United States
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
[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
Commission File Number 0-26624
ALTERNATE POSTAL DELIVERY, INC.
(Exact name of small business issuer as specified in its charter)
Michigan 38-2841197
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Ionia, SW, Suite 300, Grand Rapids, Michigan 49503
(Address of principal executive offices) (Zip Code)
616-235-0698 FAX 616-235-3405
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 ___
As of May 9, 1996, 4,022,894 shares of the issuer's common stock were
outstanding.
This report contains 14 pages.
ALTERNATE POSTAL DELIVERY, INC.
FORM 10-QSB
INDEX
Page
PART I. Financial Information: No.
Consolidated Balance Sheet - March 31, 1996.................3 & 4
Consolidated Statement of Operations - three
months ended March 31, 1996 and 1995...........................5
Consolidated Statement of Cash Flows - three
months ended March 31, 1996 and 1995...........................6
Notes to Financial Statements...............................7 & 8
Management's Discussion and Analysis or Plan
of Operation..............................................9 - 11
PART II. Other Information:
Exhibits and Reports on Form 8-K...............................12
Signature......................................................13
PART I. Financial Information
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
March 31, 1996
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $2,944,820
Accounts receivable, net of allowance of $51,500 2,052,126
Prepaid expenses and other assets 234,958
----------
Total current assets 5,231,904
Notes receivable, less current portion 75,834
Property and equipment:
Furniture and equipment 909,712
Less accumulated depreciation and amortization 571,934
----------
337,778
Computer software, net of accumulated amortization 56,885
Goodwill, net of accumulated amortization 1,269,713
Other assets 50,991
----------
$7,023,105
==========
See accompanying notes.
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
March 31, 1996
(unaudited)
LIABILITIES
Current liabilities:
Notes payable, bank 12,876
Notes payable, others 108,437
Current portion of capitalized lease obligations 39,477
Current portion of long-term notes payable 7,098
Accounts payable 1,084,640
Accrued liabilities 519,184
Refundable deposits 10,000
Deferred revenue 110,428
-----------
Total current liabilities 1,892,140
Long-term notes payable, less current portion 916,101
Capitalized lease obligations, less current portion 35,237
SHAREHOLDERS' EQUITY
Preferred stock-no par value, authorized 2,000,000 shares,
no shares issued and outstanding
Common stock-no par value, voting, authorized 8,000,000 shares;
4,022,894 shares issued and outstanding 9,676,170
Accumulated losses, as S corporation (Note 4) (1,291,039)
-----------
Total Common Stock 8,385,131
Accumulated losses, as C corporation (Note 4) (4,205,504)
-----------
Total shareholders' equity 4,179,627
-----------
$ 7,023,105
===========
See accompanying notes.
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------------
1996 1995
----------- -----------
(unaudited)
<S> <C> <C>
Net sales $ 5,863,488 $ 5,597,810
Cost of sales 4,431,801 4,231,222
----------- -----------
Gross profit 1,431,687 1,366,588
Selling, general and administrative expenses 1,427,932 1,034,965
----------- -----------
Income (loss) from operations 3,755 331,623
Other income (expense) (254,503) (62,378)
----------- -----------
Income (loss) before taxes (250,748) 269,245
Provision for taxes 3,310 0
----------- -----------
Net income (loss) (254,058) 269,245
=========== ===========
Primary income (loss) per share ($ 0.06) $ 0.11
=========== ===========
Fully diluted income (loss) per share ($ 0.06) $ 0.10
=========== ===========
Weighted average number of shares outstanding:
Primary 4,007,509 2,463,158
=========== ===========
Fully diluted 4,007,509 2,793,750
=========== ===========
</TABLE>
See accompanying notes.
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
Three months ended
March 31,
--------------------------
1996 1995
----------- -----------
(unaudited)
Cash flows from operating activities $ 239,305 $ 573,755
----------- -----------
Cash flows from investing activities (67,782) 112
----------- -----------
Cash flows from financing activities (617,768) (515,396)
----------- -----------
Net increase (decrease) in cash and cash equivalents (446,245) 58,471
Cash and cash equivalents, beginning of period 3,391,065 419,045
----------- -----------
Cash and cash equivalents, end of period $ 2,944,820 $ 477,516
=========== ===========
See accompanying notes.
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. The interim financial data is unaudited; however, in the opinion of
management, the interim data includes all adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of the results for the
interim periods. The financial statements included herein have been prepared by
the Company 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 such rules and
regulations, although the Company believes that the disclosures included herein
are adequate to make the information presented not misleading.
2. The organization and business of the Company, accounting policies followed by
the Company and other information are contained in the notes to the Company's
financial statements filed as part of the Company's Form 10-KSB. This quarterly
report should be read in conjunction with the Form 10-KSB.
3. Income (loss) per share calculation has been determined assuming exercise of
all outstanding options and warrants.
Fully diluted loss per share for the three months ended March 31, 1995
further assumes that the Convertible Notes were converted to common stock
according to the terms of the Convertible Notes at the beginning of the period
reported on. This adjustment also includes the elimination of the related
interest expense attributable to the Convertible Notes.
The results of these transactions and the impact on the net income
(loss) and primary and fully diluted income (loss) per share are provided in
Exhibit 11.1.
4. Shareholders' equity represents combined equity after the pooling of
interests. Accumulated losses, as S corporation, represent the losses and
capital of the company during the period of time it was a subchapter S
corporation. All other losses of the combined entities are presented under
Accumulated losses, as C corporation.
5. Acquisitions. See Forms 8-K and 8-K/A for more detailed financial and
pro-forma information.
In January 1996, the Company acquired certain assets and assumed
certain liabilities of Preferred Customer Delivery, Inc., a private mail
delivery company located in northern California for a total purchase price of
approximately $540,000 consisting of $165,000 cash, the assumption of a $110,000
note payable and 50,000 shares of Common Stock. The purchase agreement provides
for contingent consideration not to exceed $100,000 based on gross revenues
resulting from this business for two years after acquisition. Goodwill is being
amortized on a straight line method over forty years. This acquisition will be
accounted for using the purchase method.
In March 1996, The Company acquired National Home Delivery, Inc. (NHD)
through a stock-for-stock exchange. NHD, which is based in Schaumburg, Illinois,
utilizes newspapers and related media as a vehicle to distribute advertising and
samples to consumer residences. The Company issued 700,000 shares of its Common
Stock in exchange for all of the outstanding shares of National Home Delivery,
Inc. The acquisition will be accounted for as a pooling of interests. There were
no differences in accounting practices. Results of operations of the previously
separate entities is summarized below:
Three months ended March 31,
1996 1995
(in thousands) APD NHD APD NHD
Revenue $2,358 $3,614 $1,911 $3,774
Extraordinary items $0 $0 $0 $0
Net income ($276) $22 ($7) $276
====== ====== ====== ======
Net sales for the three months ended March 31, 1996 and 1995 in the amounts of
$5,863,488 and $5,597,810, respectively, reflect the elimination of intercompany
transactions resulting in revenue and cost of sales in the amount of $108,714
for the three months ending March 31, 1996 and $87,287 for the quarter ending
March 31, 1995.
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview and Plan of Operation
During the first quarter of 1996, the Company began its plan of
consolidation with two key acquisitions. On January 29, 1996, the Company
acquired certain assets of Preferred Customer Delivery, Inc. (PCD) and added
this business located in San Francisco, CA to its Implementation division. PCD
was a private delivery company delivering TMC products for local newspapers,
magazines and samples. The second acquisition was on March 29, 1996, with the
"pooling of interest" transaction for the acquisition of National Home Delivery,
Inc. (NHD). NHD's revenue stream comes from (a)Product Sampling, which parallels
the Company's Distribution Marketing division and (b) its "USSPI" or ROP
division, whereby NHD represents suburban newspapers nationwide for national
advertising and inserts. The Company has decided not to continue Home Mall, a
new segment of business developed by National Home Delivery. Alternate Postal
expects sample delivery for packaged goods companies to be a significant growth
area for the Company.
With the addition of NHD, the Company began operating with five areas of
business as follows:
Magazines (Recurring Deliveries)
Newspaper Sales (Affiliate Relations and Software Systems)
Delivery Implementation (Company-owned Affiliate)
Distribution Marketing (Recurring Relationships), which now includes
NHD's product sampling business.
ROP (Newspaper Advertising Space)
During the first quarter, two other events had a direct impact on the
Company's magazine delivery business. The first event was the final decision on
postal re-classification recommended by the PRC (Postal Rate Commission) and
accepted by the USPS Board of Governors.
This postal re-classification case had the effect of making private
delivery more competitive with smaller circulation monthly publications and
heavy magazines, and less competitive with certain large national weekly
publications and large circulation monthlies which can take advantage of
discounts offered by the Postal Service. Re-classification is planned to go into
effect July 1, 1996.
The second event was the decision of Publishers Express, Inc., a
competitor of the Company, to discontinue operations. As a result the Company
has established affiliation with 12 former Publishers Express newspaper
providers in key markets that are complementary to Alternate Postal's current
network.
Combining Alternate Postal's total household reach with National Home
Delivery, San Francisco and Publishers Express markets, the Company now reaches
over 30 million households.
Results of Operations
Net sales were up during the quarter ended March 31, 1996, as compared
to the same quarter in 1995. With the addition of St. Petersburg, Florida in
November 1995 and San Francisco, California in February 1996 to the Company's
Implementation business, Implementation revenues increased by more than $500,000
over the same quarter in the previous year. Declines of $107,000 in Magazines
and $71,000 in Newspaper Sales were offset by an increase of $119,000 in
Distribution Marketing. NHD's ROP business had an increase of $603,000, while
Product Sampling had a decrease of $763,000. The Distribution Marketing and
Product Sampling businesses fluctuate from quarter to quarter based upon the
timing of distribution jobs. The gross margin remained constant at 24.4% for
both years. Net sales and gross profit each increased 4.7% over the same quarter
of the previous year.
Selling, general and administrative expenses increased $392,000 during
the 1996 quarter over the previous year's quarter. This was attributable to
business acquisitions in the Company's Implementation area of business. Also
included in the first quarter of 1996 is $41,221 for fees for executive search
firms.
Income from operations decreased during the quarter ending March 31,
1996 as compared to the same period of the previous year due to the increase in
selling, general and administrative expenses for the additional Implementation
markets.
Other income (expense) consists of interest income, interest expense,
and one-time non-recurring charges. Interest income earned during the quarter
ended March 31, 1996 was $48,531, which is up from $10,860 for the quarter
ending March 31, 1995. This is largely due to the invested funds from the
Company's initial public offering completed in September 1995. Interest expense
for the quarter ending March 31, 1996 and 1995 was $41,885 and $83,238,
respectively. The decrease is attributable to the elimination of the interest
expense on the Convertible Notes which were paid off or converted to Common
Stock at the Company's initial public offering. During the quarter ended March
31, 1996, the Company incurred acquisition costs for the NHD pooling of interest
transaction of $40,221 which is not attributable to the ongoing operations of
the Company. In addition, the Company incurred one-time expenses attributable to
the Home Mall business investment which the Company has chosen to discontinue.
For the quarter ending March 31, 1996, these costs amounted to $220,928.
Liquidity and Capital Resources
The Company continues to have a strong cash position after the two
acquisitions in the first quarter of 1996. Cash and cash equivalents totaled
$2,944,820 at March 31, 1996.
Cash used for the additions to property and equipment for the quarter
ending March 31, 1996 and 1995, was $73,782 and $7,667, respectively. Cash used
for payment of notes payable for the quarter ending March 31, 1996 and 1995 was
$455,426 and $512,500, respectively. In addition, $165,000 was spent as part of
the purchase price for Preferred Customer Delivery, Inc. in January 1996. Other
changes in cash position were largely attributable to working capital
fluctuations.
The Company believes that cash flows from operations along with its
current cash balance will be sufficient to fund its current growth plans as well
as meet its presently anticipated capital requirements for the next twelve
months.
Outlook for Remainder of 1996
The Company intends to focus on assimilating its two acquisitions and
the 12 additional former Publishers Express markets in the second quarter.
Revenue is expected to increase in the second quarter compared to the first
quarter reflecting the business acquired from Preferred Customer Delivery in
January 1996.
In the third quarter the Company intends to identify additional
potential candidates for acquisition as part of its ongoing plan as well to
realize efficiencies and synergies in the alternate delivery market.
PART II. Other Information:
Item 6. Exhibits and Reports on form 8-K.
Exhibit 11.1 Computation of income (loss) per share. Page 14.
During the period of this report, there were four Form 8-K filings as follows:
8-K filed February 8, 1996 for acquisition of Preferred Customer
Delivery, Inc. for Current Report event dated January 24, 1996.
8-K/A filed April 5, 1996 as amendment to provide the related Financial
Statement and Pro Forma Financial Information applicable to the Current Report
event dated January 24, 1996.
8-K filed April 11, 1996 for acquisition of National Home
Delivery, Inc. for Current Report event dated March 29, 1996.
8-K/A filed May 3, 1996 as amendment to provide the related Financial Statement
and Pro Forma Financial Information applicable to the Current Report event dated
March 29, 1996.
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ALTERNATE POSTAL DELIVERY, INC.
Date: May 9, 1996 By: Phillip D. Miller
Phillip D. Miller
President and Chief Executive
Officer
By: Sandra J. Smith
Sandra J. Smith
Chief Financial Officer
EXHIBIT 11.1
COMPUTATION OF INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
Three months ending
March 31,
1996 1995
----------- -----------
<S> <C> <C>
Primary income (loss) per share -- --
Adjustments to net income (loss):
Net income (loss) ($ 254,058) $ 269,245
Adjusted net income (loss) ($ 254,058) $ 269,245
Adjustments to shares outstanding:
Actual weighted average shares outstanding 4,007,509 2,463,158
Net additional shares issuable upon conversion of
warrants and options -- --
Adjusted shares outstanding 4,007,509 2,463,158
Primary income (loss) per share ($ 0.06) $ 0.11
Three months ending
March 31,
1996 1995
----------- -----------
Fully diluted income (loss) per Share -- --
Adjustments to net income (loss):
Net income (loss) ($ 254,058) $ 269,245
Elimination of convertible notes interest expense $ 34,741
Elimination of deferred financing fees ($ 33,027)
Adjusted net income (loss) ($ 254,058) $ 270,959
Adjustments to shares outstanding:
Actual weighted average shares outstanding 4,007,509 2,463,158
Conversion of Convertible Notes into 15% of the 314,062
common stock outstanding
Pre-emptive shares 16,530
Net additional shares issuable upon conversion of
warrants and options -- --
Adjusted shares outstanding 4,007,509 2,793,750
Fully diluted income (loss) per share ($ 0.06) $ 0.10
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This scheduele contains summary financial information extracted from the
Consolidated Balance Sheet at March 31, 1996 (unaudited) and the Consolidated
Statement of Operations for the three months ended March 31, 1996 (unaudited)
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<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> 2,945
<SECURITIES> 0
<RECEIVABLES> 2,104
<ALLOWANCES> 52
<INVENTORY> 0
<CURRENT-ASSETS> 5,232
<PP&E> 910
<DEPRECIATION> 572
<TOTAL-ASSETS> 7,023
<CURRENT-LIABILITIES> 1,892
<BONDS> 0
0
0
<COMMON> 8,385
<OTHER-SE> (4,206)
<TOTAL-LIABILITY-AND-EQUITY> 7,023
<SALES> 0
<TOTAL-REVENUES> 5,863
<CGS> 0
<TOTAL-COSTS> 4,482
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42
<INCOME-PRETAX> (251)
<INCOME-TAX> 3
<INCOME-CONTINUING> (254)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (254)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
