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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended March 31, 1995, or
[_] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition period from ______ to ______
Commission file number 1-10263
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T/SF COMMUNICATIONS CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 73-1341805
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2407 East Skelly Drive, Tulsa, Oklahoma 74105
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (918) 747-2600
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N/A
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(Former Name of Registrant)
Securities registered pursuant to Section 12(b) of the Act; Common Stock, $0.10
Par Value Per Share.
At May 11, 1995, there were 4,894,004 shares of the registrant's Common Stock
outstanding.
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 Exchange Act of 1934 during
the preceding 12 months (or for such shorter period 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
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T/SF COMMUNICATIONS CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C> <C>
PART I Financial Information
Item 1 Financial Statements
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Consolidated Balance Sheets - March 31, 1995
(unaudited) and December 31, 1994 4-5
Consolidated Statements of Operations - Three
Months ended March 31, 1995 and 1994
(unaudited) 6
Consolidated Statements of Cash Flows - Three
Months Ended March 31, 1995 and 1994
(unaudited) 7-8
Notes to Consolidated Financial Statements 9-10
Item 2 Management's Discussion and Analysis of
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Financial Condition and Results of Operations 10-11
PART II Other Information
Item 6 Exhibits and Reports on Form 8-k 12
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</TABLE>
2
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PART I
Item 1. Financial Information
3
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T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands, except Per Share Amounts)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1995 1994
-------- --------
(UNAUDITED)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,901 $ 4,311
Short-term investments 1,000 2,000
Accounts receivable, less reserve for doubtful
accounts of $565 in 1995 and $506 in 1994 11,100 8,535
Inventories 449 596
Current contract receivable and other current assets 6,344 6,347
Refundable income taxes 167 167
Assets held for sale 6,080 6,287
Loan to parent company 2,446 1,250
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Total current assets 31,487 29,493
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CONTRACT RECEIVABLE AND INVESTMENTS 1,799 2,419
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PROPERTY, PLANT AND EQUIPMENT, AT COST
Exposition equipment 3,017 2,712
Other 5,206 4,696
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8,223 7,408
Less - accumulated depreciation 3,188 2,824
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5,035 4,584
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DEFERRED TAX ASSETS 1,144 732
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INTANGIBLES AND OTHER ASSETS, NET 12,212 11,909
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$ 51,677 $ 49,137
========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1995 1994
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(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 4,693 $ 4,388
Accrued liabilities 8,641 7,055
Deferred tax liabilities 1,063 823
Current portion of long-term debt 1,092 1,051
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Total current liabilities 15,489 13,317
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LONG-TERM DEBT, NET OF CURRENT PORTION 3,611 3,674
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DEFERRED CONTRACT LIABILITES 2,021 2,179
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STOCKHOLDERS' EQUITY:
Preferred stock, $10 par value, 1,000 shares
authorized, no shares issued and
outstanding - -
Common stock, $.10 par value, 10,000 shares
authorized, 4,865 shares issued and
outstanding 486 486
Additional paid-in capital 20,242 20,242
Retained earnings 9,828 9,239
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Total stockholders' equity 30,556 29,967
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$ 51,677 $ 49,137
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1995 1994
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(Unaudited)
<S> <C> <C>
REVENUES
Publishing $ 3,700 $ 3,198
Exposition services 5,827 3,904
Information services 4,246 4,071
Other operating income and interest 247 589
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14,020 11,762
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COSTS AND EXPENSES
Publishing 2,441 2,313
Exposition services 3,964 2,705
Information services 2,703 2,436
General and administrative 2,840 2,094
Interest 138 136
Depreciation and amortization 925 610
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13,011 10,294
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INCOME BEFORE INCOME TAXES 1,009 1,468
PROVISION FOR INCOME TAXES ( 420 ) ( 637 )
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NET INCOME $ 589 $ 831
======== ========
PER SHARE AMOUNTS:
Earnings per common and
common equivalent share $ 0.12 $ 0.16
======== ========
Cash dividends per common share $ - $ -
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1995 1994
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(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 589 $ 831
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Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 925 610
Accretion of interest expense 14 8
(Gain) Loss on sale of property, plant and equipment 19 ( 4)
Changes in assets and liabilities:
Accounts receivable and refundable
income taxes ( 2,566) ( 2,121)
Inventories 147 16
Current contract receivable and
other current assets ( 541) ( 184)
Intangibles and other assets ( 396) 171
Accounts payable and accrued liabilities 1,806 1,225
Deferred income taxes ( 36) -
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Total adjustments ( 628) ( 279)
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Net cash provided by (used in) operating activities ( 39) 552
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CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of short-term investments 1,000 -
Capital expenditures ( 1,125) ( 493)
Collections on contract receivable 1,438 760
Payments on deferred contract liabilities ( 222) ( 152)
Net additions to investments ( 73) -
Proceeds from the sale of property,
plant and equipment 16 12
Payments for acquisitions, net of cash acquired - ( 1,114)
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Net cash provided by (used in) investing activities 1,034 ( 987)
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</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1995 1994
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(Unaudited)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under bank lines-of-credit - 500
Principal payments of long-term debt ( 240) ( 695)
Loan to parent company ( 1,165) -
Issuance of common stock - 347
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Net cash provided by (used in) financing activities ( 1,405) 152
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NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ( 410) ( 283)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,311 2,633
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,901 $ 2,350
====== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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For the Three Months Ended March 31, 1995 and 1994
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10
Regulation S-X of the Securities and Exchange Commission. Accordingly, the
financial statements do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of only normal recurring
accruals) considered necessary for a fair presentation have been included.
Results of operations for the three months ended March 31, 1995, are not
necessarily indicative of the results to be expected for the year ending
December 31, 1995. For further information, refer to the consolidated financial
statements and related notes thereto included in the Company's annual report on
Form 10-K for the year ended December 31, 1994.
2. Common Stock and Earnings Per Share
There were 4,864,818 and 5,298,718 weighted average shares of common
stock issued and outstanding during the three months ended March 31, 1995 and
1994, respectively.
3. Income Taxes
The income tax provisions for the three months ended March 31, 1995 and
1994, do not bear a normal relationship to the statutory federal income tax rate
of 34% mainly as a result of amortization of goodwill related to acquisitions
which is not deductible for income tax purposes.
4. Proposed Merger
On January 25, 1995, the Company entered into an Agreement and Plan of
Merger, as amended, with Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab-Fox")
whereby, subject to approval of each company's stockholders, Tribune/Swab-Fox
will be merged with and into the Company. Tribune/Swab-Fox stockholders (other
than the Company) will receive 0.1255 of a share of the Company's common stock
or, if elected, and subject to certain limitations, $0.88 in cash, for each
Tribune/Swab-Fox share.
5. Related Party Transactions
Management and administrative services are provided by the Company's
corporate staff to Tribune/Swab-Fox which, at March 31, 1995, owned 78% of the
Company's outstanding common stock. The charge of $45,000 to Tribune/Swab-Fox
in 1995 and $23,333 per month in 1994 for these services is based on an
agreement between Tribune/Swab-Fox and the Company (which is subject to review
again if the proposed merger is not approved by both companies' stockholders
9
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at each of the Speacial Meeting of Stockholders on May 24, 1995), and is
reflected in the accompanying statements of operations as a reduction of general
and administrative expenses.
In March, 1995, upon exercise of an option, the Company acquired 389,000
shares of Tribune/Swab-Fox Class A Common Stock from the Profit Sharing Plan and
Trust of Tribune/Swab-Fox for $291,750, with a cash payment of $72,937 and a
note payable for $218,813. The Company now owns 1,142,729 shares of
Tribune/Swab-Fox.
6. Assets Held For Sale
The Company's Board of Directors has approved for sale and the Company
has engaged an investment banker to sell three of BMT Communications, Inc.'s
trade journals. Accordingly, the net assets related to these trade journals are
reflected as "Assets held for sale" in the balance sheets. Publishing revenues
include approximately $2,930,000 and $2,615,000, related to the trade journals
held for sale for the three months ended March 31, 1995 and 1994, respectively.
ITEM 2. Management's Discussion and Analysis Of Financial Condition and Results
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Of Operations
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Results Of Operations
- ---------------------
Operations for the three months ended March 31, 1995, has the operations
of Galaxy Registration, Inc. ("Galaxy") for three months whereas its operations
are included in exposition services for only the one month in 1994 after the
effective acquisition date of March 1, 1994.
Revenues of $14,020,000 for the three months ended March 31, 1995, were
$2,258,000 higher than for the same period ended March 31, 1994,. The revenue
increase consists of $1,640,000 related to Galaxy as noted above, and a $510,000
increase in trade publishing advertising revenues of which $316,000 is
attributable to the three trade journals being held for sale and $194,000 is
attributable to International Gaming and Wagering Business. The information
services revenue increase of $175,000 for the three months ended March 31,
1995, consists of increases in employment histories revenue, both higher volume
and an increase in the price of employment histories in early 1994, volume
increase in the criminal records product introduced in 1993, and an increase in
MVR revenues (due mainly to higher average revenue per MVR resulting from a
change in the MVR customer mix), offset by a $555,000 decrease during the three
months ended March 31, 1995, in long distance telephone resale revenue as a
result of the Company exiting this business during the latter part of the first
quarter of 1994 due to competitive and regulatory considerations.
Other operating income for the three months ended March 31, 1995, is
lower than 1994 since a co-sponsored trade show for the convenience store
industry occurred in April, 1995, whereas this trade show was held in March,
1994.
Publishing costs and expenses were $128,000 higher for the three months
ended March 31, 1995, as compared with the same period in 1994, which is related
to the increase in
10
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advertising pages in 1995. Exposition services costs and expenses increased
during the three months ended March 31, 1995, mainly related to Galaxy.
Information services costs and expenses were $267,000 higher for the three
months ended March 31, 1995, as compared with 1994. The increase in costs
related to new employment screening services which were commenced in mid-1994
and the increase in personnel and communications costs related to higher
volumes, was partially offset by the decrease of approximately $470,000 for the
three months ended March 31, 1995, related to long distance telephone resale
costs because of exiting this business in the latter part of the first quarter
of 1994.
General and administrative expenses were $746,000 higher for the three
months ended March 31, 1995, as compared with the same period in 1994. Galaxy
general and administrative expenses were $703,000 higher in 1995 and each of the
other divisions had small increases related to continued growth, whereas
corporate expenses were approximately $100,000 lower for the three months in
1995.
Interest expenses did not significantly change for the three months
ended March 31, 1995, as compared with the same period in 1994, because higher
interest rates on debt tied to the prime rate offset the reduction in interest
related to principal payments on debt during the past year.
Depreciation and amortization increased $315,000 for the three months
ended March 31, 1995, as compared with the same period in 1994, substantially
all related to Galaxy (both the number of months Galaxy was included in each
year and depreciation related to Galaxy's 1994 and 1995 capital expenditures,
which have a short depreciable life, to handle Galaxy's growth in 1994 and 1995.
Provision for income taxes as a percent of income before income taxes
is higher than the statutory federal income tax rate since goodwill amortization
related to acquisitions is not deductible for income tax purposes.
Financial Condition
-------------------
The changes in the Company's financial condition during the three months
ended March 31, 1995, are mainly seasonal changes related to the Company's
exposition services and trade publishing operations. The increase in outstanding
balance of the loan to parent company is under a short-term line-of-credit,
details of which are set forth in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994.
11
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial data schedule.
(b) Reports on Form 8-K
No report on Form 8-K was filed during the quarter ended March 31,
1995.
12
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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.
T/SF COMMUNICATIONS CORPORATION
(Registrant)
Date: March 11, 1995 By: /s/ Howard G. Barnett, Jr.
------------------------------------
Howard G. Barnett, Jr., Chairman of
the Board, Chief Executive Officer
and President
Date: March 11, 1995 By: /s/ J. Gary Mourton
------------------------------------
J. Gary Mourton, Senior Vice
President-Finance and Chief
Financial Officer
13
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EXHIBIT INDEX
The following exhibits are included as part of this quarterly
report on Form 10-Q:
27. Financial data schedule.
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM QUARTER
PAPER FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 3,901
<SECURITIES> 1,000
<RECEIVABLES> 11,665
<ALLOWANCES> 565
<INVENTORY> 449
<CURRENT-ASSETS> 31,487
<PP&E> 8,223
<DEPRECIATION> 3,188
<TOTAL-ASSETS> 51,576
<CURRENT-LIABILITIES> 15,388
<BONDS> 3,611
<COMMON> 486
0
0
<OTHER-SE> 30,556
<TOTAL-LIABILITY-AND-EQUITY> 51,576
<SALES> 13,773
<TOTAL-REVENUES> 14,020
<CGS> 9,108
<TOTAL-COSTS> 12,873
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 138
<INCOME-PRETAX> 1,009
<INCOME-TAX> 420
<INCOME-CONTINUING> 589
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 589
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
