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Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q SB
(Mark One)
( ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1997
--------------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-19056
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Northstar Computer Forms, Inc.
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(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 March 10, 1997
----- -----------------------------
Common Stock, $.05 par value 1,719,871 Shares
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Part 1. Financial Information
Item 1. Financial Statements
NORTHSTAR COMPUTER FORMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
January 31, October 31,
1997 1996
ASSETS ----------- ----------
Current Assets:
Cash and cash equivalents $ 1,428,300 $ 2,378,105
Accounts receivable, less
allowance for doubtful accounts
of $157,800 in 1997 and $144,000 in 1996 7,236,863 4,728,735
Inventories 1,401,155 2,292,057
Other current assets 293,113 216,280
Deferred income taxes 154,033 148,796
----------- -----------
Total current assets 10,513,464 9,763,973
----------- -----------
Property, plant and equipment 28,297,519 27,730,780
Less accumulated depreciation and
amortization (12,456,237) (11,561,128)
----------- ------------
Net property, plant and equipment 15,841,282 16,169,652
----------- -----------
Note receivable, less current portion 939,241 990,060
Goodwill 1,908,929 1,959,305
Other assets 499,288 518,442
----------- -----------
Total Assets $29,702,204 $29,401,432
----------- -----------
----------- -----------
See accompanying notes to unaudited Condensed
Consolidated Financial Statements
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NORTHSTAR COMPUTER FORMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
January 31, October 31,
1997 1996
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 812,500 $ 1,029,825
Accounts payable 1,928,733 2,103,537
Accrued liabilities 1,442,315 1,249,388
----------- -----------
Total current liabilities 4,183,548 4,382,750
Deferred compensation 800,525 775,199
Deferred income taxes 1,130,853 1,039,773
Long-term debt, less current portion 10,378,050 10,565,175
Commitments
Stockholders' equity:
Common stock, $.05 par value
authorized, 5,000,000 shares; issued
and outstanding, 1,716,571
at January 31, 1997 and October 31, 1996 85,828 85,828
Additional paid-in capital 1,995,177 1,995,177
Retained earnings 11,128,223 10,557,530
----------- -----------
Total stockholders' equity 13,209,228 12,638,535
----------- -----------
Total Liabilities and Stockholders' Equity $29,702,204 $29,401,432
----------- -----------
----------- -----------
See accompanying notes to unaudited Condensed
Consolidated Financial Statements
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NORTHSTAR COMPUTER FORMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
Three Months Ended
January 31
1997 1996
------------ ------------
Net Sales $11,608,757 $5,603,897
Cost of goods sold 8,519,722 4,730,953
------------ ------------
Gross profit 3,089,035 872,944
Selling, general and
administrative expenses 1,912,879 723,737
------------ ------------
Operating income 1,176,156 149,207
Other income (expense):
Interest expense (230,356) (40,870)
Other, net, principally
interest income 6,893 17,399
------------ ------------
(223,463) (23,471)
------------ ------------
Earnings before income taxes 952,693 125,736
Provision for income taxes 382,000 43,000
------------ ------------
Net earnings $ 570,693 $ 82,736
------------ ------------
------------ ------------
Net earnings per common share $ .31 $ .05
------------ ------------
------------ ------------
Weighted average common and
common equivalent shares
outstanding 1,828,842 1,753,186
------------ ------------
------------ ------------
See accompanying notes to unaudited Condensed
Consolidated Financial Statements
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NORTHSTAR COMPUTER FORMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
for the three months ended January 31, 1997 and 1996
1997 1996
----------- -----------
Cash flows from operating activities:
Net earnings $ 570,693 $ 82,736
Adjustments to reconcile net earnings to
net cash (used in) provided by operating
activities
Depreciation and amortization 679,946 378,150
Provision for losses on receivables 13,800 13,800
(Gain) Loss on sale of equipment 1,710 (300)
Net changes in operating assets and
liabilities (1,494,707) 104,765
----------- -----------
Net cash provided by (used in) operating activities (228,558) 579,151
----------- -----------
Cash flows from investing activities:
Capital expenditures and equipment deposits (256,438) (120,918)
Proceeds from sale of equipment 400 300
Notes receivable repayments 50,819 41,892
----------- -----------
Net cash used in investing activities (205,219) (78,726)
----------- -----------
Cash flows from financing activities:
Dividends paid (111,578) (111,404)
Principal payments on long-term debt (404,450)
----------- -----------
Net cash used in financing activities (516,028) (111,404)
----------- -----------
Net increase (decrease) in cash and cash
equivalents (949,805) 389,021
Cash and cash equivalents at beginning of period 2,378,105 1,180,788
----------- -----------
Cash and cash equivalents at end of period $ 1,428,300 $ 1,569,809
----------- -----------
----------- -----------
Supplemental disclosure of cash flow:
Cash paid during the period for:
Income taxes $ 21,900 $ 8,250
Interest 230,357 40,870
See accompanying notes to unaudited Condensed
Consolidated Financial Statements
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NORTHSTAR COMPUTER FORMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1997
(Unaudited)
1. Basis of Presentation
The consolidated financial statements included in this Form 10-QSB have
been prepared by Northstar Computer Forms, Inc. (the Company), without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed, or omitted, pursuant to these
rules and regulations. The year end balance sheet was derived from audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles. These consolidate financial
statements should be read in conjunction with the financial statements and
related notes included in the Company's 1996 Annual Report on Form 10-KSB
as filed with the Securities and Exchange Commission.
The consolidated financial statements presented herein as of January 31,
1997 and for the three months then ended reflect, in the opinion of
management, all adjustments (which include only normal, recurring
adjustments) necessary for a fair presentation of financial position and
results of operations for the period presented. The results of operations
for any interim period are not necessary indicative of results for the full
year.
2. 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.
3. Acquisition of Assets of a Division of Deluxe Corporation
In July 1996, the Company purchased substantially all of the assets of the
Financial Forms Division of Deluxe Corporation. The Company renamed the
division Northstar Financial Forms. The purchase price of $9,200,000 cash
was financed with a $9,000,000 term loan. The assets acquired consist
principally of equipment which was used to manufacture internal bank forms.
The Company intends to continue to use the assets to manufacture internal
bank forms which is the same product manufactured by the Company's
subsidiary, General Financial Supply, Inc.
The division's financial results are included in the Statement of Earnings
for the three months ended January 31, 1997. The financial results of
operations for the three months ended January 31, 1996 on a pro forma basis
as though the division had been acquired as of November 1, 1995 are as
follows.
Sales $10,574,927
Net earnings 334,261
Net earnings per common share .19
4. Stock Options
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation." This statement
establishes financial accounting and reporting standards for stock-based
employee compensation plans. The Company intends to follow the option that
permits entities to continue to apply current accounting standards to
stock-based employee compensation arrangements. Effective with fiscal
year-end 1997 reporting, the Company will disclose pro forma net income and
earnings per share amounts as if Statement No. 123 accounting were applied
to the Company's stock compensation programs.
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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
(Unaudited)
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 January 31
--------------------------------------
Percentage of Net Sales Increase
----------------------- 1997 vs
1997 1996 1996
------ ------ -------
Net Sales ................... 100.0% 100.0% 107.2%
Cost of Goods Sold .......... 73.4 84.4 80.1
------ ------ -----
Gross Profit ........... 26.6 15.6 253.9
------ ------ -----
Selling, General and
Administrative Expenses ... 16.5 12.9 164.3
------ ------ -----
Operating Income ............ 10.1 2.7 688.3
Net Earnings ................ 4.9 1.5 589.8
------ ------ -----
The following table sets forth the sales for the periods indicated the
internal bank forms, general business forms and consolidated sales of the
Company.
INTERNAL GENERAL CONSOLIDATED
BANK FORMS % BUSINESS FORMS % SALES
---------- --- -------------- --- -------------
Current Quarter
1997 $8,405,572 72 $3,203,185 28 $ 11,608,757
1996 $3,183,550 57 $2,420,347 43 $ 5,603,897
Increase 5,222,022 782,838 6,004,860
Percentage Increase 164.0% 32.3% 107.2%
Approximately $4,800,000 or 92 percent of the increase in internal bank form
sales came from the new division, Northstar Financial Forms. The remaining
increase occurred mainly due to growth in standard bank form orders from new and
existing customers.
In the general business forms business, the sales increase is due to an increase
in orders from existing customers. Sales in one product line increased
approximately $335,000, accounting for approximately 43 percent of the sales
increase in general business forms.
Gross profit for the first quarter of 1997 increased from 15.6 percent in 1996
to 26.6 percent in 1997. Without the contribution of the new division, gross
profit for the first quarter would have been 18.6 percent. During 1997,
manufacturing costs, exclusive of material, remained relatively constant.
Material costs decreased slightly as certain paper prices declined late in
fiscal 1996.
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Approximately $190,000 or 82.5 percent of the first quarter interest expense
relates to the $9,000,000 debt incurred in July 1996 to acquire the new
division. Earnings before income taxes was $952,693 or 8.2 percent of sales in
1997, compared with $125,736 or 2.2 percent of sales in the first quarter of
1996. Earnings per share were $ .31 in 1997 and $ .05 in 1996.
Financial Condition
The Company's long-term debt consists of the acquisition term loan and Variable
Rate Demand Industrial Development Revenue Bonds. The Company's obligation to
repay the bonds is collateralized by an irrevocable, direct-pay letter of
credit. The term loan and the letter of credit are collateralized by the
Company's property, plant and equipment, inventories and accounts receivable.
The term loan principal is payable from annual excess cash flow as defined in
the loan agreement and in quarterly installments beginning July 31, 1997, with
any remaining principal balance due on July 31, 2003. Interest is payable
monthly. The bonds require annual principal payments and monthly interest
payments at a variable rate based upon comparable tax-exempt issues. Both the
term loan and the letter of credit specify limits on capital expenditures and
dividends. Both also specify working capital, net worth and certain financial
ratios that the Company must maintain.
The Company continues to expand its manufacturing capacity by the acquisition of
equipment. Capital expenditures for equipment during the three months ended
January 31, 1997 were $256,438 compared to $120,918 for the comparable period of
1996. The company anticipates capital expenditures of approximately $1,000,000
in fiscal 1997.
Net cash used in operations was $228,558 for the three months ended January 31,
1997 compared to $579,151 provided by operations for the same period in 1996.
The Company's working capital was $6.3 million on January 31, 1997 compared to
$5.4 million on October 31, 1996. If necessary to finance operations, the
Company has available a bank line of credit for $1.5 million at an interest rate
equal to the bank's reference rate.
The Company believes its existing financial resources are adequate to fund its
fiscal year 1997 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
The acquisition of the financial forms division will have a significant impact
on the Company's business during fiscal year 1997. Management will continue
focusing on integrating operations, developing computer reporting systems and
implementing marketing plans to improve operating efficiency between all
manufacturing locations. The savings from the operating efficiencies, however,
will be somewhat offset by additional costs, particularly interest expense on
the Term Loan and the depreciation and amortization costs of the new operation.
The Company is not aware of any trends, events or other uncertainties that will
have a significant impact on its financial condition or results of operations.
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NORTHSTAR COMPUTER FORMS, INC.
PART II. - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (11) schedule of computation of per share earnings.
(b) Reports on Form 8-K
None
None of the other items contained in Part II of Form 10-QSB is applicable to the
Company for the quarter ended January 31, 1997.
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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.
Northstar Computer Forms, Inc.
(Registrant)
Date: March 11, 1997 By: Mary Ann Morin
------------------------- -----------------------------
Mary Ann Morin
Chief Financial Officer
(Principal Financial Officer)
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NORTHSTAR COMPUTER FORMS, INC.
Exhibit
11. Schedule of Computation of Per Share Earnings.
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NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
Three Months Ended
January 31
1997 1996
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NET EARNINGS $ 570,693 $ 82,736
EARNINGS PER SHARE
Primary:
Net earnings $ .31 $ .05
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Fully diluted (1):
Net earnings $ .31 $ .05
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AVERAGE NUMBER OF
COMMON AND COMMON
EQUIVALENT SHARES
Primary:
Weighted average number of
common shares outstanding 1,716,571 1,713,896
Common equivalent shares:
Dilutive stock options, using
Treasury Stock Method 112,271 39,290
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1,828,842 1,753,186
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Fully diluted (1)
Weighted average number of
common shares outstanding 1,716,571 1,713,896
Common equivalent shares:
Dilutive stock options, using
Treasury Stock Method 112,271 39,290
--------- ---------
1,828,842 1,753,186
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(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%
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 1428300
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<RECEIVABLES> 7394663
<ALLOWANCES> 157800
<INVENTORY> 1401155
<CURRENT-ASSETS> 10513464
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0
0
<COMMON> 85828
<OTHER-SE> 13123400
<TOTAL-LIABILITY-AND-EQUITY> 29702204
<SALES> 11608757
<TOTAL-REVENUES> 11608757
<CGS> 8519722
<TOTAL-COSTS> 10432601
<OTHER-EXPENSES> 223463
<LOSS-PROVISION> 13800
<INTEREST-EXPENSE> 230356
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<INCOME-TAX> 382000
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