<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 December 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 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 _____
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At February 13, 1996, 3,546,648 shares of common stock, $0.01 par value, were
outstanding.
Page 1 of 9
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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>
ASSETS DECEMBER 31, OCTOBER 1,
1995 1995
------------- -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,574,476 $ 2,910,264
Note receivable - current portion 7,449 7,747
Accounts receivable, net of allowance for
doubtful accounts of $427,502 - December 31,
1995 and $410,000 - October 1, 1995 5,127,932 3,673,623
Inventories (Note 2) 1,257,990 1,665,313
Other current assets 498,856 316,012
Deferred income taxes 249,452 266,030
------------ ------------
Total current assets 11,716,155 8,838,989
------------ ------------
Property, plant and equipment - at cost, net of
accumulated depreciation of $12,115,000 -
December 31, 1995 and $11,824,356 - October 1,
1995 7,484,474 7,768,880
------------ ------------
Other assets:
Note receivable - long-term portion 10,363 12,201
Other 93,946 73,136
------------ ------------
Total other assets 104,309 85,337
------------ ------------
$19,304,938 $16,693,206
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 735,390 $ 730,692
Accounts payable 1,803,195 1,738,699
Customer advances 4,313,556 3,045,342
Income taxes payable 612,924 189,549
Other current liabilities 676,495 563,196
------------ ------------
Total current liabilities 8,141,560 6,267,478
------------ ------------
Long-term debt, net of current maturities 3,718,490 3,900,535
------------ ------------
Deferred income taxes 899,398 960,419
------------ ------------
Stockholders' equity:
Preferred stock, $1 par;
500,000 shares authorized; none issued
Common stock, $0.01 par; - -
6,000,000 shares authorized; issued and
outstanding 3,546,648 35,467 35,467
Capital in excess of par 1,388,461 1,388,461
Retained earnings 5,528,561 4,548,827
Less: Note receivable from stockholder (406,999) (407,981)
------------ ------------
Total stockholders' equity 6,545,490 5,564,774
------------ ------------
$19,304,938 $16,693,206
============ ============
</TABLE>
See accompanying notes to financial statements.
Page 2 of 9
<PAGE>
Unaudited
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SCANFORMS, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Thirteen Weeks Ended
December 31 January 1
1995 1995
----------- ----------
<S> <C> <C>
Net sales $8,566,130 $7,458,102
Cost of sales 5,740,918 5,120,031
----------- -----------
Gross profit on sales 2,825,212 2,338,071
Operating expense 1,192,978 1,086,369
----------- -----------
Income from operations 1,632,234 1,251,702
Other expenses:
Interest cost 6,737 87,366
----------- -----------
Income before income taxes 1,625,497 1,164,336
Income taxes 645,763 476,196
----------- -----------
Net income 979,734 688,140
Retained earnings-beginning 4,548,827 2,978,287
----------- -----------
Retained earnings-ending $5,528,561 $3,666,427
=========== ===========
Weighted average number of shares
fully diluted 3,668,296 3,617,262
=========== ===========
Net earnings per common share
fully diluted $ 0.27 $ 0.19
=========== ===========
</TABLE>
See accompanying notes to financial statements.
Page 3 of 9
<PAGE>
Unaudited
---------
SCANFORMS, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Thirteen Weeks Ended
December 31 January 1
1995 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 8,396,406 $ 5,041,918
Cash paid to suppliers and employees (6,269,637) (5,602,742)
Interest received 96,887 46,404
Interest paid (111,241) (136,940)
Income taxes paid (266,831) (612,650)
----------- -----------
Net cash (used in) operating
activities 1,845,584 (1,264,010)
----------- -----------
Cash flows from investing activities:
Purchases of plant and equipment (6,238) (788,186)
Additional CSV on life insurance (905) -
Payment of vendor note receivable 2,136 -
Payment of note from stockholder 982 920
----------- -----------
Net cash (used in) investing
activities (4,025) (787,266)
----------- -----------
Cash flows from financing activities:
Issuance of common shares of
capital stock - 100
Paid in surplus on issuance of
common shares of capital stock - 2,900
Proceeds from long-term debt - 603,000
Repayment of long-term debt (177,347) (304,950)
Principle payments under capital
lease obligations - (6,061)
----------- -----------
Net cash from (used in) financing
activities (177,347) 294,989
----------- -----------
Net increase (decrease) in cash 1,664,212 (1,756,287)
Cash:
Beginning 2,910,264 3,522,546
----------- -----------
Ending $ 4,574,476 $ 1,766,259
=========== ===========
</TABLE>
See accompanying notes to financial statements.
Page 4 of 9
<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>
Thirteen Weeks Ended
December 31 January 1
1995 1995
------------ ------------
<S> <C> <C>
Net Income $ 979,734 $ 688,140
Adjustments to reconcile net income
to net cash (used in) operating
activities:
Depreciation and amortization 290,644 265,035
Deferred finance charges 2,199 5,947
Increase in allowance for doubtful
accounts 15,002 15,002
Decrease(Increase) in assets:
Accounts receivable (1,469,311) (1,401,095)
Inventories 407,323 (471,526)
Other current assets (182,844) 138,428
Deferred income taxes 16,578 (333)
Other assets (22,104) (47,671)
Increase(decrease) in liabilities:
Accounts payable 64,496 708,367
Customer advances 1,268,214 (1,128,413)
Other current liabilities 113,299 100,229
Income taxes payable 423,375 (95,338)
Deferred income taxes (61,021) (40,782)
------------ ------------
Net cash (used in) operating activities $ 1,845,584 $(1,264,010)
============ ============
</TABLE>
See accompanying notes to financial statements.
Page 5 of 9
<PAGE>
Unaudited
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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 periods ended December 31, 1995 and January 1, 1995. The
fiscal year ending September 30, 1996 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 ended December 31, 1995
are not necessarily indicative of the results that may be expected for the
fiscal year ending September 30, 1996. 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 1, 1995.
Note 2 - Inventories:
- ---------------------
Inventories consisted of the following:
<TABLE>
<CAPTION>
December 31 October 1
1995 1995
----------- -----------
<S> <C> <C>
Raw materials $ 968,579 $1,288,936
Work in process 289,411 376,377
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$1,257,990 $1,665,313
========== ==========
</TABLE>
Note 3 - Subsequent events:
- ---------------------------
The Company reported on February 1, 1996 that a management group,
consisting of its President and one of its Directors, has advised that it
intends to present to the Company's Board of Directors a proposal which will pay
$3.60 cash per share to the Company's public shareholders and would result in
the Company becoming privately held by the management group. The proposal
resulted from a process commenced with a public announcement in March 1995 of
the Company's willingness to consider proposals for a significant transaction.
Any such proposal would be contingent upon the negotiation and completion of
bank financing by the management group and of final documentation relating to
the transaction, the receipt of a fairness opinion and the approval of the Board
of Directors, including its independent Director, and of the shareholders at a
special meeting.
Page 6 of 9
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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RESULTS OF OPERATIONS: THIRTEEN WEEKS ENDED DECEMBER 31, 1995 VS. THIRTEEN
--------------------------------------------------------------------------
WEEKS ENDED JANUARY 1, 1995
---------------------------
The Company's net sales increased from $7,458,102 during the thirteen
weeks ended January 1, 1995 to $8,566,130 during the thirteen weeks ended
December 31, 1995, a 14.9% increase, principally reflecting an increase in
customer demand. Gross profit increased by 20.8% from $2,338,071 to
$2,825,212. The increase in gross profit was primarily the result of the
higher sales volume which contributed to more efficient productivity. In
addition declining paper prices during this period plus a special order from
one of the Company's larger customers contributed to the high margin.
Operating expense was $1,192,978 and $1,086,369 for the first thirteen
weeks of fiscal 1996 and fiscal 1995, respectively. The increase of 9.8% was
due to various factors including increased compensation expense, the payment
of performance bonuses, consulting fees and an increase in costs related to
acquisition and merger considerations and the preparation of the annual
report.
Interest cost decreased from $87,366 to $6,737 during the first thirteen
weeks of fiscal 1996 as compared to the same period in fiscal 1995. The
decrease was due primarily to the reduction of interest rates under the loan
agreements with the new lending institution which occurred in July of 1995,
and the additional interest income earned as a result of higher cash balances.
GENERAL:
--------
Competition in the direct mail industry continues to be strong, and
overall pricing remains somewhat depressed. The Company, because of its
investment in upgrading its press quality performance and with the acquisition
of additional personalization equipment, is in a good position to compete in
the tight market.
As explained in Note 3 of the financial statements, the Company has been
advised that a proposal will be forthcoming from a management group to acquire
all the common stock of the public shareholders and to take the Company
private.
Page 7 of 9
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (continued)
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LIQUIDITY AND CAPITAL RESOURCES:
--------------------------------
The Company's working capital increased to $3,574,595 as of December 31,
1995, an increase of $1,003,084 or 30.0% from $2,571,511 on October 1, 1995.
The increase was the result of an increase in net income for the thirteen week
period.
Certain other significant balance sheet changes during the 13 weeks ended
December 31, 1995 included an increase in customer advances of $1,268,214, an
increase in accounts receivable of $1,469,311, a decrease in inventories of
$407,323 and an increase in income taxes payable of $423,375. The increase in
customer advances represents customer payments to cover postage costs, as the
Company delivers direct mail materials to the post office for shipment over
the near future. Accounts receivable were higher due to increased billings in
the first quarter of 1996, reflecting increased sales. The decrease in
inventories is the result of the consumption of built up paper inventory
during the 13 week period and the higher billings of work-in-process as of the
end of the period. The increase in the income taxes payable is the result of
the higher profits in the first quarter of 1996 versus the first quarter of
1995 and the timing differences between the accrual and the payment of income
taxes.
The Company is in the process of purchasing additional production
equipment for product personalization in the amount of $972,800, which is
anticipated to be financed by five year term purchase money debt and for the
press area in the amount of $98,000, which will be financed by working
capital. These acquisitions are necessary to service the Company's existing
customer base and remain competitive.
During the first quarter of 1996, 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 ($1,246,446 as of December 31, 1995) will
enable the Company to meet its currently anticipated operating requirements
during the fiscal year 1996.
Page 8 of 9
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PART II OTHER INFORMATION
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Item 5: OTHER INFORMATION
The Company reported on February 1, 1996 that a management group,
consisting of its President and one of its Directors, has advised that it
intends to present to the Company's Board of Directors a proposal which
will pay $3.60 cash per share to the Company's public shareholders and
would result in the Company becoming privately held by the management
group. The proposal resulted from a process commenced with a public
announcement in March 1995 of the Company's willingness to consider
proposals for a significant transaction. Any such proposal would be
contingent upon the negotiation and completion of bank financing by the
management group and of final documentation relating to the transaction,
the receipt of a fairness opinion and the approval of the Board of
Directors, including its independent Director, and the shareholders at a
special meeting.
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.
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: February 13, 1996
/s/ Robert A. Samans
---------------------------
Robert A. Samans, President
/s/ William P. Carey
---------------------------
William P. Carey, Treasurer
(Principle Financial and
Accounting Officer)
Page 9 of 9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-29-1996
<PERIOD-START> OCT-02-1995
<PERIOD-END> DEC-31-1995
<CASH> 4,574,476
<SECURITIES> 0
<RECEIVABLES> 5,127,932
<ALLOWANCES> 427,502
<INVENTORY> 1,257,990
<CURRENT-ASSETS> 11,716,155
<PP&E> 19,599,474
<DEPRECIATION> 12,115,000
<TOTAL-ASSETS> 19,304,938
<CURRENT-LIABILITIES> 8,141,560
<BONDS> 0
<COMMON> 35,467
0
0
<OTHER-SE> 6,545,490
<TOTAL-LIABILITY-AND-EQUITY> 19,304,938
<SALES> 8,566,130
<TOTAL-REVENUES> 8,566,130
<CGS> 5,740,918
<TOTAL-COSTS> 5,740,918
<OTHER-EXPENSES> 1,192,978
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,737
<INCOME-PRETAX> 1,625,497
<INCOME-TAX> 645,763
<INCOME-CONTINUING> 979,734
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 979,734
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
</TABLE>
