<PAGE>
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 June 30, 1997, 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
--------
T/SF COMMUNICATIONS CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 73-1341805
----------------------- --------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
2407 East Skelly Drive, Tulsa, Oklahoma 74105
--------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (918) 747-2600
--------------
N/A
- ------------------------------------------------------------------------------
(Former Name of Registrant)
Securities registered pursuant to Section 12(b) of the Act: Common Stock, $0.10
Par Value Per Share.
At August 13, 1997, there were 3,331,646 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
---- ----
<PAGE>
T/SF COMMUNICATIONS CORPORATION
INDEX
Page No.
--------
PART I Financial Information
Item 1
------
Consolidated Balance Sheets - June 30, 4-5
1997 (unaudited) and December 31, 1996
Consolidated Statements of Operations - 6
Three Months and Six Months Ended June
30, 1997 and 1996 (unaudited)
Consolidated Statements of Cash Flows - 7-8
Six Months Ended June 30, 1997 and 1996
(unaudited)
Notes to Consolidated Financial 9-10
Statements
Item 2
------
Management's Discussion and Analysis of 10-12
Financial Condition and Results of
Operations
PART II Other Information
Item 6
------
Exhibits and Reports on Form 8-K 12
2
<PAGE>
PART I
Item 1. Financial Information
3
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,155 $ 2,257
Accounts receivable, less reserve for doubtful accounts
of $547 in 1997 and $412 in 1996 11,984 10,194
Inventories 217 193
Deferred tax assets 631 896
Contract receivable and other current assets 2,373 2,604
Refundable income taxes 884 2,102
----------- ----------
Total current assets 20,244 18,246
----------- ----------
NOTES RECEIVABLE AND INVESTMENTS 1,208 1,203
----------- ----------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Exposition equipment 3,716 3,107
Data processing and office furniture and equipment 10,008 8,635
----------- ----------
13,724 11,742
Less - accumulated depreciation 8,223 7,182
----------- ----------
5,501 4,560
----------- ----------
DEFERRED TAX ASSETS 404 578
----------- ----------
INTANGIBLES AND OTHER ASSETS, NET 31,880 31,395
----------- ----------
$ 59,237 $ 55,982
=========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 20 $ 500
Accounts payable 6,153 3,496
Accrued liabilities 2,991 5,028
Deferred revenue 5,341 2,343
Current portion of long-term debt 838 1,133
----------- ----------
Total current liabilities 15,343 12,500
----------- ----------
LONG-TERM DEBT 3,110 3,493
----------- ----------
DEFERRED CONTRACT LIABILITIES AND CREDITS 1,478 1,803
----------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock, $10 par value, 1,000 shares authorized -- --
Common stock, $.10 par value, 10,000 shares authorized 328 332
Additional paid-in capital 12,445 13,754
Retained earnings 26,533 24,100
----------- ----------
Total stockholders' equity 39,306 38,186
----------- ----------
$ 59,237 $ 55,982
=========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- --------------------------
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Operating revenues $ 19,049 $ 15,622 $ 36,179 $ 29,306
Interest income and other 460 666 756 1,086
--------- --------- ---------- ---------
19,509 16,288 36,935 30,392
--------- --------- ---------- ---------
COSTS AND EXPENSES:
Operating costs 11,094 9,645 21,838 18,383
General and administrative 4,593 3,429 8,356 6,576
Interest 130 137 285 288
Depreciation and amortization 1,160 914 2,272 1,798
--------- --------- ---------- ---------
16,977 14,125 32,751 27,045
--------- --------- ---------- ---------
INCOME BEFORE INCOME TAXES 2,532 2,163 4,184 3,347
PROVISION FOR INCOME TAXES (1,035) (861) (1,751) (1,339)
--------- --------- ---------- ---------
NET INCOME $ 1,497 $ 1,302 $ 2,433 $ 2,008
========= ========= ========== =========
PER SHARE AMOUNTS:
Earnings per common and common
equivalent share $ 0.42 $ 0.37 $ 0.68 $ 0.57
========= ========= ========== =========
CASH DIVIDENDS PER COMMON SHARE $ -- $ -- $ -- $ --
========= ========= ========== =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
6
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,433 $ 2,008
----------- ----------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 2,272 1,798
Accretion of interest expense 115 114
Loss on sale of assets 210 --
Changes in assets and liabilities:
Accounts receivable and refundable
income taxes (355) (707)
Inventories 77 (45)
Contract receivable and
other current assets (248) 360
Intangibles and other assets 323 (146)
Accounts payable and accrued liabilities (40) (1,130)
Deferred revenue 2,998 1,386
Deferred income taxes 439 438
----------- ----------
Total adjustments 5,791 2,068
----------- ----------
Net cash provided by operating activities 8,224 4,076
----------- ----------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
7
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Collections on contract and notes receivable 563 740
Capital expenditures (2,675) (1,256)
Proceeds from the sale of assets 35 --
Payments for acquisitions, net of cash acquired (939) --
Payments on deferred contract liabilities (339) (275)
Net additions to investments (143) (227)
---------- ---------
Net cash used in investing activities (3,498) (1,018)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt (1,016) (3,069)
Payments under bank line-of-credit (500) --
Issuance of common stock 63 57
Repurchase of common stock (1,375) --
---------- ---------
Net cash used in financing activities (2,828) (3,012)
---------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,898 46
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,257 13,383
---------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,155 $ 13,429
========== =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
8
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
For the three months and six months ended June 30, 1997 and 1996
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 of
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 normal recurring
accruals) considered necessary for a fair presentation have been included.
Results of operations for the three months and six months ended June 30, 1997,
are not necessarily indicative of the results to be expected for the year ending
December 31, 1997. 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, 1996.
2. Common Stock and Earnings Per Share
Weighted average common and common equivalent shares issued and outstanding
during the three months and six months ended June 30, 1997, were 3,548,000 and
3,552,000, respectively, and the weighted average equivalent shares for the
three months and six months ended June 30, 1996, were 3,546,000 and 3,526,000,
respectively.
3. Recent Pronouncement
In February, 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings Per Share ("SFAS No. 128"), which establishes new
standards for computing and presenting earnings per share. The provisions of
SFAS No. 128 are effective for earnings per share calculations for periods
ending after December 15, 1997. 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. If the provisions of SFAS No. 128 had been adopted at the
beginning of 1997, earnings per share would have been as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30,
------------------ ----------------
1997 1996 1997 1996
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Earnings per share:
Basic $ .45 $ .39 $ .74 $ .60
Diluted .42 .37 .68 .57
</TABLE>
9
<PAGE>
4. Income Taxes
The income tax provision for the three months and six months ended June 30,
1997 and 1996, does 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 and state income taxes.
5. Related Party Transaction
In January, 1997, 50,000 shares of common stock of the Company were acquired
for $27.50 per share, the weighted average closing market price on the American
Stock Exchange for one week prior to the purchase less $0.50 discount per share,
or an aggregate cash payment of $1,375,000, from Boatman's Trust Company, a five
percent (5%) holder of the Company's common stock prior to this transaction, as
Trustee of the Hayden Barnett Kiser Charitable Unitrust.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
Results of Operations
---------------------
In August, 1996, the Company acquired 100% of CORSEARCH, Inc. (`CORSEARCH"),
a provider of trademark and tradename research. In February, 1997, the Company
increased its ownership in Casino Publishing Company, publisher of the trade
journal, Casino Executive, to 88%, which is included in the Company's
consolidated operations since that date.
Revenues of $19,509,000 and $36,935,000 for the three months and six months
ended June 30, 1997, respectively, were $3,221,000 and $6,543,000 higher,
respectively, than the three months and six months ended June 30, 1996.
Information services revenue increased approximately $2,484,000 for the three
months and $5,479,000 for the six months ended June 30, 1997, of which
approximately $1,710,000 and $3,757,000, respectively, is attributable to
CORSEARCH and $774,000 and $1,722,000, respectively, is attributable to
continued growth in employment histories volume and criminal record volume, and
higher average price from motor vehicle reports (MVR'S) attributable to
continued increase in the MVR Express volume, a premium service. Exposition
services revenue increased $897,000 for the three months and $1,103,000 for the
six months ended June 30, 1997 consisting mainly of an increase in trade show
directories produced during the second quarter of 1997 and the effect of higher
fees effective in early 1996 for exhibitor services, reduced by lower
registration services due to bi-annual trade shows in 1996. Gaming media
services (formerly publishing) revenue increased approximately $270,000 for the
six months ended June 30, 1997 related to Casino Executive trade journal revenue
from the date that a majority of Casino Publishing Company was acquired by the
Company reduced by fewer pages of advertising in IGWB due to overall industry
reduction in advertising, the loss of several large advertisers in the lottery
segment of the gaming industry and elimination of two trade shows in 1997.
Interest income and other for the three months and six months ended June 30,
1997, is approximately $200,000 and $300,000, respectively, lower than the same
periods in 1996, which is substantially all attributable to the reduction in
interest earned in 1997 since the cash and short-term investments in 1996 were
used to acquire CORSEARCH, partially offset by equity earnings in 1997 from the
Company's interest in Gaming for Africa and interest income related to an income
tax refund.
10
<PAGE>
Operating costs for the three months and six months ended June 30, 1997, are
$1,449,000 and $3,455,000, respectively, higher than the same periods in 1996.
Information services costs increased approximately $1,074,000 and $2,271,000 for
the three months and six months ended June 30, 1997, respectively, as compared
with the same periods in 1996, which consists of $870,000 and $1,668,000,
respectively, related to CORSEARCH, with substantially all of the remainder
related to the criminal records volume increase and new product costs.
Exposition services costs increased approximately $420,000 and $972,000 during
the three months and six months ended June 30, 1997, respectively, as compared
with the same periods in 1996, attributable to the direct costs of the increase
in directories published during the six months ended June 30, 1997, and
additional payroll costs in 1997 related to the increase in operating personnel
throughout 1996 and early 1997. Gaming media services costs are approximately
$45,000 lower during the three months and $212,000 higher during the six months
ended June 30, 1997 as compared with the prior year, related mainly to Casino
Executive costs in 1997, reduced by lower trade show costs due to elimination in
1997 of two trade shows.
General and administrative expenses are $1,164,000 and $1,780,000 higher for
the three months and six months ended June 30, 1997, respectively, as compared
with the same periods in 1996, substantially all which are attributable to
CORSEARCH and Casino Executive. Information services expenses are approximately
$200,000 higher in 1997 related to growth. Included in 1996 was a provision for
losses on prepaid production costs that had been made to a digital information
vendor during 1995 and early 1996.
Interest expense did not change significantly during three months and six
months ended June 30, 1997, as compared with the same periods in 1996, because
the decrease in interest expense attributable to a reduction in debt from
principal payments during the past year was offset by interest on new debt
incurred related to the acquisition of CORSEARCH.
Depreciation and amortization are $246,000 and $474,000 higher for the three
months and six months ended June 30, 1997, respectively, as compared with the
same periods in 1996, substantially all related to CORSEARCH, including
amortization of goodwill related to this acquisition.
Financial Condition
-------------------
The changes in the Company's financial condition during the six months ended
June 30, 1997, are mainly seasonal changes related to the Company's operations.
At June 30, 1997, no advances on the Company's bank line of credit were
outstanding. In May, 1997, the Company acquired a majority interest in Galaxy
Expocard Europe, B.V. which had previously licensed the Company's registration
technology and, in February, 1997, the Company acquired the majority interest in
Casino Publishing Company, both of which were acquired with cash flows from
operations.
11
<PAGE>
Liquidity
---------
As of June 30, 1997, the Company's $16,000,000 line of credit that could be
used for acquisitions and working capital expired. No amounts were outstanding
under this line of credit. Although, the bank indicated an interest in renewing
the line of credit, the Company has not pursued the renewal of this line of
credit at this time.
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 June 30, 1997.
12
<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.
T/SF COMMUNICATIONS CORPORATION
(Registrant)
Date: August 13, 1997 By: /s/ Howard G. Barnett, Jr.
---------------------------------------------
Howard G. Barnett, Jr.
Chairman, Chief Executive Officer
and President
Date: August 13, 1997 By: /s/ J. Gary Mourton
----------------------------------------------
J. Gary Mourton, Senior Vice
President-Finance and Chief
Financial Officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,155
<SECURITIES> 0
<RECEIVABLES> 12,351
<ALLOWANCES> 547
<INVENTORY> 217
<CURRENT-ASSETS> 20,244
<PP&E> 13,724
<DEPRECIATION> 8,223
<TOTAL-ASSETS> 59,237
<CURRENT-LIABILITIES> 15,343
<BONDS> 3,110
0
0
<COMMON> 328
<OTHER-SE> 38,978
<TOTAL-LIABILITY-AND-EQUITY> 59,237
<SALES> 36,179
<TOTAL-REVENUES> 36,935
<CGS> 21,838
<TOTAL-COSTS> 21,838
<OTHER-EXPENSES> 8,356
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 285
<INCOME-PRETAX> 4,184
<INCOME-TAX> 1,751
<INCOME-CONTINUING> 2,433
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,433
<EPS-PRIMARY> .68
<EPS-DILUTED> .68
</TABLE>
