<PAGE> 1
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 DECEMBER 31, 1995 or
--------------------------------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
-------------------------- -------------------
Commission File Number 0-14315
--------------------------------------------------------
NRP INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2050538
- ------------------------------------ --------------------------------------
(State of incorporation) (I. R. S. Employer Identification No.)
5950 Berkshire Lane, Suite 1650 Dallas, Texas 75225
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 361-9870
-----------------------------
- --------------------------------------------------------------------------------
(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
----- -----
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
- --------------------------------------------------------------------------------
<PAGE> 2
NRP INC.
DECEMBER 31, 1995
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
December 31, 1995 and June 30, 1995 3
Consolidated Statements of Operations -
Three Months Ended December 31, 1995
and December 31, 1994 4
Six Months Ended December 31, 1995
and December 31, 1994 5
Consolidated Statements of Cash Flow
Six Months Ended December 31, 1995
and December 31, 1994 6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operati 9-11
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
2
<PAGE> 3
NRP INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Dec. 31, 1995 June 30, 1995
(Unaudited) (Audited)
------------- -------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash $ 1,507,432 $ 2,481,170
Notes receivable 662,455 1,144,440
Accounts receivable, less allowance for doubtful
accounts of $25,751 and $90,846 11,017,468 7,908,402
Prepaid expenses 233,042 254,363
Deferred income tax benefit 390,981 390,981
----------- -----------
Total Current Assets 13,811,378 12,179,356
Equipment and Other Assets:
Equipment, net of accumulated depreciation of
$5,668,835 and $4,420,052 10,482,127 10,861,451
Cost in excess of net assets acquired, net of
accumulated amortization of $932,767 and $894,864 1,307,642 1,345,545
Other assets 917,210 970,278
----------- -----------
Total Equipment and Other Assets 12,706,979 13,177,274
----------- -----------
$26,518,357 $25,356,630
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts payable $ 3,523,959 $ 3,023,716
Notes payable -- --
Unearned revenues and customer deposits 706,683 999,969
Accrued compensation 972,685 953,217
Accrued telephone expense 772,291 653,731
Other accrued liabilities 1,991,956 2,178,060
Current portion of long-term debt 1,539,775 1,732,619
----------- -----------
Total Current Liabilities 9,507,349 9,541,312
Long-term Debt 2,885,297 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 5,331,769 3,442,792
----------- -----------
Total Shareholders' Equity 14,125,711 12,236,734
----------- -----------
$26,518,357 $25,356,630
=========== ===========
</TABLE>
See accompanying note.
3
<PAGE> 4
NRP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Revenues $22,961,196 $12,760,875
Cost of sales 16,338,841 9,222,561
----------- -----------
Gross profit 6,622,355 3,538,314
Selling, general and administrative expense 4,092,601 2,718,596
Depreciation and amortization expense 743,232 517,821
----------- -----------
Income from operations 1,786,522 301,897
Interest expense 185,386 222,820
Interest income 18,779 23,144
----------- -----------
Income before provision for income taxes 1,619,915 102,221
Income tax benefit (expense) (550,772) 114,968
Net income $ 1,069,143 $ 217,189
=========== ===========
Earnings per common share and common share
equivalents (Note 1) $ 0.05 $ 0.01
=========== ===========
Weighted average common and common
equivalent shares outstanding 20,991,324 17,822,917
=========== ===========
</TABLE>
See accompanying note.
4
<PAGE> 5
NRP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Revenues $40,999,006 $25,264,045
Cost of sales 28,640,569 18,113,094
----------- -----------
Gross profit 12,358,437 7,150,951
Selling, general and administrative expense 7,729,248 5,279,856
Depreciation and amortization expense 1,433,678 949,573
----------- -----------
Income from operations 3,195,511 921,522
Interest expense 377,629 442,498
Interest income 44,196 49,573
----------- -----------
Income before provision for income taxes 2,862,078 528,597
Income tax expense 973,107 --
----------- -----------
Net income $ 1,888,971 $ 528,597
=========== ===========
Earnings per common share and common share
equivalents (Note 1) $ 0.08 $ 0.02
=========== ===========
Weighted average common and common
equivalent shares outstanding 20,991,324 18,114,804
=========== ===========
</TABLE>
See accompanying note.
5
<PAGE> 6
NRP INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
SIX MONTHS ENDED DECEMBER 31, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 1,888,971 $ 528,597
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 1,433,678 949,573
Loss on disposition of assets 1,236 --
Changes in certain other assets and liabilities:
Accounts receivable (3,109,066) (288,973)
Notes receivable 481,985 (547,471)
Prepaid expenses 21,321 (76,797)
Assets held for sale -- 27,867
Other assets 14,266 (520,895)
Accounts payable 500,243 1,255,139
Unearned revenue and customer deposits (293,286) 846,632
Accrued liabilities (48,076) (1,692,649)
----------- -----------
Net cash provided by operating activities 891,272 481,023
Cash Flow From Investing Activities:
Capital expenditures (1,153,879) (3,097,192)
Proceeds from sale of assets, net 175,000 --
----------- -----------
Net cash used in investing activities (978,879) (3,097,192)
Cash Flow From Financing Activities:
Net proceeds from (payments on) line of credit -- (1,148,458)
Payments on capital leases (307,072) (264,293)
Proceeds from long-term debt -- 725,624
Payments on long-term debt (579,059) (84,758)
----------- -----------
Net cash used in financing activities (886,131) (771,885)
----------- -----------
Net increase (decrease) in cash (973,738) (3,388,054)
Cash at beginning of the period 2,481,170 5,166,074
----------- -----------
Cash at end of the period $ 1,507,432 $ 1,778,020
=========== ===========
Supplemental information on non-cash transactions is as follows:
Capital lease obligations entered into -- $ 1,574,887
Note receivable obtained upon disposition of assets of
discontinued operation -- 745,618
</TABLE>
See accompanying note.
6
<PAGE> 7
NRP INC.
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(UNAUDITED)
1. 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. For the three and six month periods ended
December 31, 1995 and 1994, net income was adjusted to reflect the income
attributable to stock options issued to key employees and officers by Advanced
Telemarketing Corporation, a subsidiary of the Registrant.
Primary and fully-diluted weighted average shares outstanding for the three
month periods ended December 31, 1995 and 1994 was computed as follows:
<TABLE>
<CAPTION>
Primary Fully-Diluted
--------------------------- ---------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Common shares outstanding 13,563,361 13,563,361 13,563,361 13,563,361
Net effect of dilutive stock
options and warrants 2,920,741 -- 3,168,407 --
Net effect of assumed conversion
of dilutive preferred stock 4,259,556 4,259,556 4,259,556 4,259,556
---------- ---------- ---------- ----------
Weighted average shares
outstanding 20,743,658 17,822,917 20,991,324 17,822,917
========== ========== ========== ==========
</TABLE>
Primary and fully-diluted weighted average shares outstanding for the six month
periods ended December 31, 1995 and 1994 was computed as follows:
<TABLE>
<CAPTION>
Primary Fully-Diluted
--------------------------- ---------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Common shares outstanding 13,563,361 13,563,361 13,563,361 13,563,361
Net effect of dilutive stock
options and warrants 2,811,516 291,887 3,168,407 291,887
Net effect of assumed conversion
of dilutive preferred stock 4,259,556 4,259,556 4,259,556 4,259,556
---------- ---------- ---------- ----------
Weighted average shares
outstanding 20,634,433 18,114,804 20,991,324 18,114,804
========== ========== ========== ==========
</TABLE>
7
<PAGE> 8
Net income applicable to common stock for the three month periods ended
December 31, 1995 and 1994 was computed as follows:
<TABLE>
<CAPTION>
1995 1994
---------- --------
<S> <C> <C>
Net Income $1,069,143 $217,189
Less: Income applicable to Advanced
option holders 112,625 35,323
---------- --------
Net income applicable to common stock $ 956,518 $181,866
========== ========
</TABLE>
Net income applicable to common stock for the six month periods ended December
31, 1995 and 1994 was computed as follows:
<TABLE>
<CAPTION>
1995 1994
---------- --------
<S> <C> <C>
Net Income $1,888,971 $528,597
Less: Income applicable to Advanced
option holders 199,478 199,196
---------- --------
Net income applicable to common stock $1,689,493 $329,401
========== ========
</TABLE>
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The accompanying unaudited consolidated financial statements, in the
opinion of the Registrant's management, contain all material, normal and
recurring adjustments necessary to present accurately the consolidated
financial condition of the Registrant and the consolidated results of its
operations for the quarter and six months ended December 31, 1995. The
unaudited consolidated results of operations for the periods reported are not
necessarily indicative of the results to be experienced for the entire current
fiscal year.
Results of Operations
The Company earned income from operations of $1,786,522 or 7.8% of
revenues of $22,991,196 for the quarter ended December 31, 1995 and for the six
months ended December 31, 1995 earned income from operations of $3,195,511 or
7.8% of revenues of $40,999,006. In the previous fiscal year the Company
earned income from operations of $301,897 or 2.4% of revenues and 921,522 or
3.6% of revenues in comparable three and six month periods, respectively.
For the quarter ended December 31, 1995 revenues increased $10,200,321
(79.9%) over revenues generated in the corresponding quarter of the previous
fiscal year and increased $15,734,961 (62.3%) for the six months ended December
31, 1995 versus the comparable prior year six month period. Approximately
49.5% of the revenue growth in the six months ended December 31, 1995 versus
the comparable prior year period emanates from the addition of new clients
while the remaining 50.5% of the growth resulted from changes in the volume of
business generated by the Company's existing clients. One of the Company's
existing clients represented approximately 45.3% of the revenues produced by
the Company during the current year six month period ended December 31, 1995.
Although the loss of this client could have a material adverse effect on the
Company, the Company performs services for various autonomous business units
within the client's organization and, accordingly, management believes that the
risk associated with any concentration of business with the client is mitigated
to some extent. In addition, with the addition of new clients and increases in
business volumes with other customers, the percentage of the Company's revenues
generated by this customer decreased for the six months ended December 31, 1995
from the 53.1% of the Company's revenues this client 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. The Company
continues to perform project-based business for certain of its customers and
there can be no assurance that these clients will continue existing projects or
provide new 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
notwithstanding the lack of long-term contracts with these customers.
Gross profits earned on revenues for the three months ended December
31, 1995 increased $3,084,041 (87.2%) from the prior year's quarter while for
the six month period ended December 31, 1995 gross profits increased 5,207,486
(72.8%). The increases were due in part to the increases in revenues in the
current year discussed above and in part to increases in the Company's
operating efficiency. As a percentage of revenues, gross profits for the three
and six month periods ended December 31, 1995 were 28.8% and 30.1%,
respectively, versus 27.7% and 28.3% in the comparable three and six month
periods of the prior year, respectively. This gain in operating efficiency
resulted from management's ongoing efforts to enhance capacity utilization
despite a large increase in the Company's operating capacity in the current
year compared to the prior year. (At December 31, 1994 the Company
operated approximately 1,500 agent positions
9
<PAGE> 10
compared to approximately 3,000 agent positions operated by the Company at
December 31, 1995). Operating efficiencies also benefitted from the innovative
application of the Company's core technology and to the renegotiation of the
Company's telecommunications tariff.
Selling, general and administrative expenses increased $1,374,005
(50.5%) in the current year's quarter ended December 31, 1995 and increased
2,449,392 (46.4%) in the current year's six month period ended December 31,
1995 versus comparable periods in the prior fiscal year. The increases in both
the three and six month periods emanated primarily from (i) the additional
infrastructure and personnel necessary to support the Company's increased
operating capacity and maintain the Company's high service quality, (ii)
increased costs related to the recruitment and training of telephone agents,
and (iii) sales commissions associated with the revenue increases discussed
above. In this atmosphere of revenue growth and capacity expansion, management
is continuing its ongoing efforts to improve efficiencies while maintaining the
Company's high quality standards. For example, as a percentage of revenues,
SG&A expenses decreased to 17.8% and 18.9% for the three and six month periods
ended December 31, 1995, respectively, versus 21.3% and 20.9% for the
comparable prior year three and six month periods, respectively.
The $484,105 (51.0%) increase in depreciation and amortization expense
in the six months ended December 31, 1995 was primarily the result of the
significant expansion of the Company's operating capacity executed during the
second half of the fiscal year ended June 30, 1995 and which accordingly was
not reflected in the prior fiscal year's results for the six month end December
31, 1994. Despite the increase in whole dollars, the impact of the expansion
on depreciation and amortization expense was mitigated by the increase in
revenues in the current fiscal year. As a percentage of revenues, the expense
for the current year's three and six month periods was 3.2% and 3.5%,
respectively as compared to 4.1% and 3.8%, respectively, for the same periods
in the previous fiscal year.
Net interest expense for the quarter ended December 31, 1995 decreased
$33,069 versus the comparable prior year quarter and decreased $59,492 for the
six months ended December 31, 1995 versus the comparable prior year six month
period. Net interest has decreased despite the increased working capital
demands created by the Company's revenue growth as a result of managements's
efforts to improve cash flow by decreasing the number of days receivables are
outstanding, in particular with the Company's larger clients. Such efforts
have resulted in diminished utilization of the Company's working capital
borrowing facilities.
For the three and six month periods ended December 31, 1995, the
Company's effective tax rate was approximately 34%. In the prior year the
Company earned certain targeted jobs tax credits to significantly reduce the
impact of federal income taxes. 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 which are expected to have a material favorable or unfavorable
impact on operating results.
Liquidity and Capital Resources
The Company, during the previous two fiscal years ended June 30, 1995,
consummated several transactions, including the sale of two operating
subsidiaries and the conversion of approximately $3.1 million of short-term
debt into equity, which resulted in the strengthening of the Company's balance
sheet, thereby increasing the Company's liquidity and focusing the Company's
resources and efforts on the significant growth potential of its
telecommunications based marketing and information services subsidiary. After
completing these transactions, management focused on creating the
infrastructure and securing the working capital financing necessary to
facilitate this growth potential. During this two year period the Company
increased its production capacity from approximately 700 workstations to over
3,000 workstations. This enhanced capacity was funded with a $1.5 million
equipment term loan from a major commercial bank, various capital
10
<PAGE> 11
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 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.
11
<PAGE> 12
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 Financial Data Schedule
12
<PAGE> 13
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.
February 9, 1996 By: /s/ Jerry L. Sims, Jr.
- ----------------- ------------------------------------
Dated Jerry L. Sims, Jr.
Controller
13
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,507,432
<SECURITIES> 0
<RECEIVABLES> 11,679,923
<ALLOWANCES> 25,751
<INVENTORY> 0
<CURRENT-ASSETS> 13,811,378
<PP&E> 16,150,962
<DEPRECIATION> 5,668,835
<TOTAL-ASSETS> 26,518,357
<CURRENT-LIABILITIES> 9,507,349
<BONDS> 0
<COMMON> 135,634
0
8,698
<OTHER-SE> 13,981,379
<TOTAL-LIABILITY-AND-EQUITY> 26,518,357
<SALES> 0
<TOTAL-REVENUES> 40,999,006
<CGS> 0
<TOTAL-COSTS> 28,640,569
<OTHER-EXPENSES> 9,162,926
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 377,629
<INCOME-PRETAX> 2,862,078
<INCOME-TAX> 973,107
<INCOME-CONTINUING> 1,888,971
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,888,971
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
