UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 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 0-16371
NAMSCO CORPORATION
(Exact name of registrant as specified in its charter)
Utah 87-0430312
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
E. 122 Montgomery
SPOKANE, WA. 99207
(Address of principal executive offices) (Zip code)
(509) 327-7784
(Registrant's telephone number,
including area code)
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
As of April 30, 1995, 4,319,902 shares of common stock were
outstanding.
The total number of pages in this form 10-Q is 10 pages.
<PAGE>
NAMSCO CORPORATION AND SUBSIDIARY
Form 10-QSB
INDEX
Page Number
Part I. Financial Information
Item I. Financial Statements
Consolidated Balance Sheets
March 31, 1995 and December 31, 1994 3-4
Consolidated Statements of Income
for the three month periods ended
March 31, 1995 and 1994 5
Consolidated Statements of Stockholders'
Equity
December 31, 1994 and March 31, 1995 6
Consolidated Statement of Cash Flows for the
three month periods ended March 31, 1995
and 1994 7
Notes to Financial Statements 8-13
Item II. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 14-15
Part II. Other Information and Signatures 16-17
<PAGE>
NAMSCO CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
ASSETS 1995 1994
Current assets:
Cash $ 156,555 $ 130,182
Accounts receivable 465,067 496,255
Current portion of net investment
in sales-type leases 2,115,429 2,078,813
Current portion of notes
receivable-Tribute contracts 379,290 449,306
Inventories 1,459,430 1,396,474
Prepaid expense and other 120,769 170,604
__________ _________
Total 4,696,540 4,721,634
Property and Equipment (net)
Rental equipment 1,199,852 1,120,874
Operating equipment and
leasehold improvements 1,946,014 1,952,683
Total 3,145,866 3,073,557
Other assets
Non-current portion of net investment
in sales-type leases 14,598,834 14,395,846
Non-current portion notes receivable-
Tribute contracts 208,301 246,796
Non-current portion of
term contracts 192,190 217,716
Notes and advance due from related
parties 424,375 424,375
Total 15,423,700 15,284,733
Total Assets $23,266,106 $23,079,924
Notes to the financial statements for the year ended December 31, 1994 should
be read in conjunction with these interim financial statements and are not
repeated here.
<PAGE>
NAMSCO CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Continued)
March 31, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
Current liabilities:
Accounts payable:
Trade $ 688,703 $ 663,980
Reorganization costs 148,270 148,270
Accrued expenses:
Payroll & related taxes 137,866 134,230
Sales commissions 100,348 44,918
Interest 201,135 210,002
Current maturities of
long-term debt 9,997,308 9,833,911
Advance rental collections 29,412 42,527
Total 11,303,042 11,077,838
Liabilities due after one year:
Maintenance on Tribute contracts 63,825 60,262
Long-term debt 9,460,658 9,305,883
Advance collections on
rental accounts 126,210 62,564
Deferred income taxes 834,845 923,545
Total 10,485,538 10,352,253
Commitments and contingencies
Stockholders' Equity
Common stock,$.007 par value;
Authorized, 15,000,000 shares; issued
and outstanding, 4,319,902 30,240 30,240
Additional paid-in capital 201,269 201,269
Retained earnings 1,246,016 1,418,324
Total 1,477,526 1,649,833
Total Liabilities & Equity $23,266,106 $23,079,924
Notes to the financial statements for the year ended December 31, 1994 should
be read in conjunction with these interim financial statements and are not
repeated here.
<PAGE>
NAMSCO CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Three months ended March 31,
Revenues: 1995 1994
New music installations $ 1,376,669 $ 1,257,698
Renewal contracts 120,802 28,544
Tribute contracts 180,197 165,511
Direct sales and other 188,067 186,831
Finance 531,084 416,490
Service 131,461 135,290
Rental 132,031 102,434
Total 2,660,311 2,292,798
Costs and Expenses:
Cost of sales 586,501 674,967
Selling, general and
administrative 1,114,654 864,920
Maintenance 233,496 205,390
Total 1,934,651 1,745,277
Income from operations 725,660 547,521
Other expense:
Interest 522,013 452,576
Cancellation of sales-type leases
Systems replaced with
CD equipment 285,822 432,577
Removed systems 178,833 131,433
Total 986,668 1,016,586
Loss before income taxes (261,008) (469,065)
Provision for income taxes (88,700) (159,500)
Net loss $ (172,308) $ (309,565)
Weighted average common
shares outstanding 4,319,902 4,319,902
Loss per share of common stock $ (.04) $ (.07)
Notes to the financial statements for the year ended December 31, 1994 should
be read in conjunction with these interim financial statements and are not
repeated here.
<PAGE>
NAMSCO CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
December 31, 1994 and March 31, 1995
Common Stock Additional
Paid-in Retained
Shares Amount Capital Earnings
BALANCE, December 31, 1994 4,319,902 $30,240 $201,267 $1,418,324
Net loss for the three months
ended March 31, 1995 - - - (172,308)
BALANCE, March 31, 1995 4,319,902 $30,240 $201,267 $1,246,016
Notes to the financial statements for the year ended December 31, 1994 should
be read in conjunction with these interim financial statements and are not
repeated here.
<PAGE>
NAMSCO CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
1995 1994
Net cash flow from operating
activities $ 84,759 $468,975
Cash flows from investing activities:
Additions-rental equipment (141,978) (131,450)
Additions-music and
video libraries (36,111) (38,917)
Additions-operating equipment (23,522) -
Total (201,611) (170,367)
Cash flows from financing activities:
Proceeds from sale of contracts 593,194 185,403
Principal payments on funds received
from sale of contracts (145,072) (125,152)
Proceeds from borrowing 19,065 -
Payments of long term debt (323,962) (332,241)
Total 143,225 (271,990)
Increase in cash 26,373 26,618
Cash at beginning of period 130,182 142,546
Cash at end of period $156,555 $169,164
Notes to the financial statements for the year ended December 31, 1993 should
be read in conjunction with these interim financial statements and are not
repeated here.
<PAGE>
NAMSCO CORPORATION AND SUBSIDIARY
Note to Financial Statements
Note 1- Compliance with terms of Secured Credit Agreement and Implementation
of "standstill period" by Secured Creditor.
The Company is in default under the terms of the credit agreement with a bank.
As a result, the entire debt to the bank has been classified as a current
liability. The default is related to non-compliance with the provisions for
maintaining positive cash flow, timely payment of taxes and a limitation on
capital expenditures. The bank has not waived the non-compliance. The
Company has made all regularly scheduled payments to the bank.
Due to non-compliance, the secured creditor has continued the "standstill
periods" which restrict payments on amounts due on the Senior Convertible
Debentures as well as payments to unsecured creditors during the "standstill
period". The current "standstill period" expires on July 8, 1995 and it is
not determinable if additional "standstill periods" will be implemented.
Item II
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Liquidity and Capital Resources
The Company's primary source of cash flow is from the collection of monthly
service fees on the 3,900 (approx) music playback systems, 1,700 (approx)
music library agreements and 700 (approx) tribute programs currently in place
in funeral homes. Customers have the option of paying cash, financing or
leasing new music installations. Lease and sale agreements are sold
(discounted) to a finance company to provide the funds to cover the costs
associated with installing new music playback systems and tribute programs
that are not paid in full at the time of the installation. The discounted
amount realized from the sale of the agreement is approximately the same as
the cash sale price for the equipment.
The Company has been in contact with additional financing sources to assure
that it will have the financing to continue new installations of its music
systems and tribute programs. Indications are that other sources are
available.
Results of Operations
Total revenues for the quarter ended March 31, 1995 are $367,513 or 16%
greater than total revenues for the same period of the prior year. The
increase is the result of increases in the price of new music installations
and the number of renewal agreements for the period. The amount of finance
income recognized from the net investment in sales-type leases also increased
reflecting the gross increase in the number of new systems installed. A total
of 134 new installations were completed in the first quarter of 1995 and 1994.
A total of 33 renewal agreements were completed in the first quarter of 1995
compared to the renewal of 10 expiring lease agreements in 1994. The expiring
agreements that are not renewed under term agreements represent customers that
continue to be billed as monthly rentals which is reflected in the increase of
rental accounts.
The decrease in cost of sales as a percent of new music and tribute
installations reflects the change instituted in 1994 to make a less expensive
cabinet style available to existing users of tape playback systems that wished
to convert to CD playback systems. The majority of the new CD music
installations in the later part of 1994 and during the first quarter of 1995
were the new "conversion" style cabinet that is less expensive to manufacture
and less costly to ship. Cost of sales for the first quarter of 1995 is 34%
for 1995 compared to 41% for the same period of 1994 with the same number of
new installations.
Selling, general and administrative costs increased to 41% of gross sales for
the first quarter ended March 31, 1995 compared to 36% for the same period of
the prior year. The increase in costs reflects 1994 audit expenses expensed
in 1995 along with an increase in sales expenses. In the month of March,
1995, a total of 117 orders were written for new CD music installations and
the commissions due were accrued even though the CD systems were not installed
during the month. Also, two sales meetings were held during the first quarter
of 1995 to discuss changes in equipment and pricing that was effective March
1, 1995 compared to one sales meeting during the same period of 1994.
Maintenance costs increased 14% in the first quarter ended March 31, 1995
compared to the same period of the prior year. The increase is primarily
attributable to the cost of meetings held in 1995 that were not held in 1994
with service and installation personnel to review installation and service
procedures. These costs will not be incurred again during 1995.
Interest expense increased in the first quarter of 1995 by $30,563 over the
same period of the prior year reflecting the increase in debt from the sale of
contracts to a finance company. Also, the effective interest rate on funds
from the finance company is higher than the interest rate for debt that is
being currently reduced.
The book value of replaced systems is charged to other expense in the period
the replacement installation is made. The book value for equipment under
lease includes the recorded residual value and the present value of future
payments that are cancelled at the time of the replacement. The value of
rental equipment removed is the undepreciated book value of the rental
equipment. The number of tape playback systems replaced by new CD playback
systems increased in the first quarter of 1995 over the same period of the
prior year. This increase was offset by a reduction in book value of the
individual tape systems replaced.
The book value of removed systems charged to operations are made up of the
same costs as replaced systems. During the first quarter ended March 31,
1955, the number of removed systems increased to 74 tape playback systems from
59 systems for the same period of the prior year, and increase of 25%.
The effect of the above changes resulted in a decrease in the net loss during
the quarter ended March 31, 1995 compared to the net loss for the same period
of the prior year.
Balance Sheet
The net investment in sales-type leases increased $239,604 in the first
quarter of 1995. This reflects the addition of new lease agreements at rates
greater than the expiring or replaced lease agreements. More emphasis has
been placed on writing lease agreements with fewer orders for the outright
purchase of the CD playback equipment. This has resulted in more leases of
equipment for new CD playback installations.
The receivables from tribute contracts declined $108,511 in the first quarter
of 1995. The decline reflects the expiration of tribute contracts in excess
of new contracts added.
Inventories increased $62,956 during the quarter ended March 31, 1995. This
reflects the anticipated increase in installations resulting from the new
sales orders for 117 installations written in the month of March, 1995. A new
ready to assemble (RTA) cabinet design was made in March, 1995 and material to
build the cabinet was brought in at that time. Cabinets in stock that are
being replaced by the new RTA cabinet will be installed before the new RTA
cabinet is used.
Total term debt increased $318,172 during the quarter ended March 31, 1995.
This reflects the addition of $164,372 to long-term debt for interest due on
Senior Convertible Debentures that was set aside by the "standstill period"
ending on March 10, 1995 as well as other new borrowings. The new borrowings
represent the proceeds from the sale of lease agreements to a finance company.
Part II. Other Information
Item 3. Defaults upon Senior Securities
Payment of interest on Senior Convertible Debentures was suspended by
the continuation of "standstill periods" invoked by the secured creditor as
provided in the Plan of Reorganization. The initial "standstill period" began
on March 10, 1994 and has been continued through July 8, 1995. The Plan of
Reorganization provides that the suspension of interest payments do not
consutitute an "Event of Default" and as of this date, no other "Event of
Default" has occured.
Opinion of Management
The balance sheet as of March 31, 1995 and the related statements of income,
changes in stockholders' equity and cash flows for the three month periods
ended March 31, 1995 and 1994 are unaudited. In the opinion of Management,
all adjustments necessary for a fair presentation of such financial statements
have been included. Such adjustments consisted only of normal recurring
items. Interim results are not necessarily indicative of results for a full
year. It is suggested that these financial statements be read in conjunction
with the financial statements and notes thereto included in the Company's
latest 10-KSB filing with the SEC. A copy of the form 10-KSB can be obtained
by contacting the corporate office and requesting a copy.
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 thereunto duly authorized.
Date May 11, 1995 /s/ Merrill P. Womach
Merrill P. Womach
President and Chief Executive Officer
Acting Secretary and Treasurer
(Principal Executive Officer)
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