<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
---------
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
---
EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 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 0-6004
------
Scanforms, Inc.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 23-1704876
- - -------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
181 Rittenhouse Circle
Keystone Park, Bristol, Pa. 19007
- - ----------------------------------------- -----------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code:
(215) 785-0101
--------------
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 _____
-----
At May 8, 1995, 3,536,315 shares of common stock, $0.01 par value, were
outstanding.
Page 1 of 11
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PART I FINANCIAL INFORMATION
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Item 1. Financial Statements.
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SCANFORMS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
April 2 October 2
1995 1994
----------- -----------
Unaudited
-----------
<S> <C> <C>
A S S E T S
- - -----------
Current assets:
Cash $ 2,104,466 $ 3,522,546
Accounts receivable, net of allowance
for doubtful accounts of
$420,004 - April 2, 1995 and
$390,000 - October 2, 1994 3,707,196 3,819,234
Inventories - (Note 2) 1,205,610 834,297
Other current assets 503,400 250,100
Deferred income taxes 268,804 268,138
----------- -----------
Total current assets 7,789,476 8,694,315
----------- -----------
Property, plant and equipment at cost
net of accumulated depreciation of
$11,268,412 - April 2, 1995 and
$10,737,020 - October 2, 1994 7,851,768 7,568,548
----------- -----------
Other assets 287,524 71,522
----------- -----------
Total assets $15,928,768 $16,334,385
=========== ===========
</TABLE>
See accompanying notes to financial statements.
Page 2 of 11
<PAGE>
SCANFORMS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
April 2 October 2
1995 1994
------------ ------------
Unaudited
------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
Current liabilities:
Current maturities of long-term debt $ 1,231,644 $ 1,492,524
Accounts payable 1,784,286 1,476,507
Customer advances 2,230,969 4,109,152
Other current liabilities 645,881 429,609
Income taxes payable 282,354 561,143
------------ ------------
Total current liabilities 6,175,134 8,068,935
------------ ------------
Long-term debt, net of current
maturities shown above 3,786,219 3,152,091
------------ ------------
Deferred income taxes 1,047,813 1,128,807
------------ ------------
Stockholders' equity:
Preferred stock, $1 par value,
500,000 shares authorized;
none issued
Common stock, $0.01 par value,
6,000,000 shares authorized;
3,663,460 shares issued and
outstanding 36,735 36,635
Capital in excess of par value 1,512,371 1,509,471
Retained earnings 3,908,496 2,978,287
Note receivable from stockholder (409,822) (411,663)
Treasury stock (128,178) (128,178)
------------ ------------
Stockholders' equity 4,919,602 3,984,552
Total liabilities and stockholders'
equity $15,928,768 $16,334,385
============ ============
</TABLE>
See accompanying notes to financial statements.
Page 3 of 11
<PAGE>
Unaudited
---------
SCANFORMS, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Twenty Six Weeks Ended Thirteen Weeks Ended
April 2 April 3 April 2 April 3
1995 1994 1995 1994
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $13,498,055 $11,979,896 $6,039,953 $5,487,256
Cost of sales 9,670,393 8,689,151 4,550,361 4,035,418
----------- ----------- ---------- ----------
Gross profit 3,827,662 3,290,745 1,489,592 1,451,838
Operating expense 2,058,927 1,918,661 972,559 981,039
----------- ----------- ---------- ----------
Income from
operations 1,768,735 1,372,084 517,033 470,799
Other expenses:
Interest cost 198,329 227,827 110,963 115,053
----------- ----------- ---------- ----------
Income before income
taxes and cumulative
effect adjustment 1,570,406 1,144,257 406,070 355,746
Income taxes 640,197 399,340 163,999 100,191
----------- ----------- ---------- ----------
Income before effect
of a change in tax
accounting method 930,209 744,917 242,071 255,555
Cumulative effect
on prior years of
tax accounting
method - 260,686 - -
----------- ----------- ---------- ----------
Net income 930,209 484,231 242,071 255,555
Retained earnings-
beginning 2,978,287 1,814,766 3,666,427 2,043,442
----------- ----------- ---------- ----------
Retained earnings-
ending $ 3,908,496 $ 2,298,997 $3,908,496 $2,298,997
=========== =========== ========== ==========
Weighted average number
of common shares
outstanding 3,632,845 3,615,390 3,632,845 3,615,390
=========== =========== ========== ==========
Earnings per common
share before cumulative
effect $ 0.25 $ 0.20 $ 0.07 $ 0.07
Cumulative accounting
change - (0.07) - -
--------- --------- --------- ----------
Net earnings per
common share $ 0.25 $ 0.13 $ 0.07 $ 0.07
========= ========= ========= ==========
</TABLE>
See accompanying notes to financial statements.
Page 4 of 11
<PAGE>
Unaudited
---------
SCANFORMS, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Twenty Six Weeks Ended
April 2 April 3
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 11,815,230 $ 11,504,062
Cash paid to suppliers and employees (11,728,383) (10,007,153)
Interest received 84,960 17,155
Interest paid (284,252) (345,943)
Income taxes paid (869,111) (291,679)
------------ -------------
Net cash (used in) operating
activities (981,556) 876,442
------------ -------------
Cash flows from investing activities:
Proceeds from sale of equipment - 30
Purchases of plant and equipment (814,612) (92,029)
Payment of note from stockholder 1,841 984
------------ -------------
Net cash (used in) investing
activities (812,771) (91,015)
------------ -------------
Cash flows from financing activities:
Issuance of common shares
of capital stock 100 5,000
Paid in surplus on issuance of
common shares of capital stock 2,900 120,000
Proceeds from long-term debt 1,350,737 319,004
Repayment of subordinated debt - (793,500)
Repayment of long-term debt (965,934) (539,315)
Principle payments under capital
lease obligations (11,556) (47,976)
------------ -------------
Net cash from (used in) financing
activities 376,247 (936,787)
------------ -------------
Net (decrease) in cash (1,418,080) (151,360)
Cash:
Beginning 3,522,546 830,246
------------ -------------
Ending $ 2,104,466 $ 678,886
============ =============
</TABLE>
See accompanying notes to financial statements.
Page 5 of 11
<PAGE>
Unaudited
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SCANFORMS, INC.
STATEMENT OF CASH FLOWS
Reconciliation of Net Income to Net Cash Flows From
Operating Activities
<TABLE>
<CAPTION>
Twenty Six Weeks Ended
April 2 April 3
1995 1994
----------- -----------
<S> <C> <C>
Net Income $ 930,210 $ 484,231
Adjustments to reconcile net income
to net cash (used in) operating
activities:
Depreciation and amortization 531,392 465,614
Loss on disposal of fixed assets - 8,381
Deferred finance charges 11,894 11,950
Interest income stockholder (4,957)
Increase in allowance for doubtful
accounts 30,004 30,004
Decrease(Increase) in assets:
Accounts receivable 82,034 8,826
Inventories (371,313) 177,261
Other current assets (253,300) (163,311)
Deferred income taxes (666) -
Other assets (227,896) (81,375)
Increase(decrease) in liabilities:
Accounts payable 307,779 195,276
Customer advances (1,878,183) (528,996)
Other current liabilities 84,738 (94,810)
Income taxes payable (147,255) 69,121
Deferred income taxes (80,994) 299,227
------------ ------------
Net cash from(used in) operating
activities $ (981,556) $ 876,442
============ ============
Schedule of Noncash Investing and Financial Activities
Notes receivable from stockholders $ 1,841 $ 3,973
</TABLE>
See accompanying notes to financial statements.
Page 6 of 11
<PAGE>
Unaudited
---------
SCANFORMS, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Basis of Presentation:
- - -------------------------------
Accounting Period:
The registrant employs a fifty-two, fifty-three week year for financial
accounting purposes. Accordingly, these quarterly financial statements are for
the thirteen week and twenty six week period ended April 2, 1995 and April 3,
1994. The fiscal year ending October 1, 1995 will consist of fifty-two weeks.
The accompanying unaudited 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 Rule 10-01 of the
Regulation S-X. Accordingly, they do not include all of the information and
footnotes 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. Operating results for the thirteen weeks and twenty six weeks
ended April 2, 1995 are not necessarily indicative of the results that may be
expected for the fiscal year ending October 1, 1995. For further information,
refer to the financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the fiscal year ended October 2, 1994.
Note 2 - Inventories:
- - ---------------------
Inventories consisted of the following:
<TABLE>
<CAPTION>
April 2 October 2
1995 1994
---------- ----------
<S> <C> <C>
Raw materials $ 987,083 $ 464,377
Work in process 218,527 369,920
---------- ----------
$1,205,610 $ 834,297
========== ==========
</TABLE>
Page 7 of 11
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-------------------------------------------------
RESULTS OF OPERATIONS: TWENTY SIX WEEKS ENDED APRIL 2, 1995 VS. TWENTY SIX
WEEKS ENDED APRIL 3, 1994
The Company's net sales increased from $11,979,896 during the twenty six
weeks ended April 3, 1994 to $13,498,055 during the twenty six weeks ended April
2, 1995, a 12.7% increase, principally reflecting an expansion of the customer
base. Gross profit increased by 16.3% from $3,290,745 to $3,827,662. The
increase in gross profit was primarily the result of increased sales volume and
an improved product mix, net of a retro-active workmen's compensation insurance
premium assessment.
Operating expense was $2,058,927 and $1,918,661 for the twenty six weeks of
fiscal 1995 and fiscal 1994, respectively. The increase of 7.3% was due to
various factors including increased compensation expense, the payment of
performance bonuses, consulting fees, additional employees and trade shows.
Interest cost decreased from $227,827 to $198,329 during the twenty six weeks of
fiscal 1995 as compared to the same period in fiscal 1994. The 14.9% decrease
was due to the retirement of fixed debt.
The Company adopted FASB Statement 109 in the first 13 weeks of fiscal
1994. The cumulative effect of the change in the method of accounting for income
taxes resulting from the Company's adoption of FASB Statement 109 was to
decrease net income during the first thirteen weeks of fiscal 1994 by $260,686,
or $0.07 per share. The $260,686 decrease constitutes a non-cash item and was a
one time charge to equity.
RESULTS OF OPERATIONS: THIRTEEN WEEKS ENDED APRIL 2, 1995 VS. THIRTEEN WEEKS
ENDED APRIL 3, 1994
The Company's net sales increased from $5,487,256 during the thirteen weeks
ended April 3, 1994 to $6,039,953 during the thirteen weeks ended April 2, 1995,
a 10.1% increase, principally reflecting an expansion of the customer base.
Gross profit increased by 2.6% from $1,451,838 to $1,489,592. The disparity in
gross profit percentage increase compared to net sales was the result of the
product mix.
Operating expense was $972,559 and $981,039 for the thirteen weeks of
fiscal 1995 and fiscal 1994, respectively. The operating expense held relatively
constant.
Interest cost decreased from $115,053 to $110,963 during the thirteen weeks
of fiscal 1995 as compared to the same period in fiscal 1994. The 3.6% decrease
was due to the retirement of fixed debt.
Page 8 of 11
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
-------------------------------------------------
GENERAL:
Competition in the direct mail industry continues to be strong, and some
pricing remains depressed. More pressure has been put on the margins due to
increases in paper prices. As disclosed under "Liquidity and Capital Resources,"
the Company has purchased additional production equipment in order to service
its expanded customer base and resulting increased volume.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's working capital increased to $1,614,342 as of April 2, 1995,
an increase of $988,962 or 158.1% from $625,380 on October 2, 1994. The increase
resulted from the increase in net income for the twenty six week period.
Equipment purchased during October 1994, in the amount of $795,114, is
being financed with five year term loans in the amount of $794,310. A new water
system for one of the Goebel presses has been purchased in the amount of
$209,999. This system is being financed over three years along with the
remainder of a note due on the Goebel press in the amount of $346,428. The new
note is in the amount of $556,427.
Certain other significant balance sheet changes during the 26 weeks ended
April 2, 1995 included decreases in customer advances of $1,878,183, and in
accounts receivable of $82,034, increases in inventories of $371,313 and in
accounts payable of $307,779. The reduction in customer advances resulted from
the utilization of customer deposits to cover postage costs as the Company
delivered direct mail materials to the post office for shipment. The increase in
inventories is the result of the build up of paper inventory in anticipation of
paper price increases and spot shortages. The increase in the accounts payable
reflects the timing of vendors invoices as a result of purchases relating to the
second quarter production.
During the thirteen weeks ended April 2, 1995, the Company placed $323,789
in orders for production equipment. The Company intends to obtain term financing
for the equipment.
During the first twenty-six weeks of 1995, the Company did not utilize its
working capital line of credit with its principal lending bank. The Company
believes that the cash flow generated from operations and the amount available
under its working capital line of credit ($1,634,639 as of April 2, 1995) will
enable the Company to meet its currently anticipated operating requirements at
the levels resulting from the acquisition of equipment described above.
Page 9 of 11
<PAGE>
PART II OTHER INFORMATION
- - ------- -----------------
Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
The Company's Annual Meeting of Stockholders was held on February 28, 1995.
At the meeting, the Stockholders voted on the following matter:
Election of Directors - The Stockholders cast 2,882,344 shares for, and
withheld authority to cast 98,875 votes for, the election of Sebastian A.
Carcioppollo. The Stockholders cast 2,882,344 votes for, and withheld authority
to cast 5,600 votes for, the election of Joel R. Jacks. The Stockholders cast
2,882,344 votes for, and withheld authority to cast 3,700 votes for, the
election of Robert A. Samans.
Item 5: OTHER INFORMATION
The Company, on March 2, 1995, issued a press release announcing that it
had received two merger proposals which its Board of Directors intended to
evaluate along with any other proposals that may be forthcoming. Each of the
proposals was contingent upon Robert A. Samans, the Company's Chief Executive
Officer, remaining with the Company under terms satisfactory to him. The release
stated that the Board of Directors has not determined whether it will recommend
any transaction and that it may determine that the most desirable course of
action for the Company would be to remain independent. An independent Board
committee was formed to assist in these matters and the firm of Janney,
Montgomery, Scott, Inc. was retained for financial advisory purposes.
Discussions concerning the proposal, and related issues, from one party have
reached an impasse and no offer has been received from the other. The
independent Board committee is expected to continue in effect for a period so as
to be able to consider any added proposals that may be developed by its
financial advisory firm.
Item 6: EXHIBITS AND REPORTS ON FORM 8-K
b. No reports on Form 8-K were filed during the quarter for which this
report is filed.
Page 10 of 11
<PAGE>
SIGNATURE
---------
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.
SCANFORMS, INC.
DATE: May 8, 1995
/s/ Robert A. Samans
---------------------------
Robert A. Samans, President
/s/ William P. Carey
---------------------------
William P. Carey, Treasurer
(Principle Financial and
Accounting Officer)
Page 11 of 11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-01-1995
<PERIOD-START> OCT-03-1994
<PERIOD-END> APR-02-1995
<CASH> 2,104,466
<SECURITIES> 0
<RECEIVABLES> 3,707,196
<ALLOWANCES> 420,000
<INVENTORY> 1,205,610
<CURRENT-ASSETS> 7,789,476
<PP&E> 19,120,180
<DEPRECIATION> 11,268,412
<TOTAL-ASSETS> 15,928,768
<CURRENT-LIABILITIES> 6,175,134
<BONDS> 0
<COMMON> 36,735
0
0
<OTHER-SE> 4,882,867
<TOTAL-LIABILITY-AND-EQUITY> 15,928,768
<SALES> 13,498,055
<TOTAL-REVENUES> 13,498,055
<CGS> 9,670,393
<TOTAL-COSTS> 9,670,393
<OTHER-EXPENSES> 2,058,927
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 198,329
<INCOME-PRETAX> 0
<INCOME-TAX> 640,197
<INCOME-CONTINUING> 930,209
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 930,209
<EPS-PRIMARY> 0
<EPS-DILUTED> 0.25
</TABLE>
