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 November 30, 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.
----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 13-2635899
------------------------------ -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 Oser Avenue, Hauppauge, NY 11788
----------------------------------------
(Address of principal executive offices)
516-231-0333
--------------------------
(Issuer's telephone number)
None
-----------------------------------------
(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
1,506,569 shares of common stock, par value $.01 per share,
as of December 31, 1995.
Page 1
<PAGE>
TSR, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Part I. Financial Information:
Item 1. Financial Statements:
Consolidated Condensed Balance Sheet--November 30, 1995..................... 3
Consolidated Condensed Statements of Earnings--
For the three and six months ended November 30, 1995 and 1994.......... 4
Consolidated Condensed Statements of Cash Flows--
For the six months ended November 30, 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...................................................................... 10
</TABLE>
Page 2
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
TSR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
November 30,
1995
-----------
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents (Note 5).......................................... $ 2,030,012
Marketable securities (Note 6).............................................. 1,908,344
Accounts receivable (net of allowance for doubtful accounts of $162,153).... 5,877,558
Other receivables........................................................... 74,401
Prepaid expenses............................................................ 73,383
Prepaid and recoverable income taxes........................................ 29,691
Deferred income taxes ...................................................... 136,000
-----------
Total current assets ................................................... 10,129,389
Equipment and leasehold improvements, at cost (net of accumulated
depreciation and amortization of 761,869) .................................... 262,386
Other assets................................................................... 33,961
Deferred income taxes.......................................................... 24,000
-----------
$10,449,736
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts and other payables................................................. $ 101,680
Accrued and other liabilities............................................... 1,548,215
Income taxes payable........................................................ 91,544
Advances from customers..................................................... 267,135
----------
Total current liabilities ............................................... 2,008,574
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........................................................... 9,807,536
Less: 955,027 common shares in treasury, at cost ......................... (2,954,043)
-----------
8,441,162
-----------
$10,449,736
===========
</TABLE>
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 AND SIX MONTHS ENDED NOVEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
---------------------------- -------------------------------
1995 1994 1995 1994
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues.................................... $7,608,136 $6,230,273 $15,189,180 $12,561,295
Cost of sales............................... 5,527,348 4,444,593 11,031,196 8,991,033
Selling, general and
administrative expenses.................. 1,800,042 1,468,727 3,500,153 2,957,917
---------- ---------- ----------- -----------
7,327,390 5,913,320 14,531,349 11,948,950
---------- ---------- ----------- -----------
Income from operations...................... 280,746 316,953 657,831 612,345
Other income:
Interest and dividend income.............. 61,812 48,101 130,617 89,603
Gain (loss) from sale of assets........... 5,567 -- (1,924) --
---------- ---------- ----------- -----------
Income before income taxes.................. 348,125 365,054 786,524 701,948
Provision for income taxes.................. 156,000 170,000 349,000 333,000
---------- ---------- ----------- -----------
Net income ............................... $ 192,125 $ 195,054 $ 437,524 $ 368,948
========== ========== =========== ===========
Net income per common share................. $ 0.13 $ 0.13 $ 0.29 $ 0.24
========== ========== =========== ===========
Weighted average number of common
shares outstanding ........................ 1,514,569 1,514,569 1,514,569 1,514,569
========== ========== =========== ===========
</TABLE>
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 SIX MONTHS ENDED NOVEMBER 30, 1995 AND 1994
Six Months Ended
November 30,
------------------------
1995 1994
---------- ----------
Cash flows from operating activities:
Net income.......................................... $ 437,524 $ 368,948
---------- ----------
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization..................... 85,479 57,756
Provision for losses on accounts receivable....... -- --
Gain on sale of securities........................ (8,111) (443)
Deferred income taxes............................. (4,000) (34,000)
Loss on sale of assets............................ 1,924 --
Changes in assets and liabilities:
Trade accounts receivable ...................... (832,447) (442,998)
Other accounts receivable ...................... 43,134 47,536
Prepaid expenses ............................... (43,323) 21,204
Prepaid and recoverable income taxes ........... 10,001 (1,302)
Other assets ................................... (10,640) 5,597
Accounts payable and accrued expenses .......... (35,797) 82,790
Income taxes payable ........................... (3,568) 1,998
Advances from customers ........................ 28,544 --
---------- ----------
Total adjustments................................. (768,804) (261,862)
---------- ----------
Net cash provided by (used in) operating activities. (331,280) 107,086
---------- ----------
Cash flows from investing activities:
Proceeds from sales of marketable securities...... 3,426,751 1,474,638
Purchase of marketable securities................. (972,803) (2,926,080)
Purchase of fixed assets.......................... (134,740) (70,516)
Proceeds from sales of fixed assets............... 14,256 --
---------- ----------
Net cash provided by (used in) investing activities. 2,333,464 (1,521,958)
---------- ----------
Cash flows from financing activities:
Cash dividends ................................... (605,828) --
---------- ----------
Net cash used in financing activities............... (605,828) --
---------- ----------
Net increase (decrease) in cash and cash equivalents.. 1,396,356 (1,414,872)
Cash and cash equivalents at beginning of period...... 633,656 3,261,298
---------- ----------
Cash and cash equivalents at end of period............ $2,030,012 $1,846,426
========== ==========
Supplemental Disclosures:
Income tax payments (refunds), net.................. $ 347,000 $ 381,000
========== ==========
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
NOVEMBER 30, 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). The results of operations for the six month period
ended November 30, 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. Cash and cash equivalents consist primarily of United States Treasury Bills
with a maturity at acquisition of 90 days or less.
6. 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.
7. 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.
8. In the second quarter of fiscal 1996, the Registrant determined to withdraw
from the health care services business. The growth and profitability
experienced had not matched what was expected when the business commenced.
Small recent improvements in operating results notwithstanding, the
Registrant had concluded that its resources were better utilized in the
further development of the contract programming business.
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
SIX MONTHS ENDED NOVEMBER 30, 1995 AS COMPARED WITH NOVEMBER 30, 1994
Income from operations as a percentage of revenues decreased to 4.3% in the
current six month period from 4.9% in the prior year comparable period. This
decline occurred despite $120,000 of expenses accrued in the prior year period
to cover ongoing customer support costs associated with terminating the
Registrant's construction specifications business by March, 1996. The decline in
income from operations as a percentage of revenues is attributable to additional
compensation paid to additional contract programming sales and recruiting
employees who do not make an immediate contribution to operating results but are
expected to fuel future growth. The decline was also attributable to lower
margins in contract programming.
For the six months ended November 30, 1995, revenues increased $2,638,000 or
20.9% over the prior year period. Although construction specifications and
health care services revenues were down slightly from the prior year, contract
programming services revenues increased $2,835,000, which resulted primarily
from further penetration within existing accounts by the sales personnel.
Cost of sales increased $2,040,000 or 22.7% over the prior year period. This
increase included additional costs of $2,238,000 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 $153,000 in the construction specifications business, primarily
because of $120,000 of expenses accrued in the prior year to cover ongoing
customer support costs associated with terminating this business by March, 1996.
Health care services had a decrease in cost of sales of $45,000 whch resulted
from reduced revenues.
Selling, general, and administrative expenses increased $542,000, or 18.3% over
the prior year comparable period. The contract programming and construction
specifications businesses incurred increases amounting to $635,000, 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 for the period.
Interest and dividend income increased by $41,000 for the period, primarily
because of an increase in short-term interest rates paid on the Registrant's
treasury bills compared to the year ago.
The effective income tax rate decreased to 44.4% in the current period from
47.4% in the prior year period, mainly because of reduced non-deductible
entertainment expenses in the current period.
Page 7
<PAGE>
TSR, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, CONTINUED
THREE MONTHS ENDED NOVEMBER 30, 1995 AS COMPARED WITH NOVEMBER 30, 1994
Income from operations as a percentage of revenues decreased to 3.7% in the
current year quarter from 5.1% in the prior year comparable period. This decline
occurred, despite $60,000 of expenses accrued in the prior year quarter to cover
ongoing customer support costs associated with terminating the Registrant's
construction specifications business by March, 1996. The decline in income from
operations is attributable to additional compensation paid to newly hired sales
and recruiting employees in the Registrant's recently opened contract
programming office in Connecticut and to a decline in profit margins in the
contract programming business.
For the quarter ended November 30, 1995, revenues increased $1,378,000 or 22.1%
over the prior year period. Although construction specifications and health care
services revenues were down slightly from the prior year, contract programming
services revenues increased $1,558,000, which resulted primarily from further
penetration within existing accounts by the sales personnel.
Cost of sales increased $1,083,000 or 24.4% over the prior year quarter. This
increase included additional costs of $1,217,000 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 $75,000 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 $331,000, or 22.6% over
the prior year comparable period. The contract programming business incurred
increases amounting to $379,000, due to additional commission based compensation
and the hiring of additional sales and recruiting employees. These new hires
included those assigned to the Registrant's new office in Connecticut. This is
in line with Registrant's plan for growth which seeks to focus on bringing in
new accounts. The health care services business reduced expenses for the period
due to the termination of the business in the middle of the current quarter.
Interest and dividend income increased by $14,000 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 44.8% in the current quarter from
46.6% in the prior year period, mainly because of reduced non-deductible
entertainment expenses in the current quarter.
Page 8
<PAGE>
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 used in operations resulted primarily from an increase in accounts
receivable, which occurred partly because of the revenue increase and partly due
to a longer collection cycle. This use of cash was partly offset by cash
provided from net income.
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 period, 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 United States Treasury Bills. 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 November 30,1995 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
presently 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
In the second quarter of fiscal 1996, the Registrant determined to withdraw from
the health care services business. The growth and profitability experienced had
not matched what was expected when the business commenced. Small recent
improvements in operating results notwithstanding, the Registrant had concluded
that its resources were better utilized in the further development of the
contract programming business.
Page 9
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8k
(a). Exhibit 27: Financial Data Schedule
(b). Reports on Form 8k: None
TSR, INC. AND SUBSIDIARIES
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.
-----------------------------------------------
(Registrant)
Date: January 09, 1996
/s/ J. F. HUGHES
-----------------------------------------------
J. F. Hughes, Chairman, President and Treasurer
Date: January 09, 1996
/s/ JOHN G. SHARKEY
-----------------------------------------------
John G. Sharkey, Vice President, Finance
Page 10
<TABLE> <S> <C>
<ARTICLE> 5
<CAPTION>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> NOV-30-1995
<CASH> 2,030,012
<SECURITIES> 1,908,344
<RECEIVABLES> 6,039,711
<ALLOWANCES> 162,153
<INVENTORY> 0
<CURRENT-ASSETS> 10,129,389
<PP&E> 1,024,255
<DEPRECIATION> 761,869
<TOTAL-ASSETS> 10,449,736
<CURRENT-LIABILITIES> 2,008,574
<BONDS> 0
<COMMON> 24,696
0
0
<OTHER-SE> 8,416,466
<TOTAL-LIABILITY-AND-EQUITY> 10,449,736
<SALES> 0
<TOTAL-REVENUES> 15,189,180
<CGS> 0
<TOTAL-COSTS> 11,031,196
<OTHER-EXPENSES> 3,500,153
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 786,524
<INCOME-TAX> 349,000
<INCOME-CONTINUING> 437,524
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 437,524
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0.29
</TABLE>
