<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended: September 30, 1995 Commission File Number: O-14741
------------------ -------
ASA International Ltd.
-----------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Delaware 02-0398205
- - -------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10 Speen Street, Framingham, MA 01701
- - ---------------------------------------- --------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 508-626-2727
------------
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.
X
Yes: ----- No: -----
As of September 30, 1995, there were 3,787,517 shares of Common Stock of
the Registrant outstanding.
<PAGE> 2
PART I
Item 1
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 23,273 $ 10,381
Receivables - net 6,617,358 5,228,384
Computer hardware held for resale 241,366 313,836
Other current assets 950,732 901,642
----------- -----------
TOTAL CURRENT ASSETS 7,832,729 6,454,243
PROPERTY AND EQUIPMENT (less
depreciation of $4,627,187 and
$4,226,580, respectively) 4,682,777 4,813,453
SOFTWARE (less amortization of
$7,382,691 and $6,342,913,
respectively) 6,267,992 6,485,771
COST EXCEEDING NET ASSETS ACQUIRED
(less amortization of $1,298,864
and $1,104,704, respectively) 1,601,557 1,795,718
OTHER ASSETS 509,863 581,745
----------- -----------
$20,894,918 $20,130,930
=========== ===========
</TABLE>
See notes to Condensed Consolidated Financial Statements.
<PAGE> 3
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving credit and bank note $ 1,475,000 $ 975,000
Accounts payable 1,680,863 1,994,103
Accrued expenses 3,163,847 2,368,444
Income taxes 512,994 -
Other current liabilities 1,284,379 1,912,243
----------- -----------
TOTAL CURRENT LIABILITIES 8,117,083 7,249,790
LONG-TERM OBLIGATIONS, NET OF CURRENT
MATURITIES 2,782,259 3,111,905
DEFERRED TAXES 117,000 117,000
COMMITMENTS
SHAREHOLDERS' EQUITY:
Common stock 39,173 39,173
Additional paid-in capital 7,681,632 7,681,632
Retained earnings 2,578,213 2,351,872
----------- -----------
10,299,018 10,072,677
Less: treasury stock, at cost 420,442 420,442
----------- -----------
9,878,576 9,652,235
----------- -----------
$20,894,918 $20,130,930
=========== ===========
</TABLE>
See notes to Condensed Consolidated Financial Statements.
<PAGE> 4
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------
1995 1994
----------------------------
(Unaudited)
<S> <C> <C>
REVENUE
Computer and add-on hardware $ 2,237,548 $ 1,722,407
Services 4,252,568 3,997,752
Product licenses 1,406,793 1,301,594
----------- ------------
GROSS REVENUE 7,896,909 7,021,753
COST OF COMPUTER AND ADD-ON HARDWARE 1,876,157 1,495,917
----------- ------------
REVENUE NET OF HARDWARE COSTS 6,020,752 5,525,836
EXPENSES
Cost of services 2,964,142 2,489,861
Cost of product licensing and development 724,833 631,788
Marketing and sales 1,045,729 1,206,045
General and administrative 818,274 905,857
Amortization of goodwill 67,220 66,386
------------ ------------
TOTAL EXPENSES 5,620,198 5,299,937
EARNINGS FROM OPERATIONS 400,554 225,899
INTEREST EXPENSE - NET 124,279 64,246
------------ ------------
EARNINGS BEFORE INCOME TAXES 276,275 161,653
INCOME TAXES 195,000 89,273
------------ ------------
NET EARNINGS $ 81,275 $ 72,380
============ ============
EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE:
NET EARNINGS $.02 $.02
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 4,325,287 4,269,612
============ ============
</TABLE>
See notes to Condensed Consolidated Financial Statements.
<PAGE> 5
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------
1995 1994
----------------------------
(Unaudited)
<S> <C> <C>
REVENUE
Computer and add-on hardware $ 6,084,582 $ 3,942,708
Services 12,489,271 12,199,452
Product licenses 4,165,500 3,520,167
----------- ------------
GROSS REVENUE 22,739,353 19,662,327
COST OF COMPUTER AND ADD-ON HARDWARE 5,109,574 3,484,116
----------- ------------
REVENUE NET OF HARDWARE COSTS 17,629,779 16,178,211
EXPENSES
Cost of services 8,306,607 7,689,119
Cost of product licensing and development 2,204,600 1,239,057
Marketing and sales 3,266,447 3,640,164
General and administrative 2,517,061 2,860,312
Amortization of goodwill 196,660 197,493
------------ ------------
TOTAL EXPENSES 16,491,375 15,626,145
EARNINGS FROM OPERATIONS 1,138,404 552,066
INTEREST EXPENSE - NET 367,063 287,650
------------ ------------
EARNINGS BEFORE INCOME TAXES 771,341 264,416
INCOME TAXES 545,000 140,140
------------ ------------
NET EARNINGS $ 226,341 $ 124,276
============ ============
EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE:
NET EARNINGS $.05 $.03
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 4,202,985 4,269,612
============ ============
</TABLE>
See notes to Condensed Consolidated Financial Statements.
<PAGE> 6
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------
1995 1994
----------------------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 226,341 $ 124,276
Adjustments to reconcile net earnings
to net cash provided by (used for)
operating activities:
Depreciation and amortization 1,634,543 1,301,881
Changes in assets and liabilities,
net of effects of acquisitions/
dispositions (1,018,276) 446,780
------------ ------------
Total adjustments 616,267 1,748,661
------------ ------------
Net cash provided by operating activities 842,608 1,872,937
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (269,929) (223,358)
Additions to software (821,998) (1,962,244)
Reduction of sales-type leases 140,998 37,769
Other assets 7,500 48,447
------------ ------------
Net cash provided by (used for)
investing activities (943,429) (2,099,386)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in bank and other notes 500,000 230,030
Reduction in long-term debt (386,287) (277,342)
------------ ------------
Net cash used for financing activities 113,713 (47,312)
------------ ------------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) 12,892 (273,761)
Balance, beginning of year 10,381 365,146
------------ ------------
Balance, end of period $ 23,273 $ 91,385
============ ============
</TABLE>
See notes to Condensed Consolidated Financial Statements.
<PAGE> 7
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
- - ------------------------------
As permitted by the rules of the Securities and Exchange Commission
applicable to quarterly reports on Form 10-Q, these notes are condensed and do
not contain all disclosures required by generally accepted accounting
principles. Reference should be made to the financial statements and related
notes included in the Company's Annual Report on Form 10-K.
In the opinion of management, the accompanying financial statements reflect all
adjustments which were of a normal recurring nature necessary for a fair
presentation of the Company's results of operations for the three and nine
months ended September 30, 1995 and September 30, 1994, respectively.
The results disclosed in the Condensed Consolidated Income Statement for the
nine months ended September 30, 1995 are not necessarily indicative of the
results expected for the full year.
<PAGE> 8
Item 2
Management's Discussion and Analysis of Financial Condition
and Results of Operations
-----------------------------------------------------------
Results of Operations
Third Quarter of 1995
compared to
Third Quarter of 1994
<TABLE>
<CAPTION>
(000's omitted)
--------------- --------------------
Revenue Increase/(Decrease)
--------------- --------------------
1995 1994 Amount Percentage
---- ---- ------ ----------
<S> <C> <C> <C> <C>
Computer and add-on
hardware $ 2,238 $ 1,722 $ 516 30%
Services 4,252 3,998 254 6%
Product licenses 1,407 1,302 105 8%
-------- -------- -------- --------
Gross revenue $ 7,897 $ 7,022 $ 875 12%
======== ======== ======== ========
Revenue net of
hardware costs $ 6,021 $ 5,526 $ 495 9%
======== ======== ======== ========
</TABLE>
The increase of approximately $516,000 in computer and add-on hardware revenue
for the third quarter of 1995, compared to the third quarter of 1994, resulted
primarily from increases in revenue from the direct marketing systems and
electronic time recording product lines which were partially offset by
decreases in revenue for the other Company product lines.
Hardware margins increased to approximately 16% in the third quarter of
1995, from approximately 13% in the same period in 1994. Margins on computer
and add-on hardware do fluctuate based on the mix of computer hardware and
ancillary hardware products sold. Accordingly, the Company expects hardware
gross margins in the future to continue to fluctuate. The Company continues to
direct its efforts toward building service and product license revenue to
offset the historical decline in hardware revenue and margins.
Revenue from services increased by approximately $254,000 or 6%. Gross
margin from services decreased to approximately 28% from 38% of revenue from
services. In addition, demand for Company products in the electronic time
recording and direct marketing systems product lines has required the use of
subcontractors and third-party software vendors to perform services on the
Company's behalf. The decrease in gross margin from services partially results
from the higher costs associated with these outside service providers. The
Company's revenue and margin from services fluctuate from period to period due
to its existing mix of contracts and projects.
<PAGE> 9
Item 2
- continued -
Product license revenue increased by approximately $105,000 or 8% in the
third quarter of 1995 compared to the same period in 1994. The change was a
result of revenue increases from the international trade, electronic time
recording, and direct marketing systems product lines, partially offset by
decreases from the tire and legal systems product lines.
Revenue net of hardware cost increased by approximately $495,000 or 9%, in the
three months ended September 30, 1995, compared to the same period in the
prior year. Revenue net of hardware cost increased in the electronic time
recording and direct marketing systems product lines while revenue net of
hardware cost decreased for the international trade, tire, and legal systems
product lines.
Marketing and sales expenses decreased by approximately $160,000 or 13%.
General and administrative expenses decreased by approximately $88,000 or 10%,
compared to the third quarter of 1994. These changes reflect the cost
reductions and controls enacted by the Company in the prior year. The cost
reductions and controls included severing specific employees, not replacing
employees as they left voluntarily, delaying hiring decisions previously
budgeted, changing long-distance carriers, combining of functions between
divisions at the point in time when an employee left, and hiring temporary
employees as opposed to full-time employees (thus reducing employee benefit
costs).
Pretax earnings from operations were approximately $401,000 for the third
quarter of 1995, compared to pretax earnings from operations of approximately
$226,000 for the third quarter of 1994. The increase in earnings resulted from
an increase in contribution from the electronic time recording and direct
marketing systems product lines, partially offset by decreases in contribution
from the international trade, tire, and legal systems product lines.
Net earnings for the third quarter of 1995 were approximately $81,000, as
compared to net earnings of approximately $72,000 for the comparable period in
1994. The change resulted from an increase in earnings from operations of
approximately $175,000, which was partially offset by an increase in net
interest expense of approximately $60,000 and an increase in income tax expense
of approximately $106,000.
In recent years due to several recurring permanent book-tax differences, the
Company has recorded effective tax expense well in excess of statutory rates.
<PAGE> 10
Item 2
- continued -
Nine Months Ended September 30, 1995
compared to
Nine Months Ended September 30, 1994
<TABLE>
<CAPTION>
(000's omitted)
--------------- --------------------
Revenue Increase/(Decrease)
--------------- --------------------
1995 1994 Amount Percentage
---- ---- ------ ----------
<S> <C> <C> <C> <C>
Computer and add-on
hardware $ 6,085 $ 3,943 $ 2,142 54%
Services 12,489 12,199 290 2%
Product licenses 4,165 3,520 645 18%
-------- -------- -------- --------
Gross revenue $22,739 $19,662 $ 3,077 16%
======== ======== ======== ========
Revenue net of
hardware costs $17,630 $16,179 $ 1,451 9%
======== ======== ======== ========
</TABLE>
The increase of approximately $2,142,000 in computer and add-on hardware
revenue for the first nine months of 1995, compared to the first nine months of
1994, resulted primarily from increases in revenue from the electronic time
recording and direct marketing systems product lines, partially offset by a
decrease in revenue from the international trade, tire, and legal systems
product lines.
Hardware margins increased to approximately 16% in the first nine months of
1995, from approximately 12% in the same period in 1994. Margins on computer
and add-on hardware do fluctuate based on the mix of computer hardware and
ancillary hardware products sold. Accordingly, the Company expects hardware
gross margins in the future to continue to fluctuate. The Company continues to
direct its efforts toward building service and product license revenue to
offset the historical decline in hardware revenue and margins.
Revenue from services increased approximately $290,000 or 2% for the year to
date. Service revenue increases for the international trade, electronic time
recording, and direct marketing systems product lines were offset by revenue
decreases in the tire and legal systems product lines. Gross margin from
services decreased to approximately 33% from 37%. The Company's revenue and
margin from services fluctuate from period to period due to its existing mix of
contracts and projects.
Product license revenue increased by approximately $645,000 or 18% in the
first nine months of 1995 compared to the same period in 1994. The change was
a result of revenue increases from the international trade, electronic time
recording, and direct marketing systems product lines, partially offset by
decreases from the tire and legal systems product lines.
<PAGE> 11
Item 2
- continued -
Revenue net of hardware cost increased by approximately $1,451,000 or 9%, in
the nine months ended September 30, 1995, compared to the same period in the
prior year. Revenue net of hardware cost increased in the international trade,
electronic time recording, and direct marketing systems product lines, while
revenue net of hardware cost decreased for the tire and legal systems product
lines.
Marketing and sales expenses decreased by approximately $374,000 or 10%.
General and administrative expenses decreased by approximately $344,000 or 12%,
compared to the first nine months of 1994. These changes reflect the cost
reductions and controls enacted by the Company in the prior year. The cost
reductions and controls included severing specific employees, not replacing
employees as they left voluntarily, delaying hiring decisions previously
budgeted, changing long-distance carriers, combining of functions between
divisions at the point in time when an employee left, and hiring temporary
employees as opposed to full-time employees (thus reducing employee benefit
costs).
Pretax earnings from operations were approximately $1,138,000 for the first
nine months of 1995, compared to approximately $552,000 for the first nine
months of 1994. The increase in earnings resulted from an increase in
contribution from the Company's international trade, electronic time recording,
and direct marketing systems product lines. This increase was partially offset
by decreases in contribution from the Company's tire and legal systems product
lines.
Net earnings for the nine months ended September 30, 1995 were approximately
$226,000, as compared to approximately $124,000 for the comparable period in
1994. The change resulted from an increase in earnings from operations of
approximately $586,000, which was partially offset by an increase in net
interest expense of approximately $79,000 and an increase in income tax expense
of approximately $405,000.
In recent years due to several recurring permanent book-tax differences, the
Company has recorded effective tax expense well in excess of statutory rates.
<PAGE> 12
Liquidity and Capital Resources
The Company had total cash and cash equivalents at September 30, 1995 of
approximately $23,000, an increase of approximately $13,000 from December 31,
1994. Its working capital position as of September 30, 1995, was slightly
negative. However, the Company and its subsidiaries currently have a maximum
line of credit totaling $2,350,000, of which $800,000 was available at
September 30, 1995.
Over the past two years, the Company has expended signficant working capital
on the development of a new generation of software products. The level of
these expenditures has decreased in the current period. However, due to the
continuing rapid changes in software technology, the Company will have to
continue to fund product development in order to retain existing clients and to
attract new clients. The Company intends, as it has in the past, to fund this
development from its cash from operations.
The Company's hardware and software license revenues can fluctuate as a result
of a number of factors, particularly trends in the overall economy, client
buying patterns, and hardware and software technological developments.
Consequently, the Company could be subject to material variations in operating
results. As the uncertainties of the economy are incalculable, the Company
acknowledges the potential adverse impact that economic uncertainty could have
on its ability to maintain liquidity and raise additional capital. Subject to
the foregoing, the Company believes that based on the level of operating
revenue, cash on hand, and available bank debt, it has sufficient capital to
finance its ongoing business.
<PAGE> 13
PART II
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits - None
(b) Reports on Form 8-K -
On August 31, 1995, the Registrant reported that it had
retained BDO Seidman as its new independent accountants,
replacing the accounting firm of Deloitte & Touche LLP.
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
ASA International Ltd.
--------------------------------
(Registrant)
11/13/95 /s/ Alfred C. Angelone
- - ------------ --------------------------------
(Date) (Signature)
Alfred C. Angelone
Chief Executive Officer
11/13/95 /s/ Terrence C. McCarthy
- - ------------ --------------------------------
(Date) (Signature)
Terrence C. McCarthy
Vice President and Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
CONDENSED CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1995 CONDENSED
CONSOLIDATED INCOME STATEMENT FOR NINE MONTHS ENDED SEPTEMBER 30, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B)
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-01-1995
<PERIOD-END> Sep-30-1995
<EXCHANGE-RATE> 1
<CASH> 23,273
<SECURITIES> 0
<RECEIVABLES> 6,739,212
<ALLOWANCES> 121,854
<INVENTORY> 241,366
<CURRENT-ASSETS> 7,832,729
<PP&E> 9,309,964
<DEPRECIATION> 4,627,187
<TOTAL-ASSETS> 20,894,918
<CURRENT-LIABILITIES> 8,117,047
<BONDS> 2,782,259
<COMMON> 39,173
0
0
<OTHER-SE> 9,839,440
<TOTAL-LIABILITY-AND-EQUITY> 20,894,918
<SALES> 22,739,353
<TOTAL-REVENUES> 22,739,353
<CGS> 5,109,574
<TOTAL-COSTS> 15,620,789
<OTHER-EXPENSES> 5,980,168
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 367,063
<INCOME-PRETAX> 771,333
<INCOME-TAX> 545,000
<INCOME-CONTINUING> 226,333
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 226,333
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
