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, 1997
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 13, 1997, 4,022,894 shares of the issuer's common stock were
outstanding.
This report contains 12 pages.
ALTERNATE POSTAL DELIVERY, INC.
FORM 10-QSB
INDEX
Page
PART I. Financial Information: No.
Condensed Consolidated Balance Sheets - March 31, 1997,
and December 31, 1996. . . . . . . . . . . . . . . . . . . 3 & 4
Condensed Consolidated Statements of Operations - three
months ended March 31, 1997 and 1996. . . . . . . . . . . . . .5
Condensed Consolidated Statements of Cash Flows - three
months ended March 31, 1997 and 1996 . . . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements. . . . . . 7
Management's Discussion and Analysis or Plan
of Operation. . . . . . . . . . . . . . . . . . . . . . . .8 - 9
PART II. Other Information:
Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . .10
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . .11
Part I. Financial Information
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1997 1996
(unaudited)
------------ ------------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 2,000,906 $ 1,857,955
Accounts receivable, trade, less
allowance of $102,363 and $100,000
at March 31 and December 31 respectively 2,924,504 2,511,361
Notes receivable, current portion 37,375 37,375
Prepaid expenses and other assets 295,790 255,863
------------ ------------
Total current assets 5,258,575 4,662,554
Notes receivable, less current portion 46,517 34,595
Property and equipment:
Furniture and equipment 895,463 891,833
Accumulated depreciation and
amortization (685,829) (658,877)
------------ ------------
209,634 232,956
Computer software, net 48,486 43,151
Intangible assets, net 1,201,661 1,220,490
0ther assets 25,991 32,241
------------ ------------
$ 6,790,864 $ 6,225,987
============ ============
</TABLE>
Continued
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
LIABILITIES
March 31, December 31,
1997 1996
(unaudited)
------------ ------------
Current liabilities:
<S> <C> <C>
Notes payable, bank $ $ 300,000
Accounts payable 594,888 860,710
Accrued liabilities 337,878 416,947
Deferred revenue 1,664,839 302,096
Current portion of long-term
obligations 174,064 181,150
------------ ------------
Total current liabilities 2,771,669 2,060,903
Long-term obligations 178,791 334,941
Commitments and contingencies
SHAREHOLDERS' EQUITY
Preferred stock-no par value, 2,000,000
authorized shares, no shares issued and
outstanding
Common stock-no par value, voting, 8,000,000
authorized shares; 4,022,894 shares issued and
outstanding 9,677,530 9,677,530
Accumulated losses, through September 30, 1993
(Note 4) (1,291,039) (1,291,039)
------------ ------------
Total common stock 8,386,491 8,386,491
Accumulated losses, since October 1, 1993
(Note 4) (4,546,087) (4,556,348)
------------ ------------
Total shareholders' equity 3,840,404 3,830,143
------------ ------------
$ 6,790,864 $ 6,225,987
============ ============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------------
1997 1996
------------- -------------
(unaudited)
<S> <C> <C>
Net sales $4,045,909 $5,863,488
Cost of sales 2,893,137 4,431,801
------------ ------------
Gross profit 1,152,772 1,431,687
Selling, general and
administrative expenses 1,196,546 1,427,932
Other operating expenses 261,149
------------ ------------
1,196,546 1,689,081
------------ ------------
Loss from operations ( 43,774) ( 257,394)
Other income and (expense), net 12,430 6,646
------------ ------------
Loss before income taxes and
extraordinary gain ( 31,344) ( 250,748)
Income tax expense (benefit) ( 3,460) 3,310
------------ ------------
Loss before extraordinary gain ( 27,884) ( 254,058)
Extraordinary gain from early
retirement of debt 38,145
------------ ------------
Net income (loss) $ 10,261 ($ 254,058)
============ ============
Income (loss) per share (Exhibit 11.1)
Primary:
Loss before extraordinary gain ($ .01) ($ .06)
Extraordinary gain .01
------------ ------------
Net income (loss) per share $ .00 ($ .06)
============ ============
Fully diluted:
Loss before extraordinary gain ($ .01) ($ .06)
Extraordinary gain .01
------------ ------------
Net income (loss) per share $ .00 ($ .06)
============ ============
Weighted average number of shares
outstanding: (Exhibit 11.1)
Primary 4,022,894 3,997,532
============ ============
Fully diluted 4,022,894 3,992,041
============ ============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------------
1997 1996
------------ ------------
(unaudited)
<S> <C> <C>
Net cash flows from operating activities $ 630,844 $ 236,970
------------ ------------
Net cash flows from investing activities ( 24,657) ( 25,612)
------------ ------------
Net cash flows from financing activities ( 463,236) ( 657,603)
------------ ------------
Net increase (decrease) in cash and
cash equivalents 142,951 ( 446,245)
Cash and cash equivalents, beginning
of period 1,857,955 3,391,065
------------ ------------
Cash and cash equivalents, end of
period $2,000,906 $2,944,820
============ ============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED 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
of operations 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. The results of operations for the three months ended March 31,
1997 are not necessarily indicative of the results of operations expected for
the year ended December 31, 1997.
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. This per share information is
provided in Exhibit 11.1.
4. Shareholders' equity represents combined equity after a pooling of
interests on March 29, 1996. Accumulated losses, through September 30, 1993,
represent the losses and capital of the Company during the period of time it
was a subchapter S corporation. All subsequent losses of the combined
entities are presented under Accumulated losses, since October 1, 1993.
5. Certain amounts, as presented in prior periods, have been reclassified to
conform with the amounts presented for the three months ended March 31, 1997.
These reclassifications do not have an impact on the net losses previously
reported.
ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview and Plan of Operation
In the first quarter of 1997, the Company began an initiative to combine
the existing databases of its four areas of business into one delivery
capabilities database. With this enhanced tool, the Company will be better
able to maximize the information on target marketing services which it
currently offers to its clients.
The capabilities of this database will have the greatest effect on the
Associate Network of the Company which provides for the product sampling
deliveries of the business. As the alliance with News America FSI, a division
of News Corp. (NYSE ADRS: NWS), continues to gain momentum, the Company
anticipates that this area of business will see increased growth.
During the first quarter of 1997, the Company also continued planning for
the implementation of its agreement with American Newspaper Network (Media
Passage) (ANN) for the electronic placement of newspaper advertising (ROP) to
enhance the revenue capabilities of the Company's Suburban Network.
Results of Operations
During the three months ended March 31, 1997, the Company realized a
decrease of approximately 40% in revenue in the Address Specific Network as
compared to the same period of the previous year, due to the effects of the
United States Postal Service reclassification rate case. Net sales also
fluctuate from quarter to quarter based in part upon the timing of revenues
derived from the Company's Associate Network.
The gross margin increased from 24.4% for the three months ended March
31, 1996 to 28.5% for the three months ended, March 31, 1997. This increase
is largely attributable to the mix of the revenues, specifically, the Address
Specific Network revenues decreased; this area of business historically has
operated at lower gross profit margins.
Operating expenses decreased $492,535 during the 1997 quarter compared to
the previous year's quarter. This was attributable to overhead reductions
from efficiencies amounting to approximately $230,000 and to the elimination
in 1997 of nonrecurring charges of approximately $260,000 incurred in the
first quarter of 1996. These expenses were approximately $40,000 for
acquisition expenses, and approximately $220,000 for start-up expenses for a
project which the Company chose not to pursue.
Other income and (expense), net consists of interest income and interest
expense. Interest income for the three months ended March 31, 1997 and 1996
was $23,541 and $48,531 respectively. Interest expense for the three months
ended March 31, 1997 and 1996 was $11,111 and $41,885 respectively.
During the three months ended March 31, 1997, the Company recorded an
extraordinary gain from early retirement of debt as a result of a debt
reduction strategy whereby it offered to pay seventy five cents on the dollar
to existing noteholders and allowed them an immediate cash recovery instead of
the existing payment schedule which was tied to cash flow under the terms of
the notes.
Liquidity and Capital Resources
The Company continues to have a strong cash position with cash and cash
equivalents totaling $2,000,906 at March 31, 1997 and $1,857,955 at December
31, 1996.
Cash used for the additions to property, equipment, and software for the
three months ended March 31, 1997 and 1996, was approximately $13,000 and
$32,000, respectively. Cash used for net reduction of notes payable for the
three months ended March 31, 1997 and 1996 was approximately $454,000 and
$455,000, respectively. In addition, the Company made cash payments during
the three months ended March 31, 1996 of approximately $194,000 for costs of
the acquisition of Preferred Customer Delivery, Inc. Other changes in cash
position were largely attributable to working capital fluctuations.
The Company has a bank line of credit for $500,000 to assist in future
cash flow needs. The Company believes that this line of credit along with its
current cash balance will enable it to fund its current growth plans as well
as meet its presently anticipated capital requirements for the next twelve
months.
Outlook for Remainder of 1997
While revenues for the first quarter of 1997 came in below management's
expectations, the gross profit percentage came in higher than expected due to
the mix of the revenues. Moreover, the Company exceeded expectations for
planned reductions in selling, general and administrative expenses.
Management expects to continue tight control of these expenses for the
foreseeable future. In the 2nd quarter of 1997 management anticipates
improved sales results in the product sample area of the business as the
alliance with News America moves forward. Upon the completion of the
implementation of the ANN Agreement in the second quarter, the Company will
incur some one-time expenses for employee severance payments as the variable
outsourcing fees replace these fixed overhead costs. The Company will
continue to look for additional alliances and acquisitions as it continues its
plan for growth and expansion.
Forward-looking Statements
Except for historical information contained herein, the matters set forth
in this management discussion and analysis are forward-looking statements
based on current expectations. Actual results may differ materially. These
forward-looking statements involve a number of risks and uncertainties
including, but not limited to, competition, the timing of receipt of orders,
the effectiveness of the marketing program, and the Company's success in
capitalizing on its strategic alliances.
PART II. Other Information:
Item 6. Exhibits and Reports on Form 8-K.
Exhibit 11.1 Computation of income (loss) per share. Page 12.
During the period of this report, there were no required filings on Form 8-K.
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 13, 1997 By: /s/Phillip D. Miller
Phillip D. Miller
President and Chief Executive
Officer
By: /s/Sandra J. Smith
Sandra J. Smith
Chief Financial Officer
Exhibit 11.1
Computation of Income (Loss) Per Share
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------------
1997 1996
----------- -----------
(unaudited)
Net income (loss):
<S> <C> <C>
Loss before extraordinary gain ($ 27,884) ($ 254,058)
Extraordinary gain from early retirement
of debt 38,145
----------- -----------
Net income (loss) $ 10,261 ($ 254,058)
=========== ===========
Primary income (loss) per share:
Adjustments to shares outstanding:
Actual weighted average
shares outstanding 4,022,894 4,007,509
Net additional shares
issuable upon conversion
of warrants and options ( 9,977)
----------- -----------
Adjusted shares outstanding 4,022,894 3,997,532
Primary income (loss) per share:
Loss before extraordinary gain ($ .01) ($ .06)
Extraordinary gain .01
----------- -----------
Net loss per share ($ .00) ($ .06)
=========== ===========
Fully diluted income (loss) per share:
Adjustments to shares outstanding:
Actual weighted average
shares outstanding 4,022,894 4,007,509
Net additional shares
issuable upon conversion
of warrants and options ( 15,468)
----------- -----------
Adjusted shares outstanding 4,022,894 3,992,041
Fully diluted income (loss) per share:
Loss before extraordinary gain ($ .01) ($ .06)
Extraordinary gain .01
----------- -----------
Net loss per share ($ .00) ($ .06)
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at March 31, 1997 (unaudited) and the
Consolidated Statement of Operations for the three months ended March 31,
1997 (unaudited) and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000949244
<NAME> ALTERNATE POSTAL DELIVERY, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,001
<SECURITIES> 0
<RECEIVABLES> 3,027
<ALLOWANCES> 102
<INVENTORY> 0
<CURRENT-ASSETS> 5,259
<PP&E> 895
<DEPRECIATION> 686
<TOTAL-ASSETS> 6,791
<CURRENT-LIABILITIES> 2,772
<BONDS> 0
0
0
<COMMON> 8,386
<OTHER-SE> (4,546)
<TOTAL-LIABILITY-AND-EQUITY> 6,791
<SALES> 0
<TOTAL-REVENUES> 4,046
<CGS> 0
<TOTAL-COSTS> 2,893
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> (31)
<INCOME-TAX> (3)
<INCOME-CONTINUING> (28)
<DISCONTINUED> 0
<EXTRAORDINARY> 38
<CHANGES> 0
<NET-INCOME> 10
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
