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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act Of 1934
For the period ended August 31, 1995
[ ] Transition Report Under Section 13 or 15(d)
of the Securities Exchange Act Of 1934
For the transition period from ________ to ________
Commission File Number: 0-8656
TSR, Inc.
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(Exact name of small business issuer as specified in its charter)
Delaware 13-2635899
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 Oser Avenue, Hauppauge, NY 11788
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(Address of principal executive offices)
516-231-0333
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(Issuer's telephone number)
None
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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
SHARES OUTSTANDING
1,514,569 shares of common stock, par value $.01 per share, as
of September 30, 1995.
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Page 1
<PAGE>
TSR, INC. AND SUBSIDIARIES
INDEX
Page
Number
------
Part I. Financial Information:
Item 1. Financial Statements:
Consolidated Condensed Balance Sheet - August 31, 1995....... 3
Consolidated Condensed Statements of Earnings --
For the three months ended August 31, 1995 and 1994..... 4
Consolidated Condensed Statements of Cash Flows --
For the three months ended August 31, 1995 and 1994..... 5
Notes to Consolidated Condensed Financial Statements......... 6
Item 2. Management's Discussion and Analysis......................... 7
Part II. Other Information............................................... 9
Signatures................................................................ 9
Page 2
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
TSR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
August 31,
1995
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ASSETS
Current Assets:
Cash and cash equivalents....................................... $ 1,796,993
Marketable securities (Note 5).................................. 2,933,176
Accounts receivable (net of allowance for doubtful
accounts of $160,336) ........................................ 5,212,991
Other receivables............................................... 81,622
Prepaid expenses................................................ 22,169
Prepaid and recoverable income taxes............................ 3,491
Deferred income taxes........................................... 136,000
----------
Total current assets ......................................... 10,186,442
Equipment and leasehold improvements, at cost
(net of accumulated depreciation and amortization of $725,986... 259,362
Other assets...................................................... 32,966
Deferred income taxes............................................. 23,000
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$10,501,770
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts and other payables...................................... $ 170,328
Accrued and other liabilities.................................... 1,587,696
Income taxes payable............................................. 234,343
Advances from customers.......................................... 260,366
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Total current liabilities ..................................... 2,252,733
Shareholders' Equity:
Preferred stock, $1 par value, authorized
1,000,000 shares; none issued ................................. --
Common stock, $.01 par value, authorized
4,000,000 shares; issued 2,469,596 shares ..................... 24,696
Additional paid-in capital....................................... 1,562,973
Retained earnings................................................ 9,615,411
Less: 955,027 common shares in treasury, at cost ............. (2,954,043)
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8,249,037
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$10,501,770
===========
The accompanying notes are an integral part of these consolidated
condensed financial statements.
Page 3
<PAGE>
TSR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
For The Three Months Ended August 31, 1995 and 1994
Three Months Ended
August 31,
------------------------
1995 1994
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Revenues.............................................. $7,581,044 $6,331,022
Cost of sales......................................... 5,503,848 4,546,440
Selling, general and administrative expenses.......... 1,700,111 1,489,190
---------- ----------
7,203,959 6,035,630
---------- ----------
Income from operations................................ 377,085 295,392
Other income:
Interest and dividend income........................ 68,805 41,502
Loss on sale of assets ............................. (7,491) --
Income before income taxes............................ 438,399 336,894
Provision for income taxes............................ 193,000 163,000
---------- ----------
Net income ......................................... $ 245,399 $ 173,894
========== ==========
Net income per common share........................... $ 0.16 $ 0.11
========== ==========
Weighted average number of common shares outstanding.. 1,514,569 1,514,569
========== ==========
The accompanying notes are an integral part of these consolidated
condensed financial statements.
Page 4
<PAGE>
TSR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For the Three Months Ended August 31, 1995 and 1994
Three Months Ended
August 31,
-----------------------
1995 1994
---------- ----------
Cash flows from operating activities:
Net income......................................... $ 245,399 $ 173,894
---------- ----------
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization.................... 40,067 28,088
Loss on Sale of Assets ......................... 7,491 --
Deferred income taxes............................ (3,000) (13,000)
Changes in assets and liabilities:
Trade accounts receivable ..................... (167,880) (276,640)
Other accounts receivable ..................... 35,913 65,499
Prepaid expenses .............................. 7,891 25,853
Prepaid and recoverable income taxes .......... 36,201 16,794
Other assets .................................. (9,645) 2,100
Accounts payable and accrued expenses ......... 72,332 91,014
Income taxes payable .......................... 139,231 113,423
Advances from customers ....................... 21,775 --
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Total adjustments................................ 180,376 53,131
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Net cash provided by operating activities.......... 425,775 227,025
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Cash flows from investing activities:
Proceeds from maturities of marketable securities. 1,907,280 491,885
Purchase of marketable securities................. (486,275) (2,435,335)
Purchase of fixed assets.......................... (85,470) ( 4,168)
Proceeds from sale of fixed assets................ 7,855 --
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Net cash provided by investing activities......... 1,343,390 (1,947,618)
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Cash flows from financing activities:
Cash dividends.................................... (605,828) --
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Net cash used in financing activities............. (605,828) --
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Net increase (decrease) in cash and cash equivalents.. 1,163,337 (1,720,593)
Cash and cash equivalents at beginning of period...... 633,656 3,261,298
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Cash and cash equivalents at end of period............ $1,796,993 $1,540,705
========== ==========
Supplemental Disclosures:
Income tax payments (refunds), net................ $ 21,000 $ 46,000
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Interest paid..................................... $ -- $ --
========== ==========
The accompanying notes are an integral part of these
consolidated condensed financial statements.
Page 5
<PAGE>
TSR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
August 31, 1995
1. The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions of Form 10-QSB
of Regulation S-B. Accordingly, they do not include all the information and
notes required by generally accepted accounting principles for complete
financial statements. For further information refer to the Registrant's
consolidated financial statements and notes thereto included in the
Registrant's Annual Report on Form 10-KSB for the year ended May 31, 1995.
2. In the opinion of the Registrant, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the consolidated
financial position, the consolidated results of operations, and consolidated
cash flows for the periods presented.
3. The Registrant is engaged primarily in the business of providing contract
programming services. In addition, the Registrant provides construction
specifications data bases on magnetic media, primarily to architectural and
engineering firms, provides maintenance and support for its conversion
software, provides program updating and consulting services to American
Express Bank, Ltd. (AEBL), and provides temporary nurses and nurses' aides
to health care facilities and home care patients. The results of operations
for the three month period ended August 31, 1995 are not necessarily
indicative of the results to be expected for the full year.
4. The consolidated condensed financial statements include the accounts of TSR,
Inc. and its wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
5. Marketable securities consist primarily of United States Treasury Bills with
a maturity at acquisition in excess of 90 days. Such investments are
expected to be held to maturity and are carried at amortized cost.
6. On July 6, 1995 the Board of Directors of the Company declared a cash
dividend of $0.40 per share on Common Stock payable on August 28,1995 to
shareholders of record on July 31, 1995. The Company funded such dividend
from its available cash and matured marketable securities. This dividend,
which amounted to $605,828 did not have a material impact on the liquidity
of the Company. This dividend was declared due to the Registrant's favorable
operating results achieved during fiscal 1995. The Registrant has not
adopted a policy of paying dividends on a regular periodic basis.
7. The Registrant has determined to withdraw from the health care services
business. The growth and profitability experienced has not matched what was
expected when the business commenced. Small recent improvements in operating
results notwithstanding, the Registrant has concluded that its resources are
better utilized in the further development of the contract programming
business. The wind down of the health care services business is expected to
occur during the second quarter of fiscal 1996.
Page 6
<PAGE>
Part I. Financial Information
Item 2.
TSR, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion and analysis should be read in conjunction with the
consolidated condensed financial statements and the notes to the consolidated
condensed financial statements.
Results of Operations
Three Months Ended August 31, 1995 as compared with August 31, 1994
For the quarter ended August 31, 1995, revenues increased $1,250,000 or 19.7%
over the prior year period. Although construction specifications revenues were
down slightly from the prior year, contract programming services revenues
increased $1,277,000 , which resulted primarily from further penetration within
existing accounts by the sales personnel.
Cost of sales increased $958,000 or 21.1% over the prior year quarter. This
increase included additional costs of $1,022,000 from contract programming,
which resulted primarily from the above-mentioned revenue increase. However, the
increase in cost of sales was heightened, to an extent, by reduced margins in
the contract programming business. This continues the trend started in the
second half of fiscal 1995 and is attributable to increased amounts paid to
qualified programming professionals who have been in demand. Cost of sales
decreased by $78,000 in the construction specifications business, primarily
because of $60,000 of expenses accrued in the prior year to cover ongoing
customer support costs associated with terminating this business by March 1996.
Selling, general, and administrative expenses increased $211,000, or 14.2% over
the prior year comparable period. The contract programming business incurred
increases amounting to $256,000, due to additional commission based compensation
and the hiring of additional sales and recruiting employees. This is in line
with the Registrant's plan for growth which seeks to focus on bringing in new
accounts. The health care services and construction specifications businesses
reduced expenses slightly for the period.
Interest and dividend income increased by $27,000 for the quarter, primarily
because of an increase in short-term interest rates paid on the Registrant's
treasury bills compared to the year ago quarter.
The effective income tax rate decreased to 44.0% in the current quarter from
48.4% in the prior year period, mainly because of reduced non-deductible
entertainment expenses in the current quarter.
Page 7
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TSR, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, CONTINUED
Liquidity, Capital Resources and Changes in Financial Condition
Subject to continued profitability, the Registrant expects that cash flow
generated from operations will be sufficient to provide the Registrant with
adequate resources to meet all needs with respect to its existing business. In
the event the Registrant requires additional funds, the Registrant expects to
meet such needs with its cash and short-term marketable securities as well as
interest earned thereon, which the Registrant believes to be sufficient for the
foreseeable future.
Net cash flow provided by operations resulted primarily from net income. A
significant amount of cash flow was used to fund the increase in accounts
receivable, which occurred primarily because of the revenue increase. This use
of cash was mostly offset by cash provided from an increase in accounts payable
and accrued expenses, and income taxes payable. The growth of accounts payable
and accrued expenses is in line with the increase in cost of sales. The increase
in income taxes payable occurs each year in the first fiscal quarter because the
estimated federal tax payment for the quarter is due September 15, after the end
of the quarter.
Cash flow provided or used by investing activities is affected mostly by the
Registrant's decisions to either purchase United States Treasury Bills with
maturities of three months or those with longer maturities. During the current
quarter, the Registrant did not roll over some of its maturing treasury
securities. This resulted in the funds being reclassified to cash and cash
equivalents from marketable securities for financial statement purposes. Also,
in the current year quarter, the contract programming office in New Jersey
relocated to larger space to facilitate growth. This resulted in capital
expenditures for new telephone equipment, computers and furniture.
On July 18, 1995 the Board of Directors of the Registrant declared a cash
dividend of $0.40 per share on Common Stock payable on August 28, 1995 to
shareholders of record on July 31, 1995. The Registrant funded such dividend
from its available cash and matured marketable securities. This dividend, which
amounted to $605,828 did not have a material impact on the liquidity of the
Registrant. This dividend was declared due to the Registrant's favorable
operating results achieved during fiscal 1995. The Registrant has not adopted a
policy of paying dividends on a regular periodic basis.
The Registrant's capital resource commitments at August 31, 1995 consisted of
lease obligations on its branch and corporate locations. The Registrant intends
to finance these commitments from cash provided from operations.
Expiration of Licensing Agreement
The Registrant has explored renegotiation and extension of the exclusive
licensing agreement with the Construction Sciences Research Foundation, Inc.
(CSRF) under which the Registrant markets construction specifications on
magnetic media. As a result of such discussions, the Registrant does not believe
that it will be able to extend the licensing agreement beyond its present term
which expires March 1, 1996. In anticipation of the termination of such
agreement, the Registrant has accrued expenses of approximately $240,000 which
it deems adequate to cover ongoing customer support costs associated with
terminating the construction specifications business.
In July 1995, CSRF began to market an upgraded version of the construction
specifications product which will be licensed through another party. The
prospective offering of this product is expected to have a negative impact on
construction specifications revenues for the remainder of the contract term.
Termination of Health Care Services Business
The Registrant has determined to withdraw from the health care services
business. The growth and profitability experienced has not matched what was
expected when the business commenced. Small recent improvements in operating
results notwithstanding, the Registrant has concluded that its resources are
better utilized in the further development of the contract programming business.
The wind down of the health care business is expected to occur during the second
quarter of fiscal 1996.
Page 8
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TSR, INC. AND SUBSIDIARIES
Part II. Other Information
Item 6. Exhibits and Reports on Form 8K
(a) Exhibit 27: Financial Data Schedule
(b) Reports on Form 8K: None
SIGNATURES
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.
TSR, INC.
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(Registrant)
Date: October 10, 1995 /s/ J. F. HUGHES
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J.F. Hughes, Chairman, President and Treasurer
Date: October 10, 1995 /s/ JOHN G. SHARKEY
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John G. Sharkey, Vice President, Finance
Page 9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> AUG-31-1995
<CASH> 1,796,993
<SECURITIES> 2,933,176
<RECEIVABLES> 5,373,327
<ALLOWANCES> 160,336
<INVENTORY> 0
<CURRENT-ASSETS> 10,186,442
<PP&E> 985,348
<DEPRECIATION> 725,986
<TOTAL-ASSETS> 10,501,770
<CURRENT-LIABILITIES> 2,252,733
<BONDS> 0
0
0
<COMMON> 24,696
<OTHER-SE> 8,224,341
<TOTAL-LIABILITY-AND-EQUITY> 10,501,770
<SALES> 0
<TOTAL-REVENUES> 7,581,044
<CGS> 0
<TOTAL-COSTS> 5,503,848
<OTHER-EXPENSES> 1,700,111
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 438,399
<INCOME-TAX> 193,000
<INCOME-CONTINUING> 245,399
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 245,399
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
