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: APRIL 30, 1997 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: 7,453,918 shares
as of June 2, 1997
<PAGE>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page
NUMBER
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of April 30,
1997 and October 31, 1996 3
Condensed Consolidated Statements of Operations for the
three and six months ended April 30, 1997 and 1996 4
Condensed Consolidated Statements of Shareholders' Equity
for the six months ended April 30, 1997 5
Condensed Consolidated Statements of Cash Flows for the
six months ended April 30, 1997 and 1996 6
Notes to Condensed 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 1. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security-Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
<PAGE>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
April 30, October 31,
1997 1996
ASSETS
Current Assets
Cash and cash equivalents $2,186,083 $2,553,730
Short-term investments 0 302,422
Accounts receivable, net of
allowance for doubtful
accounts of $170,413 in 1997
and $380,994 in 1996 6,812,086 8,756,598
Billable production orders in
process, at cost 502,041 828,020
Deferred income tax benefit 227,232 180,918
Receivable from investee company 48,000 50,000
Other current assets 120,720 123,406
--------------- --------------
TOTAL CURRENT ASSETS 9,896,162 12,795,094
Furniture, equipment and
leasehold improvements,
at cost, less accumulated
depreciation and amortization
of $2,459,139 in 1997 and
$2,285,948 in 1996 790,857 929,103
Investment in investee company,
net of accumulated
amortization of $16,362 in
1997 and $5,112 in 1996 157,269 210,926
Deferred income tax benefit 65,202 65,202
Goodwill and other assets, net
of accumulated
amortization of $335,583 in
1997 and $303,679 in 1996 310,809 334,032
--------------- --------------
TOTAL ASSETS $11,220,299 $14,334,357
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $6,575,458 $9,370,546
Accrued liabilities 398,595 484,958
--------------- --------------
TOTAL CURRENT LIABILITIES 6,974,053 9,855,504
Long-Term Debt 250,000 250,000
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 1,650,019 1,876,787
Less: Treasury stock, 3,142,482
shares in 1997 and
3,125,582 shares in 1996 (1,360,465) (1,354,626)
--------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 3,996,246 4,228,853
--------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' $11,220,299 $14,334,357
EQUITY
=============== ===============
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
<PAGE>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED APRIL 30, FOR SIX MONTHS ENDED APRIL 30,
1997 1996 1997 1996
---- ---- ---- -----
REVENUES FROM COMMISSIONS
<S> <C> <C> <C> <C>
AND FEES $1,984,699 $2,420,681 $3,647,934 $4,647,531
------------ ------------ ------------- ------------
EXPENSES:
Salaries and related costs 1,258,225 1,676,179 2,633,727 3,268,490
Other operating expenses 708,595 656,874 1,328,840 1,424,417
Interest income, net (17,631) (23,889) (41,551) (73,045)
------------ ------------ ------------- ------------
TOTAL EXPENSES 1,949,189 2,309,164 3,921,016 4,619,862
INCOME/(LOSS) BEFORE
(BENEFIT)/PROVISION FOR
INCOME TAXES 35,510 111,517 (273,082) 27,669
Provision/(Benefit) for
income taxes 117,240 96,869 (46,314) 25,179
------------ ------------ ------------- ------------
NET INCOME/(LOSS) $(81,730) $14,648 $(226,768) $2,490
============ ============ ============= ============
NET INCOME/(LOSS) PER
COMMON SHARE $(0.01) $0.00 $(0.03) $0.00
============ ============ ============= ============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 7,464,135 7,474,418 7,469,362 8,369,419
============ ============ ============= ============
The accompanying notes are an integral part of these condensed consolidated
statements.
</TABLE>
<PAGE>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED APRIL 30, 1997
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
ADDITIONAL NUMBER
NUMBER OF PAID-IN RETAINED OF
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT TOTAL
------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, Oct. 31, 1996 10,600,000 $106,000 $3,600,692 $1,876,787 3,125,582 $(1,354,626) $4,228,853
Treasury Stock
Purchased 16,900 (5,839) (5,839)
Net loss - - - (226,768) - - (226,768)
---------- -------- ---------- ----------- --------- ----------- ----------
BALANCE, APR. 30, 1997 10,600,000 $106,000 $3,600,692 $1,650,019 3,142,482 $(1,360,465) $3,996,246
The accompanying notes are an integral part of these condensed consolidated
statements.
</TABLE>
<PAGE>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED APRIL 30,
1997 1996
----- -----
CASH FLOW FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $(226,768) $2,490
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 216,345 240,734
Equity in operations of investee company 42,407 -
Provision for doubtful accounts (120,728) 11,779
Deferred income tax benefit (46,314) -
Changes in operating assets and liabilities:
Accounts receivable 2,065,240 130,382
Billable production orders in process, at cost 325,979 28,872
Other current assets 2,686 20,375
Other assets (8,681) (1,681)
Accounts payable (2,795,088) (2,174,835)
Accrued liabilities (86,363) 81,924
---------------------- -----------------------
Net cash used in operating activities (631,285) (1,659,960)
---------------------- -----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (34,945) (316,105)
Maturity of short-term investments 302,422 572,553
Payment of receivable from investee company 2,000 -
---------------------- -----------------------
Net cash provided by investing activities 269,477 256,448
---------------------- -----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (5,839) (907,879)
---------------------- -----------------------
Net cash used in financing activities (5,839) (907,879)
---------------------- -----------------------
Net decrease in cash and cash equivalents (367,647) (2,311,391)
Cash and cash equivalents at beginning of period 2,553,730 3,184,620
---------------------- -----------------------
Cash and cash equivalents at end of period $2,186,083 $873,229
====================== =======================
The accompanying notes are an integral part of these condensed consolidated
statements.
</TABLE>
<PAGE>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 1996.
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 six month periods ended April 30, 1997 and 1996.
Results of operations for interim periods are not necessarily indicative of
annual results.
The consolidated financial statements include the accounts of the Company and
its subsidiary. All significant intercompany balances and transactions have been
eliminated.
Net income/(loss) per common share for the three and six month periods have been
computed based upon the weighted average number of shares of common stock and
common stock equivalents outstanding.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
RESULTS OF OPERATIONS FOR THE SECOND QUARTER ENDED APRIL 30, 1997 AS COMPARED TO
THE SECOND QUARTER ENDED APRIL 30, 1996.
Consolidated revenues from commission and fees decreased $435,982 or 18% from
$2,420,681 for the quarter ended April 30, 1996 to $1,984,699 for the quarter
ended April 30, 1997. $157,613 or 6% of the decrease is attributable to the
closing of the recruitment division in the 1996 period. $121,457 or 5% of the
decrease is due to the recognition last year of a non-recurring favorable
settlement during the quarter with respect to certain liabilities. $284,504 or
12% of the decrease is due to last year's closing of the Coconut Creek and
Spanish International divisions. The remaining difference is attributable to
increased activity from new and existing clients which approximated 15%,
partially offset by lost clients which approximated 10%.
Salaries and related costs decreased 25% from $1,676,179 for the quarter ended
April 30, 1996 to $1,258,225 for the quarter ended April 30, 1997. The decrease
is the result of a reduction in staffing, and the closing of the recruitment
division and Coconut Creek office. Salaries and related costs as a percent of
revenues decreased from 69% for the quarter ended April 30, 1996 to 63% for the
quarter ended April 30, 1997.
Other operating costs increased $51,721 or 8% as management continues to expand
its efforts to attract new business.
Interest income, net, decreased $6,258 due to the reduction in short-term
investments.
Income before taxes decreased $76,007 from income of $111,517 for the quarter
ended April 30, 1996 compared to income of $35,510 for the quarter ended April
30, 1997. This decrease is the result of decreased consolidated revenues,
partially offset by management's efforts to control costs as discussed above.
The provision for income taxes is a result of a decrease in a previously
reported tax benefit based upon projections of income/(loss) for the remainder
of the fiscal year.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 1997 AS COMPARED TO THE
SIX MONTHS ENDED APRIL 30, 1996.
Consolidated commission and fee revenue decreased $999,597 or 22% from
$4,647,531 for the six months ended April 30, 1996 to $3,647,934 for the six
months ended April 30, 1997. 21% of the decrease is attributable to last year's
office closures. $403,507 or 9% is due to the recruitment division closing and
$575,875 or 12% is due to the Coconut Creek and Spanish International division
closings. The remaining revenue decrease is due in part to decreased activity
from clients as discussed above and last year's non recurring favorable
settlement with respect to certain liabilities during the second quarter.
Salaries and related costs decreased 19% from $3,268,490 for the six months
ended April 30, 1996 to $2,633,727 for the six months ended April 30, 1997.
Salaries and related costs as a percent of revenues increased from 70% for the
six months ended April 30, 1996 to 72% at April 30, 1997.
Other operating expenses decreased 7%, mainly as a result of management's
continuing efforts to control costs in various operating areas.
Interest income, net, decreased $31,494, due primarily to the reduction in
short-term investment.
Income/(loss) before taxes decreased $300,751 from income of $27,669 for the six
months ended April 30, 1996, to a loss of $273,082 for the six months ended
April 30, 1997. The decrease is due primarily to office closures and reduced
client activity as discussed above, partially offset by management's efforts to
reduce and control costs.
The tax benefit is based upon projections of income/(loss) for the remainder of
the fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
The company's working capital decreased $17,481 to $2,922,109 at April 30, 1997
as compared to $2,939,590 at October 31, 1996.
For purposes of the consolidated balance sheets and consolidated statements of
cash flows, the Company considers all highly liquid debt instruments purchased
with original maturities of three months or less to be cash equivalents,
including commercial paper, certificates of deposit and money market mutual
funds. Cash equivalents decreased $367,647 from $2,553,730 at October 31, 1996
to $2,186,083 at April 30, 1997. The cash equivalent balance decrease was mainly
the result of the timing of receipts on accounts receivables and payments on
accounts payable.
The Company 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 incurred on behalf
of clients.
The Company has available an unused committed line of credit from a bank for
$5,000,000 that expires on January 15, 1998. Management believes that its
current working capital levels will be sufficient to meet the Company's
liquidity and working capital requirements for the foreseeable future. The
Company 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 1 - Legal Proceedings
On October 24, 1996 the Company was summoned to answer a complaint alleging
breach of an employment contract dated February 1, 1992 and for default in
payments due under a promissory note dated February 1, 1992. The Company has
accrued for potential damages and intends to vigorously defend this matter.
Item 4 - Submission of Matters to a Vote of Security-Holders:
On April 3, 1997 the Registrant held its annual meeting and recorded the voting
results of its shareholders for the election of Directors and the appointment of
independent auditors. The following table details these results:
APPOINTMENT OF DIRECTORS VOTES FOR VOTES AGAINST ABSTENTIONS
Director #1 5,428,576 187,104 -
Director #2 5,430,080 185,600 -
Director #3 5,430,080 185,600 -
APPOINTMENT OF INDEPENDENT AUDITORS:
VOTES FOR VOTES AGAINST ABSTENTIONS
5,445,980 153,500 16,200
Item 6 - Exhibits and Reports on Form 8-K:
Exhibits:
Exhibit 27 - Financial Data Schedule
Reports on Form 8-K:
On February 19, 1997, a Form 8-K was filed for the change in
independent auditors.
<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 in the City of Melville, State of New
York on June 13, 1997.
Greenstone Roberts Advertising, Inc.
By: ________________________________
/s/ Gary C. Roberts
President and Chief Operating Officer
By: ________________________________
/s/ Leonard Schrift
Executive Vice President
Chief Financial Officer and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> APR-30-1997
<CASH> 2,186,083
<SECURITIES> 0
<RECEIVABLES> 6,982,499
<ALLOWANCES> (170,413)
<INVENTORY> 0
<CURRENT-ASSETS> 9,896,162
<PP&E> 3,249,996
<DEPRECIATION> (2,459,139)
<TOTAL-ASSETS> 11,220,299
<CURRENT-LIABILITIES> 6,974,053
<BONDS> 250,000
0
0
<COMMON> 106,000
<OTHER-SE> 3,996,246
<TOTAL-LIABILITY-AND-EQUITY> 11,220,299
<SALES> 0
<TOTAL-REVENUES> 3,647,934
<CGS> 0
<TOTAL-COSTS> 2,633,727
<OTHER-EXPENSES> 1,328,840
<LOSS-PROVISION> (210,581)
<INTEREST-EXPENSE> (41,551)
<INCOME-PRETAX> (273,082)
<INCOME-TAX> (46,314)
<INCOME-CONTINUING> (226,768)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (226,768)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
