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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended SEPTEMBER 30, 1995 or
----------------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission File Number 0-14315
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NRP INC.
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(Exact name of registrant as specified in its charter)
Delaware 75-2050538
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(State of incorporation) (I. R. S. Employer 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
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(Former name, former address and former fiscal year, if changed since last
report)
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
COMMON STOCK, $.01 PAR VALUE SHARES OUTSTANDING: 13,563,361
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NRP INC.
SEPTEMBER 30, 1995
TABLE OF CONTENTS
<TABLE>
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PAGE
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
September 30, 1995 and June 30, 1995 3
Consolidated Statements of Operations -
Three Months Ended September 30, 1995
and September 30, 1994 4
Consolidated Statements of Cash Flow
Three Months Ended September 30, 1995
and September 30, 1994 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-9
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
</TABLE>
2
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NRP INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Sept. 30, 1995 June 30, 1995
(Unaudited) (Audited)
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<S> <C> <C>
ASSETS:
Current Assets:
Cash $ 1,937,525 $ 2,481,170
Notes receivable 667,572 1,144,440
Accounts receivable, less allowance for doubtful
accounts of $90,846 and $90,846 12,288,159 7,908,402
Prepaid expenses 147,809 254,363
Deferred income tax benefit 390,981 390,981
--------------- ---------------
Total Current Assets 15,432,046 12,179,356
Equipment and Other Assets:
Equipment, net of accumulated depreciation of
$4,963,979 and $4,420,052 10,776,578 10,861,451
Cost in excess of net assets acquired, net of
accumulated amortization of $913,815 and $894,864 1,326,594 1,345,545
Other assets 943,932 970,278
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Total Equipment and Other Assets 13,047,104 13,177,274
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$ 28,479,150 $ 25,356,630
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts payable $ 3,395,193 $ 3,023,716
Notes payable 1,462,572 --
Unearned revenues and customer deposits 849,472 999,969
Accrued compensation 1,716,985 953,217
Accrued telephone expense 297,270 653,731
Other accrued liabilities 2,691,527 2,178,060
Current portion of long-term debt 1,774,373 1,732,619
--------------- ---------------
Total Current Liabilities 12,187,392 9,541,312
Long-term Debt 3,235,190 3,578,584
Shareholders' Equity:
Preferred Stock, $.01 par value, 1,000,000 shares authorized;
29,778 convertible, $.36 cumulative Series B shares and 840,000
convertible, $.11 cumulative Series C shares issued and
outstanding 8,698 8,698
Common Stock, $.01 par, 27,500,000 shares authorized;
13,563,361 issued and outstanding 135,634 135,634
Additional paid-in capital 8,649,610 8,649,610
Retained earnings 4,262,626 3,442,792
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Total Shareholders' Equity 13,056,568 12,236,734
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$ 28,479,150 $ 25,356,630
=============== ===============
</TABLE>
See accompanying note.
3
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NRP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
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<S> <C> <C>
Revenues $ 18,037,810 $ 12,503,170
Cost of services 12,301,728 8,890,533
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Gross profit 5,736,082 3,612,637
Selling, general and administrative expense 3,636,647 2,561,260
Depreciation and amortization expense 690,446 431,752
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Income from operations 1,408,989 619,625
Interest expense 192,243 219,678
Interest income 25,417 26,429
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Net income before provision for income taxes 1,242,163 426,376
Income tax expense 422,335 114,968
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Net income $ 819,828 $ 311,408
=============== ===============
Earnings per common share and common share
equivalents (primary and fully diluted):
Net income $ 0.04 $ 0.02
=============== ===============
Weighted average common and common
equivalent shares outstanding 20,647,722 18,445,270
=============== ===============
</TABLE>
See accompanying note.
4
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NRP INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
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<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 819,828 $ 311,408
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 690,446 431,752
Changes in certain other assets and liabilities:
Accounts receivable (4,379,757) 121,717
Notes receivable 476,868 6,490
Prepaid expenses 106,554 16,004
Assets held for sale -- 27,867
Other assets 8,204 (385,858)
Accounts payable 371,477 748,287
Unearned revenue and customer deposits (150,497) (7,250)
Accrued liabilities 920,774 (677,413)
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Net cash provided by (used in) operating activities (1,136,103) 593,004
Cash Flow From Investing Activities:
Capital expenditures (743,474) (1,710,838)
Proceeds from sale of equipment 175,000 --
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Net cash used in investing activities (568,474) (1,710,838)
Cash Flow From Financing Activities:
Net proceeds from (payments on) line of credit 1,462,572 (1,218,582)
Payments on capital leases (134,466) (139,012)
Proceeds from long-term debt -- 358,662
Payments on long-term debt (167,174) (20,362)
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Net cash provided by (used in) financing activities 1,160,932 (1,019,294)
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Net decrease in cash (543,645) (2,137,128)
Cash at beginning of the period 2,481,170 5,166,074
--------------- ---------------
Cash at end of the period $ 1,937,525 $ 3,028,946
=============== ===============
Supplemental information on non-cash transactions is as follows:
Capital lease obligations entered into
-- $1,340,305
Note receivable obtained upon disposition of assets of
discontinued operation -- 745,618
</TABLE>
See accompanying note.
5
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NRP INC.
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
Earnings per share.
Primary and fully diluted earnings per common share are computed by dividing
net income applicable to common stock 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, computed based on the treasury
stock method, and the assumed conversion of the Company's issued and
outstanding preferred stock. Net income applicable to common stock for the
three month period ended September 30, 1995 was adjusted to reflect the income
attributable to stock options issued to key employee and officers by Advanced
Telemarketing Corporation, the operating subsidiary of the Company
("Advanced"). Net income applicable to common stock for the three month period
ended September 30, 1994 was not adjusted to reflect the income attributable to
such options as the effect of such adjustment was immaterial.
Primary and fully diluted weighted average shares outstanding at September 30,
1995 and 1994 was computed as follows:
<TABLE>
<CAPTION>
1995 1994
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<S> <C> <C>
Weighted average shares outstanding 13,563,361 13,563,361
Common stock equivalents:
Net effect of dilutive stock options
and warrants 2,824,805 622,353
Net effect of assumed conversion of
dilutive preferred stock 4,259,556 4,259,556
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Primary and fully diluted shares 20,647,722 18,445,270
=============== ===============
</TABLE>
Net income applicable to common stock for the three month period ended
September 30, 1995 was computed as follows:
<TABLE>
<CAPTION>
Three months ended
September 30, 1995
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<S> <C>
Net income $ 819,828
Less: income applicable to Advanced stock options (91,679)
------------------
Net income applicable to common stock $ 728,149
==================
</TABLE>
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The accompanying consolidated financial statements, in the opinion of
the Company's management, contain all material, normal and recurring
adjustments necessary to present accurately the consolidated financial
condition of the Company and the consolidated results of its operations for the
quarter ended September 30, 1995. The consolidated results of operations for
the period reported are not necessarily indicative of the results to be
experienced for the entire current fiscal year.
Results of Operations
For the three month period ended September 30, 1995, the Company
earned income from operations of $1,408,989 on $18,037,810 in revenues whereas
in the prior year quarter ended September 30, 1994, the Company earned income
from operations of $619,625 on $12,503,170 in revenues. As a percentage of
revenue, income from continuing operations in 1995's first quarter was 7.8%
versus 5.0% in the prior year's first quarter (a 56% increase).
Revenues generated for the fiscal quarter ended September 30, 1995
increased $5,534,640 (44.3%) over revenues in the corresponding quarter of the
previous fiscal year as the result of both the addition of new clients and the
expansion of business from certain of the Company's existing clients. One of
the Company's existing customers represented approximately 44.8% of the
revenues produced by the Company during this quarter. Although the loss of
this customer could have a material, adverse effect on the Company, in
management's opinion, because the Company performs services for various
autonomous business units within that customer's organization, the risk
associated with any concentration of business with the client is somewhat
mitigated. In addition, the percentage of the Company's revenues emanating
from this customer decreased in the quarter just ended from the 53.1% of total
Company revenues which this customer represented for the fiscal year ended June
30, 1995. The Company is continuing its strategy to secure recurring revenues
from long-term relationships with targeted, large corporate customers which use
telecommunications strategies as an integral, ongoing element in their
marketing and/or customer service programs. Although the Company continues to
perform project-based business for certain of its customers, there can be no
assurance that the clients which generate such project-oriented revenue will
continue their projects. However, based on the Company's historical ability to
increase revenues generated by existing clients and to attract new clients,
management believes it should be able to continue to build revenues.
During the fiscal quarter ended September 30, 1995, the gross profit
margin earned on revenues increased $2,123,445 over the first quarter of the
previous fiscal year. This 58.8% increase was due both to the 44.3% growth in
revenue and to increased operating efficiency. As a percentage of revenues,
the gross profit margin increased to 31.8% in the first quarter of the current
fiscal year from 28.9% in the comparable prior year period. This gain in
operating efficiency resulted from enhanced capacity utilization, management's
ongoing efforts to apply innovatively its technology and to its renegotiated
telecommunications tariff.
Selling, general and administrative expense ("SG&A") was $3,636,647 in
the current year quarter which was an increase of 42% ($1,075,387) over the
prior year. As a percentage of revenue, SG&A expense decreased 0.3% from 20.5%
in fiscal 1994 to 20.2% in fiscal 1995. The majority of the increase came from
(i) the costs related to recruiting and training telephone agents, (ii)
additional infrastructure costs to support new and expanded client programs and
(iii) greater sales commissions associated with the 44.3% revenue gain during
the quarter.
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Depreciation and amortization expenses totalled $690,446 in the
current quarter, an increase of nearly 60% over the comparable prior year
period. However, as a percentage of revenue, the current period expense only
increased 8.6% to 3.8% of revenue versus 3.5% in 1994. The primary reason for
the increase was the significant capacity expansion executed during the second
half of fiscal 1995 and which accordingly was not reflected in the prior year's
first quarter results. Despite the significant increase in absolute dollars,
the overall impact as a percentage of revenue was mitigated by the 44.3%
revenue gain provided through the capacity added.
Net interest expense for the first quarter of the current fiscal year
decreased 13.7% ($23,423) to $166,826 from $193,249 in the comparable prior
year quarter. Management efforts to improve cash flow by decreasing the number
of days receivables are outstanding, in particular with the Company's larger
customers, has resulted in diminished utilization of the Company's working
capital facilities despite the 44.3% increase in revenues generated by the
Company.
The Company's effective income tax rate was 34% in the three months
ended September 30, 1995 as compared to the Company's approximate tax rate of
27% for the comparable current year period. The rate increase was due to
certain targeted jobs tax credits earned by the Company in the prior fiscal
year. The federal programs which created these tax credits expired on December
31, 1994 and have not been renewed or replaced by similar programs.
Management knows of no trends or uncertainties other than those
mentioned above that are expected to have a material favorable or unfavorable
impact on operating results.
Liquidity and Capital Resources
During the previous two fiscal years ended June 30, 1995, the Company
consummated several transactions which resulted in the strengthening of its
balance sheet and increasing the Company's liquidity, in order to focus the
Company's resources and efforts on the significant growth potential of its
telecommunications-based marketing and information services subsidiary. These
transactions included the sale and discontinuation of its other two operating
subsidiaries and the conversion of approximately $3.1 million of 15% short-term
debt into equity. After completing these transactions, management focused on
creating the infrastructure and securing the working capital financing
necessary to facilitate its growth potential. During this two year period the
Company increased its production capacity from approximately 700 workstations
to approximately 2,946 workstations. This enhanced capacity was funded with an
equipment term loan from a major commercial bank, various capital and operating
leases, and with cash flow generated by operations. In addition, the Company
secured a $15 million working capital financing facility with a major bank to
meet the working capital needs created by the Company's growth.
Management believes the transactions described above have provided the
liquidity and access to working capital as well as sufficient production
capacity to meet current client demand and near-term growth. However, as
growth continues, management believes additional call centers will be needed to
accommodate the increased business and that such additional facilities will
require furniture, equipment and technological enhancement commensurate with
the quality standards of its existing facilities. The Company may have to
secure additional financing for these capital needs as its current commitments
and cash flow may be inadequate. Although no assurances can be made in this
regard, management anticipates that, based on the Company's ability to secure
such financing to date, the Company should be able to secure funding for such
future capital equipment needs.
The $15 million accounts receivable credit facility and $1.5 million
equipment term loan secured from a major commercial bank mentioned above
contain various covenants which limit, among other things, the operating
subsidiary's indebtedness, capital expenditures, investments, payments and
dividends to the Company and requires the operating subsidiary to meet
certain financial tests. Similarly, under the terms of
8
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the guaranty 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
the operating subsidiary's accounts receivables, furniture, and equipment and
are guaranteed by the Company.
On October 11, 1995, the Company renegotiated the terms of an
unsecured note payable in the principal amount of approximately $770,000 owed
by its operating subsidiary to Merrill Lynch Private Capital, Inc. ("MLPC").
The terms of the new note required a one-time $150,000 principal payment on
October 11, 1995 and twelve subsequent monthly payments of approximately
$51,000 each plus interest at the prime lending rate on the outstanding balance
accrued commencing November 1, 1995. The new note also contains a provision
discounting the principal balance of the note approximately $61,000 subject to
the timely receipt by MLPC of all payments due under the new note.
9
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PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
None
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
NRP INC.
November 10, 1995 By: /s/ Jerry L. Sims, Jr.
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Dated Jerry L. Sims, Jr.
Controller
11
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,937,525
<SECURITIES> 0
<RECEIVABLES> 12,955,731
<ALLOWANCES> 90,846
<INVENTORY> 0
<CURRENT-ASSETS> 15,432,046
<PP&E> 15,740,557
<DEPRECIATION> 4,963,979
<TOTAL-ASSETS> 28,479,150
<CURRENT-LIABILITIES> 12,187,392
<BONDS> 0
<COMMON> 135,634
0
8,698
<OTHER-SE> 12,912,236
<TOTAL-LIABILITY-AND-EQUITY> 28,479,150
<SALES> 18,037,810
<TOTAL-REVENUES> 18,037,810
<CGS> 12,301,728
<TOTAL-COSTS> 12,301,728
<OTHER-EXPENSES> 4,327,093
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 192,243
<INCOME-PRETAX> 1,242,163
<INCOME-TAX> 422,335
<INCOME-CONTINUING> 819,828
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 819,828
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
