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: JANUARY 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: 7,464,018 shares
as of March 4, 1997
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 January 31, 1997
and October 31, 1996 3
Condensed Consolidated Statements of Operations for the
three months ended January 31, 1997 and 1996 4
Condensed Consolidated Statements of Shareholders' Equity
for the three months ended January 31, 1997 5
Condensed Consolidated Statements of Cash Flows for the
three months ended January 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 6. Exhibits and Reports on Form 8-K 10
<TABLE>
<CAPTION>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
January October
31, 31,
1997 1996
---- -----
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $3,915,615 $2,553,730
Short-term investments 300,000 302,422
Accounts receivable, net of allowance for doubtful
accounts of $181,474 in 1997 5,612,114 8,756,598
and $380,994 in 1996
Billable production orders in 628,380 828,020
process, at cost
Deferred income tax benefit 344,472 180,918
Receivable from investee company 110,000 50,000
Other current assets 91,789 123,406
------------- --------------
TOTAL CURRENT ASSETS 11,002,370 12,795,094
Furniture, equipment and
leasehold improvements,
at cost, less accumulated 857,788 929,103
depreciation and amortization
of $2,374,476 in 1997 and $2,285,948 in 1996
Investment in investee company, net of accumulated
amortization of $10,737 in 1997 and $5,112 in 1996 192,464 210,926
Deferred income tax benefit 65,202 65,202
Goodwill and other assets, net of accumulated
amortization of $319,631 in 1997 and $303,679 in 1996 288,464 334,032
-------------- --------------
TOTAL ASSETS $12,406,048 $14,334,357
============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $7,608,830 $9,370,546
Accrued liabilities 463,404 484,958
-------------- -------------
TOTAL CURRENT LIABILITIES 8,072,234 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 1,731,748 1,876,787
Less: Treasury stock, 3,125,582 shares held at cost (1,354,626) (1,354,626)
--------------- ------------
TOTAL SHAREHOLDERS' EQUITY 4,083,814 4,228,853
-------------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $12,406,048 $14,334,357
=============== ==============
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
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<TABLE>
<CAPTION>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JANUARY 31,
1997 1996
---- -----
<S> <C> <C>
REVENUES FROM COMMISSIONS AND FEES $1,663,235 $2,226,850
---------------- ------------
EXPENSES:
Salaries and related costs 1,375,502 1,592,311
Other operating expenses 620,245 767,543
Interest income, net (23,919) (49,156)
1,971,828 2,310,698
--------------- -------------
LOSS BEFORE BENEFIT FOR INCOME TAXES (308,593) (83,848)
Benefit for income taxes (163,554) (71,690)
--------------- ------------
NET LOSS $(145,039) $(12,158)
=============== ============
NET LOSS PER COMMON SHARE $(0.02) $(0.00)
=============== ============
WEIGHTED AVERAGE NUMBER OF 7,474,418 9,244,963
COMMON SHARES OUTSTANDING
=============== ============
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<TABLE>
<CAPTION>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED JANUARY 31, 1997
Common Stock Treasury Stock
Additional
Number of Paid-in Retained Number
Shares of
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
Net loss - - - (145,039) - - (145,039)
------------- ------------- ----------- ------------ --------- ------------ -----------
Balance, Jan. 31, 1997 10,600,000 $106,000 $3,600,692 $1,731,748 3,125,582 $(1,354,626) $4,083,814
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 THREE MONTHS ENDED JANUARY 31,
1997 1996
----- -----
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $(145,039) $(12,158)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 110,104 115,214
Equity in operations of investee company 12,837 -
Provision for doubtful accounts 1,830 15,465
Deferred income tax benefit (163,554) -
Changes in operating assets and liabilities:
Accounts receivable 3,142,654 696,062
Billable production orders in process, at cost 199,640 189,701
Other current assets 31,617 59,771
Other assets 29,856 (194,750)
Accounts payable (1,761,716) (483,844)
Accrued liabilities (21,554) 65,292
------------------- -------------------
Net cash provided by operating activities 1,436,675 450,753
------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (17,212) (47,258)
Maturity/purchase of short-term investments 2,422 (17,522)
Increase in notes receivable (60,000) -
------------------- --------------------
Net cash used in investing activities (74,790) (64,780)
------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock - (907,879)
------------------- --------------------
Net cash used in financing activities - (907,879)
------------------- --------------------
Net increase/(decrease) in cash and cash equivalents 1,361,885 (521,906)
Cash and cash equivalents at beginning of period 2,553,730 3,184,620
------------------- --------------------
Cash and cash equivalents at end of period $3,915,615 $2,662,714
=================== ===================
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
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 three month periods ended January 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 intercompany balances and transactions
have been eliminated.
5. Net income per common share for the three month period has been
computed based upon the weighted average number of shares of common
stock and common stock equivalents outstanding, 7,474,418 for the three
month period ended January 31, 1997 and 9,244,963 for the three month
period ended January 31, 1996.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
RESULTS OF OPERATIONS FOR THE FIRST QUARTER ENDED JANUARY 31, 1997 AS COMPARED
TO THE FIRST QUARTER ENDED JANUARY 31, 1996.
Consolidated revenues from commission and fees decreased $563,615 or 25%
from $2,226,850 for the quarter ended January 31, 1996 to $1,663,235 for the
quarter ended January 31, 1997. $245,894 or 11% of the decrease is attributable
to the closing of the recruitment division. The remaining decrease is
attributable to reduced activity from existing clients which approximated 26%,
partially offset by activity from new clients which approximated 12%.
Salaries and related costs decreased 14% from $1,592,311 for the quarter
ended January 31, 1996 to $1,375,502 for the quarter ended January 31, 1997. 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
increased from 72% for the quarter ended January 31, 1996 to 83% for the quarter
ended January 31, 1997.
Other operating costs decreased $147,298 or 19% as management continues its
efforts to control costs in various operating areas.
Interest income, net, decreased $25,237 due primarily to the use of funds
to repurchase 2,061,900 shares of the Company's common stock on January 19,
1996.
The loss before benefit for income taxes increased $224,745 from a loss of
$83,848 for the quarter ended January 31, 1996 compared to a loss of $308,593
for the quarter ended January 31, 1997. This increase is the result of the
decrease in consolidated revenues, partially offset by management's efforts to
reduce and control costs as discussed above.
The effective tax rate for the tax benefit of $163,554 is 53%. This is
primarily the result of certain expenses that are permanently non-deductible for
income tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
The company's working capital decreased by $9,454 to $2,930,136 at January
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 of less to be cash
equivalents, including commercial paper, certificates of deposit and money
market mutual funds. Cash equivalents increased $1,361,885 from $2,553,730 at
October 31, 1996 to $3,915,615 at January 31, 1997. The cash equivalent balance
increase 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 of
$5,000,000 at January 9, 1997 that expires on January 15, 1998. Prior to January
9, 1997, the Company had an unused line of credit with a different bank of
$3,000,000. 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 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 March 14, 1997.
Greenstone Roberts Advertising, Inc.
By: /s/ Gary C. Roberts
Gary C. Roberts
President and Chief Operating Officer
By: /s/ Leonard Schrift
Leonard Schrift
Senior Vice President
Chief Financial Officer and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 3,915,615
<SECURITIES> 300,000
<RECEIVABLES> 5,793,588
<ALLOWANCES> (181,474)
<INVENTORY> 0
<CURRENT-ASSETS> 11,002,370
<PP&E> 3,232,264
<DEPRECIATION> (2,374,476)
<TOTAL-ASSETS> 12,406,048
<CURRENT-LIABILITIES> 8,072,234
<BONDS> 250,000
0
0
<COMMON> 106,000
<OTHER-SE> 4,083,814
<TOTAL-LIABILITY-AND-EQUITY> 12,406,048
<SALES> 0
<TOTAL-REVENUES> 1,663,235
<CGS> 0
<TOTAL-COSTS> 1,352,502
<OTHER-EXPENSES> 620,245
<LOSS-PROVISION> 1,830
<INTEREST-EXPENSE> (23,919)
<INCOME-PRETAX> (308,593)
<INCOME-TAX> (163,554)
<INCOME-CONTINUING> (145,039)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (145,039)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
