<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
[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 0-17637
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FRONTEER DIRECTORY COMPANY, INC.
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(Exact name of registrant as specified in its charter)
COLORADO 45-0411501
------------ ------------
(State or other jurisdiction (IRS Employer ID No)
of incorporation or organization)
216 N. 23RD STREET, BISMARCK, ND 58501
- - ----------------------------------------------------------------
(Address of principal executive offices)
(701) 258-4970
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(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.
X Yes 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.
The registrant had 12,558,061 shares of its $.01 par value common
stock outstanding as of May 5, 1995.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
FRONTEER DIRECTORY COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30
1995 1994
---------- -------------
(Unaudited)
- - -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
- - -------------------------------------------------------------------------------
CURRENT ASSETS:
- - -------------------------------------------------------------------------------
Cash $ 58,757 $ 55,701
Receivables:
Trade receivables (net of 3,756,188 3,952,169
allowance for doubtful accounts:
March 31, 1995 - $113,211;
September 30, 1994 - $107,857)
Current portion of long-term notes 108,674 212,408
Other 132,855 132,492
Prepaid expenses 6,772 11,471
Deferred directory costs 481,482 211,500
Deferred income tax benefit 2,400
------- --------
Total current assets 4,547,128 4,575,741
- - -------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, net of 597,657 575,294
accumulated depreciation of $786,369
at 3/31/95 and $767,663 at 9/30/94
- - -------------------------------------------------------------------------------
LONG-TERM NOTES RECEIVABLE, net of 109,091 208,264
current portion
- - -------------------------------------------------------------------------------
DEFERRED INCOME TAX BENEFIT 90,700 75,300
- - -------------------------------------------------------------------------------
INTANGIBLE ASSETS:
Directory acquisition costs, net of 161,525 246,041
accumulated amortization of $819,454 -------- --------
at 3/31/95 and $734,938 at 9/30/94
Total assets $5,506,101 $5,680,640
---------- ----------
---------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES, REDEEMABLE COMMON STOCK,
AND STOCKHOLDERS' EQUITY
March 31, September 30
1995 1994
----------- -------------
(Unaudited)
<S> <C> <C>
- - -------------------------------------------------------------------------------
CURRENT LIABILITIES:
Short-term notes payable $ 650,000 $ 800,000
Current portion of long-term debt 206,097 231,978
Due to affiliates - short-term 125,900 115,900
Trade accounts payable 1,483,402 1,444,123
Deferred revenue 299,010 302,227
Income taxes payable 186,251 269,069
Deferred income tax liability 173,900
Other accrued liabilities 227,095 167,884
-------- --------
Total current liabilities 3,177,755 3,505,081
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LONG-TERM DEBT, NET OF CURRENT PORTION 149,099 199,540
--------- ----------
Total liabilities 3,326,854 3,704,621
--------- ---------
- - -------------------------------------------------------------------------------
REDEEMABLE COMMON STOCK: $0.01 par value; 35,000 70,000
--------- ---------
March 31, 1995 - 17,500 shares;
September 30, 1994 - 35,000 shares
- - -------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common stock: authorized 100,000,000 52,467 52,092
shares, $0.01 par value; shares
issued and outstanding;
March 31, 1995 - 5,226,690;
September 30, 1994 - 5,209,190
Preferred stock: authorized 25,000,000
shares, $0.10 par value, no shares
issued and outstanding
Additional paid-in capital 2,168,623 2,123,197
Retained earnings (deficit) 3,391 (230,936)
Treasury stock; March 31, 1995 - (80,234) (38,334)
87,084 shares;
September 30, 1994 - 29,584 shares --------- ---------
Total stockholders' equity 2,144,247 1,906,019
--------- ---------
Total liabilities, redeemable $5,506,101 $5,680,640
common stock, and ---------- ----------
stockholder's equity ---------- ----------
<FN>
See notes to financial statements.
</TABLE>
<PAGE>
FRONTEER DIRECTORY COMPANY, INC.
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
March 31, March 31,
- - -------------------------------------------------------------------------------------------------------------------------------
1995 1994 1995 1994
------- --------- ------- --------
<S> <C> <C> <C> <C>
- - -------------------------------------------------------------------------------------------------------------------------------
SALES $3,966,637 $3,853,660 $2,148,649 $1,871,063
- - -------------------------------------------------------------------------------------------------------------------------------
COST OF SALES 2,508,507 2,560,032 1,455,183 1,180,324
--------- --------- --------- ---------
- - -------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 1,458,130 1,293,628 693,466 690,739
--------- --------- ------- -------
- - -------------------------------------------------------------------------------------------------------------------------------
OTHER OPERATING INCOME 101,422 83,166 53,457 42,648
--------- --------- --------- ---------
- - -------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
General administrative 931,925 831,651 463,287 412,782
Bad debts 65,000 130,000 25,000 70,000
Depreciation and amortization 146,207 203,648 73,553 101,824
--------- --------- -------- --------
1,143,132 1,165,299 561,840 584,606
--------- --------- --------- --------
NET OPERATING INCOME 416,420 211,495 185,083 148,781
--------- ---------- --------- --------
- - -------------------------------------------------------------------------------------------------------------------------------
NONOPERATING INCOME AND EXPENSES:
Gain on sale of directories 472,221
Interest Income 15,098 25,503 4,221 12,485
Interest Expense (59,492) (91,449) (28,611) (39,526)
--------- -------- --------- ---------
(44,394) 406,275 (24,390) (27,041)
--------- -------- --------- ---------
- - -------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 372,026 617,770 160,693 121,740
- - -------------------------------------------------------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES 137,700 255,000 53,900 65,000
-------- -------- ------- --------
$ 234,326 $ 372,770 $ 106,793 $ 56,740
---------- --------- --------- ---------
---------- --------- --------- ---------
- - -------------------------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE $ 0.04 $ 0.07 $ 0.02 $ 0.01
- - -------------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 5,211,776 5,143,148 5,208,884 5,143,719
<FN>
See notes to financial statements.
</TABLE>
<PAGE>
FRONTEER DIRECTORY COMPANY, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
March 31, 1995 March 31, 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 288,226 $ 362,770
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation 61,691 104,798
Amortization of directory costs 84,516 98,850
Amortization of deferred loan fees 2,197
Provision for (benefit from) deferred income taxes (7,700) 42,300
Gain on sale of property and equipment (701)
Gain on sale of directories (472,221)
Revaluation of common stock in exchange for
compensation (7,838)
Change in assets and liabilities
Decrease in trade receivables 195,981 818,217
(Increase) in other receivables (363) (66,268)
(Increase) Decrease in prepaid expenses 4,699 12,837
(Increase) in deferred directory costs (269,982) (42,301)
Increase (Decrease) in accounts payable 39,279 (647,940)
Increase (Decrease) in deferred revenue (3,217) (114,336)
Increase (Decrease) in income tax payable (244,418) 201,700
(Decrease) in deferred income tax liability (76,300)
Increase (Decease) in other accrued liability 59,211 (82,275)
-------- --------
Net cash provided by operating activities 130,922 210,490
-------- ---------
- - -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal collected on notes receivable 202,908 206,266
Proceeds from sale of equipment 1,500
Proceeds from sale of directories 154,500
Purchase of property and equipment (84,852) (22,252)
--------- --------
Net cash used in investing activities 119,556 338,514
-------- --------
- - -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) on short-term notes payable (150,000) (300,000)
Proceeds from long-term borrowings 20,048
Proceeds from loans from affiliates 20,000 500
Payments on loans from affiliates (10,000)
Principal payments on long-term borrowings (96,370) (302,381)
Purchase of treasury stock (41,900)
Purchase of redeemable stock (10,500)
Proceeds from issuance of common stock 10,800 21,315
--------- --------
Net cash used in financing activities (247,422) (591,066)
--------- ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH AND CASH 3,056 (42,062)
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 55,701 86,403
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 58,757 $ 44,341
-------- --------
-------- --------
- - ---------------------------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFO.:
Cash payments for:
Interest $ 88,761 $ 92,455
Income taxes 412,218 11,000
- - ---------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Trade account payable converted to long-term debt $ $ 32,425
Sale of directories in exchange for note receivable 426,563
Acquisition of directories in exchange for long-term debt 56,100
Acquisition of property and equipment in exchange for 15,938
common stock
Acquisition of note receivable in exchange for common 48,222
stock - Note receivable was paid in full on April 14, 1994
Acquisition of redeemable common stock in exchange for note 21,000
payable to affiliate
<FN>
See notes to financial statements
</TABLE>
<PAGE>
FRONTEER DIRECTORY COMPANY, INC.
SELECTED INFORMATION - SUBSTANTIALLY ALL
DISCLOSURES REQUIRED BY GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES ARE NOT INCLUDED
MARCH 31, 1995
NOTE 1 - UNAUDITED FINANCIAL STATEMENTS
The accompanying financial statements of Fronteer Directory Company, Inc. as of
March 31, 1995, are the responsibility of the Company's management. Except as
explained in the following paragraph, management is not aware of any material
modifications that should be made to the accompanying financial statements in
order for them to be in conformity with generally accepted accounting
principles.
Management has elected to omit substantially all of the disclosures required by
generally accepted accounting principles.
The accompanying financial statements should be read in conjunction with the
Company's financial statements as of September 30, 1994.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND PRINCIPLES OF CONSOLIDATION - The consolidated financial
statements include the accounts of the Company and its
wholly owned subsidiary, Fronteer Personnel Services, Inc. All significant
intercompany accounts and transactions have been eliminated in the preparation
of these consolidated financial statements.
Fronteer Directory Company, Inc. is engaged in the publishing and distribution
of telephone directories. Fronteer Personnel Services, Inc. is engaged in
employee leasing.
CASH AND CASH EQUIVALENTS - For purposes of reporting cash flows, the Company
considers all highly liquid investments purchased with
a maturity of three months or less to be cash equivalents.
ACCOUNTS RECEIVABLE - Fronteer Directory Company, Inc. grants credit to
customers throughout the directory market in the western
states. Although Fronteer Directory Company, Inc. has a diversified customer
base, a substantial portion of its debtors' ability to honor their contract is
dependent upon the economic conditions in the western states.
ALLOWANCE FOR DOUBTFUL ACCOUNTS - The allowance is maintained at a level
adequate to absorb probable losses and credit losses
inherent in the business based upon the Company's prior history of credit
losses. Management determines the adequacy of the allowance based upon reviews
of individual accounts, recent loss experience, current economic conditions, and
risk characteristics of the various categories of accounts and other pertinent
factors. The Company establishes payment terms with customers ranging from a
single payment due upon publication of the directory to twelve equal monthly
payments commencing upon publication of the directory. Accounts are charged to
the allowance when the debtor files for bankruptcy, the account is deemed
uncollectible, or further internal collection efforts are deemed futile and the
account is turned over to a collection agency. Accounts remaining on the
Company's books fifteen months following publication of the directory, due to
additional payment arrangements made with the Company outside of the original
contract, are charged to the allowance for doubtful accounts at that fifteen
month point.
REVENUE AND COST RECOGNITION - Revenues from advertising sales are recognized at
the point individual directories are published.
Costs of selling and production are recorded as deferred directory costs when
incurred and charged to cost of sales in the period during which the related
directory is published. Printing costs are charged to cost of sales in the
period during which the related directory is published. Costs of distribution
are charged to cost of sales as incurred. General administrative costs are
charged to expense as incurred.
<PAGE>
DEFERRED DIRECTORY COSTS - Deferred directory costs is composed of selling and
production expenses that have been allocated to
uncompleted directories. These costs are allocated based upon the relative
percentage of contracts sold as of year-end on uncompleted directories to total
current year earned revenues.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost. Additions,
renewals and betterments are capitalized, whereas
expenditures for maintenance and repairs are charged to expense. The cost and
related accumulated depreciation of assets retired or sold are removed from the
appropriate asset and depreciation accounts, and the resulting gain or loss is
reflected in income.
It is the policy of the Company to provide depreciation using the accelerated
and straight-line methods based on the estimated useful life of the individual
units of property and equipment. The estimated useful lives used as the basis
for the application of those methods are as follows:
<TABLE>
<CAPTION>
DESCRIPTION ESTIMATED USEFUL LIFE
------------ ---------------------
<S> <C>
Building 40 years
Vehicles 3 - 5 years
Equipment 5 - 10 years
</TABLE>
AMORTIZATION - Directory acquisition costs are amortized over five years using
the straight-line method. Deferred loan fees are amortized over seven years, the
term of the related loan.
INCOME TAXES - Income taxes are provided for the tax effects of transactions
reported in the financial statements and
consist of taxes currently due plus deferred taxes. Deferred taxes are computed
on the liability method as prescribed in FASB Statement No. 109 "Accounting for
Income Taxes."
DESCRIPTION OF LEASING ARRANGEMENTS - The Company leases office space under
operating leases from which its business is conducted in certain branches under
short-term leasing arrangements.
EARNINGS PER COMMON SHARE - Earnings per common share have been calculated upon
weighted average number of common shares outstanding during the year.
NOTE 3 - LOANS FROM OFFICERS
At March 31, 1995, loans from officers and other insiders totalled $125,900, are
unsecured, pay 10% interest and are payable on demand. A majority of these loans
are not expected to be repaid during the fiscal year.
NOTE 4 - EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
The Company has guaranteed its ESOP's note payable of $350,000 to Bismarck
National Bank. This guarantee is secured by the shares of Fronteer Directory
Company, Inc. stock owned by the ESOP.
NOTE 5 - SUBSEQUENT EVENTS
Subsequent to the end of the quarter, the Company made the following acquisition
and sale.
<PAGE>
ACQUISITION OF RAFCO, LTD.
On April 26, 1995, the Company entered into a Plan of Reorganization and
Exchange Agreement with RAFCO, Ltd. ("RAFCO"). Under the agreement, the Company
acquired all of the assets and business of RAFCO for 7,223,871 shares of par
value $.01 common stock and 87,500 shares of $.10 par value Series A Voting
Cumulative Preferred Stock. As a result of the transaction and as a result of
being a shareholder of RAFCO, Robert A. Fitzner, Jr. will receive 4,784,705
shares of common stock of the Company and 5,000 shares of the Series A Preferred
Stock. As of April 26, 1995, Mr. Fitzner owned 37.9% of the outstanding voting
securities of the Company and may be deemed to be in control of the Company as a
result of his pending position as a director of the Company and this stock
ownership.
RAFCO is the parent of RAF Financial Corporation ("RAF"), a full service
diversified brokerage firm headquartered in Denver, Colorado. RAF is privately
held and has been in business for more than twenty years. RAFCO also owns
approximately 50% of the stock of Secutron Corp. ("Secutron"), which has
provided computer services, products, and consulting to financial services firms
and other businesses nationwide for more than fifteen years. For the fiscal year
ended December 31, 1994, RAF had gross revenues of $13,796,032 and Secutron had
gross revenues of $3,515,230. For the same period, RAF had earnings of $4,591
while Secutron had a loss of $224,419.
SALE OF ELEVEN DIRECTORIES TO TELECOM*USA
On April 27, 1995, the Company sold eleven of its telephone directories to
Telecom*USA of Cedar Rapids, Iowa. The deal will result in payments of
approximately $2.4 million, payable $1,500,000 at closing, which occurred
May 5, 1995, and $900,000 prior to December 31, 1995. The eleven directories
sold cover markets in five states, Montana, Idaho, Wyoming, Utah, and South
Dakota, with a total distribution of 700,000 copies. Telecom*USA will also make
a noninterest bearing and nonrecourse loan of $500,000 to the Company as
consideration for the option to purchase additional directories from the
Company. If the option, which runs from June 1, 1997 to June 1, 1999, is not
exercised, the loan will be forgiven. If Telecom*USA exercises their option,
the loan will be applied to the purchase price of the directories.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and operating
results during the periods included in the accompanying condensed financial
statements.
FINANCIAL CONDITION
At March 31, 1995, shareholders' equity was $2,144,247, up $238,228, or 12%,
from fiscal year end September 30, 1994. The ratio of current assets to current
liabilities was 1.43 to 1, an increase from the 1.31 to 1 at September 30, 1994.
SIX MONTHS ENDED MARCH 31, 1995 VS. SIX MONTHS ENDED MARCH 31, 1994
Sales of $3,996,637 were recognized for the six months ended March 31, 1995, an
increase of $112,977, or 3%, over last year's first six months. Sales in Arizona
directories totalled over $176,000 for this period last year. Due to the sale of
these directories last year, no sales have been recognized in 1995. A new
directory was published for the Bozeman, Montana area for the first time in
1995. Sales in the directory totalled over $388,000. During the six months,
sales recognized in the Company's Idaho Falls, Idaho directory were up over
$101,000 from last year, or 13%, while sales in its Bismarck, North Dakota
directory were up nearly $76,000, or 7%, over last year. One directory, which
was recognized in the first six months of fiscal 1994, was incomplete at March
31, 1995 and has yet to be recognized in 1995. Sales for this book totalled
approximately $410,000 last year and are
<PAGE>
scheduled to be recognized in the third quarter of this year. A new directory
for the Big Horn Basin area of Wyoming is scheduled to be recognized for the
first time in the third quarter. Sales are expected to exceed $250,000 for the
directory.
Net income for the first two quarters of 1995 was $234,326, or $.04 per share, a
decrease of $128,444 from last year's net income of $362,770. However, in fiscal
1994, the Company recognized a one-time gain of $472,221 from the sale of its
Arizona directories. Income from operations (income before taxes and the
one-time gain on sale of directories) totalled $372,026 for the first six months
of 1995. This compares to $145,549 last year, or an increase to income from
operations of $226,477, or 156%, over last year. As stated above, one directory
which was recognized during the first two quarters of last year has yet to be
recognized this year. In 1994, this directory contributed $240,100 to net income
at the time that it was recognized.
Cost of sales amounted to $2,508,507 for the first six months of 1995, a
decrease of $51,525, or 2%, when compared to last year. As stated previously,
one directory which was recognized in the first six months of fiscal 1994 has
yet to be recognized in 1995. Cost of sales on this directory totalled
approximately $170,000 last year. This book is scheduled to be recognized in
the third quarter this year. A change in the way the Company's deferred
directory costs are calculated has resulted in a decrease of $74,000 to cost of
sales when compared to how it was calculated last year. The Company expensed
$942,973 for directory printing costs during the period, which exceeds last
year's total of $786,800 by $156,173, or 20%. This amount has risen due to more
advertising and thus larger directories to print, but for the most part has
risen due to a sharp increase in the cost of paper in the Company's directories.
The 2% decrease to cost of sales compares favorably to the 3% increase in sales.
Gross profit amounted to $1,458,130 for the first six months of 1995, an
increase of $164,502, or 13%, over the same period last year. This large
increase resulted from an increase in sales in conjunction with a decrease in
cost of sales.
Depreciation and amortization, non-cash items, totalled $146,207 for the first
six months of fiscal 1995, a decrease of $57,441, or 28%, when compared to the
same period last year. This decrease is due to the completion of amortization of
the Company's Billings and Great Falls, Montana directories last year.
Bad debts expense decreased by $65,000, or 50%, as compared to the first two
quarters of last year. This expense has shown a steady decline for more than two
years for primarily two reasons. First, the Company stepped up its collection
efforts several years ago and second, the Company no longer publishes
directories in Arizona. The Company's Arizona directories historically had
better than double the write-off percentage of its other directories. The
Company also had a decrease of $5,500, or 22%, in its collection fees for the
first six months of 1995 so all bad debt and collection related costs are on the
decline.
Interest expense also continued its decline. Interest for the first six months
of fiscal 1995 totalled $59,492, a reduction of $31,957, or 35%, when compared
to last year's total of $91,449. A reduction in Company debt of over $600,000
during 1994 is the major cause of this continued decline.
General and administrative expenses increased by $100,274, or 12%, over the
corresponding period of fiscal 1994. General and administrative expenses for
Fronteer Personnel Services, Inc. (FPS), a wholly-owned subsidiary of the
Company, increased by over $20,000 when compared to last year. Start-up costs
in Native American Document Conversion Services, LLC, a new joint venture of
the Company, totalled approximately $20,000 for the first six months of this
year. This company had no expenses last year. The Company also experienced an
increase in administrative wages for the first six months of 1995 due to annual
raises and year-end bonuses. Expenses in several expense categories declined
during the year, due primarily to the elimination of the Company's Arizona
operation.
Other operating income increased by $18,256, or 22%, when compared to last year.
Gross profits from FPS, which have been consolidated into this account,
increased by nearly $30,000, or 219%, when compared to last year's first six
months.
THREE MONTHS ENDED MARCH 31, 1995 VS. THREE MONTHS ENDED MARCH 31, 1994
Net income for the second quarter of 1995 was $106,793, an increase of $50,053,
or 88%, over last year's net income of $56,740.
<PAGE>
Sales of $2,148,649 were recognized for the three months ended March 31, 1995,
an increase of $277,586, or 15%, when compared to last year's second quarter.
Sales in the Company's Bismarck, North Dakota directory totalled $1,236,071 and
were up nearly $76,000, or 7%, over last year. A directory for Idaho Falls,
Idaho, which was recognized in the first quarter last year, was recognized in
the second quarter of 1995. This amounts to an increase of nearly $600,000 when
compared to last year's second quarter sales. One directory, which was
recognized in the second quarter last year, was incomplete at March 31, 1995 and
has yet to be recognized in 1995. Sales for this book totalled approximately
$410,000 last year and are scheduled to be recognized in the third quarter of
this year.
Cost of sales amounted to $1,455,183 for the second quarter of 1995, an increase
of $274,859, or 23%, as compared to last year. Printing expense was up $43,500
for the Bismarck, North Dakota directory when compared to last year, which is
due primarily to increases in paper costs. Cost of sales for Idaho Falls, Idaho
which was recognized in the first quarter last year, rose $372,500
<PAGE>
as compared to last year's second quarter. As stated above, one directory which
was recognized in the second quarter of fiscal 1994 has yet to be recognized in
1995. Cost of sales on this directory totalled approximately $170,000 last year.
This book is scheduled to be recognized in the third quarter this year.
Distribution costs of nearly $23,000 were incurred for the delivery of the
Company's new Bozeman, Montana directory during the quarter. No such costs were
expensed in the second quarter last year.
Depreciation and amortization, non-cash items, totalled $73,553 for the quarter,
a decrease of $28,271, or 28%, when compared to the same period last year. This
decline is due to the completion of the amortization of the Company's
acquisition costs for its Billings and Great Falls, Montana directories last
year.
Bad debts expense decreased by $45,000, or 64%, when compared to the second
quarter of last year. This expense has shown a steady decline for more than two
years, which the Company feels has resulted from its increased collection
efforts and the sale of its Arizona directories.
Interest expense also continued its decline. Interest for the three months ended
March 31, 1995, totalled $28,611, a reduction of $10,915, or 28%, when compared
to last year's total of $39,526. A reduction in Company debt of over $600,000 in
1994 is the major cause of this continued decline.
General and administrative expenses increased by $50,505, or 12%, over the
corresponding period of 1994. G&A expenses for Fronteer Personnel Services, Inc.
were up $16,434 from last year, a 45% increase. This was due primarily to the
addition of an insurance agent in the Company this past year. Due to annual
raises, the Company's administrative wages for the first six months of 1995 rose
from last year.
Other operating income increased by $10,809, or 25% when compared to last year.
Gross profits from Fronteer Personnel Services, Inc. which have been
consolidated into this account, increased by over $19,000 over last year.
LIQUIDITY AND CAPITAL RESOURCES AS OF MARCH 31, 1995
At March 31, 1995, the Company had working capital of $1,430,973 as compared to
the $1,070,660 at September 30, 1994, an increase of $360,313, or 34%.
Through the first six months of 1995, the Company continues to have a positive
cash flow from operating activities. Cash provided by operating activities for
this period totalled $130,922.
The Company currently has $500,000 available on its line of credit and
anticipates no liquidity problems this fiscal year.
The Company continues to implement procedures and plans to increase revenues and
reduce expenses.
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On March 3, 1995, the Company held its annual meeting of shareholders at
Bismarck, North Dakota. Management's slate of directors was elected and the
selection of auditors for fiscal 1995 was ratified. Following is a tabulation of
the votes cast in those matters.
<PAGE>
<TABLE>
<CAPTION>
ABSTENTIOUS/
NAME OF DIRECTOR FOR WITHHELD BROKER NON-VOTE
------------------------- ----------- -------------- ---------------------
<S> <C> <C> <C>
- - ---------------------------------------------------------------------------------------------------------------------------------
Theodore Becker 4,240,173 5,437 12,200
Richard Flurer 4,244,340 1,270 12,200
Roland Haux 4,244,340 1,270 12,200
Marlow Lindblom 4,242,340 3,270 12,200
Larry Myers 4,212,273 33,337 12,200
Dennis Olson 4,242,340 3,270 12,200
Larry Scott 4,244,340 1,270 12,200
- - ---------------------------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
ABSTENTIOUS/
FOR AGAINST BROKER NON-VOTE
----------- -------------- -------------------
<S> <C> <C> <C>
Eide Helmeke & Co. 4,255,799 11 2,000
as auditors
- - ---------------------------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ITEM 5. OTHER INFORMATION
ACQUISITION OF RAFCO, LTD.
On April 26, 1995, the Company entered into a Plan of Reorganization and
Exchange Agreement with RAFCO, Ltd. ("RAFCO"). Under the agreement, the Company
acquired all of the assets and business of RAFCO for 7,223,871 shares of par
value $.01 common stock and 87,500 shares of $.10 par value Series A Voting
Cumulative Preferred Stock. As a result of the transaction and as a result of
being a shareholder of RAFCO, Robert A. Fitzner, Jr. will receive 4,784,705
shares of common stock of the Company and 5,000 shares of the Series A Preferred
Stock. As of April 26, 1995, Mr. Fitzner owned 37.9% of the outstanding voting
securities of the Company and may be deemed to be in control of the Company as a
result of his pending position as a director of the Company and this stock
ownership.
RAFCO is the parent of RAF Financial Corporation ("RAF"), a full service
diversified brokerage firm headquartered in Denver, Colorado. RAF is privately
held and has been in business for more than twenty years. RAFCO also owns
approximately 50% of the stock of Secutron Corp. ("Secutron"), which has
provided computer services, products, and consulting to financial services firms
and other businesses nationwide for more than fifteen years. For the fiscal year
ended December 31, 1994, RAF had gross revenues of $13,796,032 and Secutron had
gross revenues of $3,515,230. For the same period, RAF had earnings of $4,591
while Secutron had a loss of $224,419.
SALE OF ELEVEN DIRECTORIES TO TELECOM*USA
On April 27, 1995, the Company sold eleven of its telephone directories to
Telecom*USA of Cedar Rapids, Iowa. The deal will result in payments of
approximately $2.4 million, payable $1,500,000 at closing, which occurred
May 5, 1995, and $900,000 prior to December 31, 1995. The eleven directories
sold cover markets in five states, Montana, Idaho, Wyoming, Utah, and South
Dakota, with a total distribution of 700,000 copies. Telecom*USA will also make
a noninterest bearing and nonrecourse loan of $500,000 to the Company as
consideration for the option to purchase additional directories from the
Company. If the option, which runs from June 1, 1997 to June 1, 1999, is not
exercised, the loan will be forgiven. If Telecom*USA exercises their option,
the loan will be applied to the purchase price of the directories.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Articles of Incorporation*
3.2 Bylaws*
<PAGE>
10.1 Underwriter's Warrant**
10.3 Incentive Stock Option Plan as amended January 15, 1992**
27 Financial Data Schedule
* Incorporated by reference to SEC File No. 33-26175-D filed
December 16, 1988 and January 18, 1989.
** Incorporated by reference to SEC File No. 33-46321 filed
March 11, 1992.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed with the SEC for the
quarter ended March 31, 1995.
<PAGE>
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.
FRONTEER DIRECTORY COMPANY, INC.
MAY 4, 1995 By: /s/ DENNIS W. OLSON
- - --------------------- -------------------------------------
Dennis W. Olson, President
MAY 4, 1995 By: /s/ LANCE OLSON, CPA
- - --------------------- -------------------------------------
Lance Olson, CPA,
Principal Accounting Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 58,757
<SECURITIES> 0
<RECEIVABLES> 3,978,073
<ALLOWANCES> (113,211)
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<PP&E> 1,384,026
<DEPRECIATION> (786,369)
<TOTAL-ASSETS> 5,506,101
<CURRENT-LIABILITIES> 3,177,755
<BONDS> 149,099
<COMMON> 52,467
0
0
<OTHER-SE> 2,091,780
<TOTAL-LIABILITY-AND-EQUITY> 5,506,101
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