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, 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: 744,033 shares
as of September 2, 1997
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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 July 31, 1997
and October 31, 1996 3
Condensed Consolidated Statements of Operations for the
three and nine months ended July 31, 1997 and 1996 4
Condensed Consolidated Statements of Shareholders' Equity
for the nine months ended July 31, 1997 5
Condensed Consolidated Statements of Cash Flows for the
nine months ended July 31, 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
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<TABLE>
<CAPTION>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
July October
31, 31,
1997 1996
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents $2,523,427 $2,553,730
Short-term investments 302,422
Accounts receivable, net of allowance for doubtful
accounts of $166,468 in 1997 and $380,994 in 1996 6,166,497 8,756,598
Billable production orders in process, at cost 373,765 828,020
Deferred income tax benefit 232,232 180,918
Receivable from investee company 65,000 50,000
Other current assets 125,361 123,406
-------------- ----------------
TOTAL CURRENT ASSETS 9,486,282 12,795,094
Furniture, equipment and leasehold improvements,
at cost, less accumulated depreciation and amortization
of $2,537,201 in 1997 and $2,285,948 in 1996 724,822 929,103
Investment in investee company, net of accumulated
amortization of $21,987 in 1997 and $5,112 in 1996 115,858 210,926
Deferred income tax benefit 65,202 65,202
Goodwill and other assets, net of accumulated
amortization of $351,535 in 1997 and $303,679 in 1996 293,206 334,032
-------------- ----------------
TOTAL ASSETS $10,685,370 $14,334,357
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $6,278,489 $9,370,546
Accrued liabilities 362,920 484,958
-------------- -----------------
TOTAL CURRENT LIABILITIES 6,641,409 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, 1,060,000 shares issued 10,600 10,600
Additional paid-in capital 3,696,092 3,696,092
Retained earnings 1,450,885 1,876,787
Less: Treasury stock, 315,267 shares in 1997 and
312,558 shares in 1996 (1,363,616) (1,354,626)
-------------- -----------------
TOTAL SHAREHOLDERS' EQUITY 3,793,961 4,228,853
-------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $10,685,370 $14,334,357
============== =================
The accompanying notes are an integral part of these condensed consolidated balance sheets.
</TABLE>
<TABLE>
<CAPTION>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED JULY 31, FOR NINE MONTHS ENDED JULY 31,
1997 1996 1997 1996
---- ---- ---- -----
<S> <C> <C> <C> <C>
REVENUES FROM COMMISSIONS
AND FEES $1,622,303 $2,197,550 $5,270,237 $6,845,081
------------- ------------- ------------- ---------------
EXPENSES:
Salaries and related costs 1,192,078 1,432,743 3,825,806 4,701,233
Other operating expenses 619,165 704,469 1,960,842 2,128,886
Interest income, net 2,356 (9,808) (39,195) (82,853)
-------------- -------------- -------------- ----------------
TOTAL EXPENSES 1,813,599 2,127,404 5,747,453 6,747,266
-------------- -------------- -------------- ----------------
INCOME/(LOSS) BEFORE
(BENEFIT)/PROVISION FOR
INCOME TAXES (191,296) 70,146 (477,216) 97,815
Provision/(Benefit) for income taxes (5,000) 13,947 (51,314) 39,126
--------------- ------------- -------------- -----------------
NET INCOME/(LOSS) $(186,296) $56,199 $(425,902) $58,689
================ ============= ============== =================
NET INCOME/(LOSS) PER COMMON SHARE $(0.25) $0.08 $(0.57) $0.07
================ ============= ============== =================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 745,317 747,442 746,391 836,942
================ ============= ============== =================
The accompanying notes are an integral part of these condensed consolidated statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JULY 31, 1997
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 1,060,000 $10,600 $3,696,092 $1,876,787 312,558 $(1,354,626) $4,228,853
Treasury Stock
Purchased 2,709 (8,990) (8,990)
Net loss - - - (425,902) - - (425,902)
-------------- ------------ ------------ ------------ ----------- -------------- --------------
BALANCE, JUL. 31, 1997 1,060,000 $10,600 $3,696,092 $1,450,885 315,267 $(1,363,616) $3,793,961
============== ============ ============ ============ ========== ============= =============
The accompanying notes are an integral part of these condensed consolidated statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31,
1997 1996
----- -----
CASH FLOW FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net (loss)/income $(425,902) $58,689
Adjustments to reconcile net (loss)/income to net cash used in
operating activities:
Depreciation and amortization 315,984 359,511
Equity in operations of investee company 78,193 -
Provision for doubtful accounts (120,728) 1,419
Deferred income tax benefit (51,314) -
Changes in operating assets and liabilities:
Accounts receivable 2,710,829 (69,329)
Billable production orders in process, at cost 454,255 (10,737)
Other current assets (1,955) (3,801)
Other assets (7,030) 29,745
Accounts payable (3,092,057) (2,609,277)
Accrued liabilities (122,038) 17,964
----------------- -------------------
Net cash used in operating activities (261,763) (2,225,816)
----------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (46,972) (392,726)
Maturity of short-term investments 302,422 843,399
Payment of receivable from investee company (15,000) -
------------------ --------------------
Net cash provided by investing activities 240,450 450,673
------------------ --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (8,990) (907,879)
------------------ --------------------
Net cash used in financing activities (8,990) (907,879)
------------------ --------------------
Net decrease in cash and cash equivalents (30,303) (2,683,022)
Cash and cash equivalents at beginning of period 2,553,730 3,184,620
------------------ --------------------
Cash and cash equivalents at end of period $2,523,427 $501,598
================== ====================
The accompanying notes are an integral part of these condensed consolidated statements.
</TABLE>
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, 1996.
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 nine month periods ended July 31, 1997 and 1996.
3 Results of operations for interim periods are not necessarily indicative of
annual results.
4 The consolidated financial statements include the accounts of the Company
and its subsidiary. All significant intercompany balances and transactions have
been eliminated.
5 Net income/(loss) per commons 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.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, EARNINGS PER SHARE, which is required to be adopted on January 31, 1998. At
that time, the Company will be required to change the method currently used to
compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The new requirement is expected to have no
impact on the third quarter ended July 31, 1997 or July 31, 1996 earnings per
share. It is expected to have no impact on the nine months ended July 31, 1997
or July 31, 1996 earnings per share. There is no expected impact of Statement
128 on the calculation of fully diluted earnings per share for these quarters or
nine month periods.
6. Effective on July 29, 1997, the shareholders of the Company approved a
reverse stock split of one-for-ten shares of common stock, payable to
shareholders of record on June 12, 1997. All common stock data in the condensed
consolidated financial statements give retroactive effect to the aforementioned
reverse stock split.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
RESULTS OF OPERATIONS FOR THE THIRD QUARTER ENDED JULY 31, 1997 AS COMPARED TO
THE THIRD QUARTER ENDED JULY 31, 1996.
Consolidated commission and fee revenue decreased $575,247 or 26% from
$2,197,550 for the quarter ended July 31, 1996 to $1,622,303 for the quarter
ended July 31, 1997. $378,080 or 17% of the decrease is due to the loss of a
significant customer in the quarter ended July 31, 1997. The remaining decrease
is due to last year's closing of the Coconut Creek, Spanish International and
Recruitment divisions, offsetting activity from new, existing and lost clients.
Salaries and related costs decreased $240,665 or 17% from $1,432,743 for the
quarter ended July 31, 1996 to $1,192,078 for the quarter ended July 31, 1997.
The decrease is the result of a reduction in staffing, and the closing of the
Recruitment division, Coconut Creek, and Spanish International offices. Salaries
and related costs as a percent of revenues increased from 65% for the quarter
ended July 31, 1996 to 73% for the quarter ended July 31, 1997.
Other operating costs decreased $85,304 or 12% as management continues its
efforts to control costs in various operating areas.
Interest income, net, decreased $12,164 due to the reduction in short-term
investments and repayment of a short term loan.
Income before taxes decreased $261,442 from income of $70,146 for the quarter
ended July 31, 1996 compared to a loss of $191,296 for the quarter ended July
31, 1997. This decrease is the result of decreased consolidated revenues,
partially offset by management's efforts to control costs as discussed above.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JULY 31, 1997 AS COMPARED TO THE
NINE MONTHS ENDED JULY 31, 1996.
Consolidated commission and fee revenue decreased $1,574,844 or 23% from
$6,845,081 for the nine months ended July 31, 1996 to $5,270,237 for the nine
months ended July 31, 1997. $851,438 or 12% of the decrease is attributable to
the loss of a significant customer during the nine month period ended July 31,
1997. $1,089,347 or 16% of the revenue decrease is due to last year's office
closures, partially offset by increased activity from new and existing clients
which approximated 5%.
Salaries and related costs decreased $875,427 or 19% from $4,701,233 for the
nine months ended July 31, 1996 to $3,825,806 for the nine months ended July 31,
1997. Salaries and related costs as a percent of revenues increased from 69% for
the nine months ended July 31, 1996 to 73% at July 31, 1997.
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 $43,658, due primarily to the reduction in
short-term investments.
Income/(loss) before taxes decreased $575,031 from income of $97,815 for the
nine months ended July 31, 1996, to a loss of $477,216 for the nine months ended
July 31, 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 $94,717 to $2,844,873 at July 31, 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 $30,303 from $2,553,730 at October 31, 1996 to
$2,523,427 at July 31, 1997.
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.
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 4 - Submission of Matters to a Vote of Security-Holders:
On July 29, 1997 the Company held a special meeting to record the voting results
of its shareholders for the reverse one for ten stock split. Shareholders of
record at the close of business on June 12, 1997 were entitled to vote on this
plan. The following table details these results:
VOTE OF ONE FOR TEN REVERSE STOCK SPLIT
FOR AGAINST ABSTENTIONS
5,680,144 70,222 23,600
Item 6 - Exhibits and Reports on Form 8-K:
Exhibits:
Exhibit 27 - Financial Data Schedule
Reports on Form 8-K:
On July 29, 1997, a Form 8-K was filed to record the approval of the
one for ten reverse stock split by the Company's shareholders. on
July 29, 1997.
<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 September 12, 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> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JUL-31-1997
<CASH> 2,523,427
<SECURITIES> 0
<RECEIVABLES> 6,332,965
<ALLOWANCES> (166,468)
<INVENTORY> 0
<CURRENT-ASSETS> 9,486,282
<PP&E> 3,262,023
<DEPRECIATION> (2,537,201)
<TOTAL-ASSETS> 10,685,370
<CURRENT-LIABILITIES> 6,641,409
<BONDS> 250,000
0
0
<COMMON> 10,600
<OTHER-SE> 3,793,961
<TOTAL-LIABILITY-AND-EQUITY> 10,685,370
<SALES> 0
<TOTAL-REVENUES> 5,270,237
<CGS> 0
<TOTAL-COSTS> 3,825,806
<OTHER-EXPENSES> 1,960,842
<LOSS-PROVISION> (214,526)
<INTEREST-EXPENSE> (39,195)
<INCOME-PRETAX> (477,216)
<INCOME-TAX> (51,314)
<INCOME-CONTINUING> (425,902)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (425,902)
<EPS-PRIMARY> (.57)
<EPS-DILUTED> (.57)
</TABLE>
