SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
For the transition period from _______ to _______
Commission file number: 33-83894-NY
LOIS/USA INC.
(Exact name of the Registrant as specified
in its charter)
Delaware 13-3441962
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
40 West 57th Street, New York, New York 10019
(Address of principal executive offices) (Zip Code)
N/A (Former name, former address and former fiscal year, if changed from
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___ No___
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distributions of securities under a plan
confirmed by a court.
Yes___ No___.
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the Issuer's classes of common
equity, as of the latest practicable date:
2,521,123
Transitional Small Business Disclosure Format (check one):
Yes____ No____.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................... 2
SIGNATURE................................5
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LOIS/USA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATION
SIX MONTHS ENDED JUNE 30, 1996 COMPARED
TO SIX MONTHS ENDED JUNE 30, 1995
As a result of the acquisition of Eisaman, Johns and Laws, Advertising Inc.
("EJL") on February 12, 1996, the amounts reported for the six months ended June
30, 1996 include consolidated amounts of the two entities. Cost savings from the
combination of the two agencies are being implemented, especially in the areas
of real estate leasing and agency administrative costs. Since the acquisition
took place in the middle of the first quarter, these cost reductions began in
the second quarter of 1996 and will continue throughout the remainder of the
year.
The combination of the two entities resulted in net income of $253,000
versus net income of $454,000 during the same six month period in 1995. While
commissions and fees rose from $8,052,000 to $13,688,000 or 70.0%, operating
expenses rose $6,020,000 to $13,244,000 an increase of 83.3%. This disparity in
revenue growth versus operating increases is related to the seasonal nature of
EJL's business. Non-operating expenses fell from $72,000 to $22,000 as a result
of lower interest expenses.
The provision for taxes fell from $302,000 in 1995 to $169,000 in 1996 in 1996
due to lower operating revenues in 1996
Earnings per share fell to $.10 per share on weighted average shares of
2,521,123. For the six months in 1995, earnings per share were $.21 on 2,175,000
shares.
THREE MONTHS ENDED JUNE 30, 1996 COMPARED
TO THREE MONTHS ENDED JUNE 30, 1996
Consolidated revenues from commission and fee income was $7,546,000 in the
second quarter of 1996 as compared to $4,321,000 during the comparable three
month period in 1995. Net income was $246,000 for the three months ended June
30, 1996 as compared to $314,000 for 1995. While commissions and fees rose
74.6%, expenses rose 89.3% from $3,763,000 to $7,125,000.
Non-operating expenses fell from 48,000 in 1995 to $11,000 in 1996 as a
result of lower net interest expense.
The provision for taxes was $164,000, down $32,000. The lower provision is
based on lower taxable income.
LIQUIDITY AND CAPITAL RESOURCES
On February 12, 1996, the Company acquired all of the outstanding shares of
capital stock of Eisaman, Johns & Laws Advertising, Inc. ("EJL"), a California
corporation, pursuant to a Stock Purchase Agreement between the Company and the
shareholders of EJL. In exchange for 49,512 shares of the common stock of EJL,
the Company issued 333,333 shares of its common stock, $.01 par value per share,
and made an initial cash payment of approximately $4 million. The shares of (the
"Common Stock") were issued from the Company's existing authorized capital
stock, and the cash was paid out of working capital and additional bank debt. In
addition, the Company has agreed to pay EJL shareholders 5% of the combined
revenue of the combined entity over the next five years, subject to certain
adjustments. The purchase price paid to EJL stockholders will range from a
minimum of $12 million to a maximum of $18 million.
Cash and cash equivalents decreased from $1,729,000 at December 31, 1995 to
$1,447,000 at June 30, 1996. The decrease was the result of cash used in
financing the EJL acquisition and the cash flows from operations.
The Company's working capital deficit decreased from ($1,564,000) at
December 31, 1995 to ($1,251,000) at June 30, 1996. This decrease was the result
of funds generated from the new bank debt offset by the $4,000,000 payment to
the former shareholders of EJL.
Management believes that cash flows from operations, together with funds
available under the Company's credit facilities with Chase Bank, will be
sufficient to meet the Company's cash needs for its existing business and any
potential acquisitions over the next twelve months.
The Company is regularly presented with opportunities to acquire
advertising agencies and intends to consider potential acquisitions which would
be complementary to the Company's current business activities and fit the
Company's acquisition strategy. Although no specific plans or commitments
currently exist, any future acquisitions may require material capital
expenditures or commitments that could place significant constraints on future
working capital. In addition, the Amended and Restated Credit Agreement contains
covenants restricting the Company from making capital expenditures in excess of
$250,000 in any fiscal year and contains certain financial condition ratios that
could place significant constraints on the Company's ability to make
acquisitions. The Company believes that the restrictions will not impair its
ability to make acquisitions for stock or deferred contingent payments in
accordance with its acquisition financing strategy.
The Company's business operations are not seasonal; however, based upon
individual client expenditures and the history of EJL, significant quarter to
quarter fluctuations in billings and net income may occur.
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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.
LOIS/USA INC.
Date: August 28, 1996 By /S/ ROBERT K. STEWART
ROBERT K. STEWART
Executive Vice President
Chief Financial and
Accounting Officer
