FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: JULY 31, 1996 Commission File #000-17468
GREENSTONE ROBERTS ADVERTISING, INC.
One Huntington Quadrangle
Melville, New York 11747
Tel. (516) 249-2121
NEW YORK 11-2250305
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification #)
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 Act of 1934 during the
preceding 12 months (or for such shorter periods 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
Indicate the number of shares outstanding of each of the Registrant's classes of
Common Stock, as of the latest practicable date:
Common Stock, $.01 par value: 7,474,418 shares
as of August 31, 1996
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GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PART I - FINANCIAL INFORMATION
PAGE NO.
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of July 31, 1996 and
October 31, 1995. 3
Consolidated Statements of Operations for the three and nine
month periods ended July 31, 1996 and 1995. 4
Consolidated Statements of Shareholders' Equity
for the nine month period ended July 31, 1996. 5
Consolidated Statements of Cash Flows for the nine
month period ended July 31, 1996 and 1995. 6
Notes to Consolidated Financial Statements. 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 8-9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 10
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<CAPTION>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JULY 31, OCT. 31
1996 1995
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $501,598 $3,184,620
Short-term investments 277,616 1,121,015
Accounts receivable, net of allowance for bad debts of
$379,142 and $377,723, respectively 7,084,616 7,016,706
Billable production orders in process, at cost 543,338 532,600
Deferred income tax benefit 332,328 332,328
Other current assets 114,905 111,105
---------- -----------
TOTAL CURRENT ASSETS 8,854,401 12,298,374
Furniture, Equipment and Leasehold Improvements:
At cost, less accumulated depreciation and amortization of
$2,195,091 and $1,883,435, respectively 973,057 891,987
Other Assets 328,413 406,012
------------ ------------
TOTAL ASSETS $10,155,871 $13,596,373
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 5,048,761 7,658,037
Accrued liabilities 570,287 552,323
---------- ----------
TOTAL CURRENT LIABILITIES 5,619,048 8,210,360
Long-Term Debt 250,000 250,000
Deferred income Tax 53,109 53,109
SHAREHOLDERS' EQUITY
Preferred stock, $1.00 par value, 1,000,000 shares -- --
authorized, no shares issued or outstanding
Common stock, $.01 par value, 30,000,000 shares
authorized, 10,600,000 shares issued 106,000 106,000
Additional paid-in capital 3,600,692 3,600,692
Retained earnings 1,881,648 1,822,959
Less: Treasury stock, 3,125,582 and 1,063,682 shares
held at cost, respectively (1,354,626) (446,747)
------------ -----------
TOTAL SHAREHOLDERS' EQUITY 4,233,714 5,082,904
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $10,155,871 $13,596,373
=========== ===========
The accompanying notes are an integral part of these consolidated balance sheets
</TABLE>
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<TABLE>
<CAPTION>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED FOR NINE MONTHS ENDED
JULY 31, JULY 31,
1996 1995 1996 1995
---- ---- ---- -----
<S> <C> <C> <C> <C>
REVENUES FROM
Commissions and fees $2,197,550 $2,155,068 $6,845,081 $6,977,421
EXPENSES:
Salaries and related costs 1,432,743 1,708,835 4,701,233 5,145,926
Other operating expenses 704,469 755,893 2,128,886 2,308,245
Interest income, net (9,808) (36,839) (82,853) (121,360)
$2,127,404 $2,427,889 $6,747,266 $7,332,811
========== ========== ========== ==========
INCOME BEFORE PROVISION/BENEFIT FOR
INCOME TAXES 70,146 (272,821) 97,815 (355,390)
Provision/(Benefit) for income taxes 13,947 (77,453) 39,126 (93,967)
NET INCOME/(LOSS) $56,199 ($195,368) $58,689 ($261,423)
======= ========== ======= ==========
NET INCOME/(LOSS) PER COMMON SHARE $0.01 ($0.02) $0.01 ($0.03)
===== ======= ===== =======
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES 7,474,418 9,536,318 8,068,907 9,536,318
========= ========= ========= =========
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
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<TABLE>
<CAPTION>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JULY 31, 1996
COMMON STOCK ADDITIONAL RETAINED TREASURY STOCK
# OF SHARES AMOUNT PAID-IN CAPITAL EARNINGS # OF SHARES AMOUNT TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
Balance October 31, 1995 10,600,000 106,000 $3,600,692 $1,822,959 1,063,682 ($ 446,747) 5,082,904
Treasury Stock Purchased 2,061,900 ( 907,879) (907,879)
Net Income/(Loss) - - - 58,689 - - 58,689
------ ------------- ----------- ---------- --------- ----------- ---------
Balance, July 31, 1996 10,600,000 106,000 $3,600,692 $1,881,648 3,125,582 ($1,354,626) $4,233,714
========== ============ =========== ========== ========= ============ ==========
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
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<TABLE>
<CAPTION>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31,
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income/(loss) $58,689 $(261,423)
Adjustments to reconcile net income/(loss) to net cash (used in) operating
activities:
Depreciation and amortization 359,511 343,582
Provision for doubtful accounts 1,419 46,395
Increases/(decreases) in cash resulting from changes in operating assets and
liabilities:
Change in accounts receivable (69,329) 375,964
Change in billable production orders in process at cost (10,737) 166,324
Change in other current assets (3,801) 46,353
Change in other assets 29,745 --
Change in deferred income tax benefit -- (176,512)
Change in accounts payable (2,609,277) (1,656,321)
Change in accrued liabilities 17,964 53,130
----------- ----------
Net Cash (used in) operating activities (2,225,816) (1,062,508)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures/purchases, net (392,726) (158,483)
Purchase/maturity of short-term investments 843,399 1,166,569
Purchase of treasury stock (907,879) -
------------- -------
Net cash (used in) investing activities (457,206) 1,008,086
Net increase/(decrease) in cash and cash equivalents (2,683,022) (54,422)
Cash and cash equivalents at beginning of year 3,184,620 1,006,294
Cash and cash equivalents at end of period $501,598 $951,872
============= ============
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
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GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated interim financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted. It
is therefore suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1995.
2. These statements reflect all adjustments consisting of normal recurring
accruals which, in the opinion of management, are necessary for a fair
presentation of the Company's financial position and results of operations
and cash flows for the three and nine month periods ended July 31, 1996
and 1995.
3. Results of operations for interim periods are not necessarily indicative
of annual earnings.
4. The consolidated financial statements include the accounts of the Company
and its subsidiary. All intercompany balances and transactions have been
eliminated.
5. Net income per common share for the three and nine month periods have
been computed based upon the weighted average number of shares of
common stock and common stock equivalents outstanding.
6. Billable production orders in process are net of advance billings to
clients, which were $50,715 at July 31, 1996, and $309,999 at October
31, 1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS FOR THE THIRD QUARTER ENDED JULY 31, 1996 AS COMPARED TO
THE THIRD QUARTER ENDED JULY 31, 1995.
Consolidated commission and fee revenue increased $42,482 or 2% from $2,155,068
for the quarter ended July 31, 1995 to $2,197,550 for the quarter ended July 31,
1996. The revenue increase is attributable to increased activity from new and
existing clients approximating 22%, partially offset by the loss of clients
which approximated 20%.
Salaries and related costs decreased 16% from $1,708,835 for the quarter ended
July 31, 1995 to $1,432,743 for the quarter ended July 31, 1996. The decrease is
the result of a reduction in staffing, and in part due to the closing of the
recruitment division. Salaries and related costs as a percent of revenues
decreased from 79% for the quarter ended July 31, 1995 to 65% for the quarter
ended July 31, 1996, also due in part to the closure of the recruitment
division.
Other operating expenses decreased 7% as management continues its efforts to
control costs in various operating areas.
Interest income, net decreased $27,031 due primarily to the accelerated payment
of accounts payables to expedite transition to a new accounting system, and the
use of funds to repurchase 2,061,900 shares of the Company's common stock and
the timing of payments on accounts payable.
Income/(loss) before provision/(benefit) for income taxes increased $342,967
from a loss of $272,821 for the quarter ended July 31, 1995 to income of $70,146
for the quarter ended July 31, 1996. The increase is the result of increases in
revenue and management efforts to reduce and control costs as discussed above.
The effective tax rate for the tax provision of $13,947 is 20%.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JULY 31, 1996 AS COMPARED TO THE
NINE MONTHS ENDED JULY 31, 1995.
Consolidated commission and fee revenue decreased $132,340 or 2% from $6,977,421
for the nine months ended July 31, 1995 to $6,845,081 for the nine months ended
July 31, 1996. The net effect of the revenue decrease is attributable to the
loss of certain clients and to the closing of the recruitment division partially
offset by increased activity from new and existing clients and the non-recurring
favorable settlement with respect to certain liabilities which occurred in the
second quarter.
Salaries and related costs decreased 9% from $5,145,926 for the nine months
ended July 31, 1995 to $4,701,233 for the nine months ended July 31, 1996. The
decrease is the result of a reduction in staffing, and in part due to the
closing of the recruitment division. Salaries and related costs as a percent of
revenues decreased from 74% for the nine months ended July 31, 1995 to 69% for
the nine months ended July 31, 1996 mainly as a result of decreased staffing for
the nine months.
Other operating expenses decreased 8%, mainly as a result of management's
continuing efforts to control costs in various operating areas.
Interest income, net, decreased $38,507 due primarily to the accelerated payment
of accounts payable as discussed above, the purchase of a new computer system,
and the use of funds to repurchase 2,061,900 shares of the Company's common
stock during the first quarter.
Income/(loss) before provision/(benefit) for income taxes increased $453,205
from a loss of $355,390 for the nine months ended July 31, 1995, to income of
$97,815 for the nine months ended July 31, 1996. The increase is the result of
management's efforts to reduce and control costs, and the non-recurring
favorable settlement with respect to certain liabilities which occurred in the
second quarter, partially offset by the decrease in revenue.
The effective tax rate for the tax provision of $39,126 is 40%.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital decreased by $852,661 to $3,235,353 at July 31,
1996 as compared to $4,088,014 at October 31, 1995, due primarily to the use of
funds to repurchase 2,061,900 shares of the Company's common stock.
Cash and cash equivalents decreased $2,683,022 from $3,184,620 at October 31,
1995 to $501,598 at July 31, 1996. The cash and cash equivalents balance
decrease was the result of accelerated payment of accounts payables to expedite
transition to a new accounting system, the purchases of capital assets, and the
repurchase of the Company's own capital stock, partially offset by the timing of
receipts on accounts receivable and the maturity of short-term investments in
U.S. Treasury Bills.
It should be noted that the Registrant recognizes commissions as a percentage of
expenditures incurred for clients. Therefore, the accounts receivable balance
does not relate only to the commissions and fees shown on the income statement,
but also represents receivables for the total of the production costs and media
purchased for clients. Similarly, the accounts payable balance includes payables
for production costs and media incurred on behalf of clients.
The Registrant has available an unused committed line of credit from a bank of
$5,000,000 at July 31, 1996. Management believes that its current working
capital levels will be sufficient to meet the Registrant's liquidity and working
capital requirements for the foreseeable future. The Registrant does not
anticipate any material increases of capital expenditures or other requirements
which will adversely affect its liquidity.
<PAGE>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT 27: FINANCIAL DATA SCHEDULE
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 in the City of Melville, State of New
York on September 13, 1996
GREENSTONE ROBERTS ADVERTISING, INC.
By: /s/ Gary C. Roberts
Gary C. Roberts
President and COO
By: /s/ Leonard Schrift
Leonard Schrift
Senior Vice President and CFO
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> JUL-31-1996
<CASH> 501,598
<SECURITIES> 277,616
<RECEIVABLES> 7,463,758
<ALLOWANCES> (379,142)
<INVENTORY> 0
<CURRENT-ASSETS> 8,854,401
<PP&E> 3,168,148
<DEPRECIATION> (2,195,091)
<TOTAL-ASSETS> 10,155,871
<CURRENT-LIABILITIES> 5,619,048
<BONDS> 250,000
0
0
<COMMON> 106,000
<OTHER-SE> 4,233,714
<TOTAL-LIABILITY-AND-EQUITY> 10,155,871
<SALES> 0
<TOTAL-REVENUES> 6,845,081
<CGS> 0
<TOTAL-COSTS> 4,701,233
<OTHER-EXPENSES> 2,128,886
<LOSS-PROVISION> 1,419
<INTEREST-EXPENSE> (82,853)
<INCOME-PRETAX> 97,815
<INCOME-TAX> 39,126
<INCOME-CONTINUING> 58,689
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,689
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
