<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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<S> <C>
(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
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or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition
period from to
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Commission File Number
0-18088
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ARCUS, INC.
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(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 95-4282434
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
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<S> <C>
222 West Las Colinas Blvd., Suite 850, Irving, Texas 75039
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(Address of principal executive offices) (ZIP Code)
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Registrant's telephone number, including area code: (214) 506-0611
_______________________________________________________________________________
(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 ( )
The number of shares outstanding of Registrant's common stock, as of
May 10, 1995: 7,638,916
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This report includes a total of 10 pages.
There is no Exhibit Index.
Sequential Page Number 1 of 10
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Part I. Financial Information
Item I. Financial Statements
ARCUS, INC.
Consolidated Balance Sheets
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<CAPTION>
March 31, December 31,
ASSETS 1995 1994
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(Unaudited)
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Current assets:
Cash $ 37,873 $ 56,636
Accounts receivable, less
allowance for doubtful accounts
of $92,000 (1994 - $86,000) 3,788,240 4,435,519
Other receivables 46,258 39,303
Inventories 207,228 210,159
Prepaid expenses 376,596 438,387
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Total current assets 4,456,195 5,180,004
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Due from Parent 5,234,767 3,987,731
Property, plant and equipment at cost:
Land, buildings and improvements 7,439,090 7,323,236
Vault equipment and vehicles 11,962,336 11,729,344
Furniture and other equipment 4,089,066 3,977,083
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23,490,492 23,029,663
Less accumulated depreciation 13,006,052 12,448,458
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Net property, plant and equipment 10,484,440 10,581,205
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Cost in excess of net assets acquired,
net of accumulated amortization of
$231,000 ( 1994 - $223,000) 383,872 392,497
Other assets 607,107 591,268
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$21,166,381 $20,732,705
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See accompanying notes.
Sequential Page Number 2 of 10
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Part I. Financial Information
Item I. Financial Statements
ARCUS, INC.
Consolidated Balance Sheets
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<CAPTION>
March 31, December 31,
1995 1994
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(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,698,201 $ 2,003,806
Accrued payroll 685,146 783,868
Accrued liabilities 374,575 588,605
Current portion of long term debt,
including capital lease obligations
of $49,000 (1994 - $83,000) 125,275 158,052
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Total current liabilities 2,883,197 3,534,331
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Deferred income taxes 8,002 8,002
Long term debt 528,805 550,741
Other liabilities 278,890 272,857
Stockholders' equity:
Preferred stock, $.01 par value,
1,000,000 shares authorized and
no shares issued and outstanding - -
Common stock, $.01 par value
24,000,000 shares authorized,
7,770,697 issued and outstanding
in 1995 and 1994 77,707 77,707
Capital in excess of par value 2,025,519 2,025,519
Retained earnings 15,834,255 14,750,715
Less - Treasury Stock,
at cost (131,781 shares) (447,736) (447,736)
Translation adjustment (22,258) (39,431)
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Total stockholders' equity 17,467,487 16,366,774
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$21,166,381 $20,732,705
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See accompanying notes.
Sequential Page Number 3 of 10
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ARCUS, INC.
Consolidated Statements of Income
(Unaudited)
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<CAPTION>
Three Months Ended
March 31
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1995 1994
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<S> <C> <C>
Revenues $10,568,329 $9,665,092
Cost of services rendered 4,640,057 4,255,174
Selling, general and
administrative expenses 3,561,765 3,396,851
Depreciation and amortization 657,009 691,969
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Total operating expenses 8,858,831 8,343,994
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Operating income 1,709,498 1,321,098
Interest income, net 142,042 39,659
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Income before taxes
based on income 1,851,540 1,360,757
Taxes based on income:
Federal 589,000 440,000
State 179,000 146,000
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768,000 586,000
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Net income $ 1,083,540 $ 774,757
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Earnings per common share $ .14 $ .10
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See accompanying notes.
Sequential Page Number 4 of 10
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ARCUS, INC.
Condensed Consolidated Statements of Cash Flow
(Unaudited)
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<CAPTION>
Three months ended
March 31
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1995 1994
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NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,786,300 $ 2,052,127
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (519,232) (702,610)
Funds invested with Parent (1,247,036) (1,240,149)
Other investing activities 14,253 14,965
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Net cash used for investing activities (1,752,015) (1,927,794)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on amount due to Parent - (18,530)
Payments on long term debt and notes payable (54,713) (111,407)
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Net cash used in financing activities (54,713) (129,937)
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Effect of exchange rate changes on cash 1,665 (15)
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Net change in cash (18,763) (5,619)
Cash at beginning of period 56,636 88,999
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Cash at end of period $ 37,873 $ 83,380
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See accompanying notes.
Sequential Page Number 5 of 10
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ARCUS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 1995
1. These consolidated financial statements do not include footnotes and
certain financial presentations normally required under generally
accepted accounting principles and, therefore should be read in
conjunction with the financial statements, filed in Form 10-K, of
Arcus, Inc. ("Arcus" or "Company") for the year ended December 31,
1994. It should be understood that accounting measurement at interim
dates inherently involves greater reliance on estimates than at year
end. The financial statements included herein are unaudited, except
for the consolidated balance sheet at December 31, 1994; however, they
contain all adjustments (consisting only of normal recurring
adjustments) which, in the opinion of the Company, are necessary to
present fairly the consolidated financial position of the Company at
March 31, 1995, and the consolidated results of operations and the
consolidated cash flows for the periods presented. Results of the
interim period ended March 31, 1995 are not necessarily indicative of
results for the full year 1995.
2. On September 20, 1994, the Company engaged the investment banking firm
of PaineWebber, Incorporated, to act as its exclusive financial
advisor with respect to the potential sale of Arcus. ATI Systems
International, Inc., which controls approximately 94.8% of the common
stock of Arcus, desires to divest its position in the Company in order
to focus resources on its specialty transportation businesses. ATI
continues to explore the possible sale of its interest in Arcus.
There presently are no agreements or commitments to sell the Company
and there are no assurances that a sale will be completed.
3. Earnings per share calculations for the quarters ended March 31, 1995
and 1994 are based upon 7,861,728 and 7,834,080 weighted average
shares outstanding, respectively. Certain employees of the Company
hold exercisable stock options. For the quarters ended March 31, 1995
and 1994, there was no material dilution of earnings per share from
stock options.
Sequential Page Number 6 of 10
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ARCUS, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
First Quarter 1994 Compared to 1993
Consolidated revenues reached a record high level of $10,568,000 this
quarter, an increase of $903,000 or 9.3% compared to last year. The increase
resulted from generally higher demand for the Company's services.
Approximately three-fourths of the increase came from services related to media
storage. One service, media library relocations, experienced less demand
during the quarter and revenue from this service declined $158,000 or 44.5%
below that of 1994.
Operating income for the first three months of 1995 was $1,709,000, an
increase of $388,000 or 29.4% compared to last year, and like revenue, reached
a record high level this quarter. Operating margins improved from 13.7% of
revenue in 1994 to 16.2% in 1995. Better overall utilization of vault
facilities and lower administrative salaries as a percent of revenue
contributed to the improvement. The Company's facility expenses, are
classified as selling and administrative expense and better utilization of
these facilities was a factor in the improvement of this component of expense
in relation to revenue. Operating results for 1994 include approximately
$148,000 of expense related to the Company's internal disaster recovery efforts
arising from the January 1994 Northridge, California earthquake.
Compared to 1994, net interest income for the quarter increased by
$102,000 to $142,000. The increase primarily resulted from a higher average
balance of funds invested with ATI Systems International, Inc. ("ATI"),
formerly Armored Transport, Inc., the parent company of Arcus. Arcus deposits
cash receipts in excess of operating expenses with ATI. It has routinely drawn
on its cash balances on hand or borrowed from ATI for working capital, as well
as other needs, both short term and long term.
LIQUIDITY AND CAPITAL RESOURCES
Arcus was a net generator of cash during the first three months of
1995, primarily as a result of earnings levels as reflected in the Company's
cash provided by operating activities. Operating cash flows were more than
sufficient to meet investment needs and third party obligations. As a result,
Arcus was able to invest $1,247,000 with ATI during the quarter, increasing the
amount due from Parent by 31.3% to $5,235,000.
Sequential Page Number 7 of 10
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ARCUS, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The majority of the Company's $519,000 in capital investments this
quarter were made to support business growth, with the largest component of
expenditures consisting of vault equipment needed for media storage. Also,
during the quarter Arcus purchased land in the amount of $114,000 for
construction of a planned new facility to begin serving the Charlotte, North
Carolina market. The new vault facility is expected to begin operations during
the fourth quarter of 1995.
Although Arcus met its liquidity needs through internally generated
funds for the three months ended March 31, 1995, the Company has from time to
time required external financing for working capital, long term investments and
other needs. To the extent external financing has been needed by the Company,
ATI historically has been the primary source of such financing. An inability
to secure financing from ATI could limit the Company's opportunity for growth.
On September 20, 1994, the Company engaged the investment banking firm
of PaineWebber, Incorporated, to act as its exclusive financial advisor with
respect to the potential sale of Arcus (See Note 2 of the Notes to Consolidated
Financial Statements).
Sequential Page Number 8 of 10
<PAGE> 9
ARCUS, INC.
Part II - Other Information
Item 1. Legal proceedings.
Not applicable.
Item 2. Changes in securities.
Not applicable.
Item 3. Defaults upon senior securities.
Not applicable.
Item 4. Submission of matters to a vote of security holders.
Not applicable.
Item 5. Other information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 27 Financial Data Schedule
B. Reports on Form 8-K
None
Sequential Page Number 9 of 10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ARCUS, INC.
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(Registrant)
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Date: May 11, 1994 /s/ Thomas H. Seefurth
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Thomas H. Seefurth, President
Date: May 11, 1994 /s/ Gerald J. Rudolph
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Gerald J. Rudolph,
Chief Financial Officer
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Sequential Page Number 10 of 10
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INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
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27 Financial Data Schedule
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 37,873
<SECURITIES> 0
<RECEIVABLES> 3,880,240
<ALLOWANCES> 92,000
<INVENTORY> 207,228
<CURRENT-ASSETS> 4,456,195
<PP&E> 23,490,492
<DEPRECIATION> 13,006,052
<TOTAL-ASSETS> 21,166,381
<CURRENT-LIABILITIES> 2,883,197
<BONDS> 0
<COMMON> 77,707
0
0
<OTHER-SE> 17,389,780
<TOTAL-LIABILITY-AND-EQUITY> 21,166,381
<SALES> 0
<TOTAL-REVENUES> 10,568,329
<CGS> 0
<TOTAL-COSTS> 4,640,057
<OTHER-EXPENSES> 4,218,774
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (142,042)
<INCOME-PRETAX> 1,851,540
<INCOME-TAX> 768,000
<INCOME-CONTINUING> 1,083,540
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,083,540
<EPS-PRIMARY> .14
<EPS-DILUTED> 0
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