<PAGE>
Page 1
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q SB
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1996
---------------
( ) 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 0-19056
-------
Northstar Computer Forms, Inc.
-------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-0882640
- ------------------------------- ----------------------------------------
(State of other jurisdiction of (I.R.S. Employer Identification Numbers)
incorporation or organization)
7130 Northland Circle N Brooklyn Park, Minnesota 55428
- ---------------------------------------------------
(Address or Principal Executive Offices) Zip Code
Registrant's telephone number, including area code (612) 531-7340
----------------
- ------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
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 .
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at September 9, 1996
----- --------------------------------
Common Stock, $.05 par value 1,715,531 Shares
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Page 2
Part 1. Financial Information
Item 1. Financial Statements
NORTHSTAR COMPUTER FORMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
July 31, 1996 October 31,
(Unaudited) 1995
------------- -----------
ASSETS
Current Assets:
Cash and cash equivalents $ 2,234,863 $ 1,180,788
Accounts receivable, less
allowance for doubtful accounts
of $87,847 in 1996 and $87,379 in 1995 3,492,553 3,646,156
Inventories 1,496,650 1,317,914
Other current assets 217,296 222,147
Deferred income taxes 134,000 132,481
----------- -----------
Total current assets 7,575,362 6,499,486
----------- -----------
Property, plant and equipment 27,911,900 19,724,836
Less accumulated depreciation and
amortization (11,230,031) (10,124,228)
----------- -----------
Net property, plant and equipment 16,681,869 9,600,608
----------- -----------
Intangibles, net 1,986,929 11,333
Notes receivable, less current portion 972,438 1,052,238
Other assets 346,140 359,699
----------- -----------
Total Assets $27,562,738 $17,523,364
----------- -----------
----------- -----------
See accompanying notes to unaudited Condensed
Consolidated Financial Statements
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Page 3
NORTHSTAR COMPUTER FORMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
July 31, 1996 October 31,
(Unaudited) 1995
------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 437,500 $ 200,000
Accounts payable 1,816,856 819,561
Accrued liabilities 591,249 934,191
----------- -----------
Total current liabilities 2,845,605 1,953,752
Deferred compensation 781,016 772,032
Deferred income taxes 754,344 675,458
Long-term debt, less current portion 11,297,500 2,535,000
Stockholders' equity:
Common stock, $.05 par value
authorized, 5,000,000 shares; issued
and outstanding, 1,715,531 in 1996 and
1,713,896 in 1995 85,776 85,695
Additional paid-in capital 1,995,230 1,983,865
Retained earnings 9,803,267 9,517,562
----------- -----------
Total stockholders' equity 11,884,273 11,587,122
----------- -----------
Total Liabilities and Stockholders' Equity $27,562,738 $17,523,364
----------- -----------
----------- -----------
See accompanying notes to unaudited Condensed
Consolidated Financial Statements
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Page 4
NORTHSTAR COMPUTER FORMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31 July 31
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 6,077,608 $ 6,108,910 $17,603,510 $17,938,877
Cost of goods sold 4,859,440 4,930,401 14,434,170 14,455,730
----------- ----------- ----------- -----------
Gross profit 1,218,168 1,178,509 3,169,340 3,483,147
Selling, general and
administrative expenses 873,045 662,183 2,405,750 2,189,346
----------- ----------- ----------- -----------
Operating income 345,123 516,326 763,590 1,293,801
Other income (expense):
Gain on sale of assets 5,325 19,254 3,687 342,028
Interest expense (57,743) (53,882) (137,011) (76,868)
Other, net, principally
interest income 13,235 15,261 57,117 33,197
----------- ----------- ----------- -----------
(39,183) (19,367) (76,207) 298,357
----------- ----------- ----------- -----------
Earnings before
income taxes 305,940 496,959 687,383 1,592,158
Provision for income taxes 127,500 199,000 276,000 637,000
----------- ----------- ----------- -----------
Net earnings $ 178,440 $ 297,959 $ 411,383 $ 955,158
----------- ----------- ----------- -----------
Net earnings
per common share: $ .10 $ .17 $ .24 $ .54
----------- ----------- ----------- -----------
Weighted average common and
common equivalent shares
outstanding 1,781,414 1,752,930 1,780,656 1,752,930
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Dividends declared
per common share $ -- $ -- $ .065 $ .06
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to unaudited Condensed
Consolidated Financial Statements
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Page 5
NORTHSTAR COMPUTER FORMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
for the nine months ended July 31, 1996 and 1995
1996 1995
---- ----
Cash flows from operating activities:
Net earnings $ 411,383 $ 955,158
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation and amortization 1,170,193 996,498
Provision for losses on receivables 41,400 41,400
Gain on sale of equipment (3,687) (342,028)
Net changes in operating assets and liabilities 678,142 (538,606)
----------- ----------
Net cash provided by operating activities 2,297,431 1,112,422
----------- ----------
Cash flows from investing activities:
Capital expenditures and equipment deposits (913,412) (1,451,825)
Proceeds from sale of equipment 5,850 527,605
Note receivable repayments 76,720
Officers and employees loan repayments 3,220
Acquisition of assets of a division of Deluxe (9,298,281)
----------- ----------
Net cash used in investing activities (10,129,123) (921,000)
----------- ----------
Cash flows from financing activities:
Borrowing on bank term note 9,000,000
Principle payment on long-term debt (210,000)
Dividends paid (111,510) (102,336)
Other (2,723) 37,965
----------- ----------
Net cash provided (used) in financing activities 8,885,767 (274,371)
----------- ----------
Net increase (decrease) in cash and cash equivalents 1,054,075 (82,949)
Cash and cash equivalents at beginning of period 1,180,788 984,722
----------- ----------
Cash and cash equivalents at end of period $ 2,234,863 $ 901,773
----------- ----------
----------- ----------
Supplemental disclosure of cash flow:
Cash paid during the period for:
Income taxes $ 258,530 $ 510,225
Interest (net of amount capitalized of 137,011 67,699
$64,844 in 1995)
See accompanying notes to unaudited Condensed
Consolidated Financial Statement
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NORTHSTAR COMPUTER FORMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996
(Unaudited)
1. Basis of Presentation
The interim condensed consolidated financial statements are unaudited and
reflect all adjustments which are, in the opinion of management, necessary
for a fair presentation of financial position, results of operations, and
cash flows for such periods. All such adjustments are of a normal and
recurring nature. The results of operations for any interim period are not
necessarily indicative of results for the full year. These interim
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto contained in Northstar Computer
Forms, Inc.'s annual report for the fiscal year ended October 31, 1995.
2. Inventories consisted of the following:
July 31, 1996 October 31, 1995
------------- ----------------
Raw materials $1,091,868 $1,087,367
Work in process 404,782 230,547
---------- ----------
Total $1,496,650 $1,317,914
---------- ----------
---------- ----------
3. Earnings Per Share
Earnings per common and common equivalent share are computed using the
weighted average number of common and common equivalent shares outstanding.
Common equivalent shares are the result of dilutive stock options.
4. Long Term Debt
Variable Rate Demand
Industrial Development Revenue
Bonds (Revenue Bonds) $ 2,735,000
Bank Term Loan, interest
at reference rate currently 81/4% 9,000,000
-----------
$11,735,000
Less current portion 437,500
-----------
$11,297,500
The Revenue Bonds require annual principal payments ranging from $250,000
to $335,000 through 2004 and bear interest at an interest rate which varies
based upon comparable tax-exempt issues, but not to exceed 12%.
The Bank Term Loan requires quarterly principal payments of $187,500
beginning July 31, 1997 with principal payments increasing to $262,500 beginning
July 31, 1998 and final balance due July 31, 2003.
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Page 7
NORTHSTAR COMPUTER FORMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996
(Unaudited)
5. Acquisition of Assets of a Division of Deluxe Corporation
On July 22, 1996 the Company purchased substantially all of the assets of
the Financial Forms Division of Deluxe Corporation (Division). The
purchase price of $9,200,000 was financed with a $9,000,000 term bank loan
(see Note 4). The assets acquired consist principally of equipment used to
manufacture internal bank forms.
The acquisition has been accounted for in accordance with the purchase
method of accounting. Accordingly, the Division's financial results are
included in the Company's Statement of Earnings for the period from July
22, 1996 through July 31, 1996, the end of the quarter.
The following summary, prepared on a pro forma basis, combines the
consolidated results of operations as if the Division had been acquired as
of the beginning of the periods presented, after including the impact of
certain adjustments, such as: depreciation of equipment, amortization of
intangibles, increased interest expense and the related income tax effects.
Nine Months Ended July 31
1996 1995
---- ----
Net sales $31,874,000 $33,393,000
Net earnings 715,000 1,188,000
Net earnings per
common share $ .40 $ .68
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NORTHSTAR COMPUTER FORMS, INC.
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations of
Interim Financial Data
The following discussion contains forward looking statements. Future operating
results are subject to fluctuations not within the control of the Company. This
discussion should be read in conjunction with the Company's financial statements
and notes thereto and with the other information contained in this and other
reports filed by the Company with the Securities and Exchange Commission.
Results of Operations
The following table sets forth, for the periods indicated, certain items in the
Company's condensed consolidated statements of earnings as a percentage of net
sales and the percentage changes of the dollar amounts of such items as compared
with the prior period.
Three Months Ended July 31
Percentage of Net Sales Increase
----------------------- (Decrease)
1996 1995 1996 vs 1995
---- ---- ------------
Net Sales ................... 100.0% 100.0% (.5)%
Cost of Goods Sold .......... 80.0 80.7 (1.4)
----- ----- -----
Gross Profit ........... 20.0 19.3 3.4
----- ----- -----
Selling, General and
Administrative Expenses ... 14.4 10.8 31.8
----- ----- -----
Operating Income ............ 5.7 8.5 (33.2)
Earnings .............. 2.9 4.9 (40.1)
----- ----- -----
Nine Months Ended July 31
Percentage of Net Sales Increase
----------------------- (Decrease)
1996 1995 1996 vs 1995
---- ---- ------------
Net Sales ................... 100.0% 100.0% (1.9)%
Cost of Goods Sold .......... 82.0 80.6 (.1)
----- ----- -----
Gross Profit ........... 18.0 19.4 (9.0)
----- ----- -----
Selling, General and
Administrative Expenses ... 13.7 12.2 9.9
----- ----- -----
Operating Income ............ 4.3 7.2 (41.0)
Earnings .............. 2.3 5.3 (56.9)
----- ----- -----
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Page 9
The following table sets forth the sales for the periods indicated of the
internal bank forms, general business forms and consolidated sales.
INTERNAL GENERAL CONSOLIDATED
BANK FORMS % BUSINESS FORMS % SALES
---------- - -------------- - --------
Current Quarter
1996 $ 3,659,310 60 $ 2,418,298 40 $ 6,077,608
1995 $ 3,011,752 49 $ 3,097,158 51 $ 6,108,910
Increase (Decrease) 647,558 (678,860) (31,302)
Percentage Change 21.5% (21.9)% (.5)%
Nine Months
1996 $10,072,186 57 $ 7,531,324 43 $17,603,510
1995 $ 8,822,150 49 $ 9,116,727 51 $17,938,877
Increase (Decrease) $ 1,250,036 (1,585,403) (335,367)
Percentage Change 14.2% (17.4)% (1.9)%
Increased sales activity in internal bank forms came from new and existing
customers. Approximately $400,000 of the internal bank form sales came from a
division of Deluxe Corporation which was acquired on July 22, 1996. This
division was subsequently named Northstar Financial Forms Division. The
remaining increase occurred mainly in standard bank form products and is due to
an overall increase in standard bank form orders from new and existing
customers.
In the general business forms business, sales of one product, sold principally
to one customer, decreased approximately $300,000 for the third quarter of 1996
and $1,200,000 for the nine months. The primary customer for the product has
subsequently been acquired by a competitor. Accordingly, the Company does not
expect any additional orders from this customer. This customer accounted for
$2.6 million in sales in 1995. All other general business forms business
decreased approximately 12% for the third quarter and 4% for the nine months.
Gross profit for the third quarter of 1996 increased from 19.3 percent in 1995
to 20.0 percent in 1996. For the nine months, gross profit decreased from 19.4
percent in 1995 to 18.0 percent in 1996. During the nine month period
variable costs, particularly material costs and variable expenses, remained
relatively constant as a percentage of sales. Labor costs increased
approximately 5 percent for the nine month period. This increase is due
principally to the higher cost of fringe benefits, particularly health insurance
costs and the additional employees in the Northstar Financial Forms Division.
In addition, fixed costs increased approximately $160,000 for the nine months or
1 percent of sales. These fixed costs increases relate to depreciation which
increased $30,117 for the quarter and $124,296 for the nine months.
Depreciation for the nine months increased due to the new facility the Company
moved to in March 1995. The increase in depreciation in the third quarter also
relates to depreciation on the assets purchased from Deluxe Corporation.
Interest expense relates principally to the financing on the new corporate
headquarters and manufacturing facility. Earnings before income taxes decreased
$191,019 or 38.4 percent for the third quarter. For the nine months, earnings
before income taxes decreased $904,775 or 56.8 percent. $322,774 of the
decrease relates to a gain on the sale of property recognized by the company in
1995. Earnings per share for the nine months was $ .24 in 1996 and $ .54 in
1995.
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Page 10
Financial Condition
Capital expenditures for equipment during the nine months ended July 31, 1996
were $913,412 compared to approximately $930,000 for the comparable period of
1995, net of capital expenditures relating to the new facility. The Company
anticipates no significant equipment additions during the last quarter of 1996.
Net cash provided by operating activities was $2,297,431 for the nine months
ended July 31, 1996 compared to $1,112,422 for the same period in 1995.
Accounts receivable and accounts payable from the added business of the newly
acquired division account for this increase. Net cash provided by operating
activities represents the primary source of working capital for equipment
acquisitions and payment of dividends. The Company's working capital was $4.7
million on July 31, 1996 compared to $3.7 million on July 31, 1995. The Company
also has available a bank line of credit for $1.5 million at an interest rate
equal to the bank's reference rate.
The Company acquired a portion of the Deluxe Corporation Forms Division
(subsequently named Northstar Financial Forms Division) on July 22, 1996 by
purchasing assets. The Company used proceeds from a bank term note of
$9,000,000 to acquire the assets consisting primarily of printing equipment and
goodwill. The Company leased the facility and now operates it as a division of
the Company which manufactures internal bank forms.
The Company believes its existing financial resources are adequate to fund its
1996 capital expenditures and dividend payments and foresees no events or
uncertainties that are likely to have a material impact on its liquidity. The
Company expects to be able to generate sufficient cash flow from operations to
avoid relying on external sources of financing, beyond the financing sources
already in existence.
Outlook
Paper prices, which increased significantly in fiscal 1995, appear to have
leveled off. The Company continues to attempt to recover the cost of the
previous paper price increases as quickly as competition will allow.
Order backlog continues to fluctuate. Because of the short manufacturing lead
time of seven to ten days and the softness of the forms market, the Company may
continue to have fluctuations in sales during 1996. The Company is attempting
to offset this by developing new markets for existing products as well as new
product lines.
The Company is currently in the process of evaluating the systems, technology
and facilities of the new division, Northstar Financial Forms. In the
evaluation the Company is planning for the efficient consolidation of this new
operation.
There are no other significant changes planned for 1996. The Company is not
aware of any other trends, events or uncertainties that will have a significant
impact on its financial condition or results of operations.
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Page 11
NORTHSTAR COMPUTER FORMS, INC.
PART II. - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit
11 Statement re computation of per share earnings.
(b) Reports on Form 8-K
July 22, 1996 acquisition of assets
None of the other items contained in Part II of Form 10-QSB is applicable to the
Company for the quarter ended July 31, 1996.
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Page 12
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.
Northstar Computer Forms, Inc.
(Registrant)
Date: September 9, 1996 By: Mary Ann Morin
--------------------- ----------------------------
Mary Ann Morin
Treasurer and Controller
(Principal Financial Officer)
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NORTHSTAR COMPUTER FORMS, INC.
Exhibit
11. Schedule of Computation of Per Share Earnings.
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Page 14
NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31 July 31
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET EARNINGS $ 178,440 $ 297,959 $ 411,383 $ 955,158
EARNINGS PER SHARE
Primary:
Net earnings $ .10 $ .17 $ .24 $ .54
Fully diluted (1): ------------ ------------ ------------ ------------
Net earnings $ .10 $ .17 $ .24 $ .54
------------ ------------ ------------ ------------
AVERAGE NUMBER OF
COMMON AND COMMON
EQUIVALENT SHARES
Primary:
Weighted average number of
common shares outstanding 1,715,351 1,713,896 1,715,351 1,713,896
Common equivalent shares:
Dilutive stock options, using
Treasury Stock Method 66,063 39,034 65,305 39,034
------------ ------------ ------------ ------------
1,781,414 1,752,930 1,780,656 1,752,930
------------ ------------ ------------ ------------
Fully diluted (1)
Weighted average number of
common shares outstanding 1,715,351 1,713,896 1,715,351 1,713,896
Common equivalent shares:
Dilutive stock options, using
Treasury Stock Method 66,063 39,034 65,305 39,034
------------ ------------ ------------ ------------
1,781,414 1,752,930 1,780,656 1,752,930
------------ ------------ ------------ ------------
</TABLE>
(1) This calculation is submitted in accordance with Regulation S-K Item 601
(b) (11) although not required by footnote 2 to paragraph 14 of APB Opinion
No. 15 because it results in dilution of less than 3%
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> JUL-31-1996
<CASH> 2234863
<SECURITIES> 0
<RECEIVABLES> 3580400
<ALLOWANCES> 87847
<INVENTORY> 1496650
<CURRENT-ASSETS> 7575362
<PP&E> 27911900
<DEPRECIATION> 11230031
<TOTAL-ASSETS> 27562738
<CURRENT-LIABILITIES> 2845605
<BONDS> 9061000
0
0
<COMMON> 85776
<OTHER-SE> 11798497
<TOTAL-LIABILITY-AND-EQUITY> 27562738
<SALES> 17603510
<TOTAL-REVENUES> 17603510
<CGS> 14434170
<TOTAL-COSTS> 2307233
<OTHER-EXPENSES> 3687
<LOSS-PROVISION> 41400
<INTEREST-EXPENSE> 137011
<INCOME-PRETAX> 687383
<INCOME-TAX> 276000
<INCOME-CONTINUING> 411383
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 411383
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
