<PAGE>
UNITED STATES
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 MARCH 31, 1996
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 0-21958
QUICKRESPONSE SERVICES, INC.
- - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 68-0102251
- - -------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1400 MARINA WAY SOUTH, RICHMOND, CA 94804
- - -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(510) 215-5000
- - -------------------------------------------------------------------------------
(Registrant's phone number, including area code)
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. X YES NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Classes of Common Stock Outstanding at March 31, 1996
- - ----------------------- -----------------------------
Common Stock, no par value 8,321,030 shares
This document contains 14 pages.
The Exhibit listing appears on Page 11.
<PAGE>
QUICKRESPONSE SERVICES, INC.
FORM 10-Q
INDEX
<TABLE>
PAGE NUMBER
-----------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Balance Sheets as of March 31, 1996 and December 31, 1995 3
Condensed Statements of Earnings for the Three Months Ended March 31, 1996
and 1995 4
Condensed Statement of Shareholders' Equity for the Three Months
Ended March 31, 1996 5
Condensed Statements of Cash Flows for the Three Months Ended March 31, 1996
and 1995 6
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
A. Exhibits 11
B. Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
QUICKRESPONSE SERVICES, INC.
CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
ASSETS
------
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $17,410 $6,460
Marketable securities, available for sale 8,597 17,976
Accounts receivable - net of allowance for doubtful accounts of $491 in 1996 and $460 in 1995 7,703 8,032
Prepaid expenses and other 474 812
--------- ------------
Total current assets 34,184 33,280
--------- ------------
Property and equipment:
Furniture and fixtures 1,073 1,052
Equipment 3,275 3,005
Leasehold improvements 1,257 1,249
--------- ------------
5,605 5,306
Less accumulated depreciation 2,157 1,946
--------- ------------
Total 3,448 3,360
Deferred income tax assets 8,709 9,502
Other assets 452 450
--------- ------------
Total assets $46,793 $46,592
--------- ------------
--------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $3,360 $3,582
Other accrued liabilities 2,495 3,437
Current portion of sublease loss reserves 873 873
--------- ------------
Total current liabilities 6,728 7,892
--------- ------------
Deferred rent 1,087 1,141
Sublease loss reserve 1,986 2,129
--------- ------------
Total liabilities 9,808 11,162
--------- ------------
Shareholders' equity :
Preferred stock - $.01 par value; 10,000,000 shares authorized; none issued and outstanding - -
Common stock - no par value; 20,000,000 shares authorized; 8,321,030 shares outstanding in
1996 and 8,305,824 shares in 1995 60,098 59,907
Accumulated deficit (23,106) (24,477)
--------- ------------
Total shareholders' equity 36,992 35,430
--------- ------------
Total liabilities and shareholders' equity $46,793 $46,592
--------- ------------
--------- ------------
</TABLE>
See notes to condensed financial statements.
3
<PAGE>
QUICKRESPONSE SERVICES, INC.
CONDENSED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
MARCH 31, MARCH 31,
1996 1995
--------- ---------
<S> <C> <C>
Revenues $12,717 $9,519
Cost of sales 7,776 5,844
--------- ---------
Gross profit 4,941 3,675
Operating expenses:
Sales and marketing 1,538 1,187
Product development 673 356
General and administrative 801 763
--------- ---------
Total operating expenses 3,011 2,306
--------- ---------
Operating earnings 1,930 1,369
Other income:
Interest and dividend income 357 318
--------- ---------
Total other income 357 318
--------- ---------
Earnings before income taxes 2,287 1,687
Income taxes 916 675
--------- ---------
Net earnings $1,371 $1,012
--------- ---------
--------- ---------
Earnings per common and common equivalent share $0.16 $0.12
--------- ---------
--------- ---------
Shares used to compute per share amounts 8,574 8,430
--------- ---------
--------- ---------
</TABLE>
See notes to condensed financial statements.
4
<PAGE>
QUICKRESPONSE SERVICES, INC.
CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
COMMON STOCK
---------------------
ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT DEFICIT EQUITY
--------- ------- ----------- -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 8,305,824 $59,907 $(24,477) $35,430
Stock option compensation - 8 - 8
Exercise of stock options, including tax benefit 15,206 183 - 183
Net earnings - 1,371 1,371
--------- ------- ----------- -------------
Balance, March 31, 1996 8,321,030 $60,098 $(23,106) $36,922
--------- ------- ----------- -------------
--------- ------- ----------- -------------
</TABLE>
See notes to condensed financial statements.
5
<PAGE>
QUICKRESPONSE SERVICES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------
1996 1995
--------- ---------
<S> <C> <C>
Operating activities:
Net earnings $1,371 $1,012
Adjustment to reconcile net earnings to net cash provided by (used in)
operating activities:
Depreciation and amortization 281 127
Deferred rent (54) -
Stock option compensation 8 8
Purchase of trading securities (net) - (8,401)
Changes in:
Accounts receivable 329 (118)
Prepaid expenses and other 338 (166)
Deferred income tax assets 905 618
Other assets - (226)
Accounts payable (222) 848
Sublease loss reserve (net) (143) (126)
Other accrued liabilities (942) 136
--------- ---------
Net cash provided by (used in) operating activities 1,871 (6,288)
--------- ---------
Investing activities:
Sale of marketable securities - available for sale (net) 9,379 -
Purchase of property and equipment (299) (319)
Capitalization of product development costs (72) (41)
--------- ---------
Net cash provided by (used in) investing activities 9,008 (360)
--------- ---------
Financing activities:
Exercise of stock options 71 97
Exercise of stock warrant - 38
--------- ---------
Net cash provided by financing activities 71 135
--------- ---------
Net increase (decrease) in cash 10,950 (6,513)
Cash and cash equivalents at beginning of period 6,460 8,629
--------- ---------
Cash and cash equivalents at end of period $17,410 $2,116
--------- ---------
--------- ---------
Other cash flow information:
Taxes paid during the period $13 $65
--------- ---------
--------- ---------
Noncash financing activities:
Tax benefit from non-qualified stock options exercised $112 $382
--------- ---------
--------- ---------
</TABLE>
See notes to condensed financial statements.
6
<PAGE>
QUICKRESPONSE SERVICES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
QuickResponse Services, Inc. (the "Company") provides a centralized product
information database (the QRS Catalog) and electronic data interchange
services (EDI services) to retailers and merchandise suppliers or vendors, to
automate and improve their merchandise management.
The balance sheet as of March 31, 1996, the statements of earnings for the
three months ended March 31, 1996 and 1995, the statement of shareholders'
equity for the three months ended March 31,1996 and the statements of cash
flows for the three months ended March 31, 1996 and 1995 have been prepared
by the Company without audit. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows at March 31,
1996 and for all periods presented have been made. The balance sheet as of
December 31, 1995 is derived from the Company's audited financial statements
as of that date.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted as permitted by regulations of the
Securities and Exchange Commission. Certain previously furnished amounts have
been reclassified to conform with presentations made during the current
periods. It is suggested that these interim condensed financial statements
be read in conjunction with the annual audited financial statements and notes
thereto included in the Company's Form 10-K for the year ended December 31,
1995.
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles necessarily requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
balance sheet dates and the reported amounts of revenues and expenses for the
periods presented. Actual amounts may differ from such estimates.
The results of operations for the periods ended March 31, 1996 and 1995 are
not necessarily indicative of the operating results anticipated for the full
year.
2. STOCK OPTIONS
During the first three months of 1996, options to purchase 15,750 shares of
common stock were exercised. At March 31, 1996, 645,786 shares are subject
to outstanding options, of which 102,089 options are exercisable. Options to
purchase approximately 258,996 shares of common stock are available for
future grants under the plans. During the three months ended March 31, 1996,
compensation expense recognized pursuant to the granting of stock options
totaled $8,000 as a result of amendments to certain options.
7
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIS FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM
THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS.
GENERAL
QRS provides a centralized product information database (The QRS Catalog),
electronic data interchange services (EDI Services), transportation and
logistics services (Easy EDI and LMS) and Collaborative Replenishment
Services (CRS) to retailers and merchandise suppliers or vendors to automate
and improve their merchandise management. The Company derives revenues from
four principal and related sources: the transmission of standard business
documents over a network, monthly charges for accessing The QRS Catalog, CRS
related fees based on the number of U.P.C.'s managed per store and logistics
management services and consulting fees. EDI Services pricing is based
primarily on the volume of characters transmitted and the type of network
access utilized. EDI services pricing also incorporates discounts based on
volume.
RESULTS OF OPERATIONS
The Company's revenues increased by 34% to $12.7 million for the first
quarter of 1996, from $9.5 million for the first quarter of 1995. These
increases were primarily attributable to three factors. First, the number of
customers increased from 139 retailers and 3,899 vendors as of March 31, 1995
to 186 retailers and 4,803 vendors and carriers as of March 31, 1996.
Second, the number of catalog trading partnerships increased as a result of
the increase in the number of customers and their trading links with each
other. Third, customers increased the number, type and size of transactions
transmitted over the network, as well as the utilization of The QRS Catalog.
Cost of sales consists primarily of the cost of purchasing network services
and the cost of the Company's data center and technical customer support
services. Cost of sales increased by 33% to $7.8 million for the first
quarter of 1996, from $5.8 million for the first quarter of 1995. The
increase was principally due to increases in purchased network services
reflecting growth in EDI services and an expanded customer support group and
data center operations reflecting growth in the Company's value-added
applications. The Company's data center costs are relatively fixed. The
gross profit margin for the first quarter of 1996 was 39%, compared to 39%
for the first quarter of 1995. There were no significant changes in prices
charged to customers for catalog or EDI services.
Sales and marketing expenses consist primarily of personnel and
personnel-related costs in the Company's sales and marketing organizations,
as well as the costs of various marketing programs. Sales and marketing
expenses increased 30% to $1.5 million for the first quarter of 1996, from
$1.2 million for the first quarter of 1995. The increase results from
increased introduction expenditures related to the Company's new product
releases in the first quarter of 1996 as well as increased personnel costs to
support the Company's growth in revenues and customers.
Product development expenses consist primarily of personnel and equipment
costs related to new product development and upgrade of existing service
offerings. Product development costs increased 89% to $673,000 for the first
quarter of 1996, from $356,000 for the first quarter of 1995. The increase
primarily resulted from additional employees and consultants working on
product development projects.
General and administrative expenses consist primarily of the personnel and
related costs of the Company's finance and administrative organizations, as
well as professional fees and other costs, such as directors and officers'
liability insurance. General and administrative expenses increased 5% to
$801,000 for the first quarter of 1996, compared to $763,000 for the first
quarter of 1995. The increase was primarily due to increased payroll and
professional fees.
8
<PAGE>
Interest income consists primarily of interest earned on cash, cash
equivalents and investment securities. Interest income increased to $357,000
for the first quarter of 1996, compared to $318,000 for the first quarter of
1995 as a result of higher invested balances partially offset by a lower
yield on investments.
Income tax was $916,000 for the first quarter of 1996, compared to $675,000
for the first quarter of 1995. The 1996 and 1995 income tax rates of 40%
approximate the combined effective federal and state income tax rates.
As a result of the foregoing, net earnings increased by 35% to $1.4 million
for the first quarter of 1996, compared to $1.0 million for the first quarter
of 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital improved from $25.4 million at December 31,
1995 to $27.5 million at March 31, 1996. Cash, cash equivalents and
marketable securities available for sale increased from $24.4 million at
December 31, 1995 to $26.0 million at March 31, 1996. Total assets increased
from $46.6 million at December 31, 1995 to $46.8 million at March 31, 1996,
while total liabilities decreased from $11.2 million to $9.8 million.
The increase in cash and cash equivalents from December 31, 1995 to March 31,
1996 results primarily from a decrease in the Company's marketable
securities. A larger portion of the Company's cash not required for
operating activities was invested during the quarter in securities with
maturities less than 90 days which are reported as cash and cash equivalents.
Management believes that the cash on hand at March 31, 1996, and cash
anticipated to be generated from future operations will be sufficient for the
Company to meet its working capital needs and capital expenditures in the
foreseeable future. The Company does not intend to pay cash dividends with
respect to common stock in the foreseeable future.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
11.1 Computation of Earnings Per Share - Primary
11.2 Computation of Earnings Per Share - Fully Diluted
10
<PAGE>
B. REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company this quarter.
11
<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 and in the capacity indicated.
QUICKRESPONSE SERVICES, INC.
----------------------------
(Registrant)
\s\ Tania Amochaev
----------------------------------------
May 15, 1996 Tania Amochaev
President and Chief Executive Officer
\s\ Shawn M. O'Connor
----------------------------------------
May 15, 1996 Shawn M. O'Connor
Vice President and Chief Financial Officer
(Principal Financial Officer)
12
<PAGE>
EXHIBIT 11.1
QUICKRESPONSE SERVICES, INC.
COMPUTATION OF EARNINGS PER SHARE
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended
March 31,
-----------------------
1996 1995
--------- ---------
PRIMARY SHARES
Weighted average common shares outstanding 8,312,838 8,160,079
Common equivalent shares 261,134 270,270
--------- ---------
8,573,972 8,430,349
--------- ---------
--------- ---------
Net earnings $1,371 $1,012
--------- ---------
--------- ---------
Earnings per common and common equivalent share $0.16 $0.12
--------- ---------
--------- ---------
13
<PAGE>
EXHIBIT 11.2
QUICKRESPONSE SERVICES, INC.
COMPUTATION OF EARNINGS PER SHARE
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended
March 31,
-----------------------
1996 1995
--------- ---------
FULLY-DILUTED SHARES
Weighted average common shares outstanding 8,312,838 8,160,079
Common equivalent shares 308,640 311,422
--------- ---------
8,621,478 8,471,501
--------- ---------
--------- ---------
Net earnings $1,371 $1,012
--------- ---------
--------- ---------
Earnings per common and common equivalent share $0.16 $0.12
--------- ---------
--------- ---------
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 17,410
<SECURITIES> 8,597
<RECEIVABLES> 8,194
<ALLOWANCES> 491
<INVENTORY> 0
<CURRENT-ASSETS> 34,184
<PP&E> 5,605
<DEPRECIATION> 2,157
<TOTAL-ASSETS> 46,793
<CURRENT-LIABILITIES> 6,728
<BONDS> 0
0
0
<COMMON> 60,098
<OTHER-SE> 36,992
<TOTAL-LIABILITY-AND-EQUITY> 46,793
<SALES> 12,717
<TOTAL-REVENUES> 12,717
<CGS> 7,776
<TOTAL-COSTS> 3,011
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 103
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,287
<INCOME-TAX> 916
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,371
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
