease obligations entered into $ 1,586,067 $ 2,466,123 $ 71,582
Issuance of preferred stock pursuant to debt conversion -- 3,067,356 --
</TABLE>
See accompanying notes.
F-7
<PAGE> 24
NRP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995, 1994 AND 1993
1. ORGANIZATION AND ACQUISITIONS
NRP Inc., operating under the trade name ATC Communications Group ("ATC" or
the "Company"), was incorporated in 1985. Through its subsidiary, ATC
engages in the telecommunications-based marketing and information services
business. Prior to the disposition of the assets of its other business
segments, ATC engaged in the businesses of direct mail marketing (primarily
Zip Code directory packages) and mail list management and brokerage
services. (See Note 14. Disposition of Assets).
At June 30, 1995, ATC has the following operating subsidiary:
<TABLE>
<CAPTION>
Percent Principal
Name Date acquired Owned by Ownership business activity
---- --------------- -------- --------- -----------------
<S> <C> <C> <C> <C>
Advanced Telemarketing April 1988 ATC 99.03% Telecommunications-
Corporation ("Advanced") Based Services
</TABLE>
During fiscal 1994 the Company conducted its telecommunications-based
operations through two subsidiaries, Advanced and American Telesales
Corporation ("American"). Effective January 1, 1995, the Company merged the
wholly owned American subsidiary into Advanced. As a result of the merger,
all of the Company's telecommunications-based operations are currently
conducted by Advanced.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation - The consolidated financial statements include
the accounts of ATC and its majority- owned subsidiaries. Intercompany
accounts and transactions have been eliminated in consolidation.
Revenues - Revenues are recognized as services are performed.
Property and equipment - Property and equipment are carried at cost.
Depreciation and amortization are calculated using the straight-line method
over the estimated useful lives of the assets. Equipment, furniture and
fixtures, and computer software are depreciated over five-year to
eight-year lives.
Capitalization of start-up costs - Advanced capitalizes certain up-front
costs associated with the start-up of new business which is to be performed
for its clients pursuant to long-term contracts (typically 3-5 years).
Such costs are amortized over the life of such long-term contracts.
Cost in excess of net assets acquired - The cost in excess of net assets
acquired recognized in the acquisition of Advanced is being amortized using
the straight-line method over 25 years.
F-8
<PAGE> 25
Income taxes - ATC joins with its subsidiaries in filing consolidated
federal income tax return. In 1993 ATC adopted the Financial Accounting
Standards Board's SFAS No. 109 "Accounting for Income Taxes", which
requires an asset and liability approach for financial accounting and
reporting for income taxes. The cumulative effect of this change was not
material to financial statements for years prior to 1993; therefore, it was
not necessary to restate prior year balances.
Statements of cash flows - For the purposes of the statements of cash
flows, the Company considers all highly liquid instruments purchased with
original maturities of three months or less to be cash equivalents.
Reclassifications - Certain 1994 and 1993 balances have been reclassified
to conform with the 1995 presentation.
Concentration of credit risk - The Company sells to customers in
diversified industries throughout the United States. The Company performs
periodic credit evaluations of its customers' financial conditions and
generally does not require collateral. Receivables are generally due
within 30 days. Credit losses from customers have been within management's
expectations. Advanced currently has five major customers (see Note 11).
3. NOTES PAYABLE
Notes payable at June 30, 1995 and 1994, are summarized below:
<TABLE>
<CAPTION>
1995 1994
------------- ----------
<S> <C> <C>
Revolving line of credit by Advanced of up to $15,000,000 with
a commercial bank at .75% over the bank's prime rate
(effective rate of 9.75% at June 30, 1995) secured by
Advanced's accounts receivable, furniture and equipment and
expiring in May 1997. $ -- $3,551,278
------------- ----------
$ -- $3,551,278
============= ==========
</TABLE>
4. LONG-TERM DEBT
Long-term debt at June 30, 1995 and 1994, is summarized below:
<TABLE>
<CAPTION>
1995 1994
--------- --------
<S> <C> <C>
Unsecured note payable by Advanced to Merrill Lynch
Private Capital Inc., payable in quarterly installments of
$25,000 of principal and interest (at prime, not to exceed
9%) through July 1997 (see further discussion below) $771,504 $807,905
Note payable to a commercial bank of up to $1,500,000 to
purchase equipment due in monthly payments beginning August
15, 1994 equal to 1/60th of the principal amount
outstanding on such date plus interest at a rate of 1.5%
over the bank's prime rate (effective rate of approximately
10.5% at June 30, 1995), with the remaining balance due May
15, 1997; collateralized by Advanced's furniture and
equipment 1,326,658 599,585
</TABLE>
F-9
<PAGE> 26
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Capital equipment lease obligations by Advanced, payable in
installments through October 1999 (Note 5) 3,213,041 2,274,701
----------- ----------
5,311,203 3,682,191
Less current maturities (1,732,619) (540,633)
----------- ----------
$ 3,578,584 $3,141,558
=========== ==========
</TABLE>
Both the note payable to the commercial bank and the revolving line of
credit discussed in Note 3 above contain various covenants which limit
Advanced's indebtedness, capital expenditures, investments and payment and
dividends to ATC. Additionally, Advanced is required to meet certain
financial tests. The note payable and the revolving line of credit are
guaranteed by ATC. The guaranty agreement limits ATC's ability to incur
indebtedness, enter into guaranties and to acquire other companies.
The unsecured note payable by Advanced to Merrill Lynch Private Capital
Inc. ("MLPC") also contains a provision requiring semi-annual prepayments
of principal if Advanced achieves certain net income levels. As of June
30, 1995 the entire principal balance under the note was due and payable to
MLPC as a result of the cumulative effect of the achievement of such net
income levels by Advanced. Currently, Advanced is in discussions with MLPC
regarding a restructuring of the payment terms of the note. At June 30,
1995 the entire balance of the note was classified as current on ATC's
balance sheet.
Future maturities of long-term debt at June 30, 1995, are as follows:
<TABLE>
<CAPTION>
Fiscal Years Ending June 30
---------------------------
<S> <C>
1996 $1,732,619
1997 1,806,394
1998 832,953
2000 and1thereafter 842,345
----------
$5,311,203
==========
</TABLE>
The Company paid interest in the amount of $920,059, $518,291, and $442,677
in 1995, 1994 and 1993, respectively.
5. LEASES
A portion of Advanced's computer equipment was purchased in 1994 and 1995
under capital leases totaling $4,070,490. These capital leases are
included in the accompanying consolidated balance sheet under the following
captions at June 30, 1995:
<TABLE>
<S> <C>
Equipment $4,070,490
Less accumulated depreciation (1,062,654)
----------
$3,007,836
==========
</TABLE>
F-10
<PAGE> 27
Future minimum lease payments for all noncancelable leases with initial or
remaining terms of one year or more at June 30, 1995, are as follows:
<TABLE>
<CAPTION>
Capital Operating
Year Ending June 30 Leases Leases
------------------- ---------- -----------
<S> <C> <C>
1996 $990,931 $3,971,163
1997 980,874 3,905,916
1998 967,575 3,089,909
1999 836,551 1,999,035
2000 and thereafter 54,258 4,200,443
---------- -----------
Total minimum future lease payments $3,830,189 $17,166,466
===========
Less: amounts representing interest (617,148)
----------
Present value of future lease payments $3,213,041
==========
</TABLE>
In 1994 the Company renegotiated one of its operating leases and recognized
as a reduction of rent expense approximately $100,000 of straight-line
rents which had been previously deferred. Rent expense on operating leases
for the years ended June 30, 1995, 1994, and 1993 was $2,791,550,
$976,745, and $960,467, respectively.
6. PREFERRED STOCK
On January 21, 1994, 127,044 shares of Series B preferred stock were
converted into 254,088 shares of common stock.
On June 16, 1994 approximately $3.1 million in short-term debt was
converted into 840,000 shares of a newly created Series C Preferred Stock.
The Series C Preferred Stock entitles the registered owners to the
following rights and preferences: (i) beginning June 30, 1995,
preferential cumulative cash dividends at the annual rate of $0.11 per
share, (ii) at any time prior to June 30, 2014, the right to convert each
share into shares of NRP Inc. Common Stock, $.01 par value, at a conversion
ratio of one share of Series C Preferred Stock for five shares of Common
Stock, (iii) a liquidation preference of $3.66 per share, (iv) cash
dividends on parity with shareholders of Common Stock based on the number
of shares of Common Stock into which each share of Series C Preferred Stock
is convertible and, (v) the right to a number of votes for each share of
Series C Preferred Stock that is equal to the number of shares of Common
Stock into which shares of Series C Preferred Stock is convertible.
7. EARNINGS PER SHARE
Primary and fully diluted earnings per common share is computed by dividing
adjusted net income by the weighted average number of shares of common
stock and dilutive common stock equivalents outstanding during the period.
Common stock equivalents consist of common stock issuable under the assumed
exercise of stock options and warrants and the assumed conversion of the
Company's issued and outstanding preferred stock. A computation of
earnings per share follows:
F-11
<PAGE> 28
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
PRIMARY
Weighted average shares outstanding 13,561,007 13,400,312 13,294,442
Common stock equivalents:
Net effect of dilutive stock options
and warrants (1) 620,651 64,322 --
Net effect of assumed conversion
of dilutive preferred stock 4,259,556 220,652 --
---------- ---------- ----------
Primary average shares 18,441,214 13,685,286 13,294,442
========== ========== ==========
FULLY DILUTED
Weighted average shares outstanding 13,561,007 13,400,312 13,294,442
Common stock equivalents:
Net effect of dilutive stock options
and warrants (2) 796,428 107,106 --
Net effect of assumed conversion
of dilutive preferred stock 4,259,556 220,652 --
---------- ---------- ----------
Fully diluted shares 18,616,991 13,728,070 13,294,442
========== ========== ==========
</TABLE>
(1) Based on the treasury stock method using the average market price.
(2) Based on the treasury stock method using the greater of the average or
ending market price.
<TABLE>
<S> <C> <C> <C>
Net income (loss) from continuing
operations $1,444,612 $ 339,901 $ (816,920)
Less preferred stock dividends -- (10,720) (56,456)
Less subsidiary income attributable to
minority interest (3) (408,929) -- --
---------- ---------- ----------
Net income (loss) from continuing
operations applicable to common
stock 1,035,683 329,181 (873,376)
Net income (loss) from discontinued
business segments (109,229) 108,854 1,999,139
Gain on disposition of assets of
business segment -- 2,546,849 --
---------- ---------- ----------
Net income applicable to
common stock $ 926,454 $2,984,884 $1,125,763
========== ========== ==========
Primary earnings per share $ 0.05 $ 0.21 $ 0.08
========== ========== ==========
Fully diluted earnings per share $ 0.05 $ 0.21 $ 0.08
========== ========== ==========
</TABLE>
(3) As discussed in Note 12, the Company's Advanced subsidiary has granted
options to purchase Advanced's common stock to certain of its key
employees and officers. The Company's net income from continuing
operations is therefore adjusted for the dilutive effect of such
options on Advanced's income applicable to the Company.
F-12
<PAGE> 29
8. OTHER RELATED PARTY TRANSACTIONS
The Company holds a note receivable from Freiburghaus & Partners, S.A.
("F&P"), a shareholder of record. The note bears interest at 11% per
annum. At June 30, 1995 and 1994, unpaid principal and accrued interest
amounted to $73,696 and $86,284, respectively. Interest income from this
note amounted to $8,853, $9,462, and $14,300, in 1995, 1994 and 1993,
respectively. In 1995, 1994, and 1993, the Company applied $21,440,
$56,456, and $56,456, respectively, of accrued preferred stock dividends
due to F&P against the note.
At June 30, 1995 and 1994, an officer of the Company had outstanding
borrowings and accrued interest of approximately $793,773 and $150,727,
respectively, pursuant to a line of credit. The borrowing bears 6% annual
interest and is due in full on June 30, 1996. Interest income from the
receivable amounted to approximately $19,000, $21,000 and $22,000 in 1995,
1994 and 1993, respectively. As of September 27, 1995 payments had been
received from the officer which reduced the balance of such borrowings to
approximately $294,000.
As part of the purchase of M/B Ltd. (see Note 14), the Company entered into
a five-year management agreement with FEM, Inc. ("FEM"), a company
controlled by a shareholder of the Company, effective March 1, 1986. In
return for consulting and administrative services, the Company paid FEM
$165,000 per year in monthly installments of $13,750 through March 1994.
ATC paid FEM consulting fees of $110,000 and $165,000 for each of the years
ended June 30, 1994 and 1993, respectively. At June 30, 1995 FEM had
outstanding borrowings and accrued interest of $123,650 pursuant to a note
receivable to the Company. The note bears 3% annual interest and is due in
full on June 30, 1996.
In August 1994 the Company sold certain of the assets of its list services
subsidiaries to an officer of such subsidiaries. See further discussion in
Note 14.
9. INCOME TAXES
As discussed in Note 2, during 1993 the Company adopted Statement of
Financial Accounting Standards No. 109 (the "Statement"). The Statement
changes the method of accounting for deferred income taxes by requiring an
asset and liability approach for financial accounting and reporting
purposes. As a result of the change in accounting, the Company recognized
a deferred tax benefit for the year ended June 30, 1993. During 1994 the
Company corrected its 1993 consolidated net operating loss carryforwards by
approximately $1,252,000 and corrected its 1993 classification of certain
of the net operating loss carryforwards by reducing costs in excess of net
assets acquired by approximately $285,000. Accordingly, the deferred
income tax benefit and net income was reduced approximately $700,000.
There was no cumulative effect on previous years as a result of the
accounting change.
During the years ended June 30, 1995 and 1994, the Company reduced cost in
excess of net assets acquired by approximately $570,000 and $340,000,
respectively by recording such net operating loss carryforwards on the
Company's balance sheet.
The components of the income tax expense (benefit) applicable to continuing
operations for the fiscal year ended June 30 are as follows:
F-13
<PAGE> 30
<TABLE>
<CAPTION>
1995 1994 1993
----------- -------------- --------------
<S> <C> <C> <C>
Current $ 438,475 $ -- $ --
Deferred (93,867) 179,763 (420,838)
----------- -------------- --------------
$ 344,608 $ 179,763 $ (420,838)
=========== ============== ==============
</TABLE>
A reconciliation of the statutory federal income tax rate and the effective
rate as a percentage of pre-tax income for the fiscal year ending June 30
is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Statutory rate 34.0% 34.0% (34.0%)
Goodwill amortization 1.8% 8.9% 12.7%
Tax credits (15.8%) -- --
Other (0.7%) (8.3%) (12.7%)
------ ------ ------
19.3% 34.6% (34.0%)
====== ====== ======
</TABLE>
The components of deferred taxes included in the accompanying consolidated
balance sheet as of June 30 are as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Deferred tax assets:
Accrued expenses $ 187,065 $ 187,948
Net operating loss carryforwards 760,371 855,417
Tax credits 265,590 --
----------- -----------
Gross deferred tax assets 1,213,026 1,043,365
Deferred tax liabilities:
Fixed assets (580,471) (312,167)
Non-compete agreement (154,010) --
----------- -----------
Gross deferred tax liabilities (734,481) (312,167)
----------- -----------
478,545 731,198
Less: valuation allowance -- (570,279)
----------- -----------
Net deferred tax asset (liability) $ 478,545 $ 160,919
=========== ===========
</TABLE>
At June 30, 1995 the Company had net operating loss carryforwards of
approximately $2,200,000 which are available to be carried forward to
future periods. Due to the ownership changes which have taken place in
prior years, the net operating loss carry forwards are subject to
limitations set forth in regulations under the Internal Revenue Code.
Under those regulations, future utilization is limited to approximately
$279,000 per year. In fiscal 1995, the Company concluded, based on an
assessment of all available evidence, that it is more likely than not that
future taxable income will be sufficient to realize the tax benefits
available; therefore, the Company reduced the valuation allowance $570,279.
Changes in the valuation allowance related to the utilization of these net
operating loss carryforwards reduced the costs in excess of net assets
acquired.
10. COMMITMENTS
Advanced entered into an employment agreement with an officer of the
company through December 1995. The agreement specifies an annual base
salary of $250,000 plus bonuses based on the Company's performance.
F-14
<PAGE> 31
11. MAJOR CUSTOMERS
The Company had sales to major customers comprising the following
percentages of consolidated revenues for the years ended June 30:
<TABLE>
<CAPTION>
Customer 1995 1994 1993
-------- ---- ---- ----
<S> <C> <C> <C>
A 53% 24% 52%
B 10% 15% 17%
C 4% 7% 12%
D 4% 27% --
E 6% 10% --
</TABLE>
12. STOCK OPTIONS AND WARRANTS
In February 1993 the Company's shareholders approved the NRP Inc. 1992
Stock Option Plan (the "Plan") which provides for the granting of options
to purchase up to a maximum of 3,000,000 shares of Common Stock to key
employees, officers, and directors of the Company and its subsidiaries.
The Company granted, pursuant to the Plan, options to purchase 1,140,000
and 475,000 shares of Common Stock in fiscal 1994 and fiscal 1995,
respectively, at the market price on the date of grant. Such options
granted are exercisable for 10 years from the date of grant. At June 30,
1995, 1,203,000 of these options were fully vested with 164,334, 137,333
and 110,333 options vesting in fiscal years 1996, 1997 and 1998,
respectively. The Company may grant additional options at any time prior
to December 11, 2002.
In May 1994 the Company granted warrants, which expire May 30, 1999, to a
financial advisory services firm entitling the firm to purchase 650,000
shares of Common Stock at a purchase price of $1.625 per share, the market
price on the date granted.
In April 1993, Advanced initiated the Advanced Telemarketing Corporation
1993 Stock Option Plan which provides for the granting of options to
Advanced's key employees, officers, and directors to purchase up to a
maximum of 436,471 shares of Advanced's common stock. To date options to
purchase 414,652 shares of Advanced's common stock have been granted.
185,946 options have vested with 137,662, 73,912 and 17,132 options vesting
in the fiscal years ending June 30 1996, 1997 and 1998, respectively.
Advanced granted such options at management's best estimate of the common
stock's market value at the date of grant.
Pursuant to the Advanced Telemarketing Corporation 1993 Stock Option Plan,
in October, 1993, Advanced granted to the president of Advanced options to
purchase 680,908 shares of Advanced's common stock (representing 15% of the
fully diluted common stock of Advanced) at $0.01 per share. In March 1995,
the president of Advanced surrendered such options in exchange for stock
options to purchase a total of 2,410,880 shares of ATC Common Stock at
$0.8125 per share, the market price at the date of grant. The ATC options
granted became fully exercisable on August 1, 1995 and are exercisable for
10 years from the date of grant.
13. EMPLOYEE BENEFIT PLAN
During fiscal 1991 Advanced adopted a defined contribution 401(k) plan
covering all eligible employees, as defined. Eligible employees may elect
to contribute up to 15% of their compensation, not to exceed $9,000 per
year. Advanced may, at its discretion, match employee contributions.
There was no employer matching contribution made in 1995, 1994 or 1993.
F-15
<PAGE> 32
14. DISPOSITION OF ASSETS
On August 30, 1994, pursuant to an asset purchase agreement, NRL Direct,
Inc., a wholly-owned subsidiary of NRP, sold certain of its assets
consisting primarily of cash, accounts receivable, fixed assets,
tradenames, and other assets for promissory notes aggregating approximately
$745,000. As a result of the asset disposition, effective July 1, 1994 ATC
no longer engages in the list brokerage and list management businesses.
The net assets conveyed were reclassified on the June 30, 1994 balance
sheet to separately identify them as assets held for sale.
On August 13, 1993 M/B Ltd. Services, Inc., a wholly-owned subsidiary of
NRP ("M/B Ltd."), pursuant to an asset purchase agreement, sold
substantially all of the assets related to the marketing, publishing and
distribution of the National Five Digit ZIP Code Directory package (the
"Directory"). M/B Ltd. received net cash consideration of approximately
$4.7 million and recognized a one-time after-tax gain of approximately $2.5
million in the fiscal year ending June 30, 1994. As a result of the asset
disposition, M/B Ltd. no longer sells the Directory.
Summary financial information related to the discontinued business segments
was as follows:
<TABLE>
<CAPTION>
For the Year Ended June 30:
1995 1994 1993
-------------- ----------- -----------
<S> <C> <C> <C>
Revenue $ -- $17,559,736 $19,318,226
Cost of Sales -- 15,277,072 15,388,171
-------------- ----------- -----------
Gross Margin $ -- $ 2,282,664 $ 3,930,055
============== =========== ===========
Income (Loss) From Operations $ (135,285) $ 179,808 $ 1,607,511
Net Interest (Expense) Income -- (11,482) (6,700)
-------------- ----------- -----------
Net Income Before Taxes (135,285) 168,326 1,600,811
Income Tax (Expense) Benefit 26,056 (59,472) 398,328
-------------- ----------- -----------
Net Income (Loss) $ (109,229) $ 108,854 $ 1,999,139
============== =========== ===========
</TABLE>
The net after-tax income or loss derived from the operation of these
business segments has been classified on the statement of income to
separately identify them as income from operations of discontinued business
segments, net of applicable taxes.
15. INDUSTRY SEGMENT INFORMATION
ATC, through its subsidiary, operates principally in one industry segment:
telecommunications based marketing and information services.
F-16
<PAGE> 33
NRP INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JUNE 30, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
Charged To
Earnings -
Balance at General And
Beginning Of Administrative Net Balance At End
Description Year Expenses Write-Off Of Year
--------------------------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1993:
Allowance for doubtful accounts $ 31,543 $ 22,500 $ 8,565 $ 62,608
============= =============== ============= ==============
YEAR ENDED JUNE 30, 1994:
Allowance for doubtful accounts $ 62,608 $ 63,000 $ (7,291) $ 118,317
============= =============== ============= ==============
YEAR ENDED JUNE 30, 1995:
Allowance for doubtful accounts $ 118,317 $ (15,000) $ (12,471) $ 90,846
============= =============== ============= ==============
</TABLE>
F-17
<PAGE> 34
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description of Exhibit Numbered Page
- -------- ---------------------- -------------
<S> <C> <C>
3.1 Certificate of Incorporation of Kenneth Resources, Inc.
(Incorporated by reference from Company's Amendment No. 1 to
Form S-1 Registration Statement - File No. 33-6268).
3.2 Certificate of Amendment of Kenneth Resources, Inc. to reflect
change of name to National Reference Publishing, Inc.
(Incorporated by reference from Company's Amendment No. 1 to
Form S-1 Registration Statement -File No. 33-6268).
3.3 Certificate of Amendment of National Reference Publishing,
Inc. to reflect change of name to NRP Inc. (Incorporated by
reference from Company's Form 10-K Annual Report for the year
ended June 30, 1994).
3.4 Bylaws of Kenneth Resources, Inc. (Incorporated by reference
from Company's Amendment No. 1 to Form S-1 Registration
Statement - File No. 33-6268).
3.5 Amendment to Bylaws of Kenneth Resources, Inc. (Incorporated
by reference from Company's Amendment No. 1 to Form S-1
Registration Statement - File No. 33-6268).
4.1 Specimen of Share Certificate of Company's Common Stock.
(Incorporated by reference from Company's Form 10-K Annual
Report for the year ended June 30, 1994).
4.2 Form of Series B Preferred Stock, as amended. (Incorporated
by reference from Company's Form 10-K Annual Report for the
year ended June 30, 1994).
4.3 NRP Inc. Series C Preferred Stock certificate issued to
Codinvest Limited with attached designations. (Incorporated
by reference from Company's Form 8-K Current Report dated June
16, 1994).
10.8 Lease Agreement dated January 1, 1991 by and between Royal
Tech Properties, Ltd. and Advanced Telemarketing Corporation.
(Incorporated by reference from Company's Form 10- K Annual
Report for the year ended June 30, 1991).
10.9 Settlement Agreement and Promissory Note dated September 18,
1992 by and between Advanced Telemarketing Corporation and
Merrill Lynch Private Capital Inc. (Incorporated by reference
from Company's Form 10-K Annual Report for the year ended June
30, 1992).
</TABLE>
1
<PAGE> 35
<TABLE>
<S> <C> <C>
10.10 Asset Purchase Agreement by and between Advanced Telemarketing
Corporation and GTE Market Resources, Inc. dated December 31,
1992. (Incorporated by reference from Company's Form 10-Q
Quarterly Report for the quarter ended December 31, 1992).
10.11 Asset Purchase Agreement by and among M/B Ltd. Services, Inc.,
NRP Inc., and United Group executed July 26, 1993.
(Incorporated by reference from Company's Form 8-K Current
Report dated August 13, 1993).
10.12 Non-Competition Agreement by and among M/B Ltd. Services,
Inc., NRP Inc., and United Communications Group executed July
26, 1993. (Incorporated by reference from Company's Form 8-K
Current Report dated August 13, 1993).
10.13 Loan and Security Agreement dated May 17, 1994 among
Continental Bank N.A., Advanced Telemarketing Corporation and
American Telesales Corporation. (Incorporated by reference
from Company's Form 8-K Current Report dated June 16, 1994).
10.14 Guaranty dated May 17, 1994 by NRP Inc. in favor of
Continental Bank, N.A. (Incorporated by reference from
Company's Form 8-K Current Report dated June 16, 1994).
10.15 Investment Letter dated June 16, 1994 by Codinvest Limited.
(Incorporated by reference from Company's Form 8-K Current
Report dated June 16, 1994).
10.16 Asset Purchase Agreement by and among NRL Brokerage, Inc., NRL
Management, Inc., S.D. Bogner, Inc., NRP Inc., and Stephen D.
Bogner executed August 30, 1994 (including promissory notes
and guaranties). (Incorporated by reference from Company's
Form 8-K Current Report dated August 30, 1994).
27 Financial Data Schedule.
</TABLE>
2
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 2,481,170
<SECURITIES> 0
<RECEIVABLES> 9,052,842
<ALLOWANCES> 90,846
<INVENTORY> 0
<CURRENT-ASSETS> 12,179,356
<PP&E> 15,281,503
<DEPRECIATION> 4,420,052
<TOTAL-ASSETS> 25,356,630
<CURRENT-LIABILITIES> 9,541,312
<BONDS> 0
<COMMON> 135,634
0
8,698
<OTHER-SE> 12,092,402
<TOTAL-LIABILITY-AND-EQUITY> 25,356,630
<SALES> 61,353,999
<TOTAL-REVENUES> 61,353,999
<CGS> 43,115,353
<TOTAL-COSTS> 43,115,353
<OTHER-EXPENSES> 15,591,373
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 858,053
<INCOME-PRETAX> 1,789,220
<INCOME-TAX> 344,608
<INCOME-CONTINUING> 1,444,612
<DISCONTINUED> (109,229)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,335,383
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
