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, 1999 Commission File #000-17468
GREENSTONE ROBERTS ADVERTISING, INC.
401 Broadhollow Road
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: 743,277 shares
as of March 4, 1999
<PAGE>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PART I - FINANCIAL INFORMATION
Page
Number
Item 1. Condensed Consolidated Financial
Statements
Condensed Consolidated Balance
Sheets as of January 31, 1999 3
and October 31, 1998
Condensed Consolidated
Statements of Operations for the 4
three months ended
January 31, 1999 and January 31,
1998
Condensed Consolidated
Statements of
Shareholders' Equity for the
three months
ended January 31, 1999 5
Condensed Consolidated
Statements of Cash Flows for the 6
three months ended
January 31, 1999 and 1998
Notes to Condensed Consolidated 7
Financial Statements
Item 2. Management's Discussion and 8
Analysis of Financial Condition
and Results of Operations
PART II - OTHER INFORMATION
Item 6. Exhibits 9
<PAGE>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(unaudited) (audited)
January 31, October 31,
1999 1998
ASSETS
Current Assets
<S> <C> <C>
Cash and cash equivalents $1,348,517 $1,753,681
Accounts receivable, net of allowance for bad debts of
$989,723 in 1999 and $986,723 in 1998 3,356,556 3,797,631
Billable production orders in process, at cost 114,400 249,858
Deferred income taxes 64,000 64,000
Other current assets 19,854 73,487
---------- ----------
Total Current Assets 4,903,327 5,938,657
Furniture, equipment and leasehold improvements,
less accumulated depreciation and amortization
of $1,330,495 in 1999 and $1,275,092 in 1998 737,038 761,119
Deferred income tax benefit 130,120 130,120
Cost in excess of net assets acquired and other assets, net
of accumulated amortization of $365,104 18,977 18,977
========== ==========
Total Assets $5,789,462 $6,848,873
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $3,357,466 $4,442,500
Accrued liabilities 153,998 194,795
---------- ----------
Total Current Liabilities 3,511,464 4,637,295
Other Liabilities 70,243 52,450
---------- ----------
Total Long Term Liabilities 70,243 52,450
Commitments and contingencies
Shareholders' Equity
Preferred stock, $1.00 par value, 1,000,000 shares
authorized, no shares issued or outstanding - -
Common stock, $.10 par value, 3,000,000 shares
authorized, 1,060,000 shares 106,000 106,000
issued and outstanding
Additional paid-in capital 3,600,692 3,600,692
Retained earnings (131,329) (179,956)
Less: treasury stock, 316,723 (1,367,608) (1,367,608)
shares at cost
---------- ----------
Total Shareholders' Equity 2,207,755 2,159,128
---------- ----------
Total Liabilities and Shareholders' Equity $5,789,462 $6,848,873
========== ==========
See accompanying notes.
</TABLE>
<PAGE>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For three months ended January 31,
1999 1998
<S> <C> <C>
COMMISSIONS AND FEES $1,158,597 $1,743,413
EXPENSES:
Salaries and employee related
expenses 783,117 1,177,756
Office and general expenses 341,748 504,397
---------- ---------
1,124,865 1,682,153
---------- ---------
Income from operations 33,732 61,260
Interest income 14,895 24,161
Equity in operations of investee company - (35,986)
---------- ----------
INCOME BEFORE INCOME TAXES 48,627 49,435
Provision for income taxes - -
---------- ---------
NET INCOME $48,627 $49,435
========== =========
EARNINGS PER COMMON SHARE, BASIC AND DILUTED $0.07 $0.07
========== =========
Shares used in computing earnings
per common share, basic 743,277 743,277
========== =========
Shares used in computing earnings
per common share, diluted 743,277 753,365
========== =========
See accompanying notes.
</TABLE>
<PAGE>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED JANUARY 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Treasury Stock
Additional
Paid-in Retained
Shares Amount Capital Earnings Shares Amount Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, Oct. 31, 1998 1,060,000 $106,000 $3,600,692 $(179,956) 316,723 $(1,367,608) $2,159,128
Net Income - - - 48,627 - - 48,627
Income
---------- --------- ---------- ---------- -------- ------------ -----------
Balance, Jan. 31, 1999 1,060,000 $106,000 $3,600,692 $(131,329) 316,723 $(1,367,608) $2,207,755
========= ======== ========== ========= ======= =========== ==========
See accompanying notes.
</TABLE>
<PAGE>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended January 31,
1999 1998
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 48,627 $ 49,435
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 55,403 74,929
Equity in operations of investee company - 35,986
Provision for bad debts 3,000 5,493
Changes in operating assets and liabilities:
Accounts receivable 438,075 (101,627)
Billable production orders in process, at cost 135,458 237,638
Other current assets 53,633 9,605
Other assets - (575)
Accounts payable (1,085,033) (995,695)
Accrued liabilities and other (23,005) (101,834)
------- --------
Net cash used in operating activities (373,842) (786,645)
-------- --------
INVESTING ACTIVITIES:
Purchase of furniture, equipment and
leasehold improvements (31,322) (3,634)
Advances to investee company, net - (32,000)
------- ------
Net cash used in investing activities (31,322) (35,634)
------- -------
Net decrease in cash and cash equivalents (405,164) (822,279)
Cash and cash equivalents at beginning of year 1,753,681 2,989,370
--------- ---------
Cash and cash equivalents at end of period $1,348,517 $2,167,091
========== ==========
See accompanying notes.
</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, 1998.
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, 1999 and 1998.
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.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of operations for the first quarter ended January 31, 1999 as compared
to the first quarter ended January 31, 1998.
Commissions and fees decreased $584,816 or 34% from $1,743,413 for the quarter
ended January 31, 1998 to $1,158,597 for the quarter ended January 31, 1999.
This decrease is principally attributable to the closing of the Orlando office
during fiscal 1998.
Salaries and employee related costs decreased $394,639 or 34% from $1,177,756
for the quarter ended January 31, 1998 to $783,117 for the quarter ended January
31, 1999. The decrease is a result of a reduction in staff attributable to the
Orlando office closing as discussed above. Salaries and employee related costs
as a percent of revenues remain at 68% for the quarter ending January 31, 1998
and for the quarter ending January 31, 1999.
Office and general expenses decreased $162,649 or 32% due primarily to the
closing of the Orlando office during fiscal 1998 and management efforts to
control costs in various operating areas.
Interest income, net, decreased $9,266 due to the reduction in short-term
investments.
Income decreased slightly from $49,435 for the quarter ended January 31, 1998
compared to income of $48,627 for the quarter ended January 31, 1999.
Liquidity and Capital Resources
The Company's working capital was $1,392,000 at January 31, 1999, primarily
comprised of cash and cash equivalents of $1,349,000, accounts receivable of
$3,357,000 and billable production orders of $114,000, offset by accounts
payable and accrued liabilities of $3,511,000.
Net cash used in operating activities for the three months ended January 31,
1999 was approximately $373,000. The principal factors contributing to the
decrease in cash flow were decreases in accounts payable of $1,085,000,
partially offset by decreases in accounts receivable of $438,000 and billable
production orders of $135,000.
Because the Company recognizes commissions as a percentage of expenditures
incurred, the accounts receivable balance relates not only to the commissions
and fees shown on the income statement, but also to receivables for 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 Company has available an unsecured $2,000,000 line of credit from a bank
which expires in March 1999. Loans against the credit line bear interest equal
to the "Prime Rate", as defined. The Prime Rate at January 30, 1999 was 7.75%.
The Company intends to renew its credit line in March 1999. 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 increases in capital expenditures or other cash
requirements which would have a material adverse effect on its liquidity.
<PAGE>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
PART II - OTHER INFORMATION
Item 6 - Exhibits
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 15, 1999.
Greenstone Roberts Advertising, Inc.
By: /s/ Ronald M. Greenstone
Ronald M. Greenstone
Chairman of the Board, Chief Executive
Officer (principal executive officer),
Chief Financial Officer (principal
financial officer), and Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JAN-31-1999
<CASH> 1,348,517
<SECURITIES> 0
<RECEIVABLES> 4,346,279
<ALLOWANCES> (989,723)
<INVENTORY> 0
<CURRENT-ASSETS> 4,903,327
<PP&E> 2,067,533
<DEPRECIATION> (1,330,495)
<TOTAL-ASSETS> 5,789,462
<CURRENT-LIABILITIES> 3,511,464
<BONDS> 0
0
0
<COMMON> 106,000
<OTHER-SE> 2,207,755
<TOTAL-LIABILITY-AND-EQUITY> 5,789,462
<SALES> 0
<TOTAL-REVENUES> 1,158,597
<CGS> 0
<TOTAL-COSTS> 783,117
<OTHER-EXPENSES> 341,748
<LOSS-PROVISION> 3,000
<INTEREST-EXPENSE> (14,895)
<INCOME-PRETAX> 48,627
<INCOME-TAX> 0
<INCOME-CONTINUING> 48,627
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48,627
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
