UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the period ended February 29, 2000
[ ] Transition Report Pursuant to 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 registrant as specified in its charter)
Delaware 13-2635899
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 Oser Avenue, Hauppauge, NY 11788
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(Address of principal executive offices)
631-231-0333
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(Registrant's telephone number)
None
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(Former name, former address and former fiscal year,
if changed since 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. [X] Yes [ ] No
SHARES OUTSTANDING
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4,721,412 shares of common stock, par value $.01 per share,
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as of March 31, 2000
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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 Sheets-
February 29, 2000 and May 31, 1999............................ 3
Consolidated Condensed Statements of Earnings-
For the three months and nine months ended
February 29, 2000 and February 28, 1999....................... 4
Consolidated Condensed Statements of Cash Flows-
For the nine months ended February 29, 2000 and
February 28, 1999............................................. 5
Notes to Consolidated Condensed Financial Statements............... 6
Item 2. Management's Discussion and Analysis.......................... 7
Part II. Other Information............................................... 12
Signatures................................................................ 12
Page 2
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
TSR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
February 29, May 31,
2000 1999
----------- -----------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents (Note 6) ........................................ $ 978,536 $ 2,234,723
Marketable securities (Note 7) ............................................ 4,961,430 5,898,272
Accounts receivable (net of allowance for
doubtful accounts of $173,000) ........................................... 12,816,013 14,226,289
Other receivables ......................................................... 204,327 167,415
Prepaid expenses .......................................................... 33,119 44,731
Prepaid and recoverable income taxes ...................................... 408,897 98,789
Deferred income taxes ..................................................... 59,000 59,000
----------- -----------
Total current assets ................................................. 19,461,322 22,729,219
Equipment and leasehold improvements, at cost (net of accumulated
depreciation and amortization of $1,939,000 and $1,833,000) ................... 213,547 161,315
Other assets ................................................................... 42,886 35,276
Deferred income taxes .......................................................... 240,000 265,000
----------- -----------
$19,957,755 $23,190,810
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts and other payables ............................................... $ 256,827 $ 305,067
Accrued and other liabilities ............................................. 3,105,842 3,774,513
Advances from customers ................................................... 1,392,121 1,206,137
Income taxes payable ...................................................... 210,772 140,548
----------- -----------
Total current liabilities ............................................ 4,965,562 5,426,265
----------- -----------
Shareholders' Equity:
Preferred stock, $1 par value, authorized
1,000,000 shares; none issued ............................................ -- --
Common stock, $.01 par value, authorized
25,000,000 shares; issued 6,078,326 shares ............................... 60,783 60,783
Additional paid-in capital ................................................ 4,134,053 4,134,053
Retained earnings ......................................................... 21,015,528 17,764,087
----------- -----------
25,210,364 21,958,923
Less: Treasury Stock, 1,333,414 and 576,500 shares at cost ................ 10,218,171 4,194,378
----------- -----------
14,992,193 17,764,545
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$19,957,755 $23,190,810
=========== ===========
</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 Nine Months Ended February 29, 2000 and February 28, 1999
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 29, February 28, February 29, February 28,
2000 1999 2000 1999
---- ---- ---- -----
<S> <C> <C> <C> <C>
Revenues ............................................... $ 18,432,266 $ 20,817,633 $ 60,067,905 $ 62,965,539
Cost of sales .......................................... 14,056,550 15,460,007 45,855,484 46,408,135
Selling, general and administrative expenses ........... 2,937,205 3,311,912 8,838,590 10,197,263
Research and development expenses ...................... -- 49,139 -- 277,620
---------- ---------- ---------- ----------
16,993,755 18,821,058 54,694,074 56,883,018
---------- ---------- ---------- ----------
Income from operations ................................. 1,438,511 1,996,575 5,373,831 6,082,521
Other income:
Interest and dividend income ...................... 103,637 105,361 313,584 251,934
Gain (loss) from marketable securities, net ....... 1,103 (4,168) 10,076 (8,049)
Gain from sales of assets ......................... 22,000 -- 23,950 --
---------- ---------- ---------- ----------
Income before income taxes ............................. 1,565,251 2,097,768 5,721,441 6,326,406
Provision for income taxes ............................. 683,000 900,000 2,470,000 2,750,000
---------- ---------- ---------- ----------
Net income ........................................ $ 882,251 $ 1,197,768 $ 3,251,441 $ 3,576,406
========== ============ ============ ============
Basic net income per common share ...................... $ 0.18 $ 0.20 $ 0.63 $ 0.60
========== ============ ============ ============
Diluted net income per common share .................... $ 0.18 $ 0.20 $ 0.63 $ 0.60
========== ============ ============ ============
Weighted average number of
common shares outstanding .......................... 4,925,962 6,026,801 5,128,198 6,001,118
========== ============ ============ ============
Weighted average number of diluted
common shares outstanding .......................... 4,925,962 6,039,793 5,128,198 6,003,070
========== ============ ============ ============
</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 Nine Months Ended February 29, 2000 and February 28, 1999
<TABLE>
<CAPTION>
Nine Months Ended
February 29, February 28,
2000 1999
---- -----
Cash flows from operating activities:
<S> <C> <C>
Net income ............................................................ $ 3,251,441 $ 3,576,406
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization ...................................... 106,287 713,855
Loss (gain) from marketable securities, net ........................ (10,076) 8,049
Deferred income taxes .............................................. 25,000 (34,000)
Gain on sales of assets ............................................ (23,950) --
Changes in assets and liabilities:
Accounts receivable .............................................. 1,410,276 52,614
Other receivables ................................................ (36,912) (83,785)
Prepaid expenses ................................................. 11,612 41,768
Prepaid and recoverable income taxes ............................. (310,108) (133,678)
Other assets ..................................................... (7,610) (26,804)
Accounts payable and accrued expenses ............................ (716,911) 763,410
Income taxes payable ............................................. 70,224 (29,117)
Advances from customers .......................................... 185,984 493,704
----------- -----------
Net cash provided by operating activities ............................. 3,955,257 5,342,422
----------- -----------
Cash flows from investing activities:
Proceeds from maturities and sales of marketable securities ........ 4,336,181 974,054
Purchases of marketable securities ................................. (3,389,263) (4,830,999)
Purchases of fixed assets .......................................... (158,519) (108,295)
Proceeds from sales of assets ...................................... 23,950 --
----------- -----------
Net cash provided by (used in) investing activities ................... 812,349 (3,965,240)
----------- -----------
Cash flows from financing activities:
Exercise of stock options .......................................... -- 825,357
Purchase of treasury stock ......................................... (6,023,793) (547,875)
----------- -----------
Net cash provided by (used in) financing activities ................... (6,023,793) 277,482
----------- -----------
Net increase in cash and cash equivalents .................................. (1,256,187) 1,654,664
Cash and cash equivalents at beginning of period ........................... 2,234,723 2,425,122
----------- -----------
Cash and cash equivalents at end of period ................................. $ 978,536 $ 4,079,786
=========== ===========
Supplemental Disclosures:
Income tax payments ................................................. $ 2,710,000 $ 2,947,000
=========== ===========
Interest paid ....................................................... $ -- $ --
=========== ===========
</TABLE>
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
February 29, 2000
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- Q
of Regulation S-X. 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 Company's
consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended May 31, 1999.
2. In the opinion of the Company, 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 Company is primarily engaged in the business of providing computer
programming consulting services. The Company provides technical computer
personnel to companies to supplement their in-house information technology
capabilities. In addition, the Company provided services converting
software applications to be year 2000 compliant utilizing Catch/21 a year
2000 software solution which automated to a significant extent the
conversion process.
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. The Company recognizes computer programming consulting services revenues as
services are provided. Provided that acceptance is probable, revenue from
Catch/21 code conversion is recognized when the converted code is
delivered.
6. The Company considers short-term highly liquid investments with maturities
of three months or less at the time of purchase to be cash equivalents.
Cash and cash equivalents were comprised of the following as of February
29, 2000:
Cash in banks .............................. $ --
Money Market Funds ......................... --
United States Treasury Bills ............... 978,536
--------
$978,536
========
7. Marketable securities consists of United States Treasury Bills and equity
securities. The treasury bills with maturities at acquisition in excess of
90 days, are classified as held to maturity investments. The Company's
equity securities are classified as trading securities. The amortized cost,
gross unrealized holding gains, gross unrealized holding losses and
carrying value for marketable securities by major security type at February
29, 2000 are as follows:
Gross Gross
Unrealized Unrealized
Amortized Holding Holding Carrying
Cost Gains Losses Value
---------- ----------- ---------- -----------
United States Treasury Bills $ 4,820,253 -- -- 4,820,253
Equity Securities .......... 133,289 39,264 (29,376) 141,177
----------- ------- -------- ----------
$ 4,953,542 $39,264 $(29,376) $4,961,430
=========== ======= ======== ==========
8. During fiscal 1999, under a buy-back plan authorized by the Board of
Directors to repurchase up to 600,000 shares of the Company's common stock,
the Company purchased for $4,194,378, 576,500 shares of its common stock at
the market value of the stock on the purchase date. The remaining
authorization under the buy-back plan was completed after year end. In June
1999 the Board of Directors authorized an additional buy-back of up to
500,000 shares of common stock, this was completed in January 2000 and
another 500,000 was authorized at that time. During the nine months ended
February 29, 2000, the Company repurchased 756,914 shares of its common
stock at a cost of $6,023,793.
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
- ---------------------
The following table sets forth for the periods indicated certain financial
information derived from the Company's consolidated statements of earnings.
There can be no assurance that trends in sales growth or operating results will
continue in the future:
Three months ended February 29, 2000 compared with three months ended February
28, 1999
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Dollar amounts in Thousands) 3 Months Ended
February 29, February 28,
2000 1999
% of % of
Amount Revenues Amount Revenues
------ -------- ------ --------
<S> <C> <C> <C> <C>
Revenues .................................................. $18,432 100.0 $20,818 100.0
Cost of Sales ............................................. 14,057 76.3 15,460 74.3
------ ----- ------ -----
Gross Profit .............................................. 4,375 23.7 5,358 25.7
Selling, General, and Administrative expenses ............. 2,937 15.9 3,312 15.9
Research and Development expenses ......................... -- -- 49 0.2
------ ----- ------ -----
Income from Operations .................................... 1,438 7.8 1,997 9.6
Other Income .............................................. 127 0.7 101 0.5
------ ----- ------ -----
Income Before Income Taxes ................................ 1,565 8.5 2,098 10.1
Provision for Income Taxes ................................ 683 3.7 900 4.3
------ ----- ------ -----
Net Income ................................................ $ 882 4.8 $ 1,198 5.8
====== ===== ====== =====
</TABLE>
Revenues
- --------
Revenues consist primarily of revenues from computer programming consulting
services. In addition, the Company's revenues included revenues from its Year
2000 business which commenced in fiscal 1997. Revenues for the quarter ended
February 29, 2000 decreased $2,385,000 or 11.5% from the comparable period in
fiscal 1999. For the current quarter 97.7% of revenues were derived from
computer programming consulting services and 2.3% from Year 2000 services, as
compared with 89.8% and 10.2% respectively in fiscal 1999.
Computer programming consulting services revenues decreased $1,196,000 or 6.2%
from $19,208,000 in the quarter ended February 28, 1999 to $18,012,000 in the
quarter ended February 29, 2000. This decrease resulted from an overall decrease
in the average number of programmers on billing with clients from approximately
532 for the quarter ended February 28, 1999 to approximately 472 for the current
quarter. The Company believes that this decrease was attributable to a delay in
new IT projects due to lingering Year 2000 effects. It was also attributable to
a reorganization at a major customer which has also delayed the start of new IT
projects with this customer. The Company continues to believe that the
consulting business with strengthen in the current calender year, although it
has not occurred as early in the year as anticipated.
Revenues from the Company's Catch/21 Year 2000 compliance services, were
$421,000 for the current quarter versus $1,610,000 in the fiscal 1999 third
quarter. The Company's Year 2000 revenues have decreased significantly and the
Company expects these revenues will further decline and are not likely to
represent a material portion of the Companies revenues in the future.
Page 7
<PAGE>
Cost of Sales
- -------------
Cost of sales as a percentage of revenues increased from 74.3% in the quarter
ended February 28, 1999 to 76.3% in the quarter ended February 29, 2000. This
increase is primarily attributable to the decrease in Year 2000 revenues for
which cost of sales as a percentage of revenues is less than the computer
programming consulting services business.
In the computer programming consulting services business, cost of sales as a
percentage of sales decreased from 79.0% in the quarter ended February 28, 1999
to 77.7% in the quarter ended February 29, 2000. This decrease is attributable
to an increase in the number of subcontractors used in the consulting business.
The services of these individuals are not directly subject to payroll taxes paid
by the Company.
The Year 2000 business incurred cost of sales of $62,000 in the quarter ended
February 29, 2000 versus $282,000 in the prior year quarter. The Company
significantly reduced the number of employees in its Year 2000 Services during
fiscal 1999 and is currently providing such services through contractual
arrangements with certain former employees.
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative expenses consist primarily of expenses
relating to account executives, technical recruiters, facilities costs,
management and corporate overhead. These expenses decreased $375,000 or 11.3%
from $3,312,000 in the quarter ended February 28, 1999 to $2,937,000 in the
quarter ended February 29, 2000. This decrease was primarily attributable to the
reduction in Year 2000 services. Selling, general and administrative expenses
related to computer programming consulting services increased $167,000 over the
prior year period to $2,912,000. This increase was primarily attributable to
expenses relating to the hiring of additional account executives and technical
recruiting professionals to broaden the Company's client base and recruit
additional technical consultants in connection with the continuation of the
Company's planned expansion.
In the quarter ended February 29, 2000, approximately $26,000 in selling,
general and administrative expenses were attributable to Year 2000 services.
These expenses consist primarily of management, and facilities expenses. Such
expenses significantly decreased from fiscal 1999. Comparable Year 2000 selling,
general and administrative expenses in the quarter ended February 28, 1999 were
$567,000.
Research and Development
- ------------------------
Research and development costs of $49,000 in the quarter ended February 28, 1999
represent amounts expended by the Company to expand Catch/21, the Company's Year
2000 compliance solution product offerings including XRAY/2000 which stands for
Examination, Repair, and Audit for Year 2000 Compliance, and various testing
utilities. There were no research and development expenses in the quarter ended
February 29, 2000.
Income from Operations
- ----------------------
In the quarter ended February 29, 2000, the computer programming consulting
service business contributed $1,106,000 or 76.9% of the income from operations,
while the Year 2000 business contributed the remaining $332,000 or 23.1%. In the
prior year quarter, the computer programming consulting service business
contributed $1,285,000 or 64.3% of income from operations and the Year 2000
business $712,000 or 35.7%. The Company is not rendering any further Year 2000
services and it does not expect Year 2000 services to materially contribute to
income from operations for the balance of its 2000 fiscal year or beyond. The
Company believes that growth in contract computer programming services will,
over time, offset the loss of income from operations from Year 2000 services.
Other Income
- ------------
Other income resulted primarily from interest and dividend income. Other income
increased by $26,000 to $127,000 primarily due to gains from sales of fixed
assets.
Income Taxes
- ------------
The effective income tax rate increased to 43.6% in the quarter ended February
29, 2000 from 42.9% in the quarter ended February 28, 1999 because of a higher
percentage of non-deductible expenses.
Page 8
<PAGE>
Nine months ended February 29, 2000 compared with nine months ended February 28,
1999.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Dollar amounts in Thousands) 9 Months Ended
February 29, February 28,
2000 1999
% of % of
Amount Revenues Amount Revenues
------ -------- ------ --------
<S> <C> <C> <C> <C>
Revenues .................................... $60,068 100.0 $62,966 100.0
Cost of Sales ............................... 45,855 76.3 46,408 73.7
------ ---- ------ ----
Gross Profit ................................ 14,213 23.7 16,558 26.3
Selling, General, and Administrative expenses 8,839 14.7 10,197 16.2
Research and Development expenses ........... -- -- 278 0.4
------ ---- ------ ----
Income from Operations ...................... 5,374 8.9 6,083 9.7
Other Income ................................ 347 0.6 244 0.4
------ ---- ------ ----
Income Before Income Taxes .................. 5,721 9.5 6,327 10.1
Provision for Income Taxes .................. 2,470 4.1 2,750 4.4
------ ---- ------ ----
Net Income .................................. $ 3,251 5.4 $ 3,577 5.7
====== ==== ====== ====
</TABLE>
Revenues
- --------
Revenues consist primarily of revenues from computer programming consulting
services. In addition, the Company's revenues included revenues from its Year
2000 business which commenced in fiscal 1997. Revenues for the nine months ended
February 29, 2000 decreased $2,898,000 or 4.6% over the comparable period in
fiscal 1999. For the current nine months 97.1% of revenues were derived from
computer programming consulting services and 2.9% from Year 2000 services, as
compared with 89.2% and 10.8% respectively in fiscal 1999.
Computer programming consulting services revenues increased $1,498,000 or 2.6%
from $56,803,000 in the nine months ended February 28, 1999 to $58,301,000 in
the nine months ended February 29, 2000. This increase resulted from an overall
increase in the average number of programmers on billing with clients from an
average of 508 for the nine months ended February 28, 1999 to approximately 513
in the nine months ended at February 29, 2000. Growth in consulting services
revenues was at a slower rate than it had been in the past. The Company believes
that this slower growth was attributable to a delay in new IT projects due to
lingering Year 2000 effects. It was also attributable to a reorganization at a
major customer which has also delayed the start of new IT projects with this
customer. The Company continues to believe that the consulting business will
strengthen in the current calender year, although it has not occurred as early
in the year as anticipated.
Revenues from the Company's Catch/21 Year 2000 compliance services, were
$1,767,000 for the current nine months versus $6,163,000 in the prior year
period. The Company's Year 2000 revenues have decreased significantly and the
Company expects these revenues will further decline and are not likely to
represent a material portion of the Companies revenues in the future.
Page 9
<PAGE>
Cost of Sales
- -------------
Cost of sales as a percentage of revenues increased from 73.7% in the nine
months ended February 28, 1999 to 76.3% in the nine months ended February 29,
2000. This increase is primarily attributable to the decrease in Year 2000
revenues for which cost of sales as a percentage of revenues is less than the
computer programming consulting services business.
In the computer programming consulting services business, cost of sales as a
percentage of sales remained the same at 77.7% in the nine months ended February
28, 1999 and the nine months ended February 29, 2000.
The Year 2000 business incurred cost of sales of $563,000 in the nine months
ended February 29, 2000 versus $2,270,000 in the prior year period. The Company
significantly reduced the number of employees in its Year 2000 Services during
fiscal 1999 and is currently providing such services through contractual
arrangements with certain former employees.
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative expenses consist primarily of expenses
relating to account executives, technical recruiters, facilities costs,
management and corporate overhead. These expenses decreased $1,358,000 or 13.3%
from $10,197,000 in the nine months ended February 28, 1999 to $8,839,000 in the
nine months ended February 29, 2000. This decrease was primarily attributable to
the reduction in Year 2000 services. Selling, general and administrative
expenses related to computer programming consulting services increased $451,000
over the prior year period to $8,718,000. This increase was primarily
attributable to expenses relating to the hiring of additional account executives
and technical recruiting professionals to broaden the Company's client base and
recruit additional technical consultants in connection with the continuation of
the Company's planned expansion.
In the nine months ended February 29, 2000, approximately $121,000 in selling,
general and administrative expenses were attributable to Year 2000 services.
These expenses consist primarily of management, and facilities expenses. Such
expenses significantly decreased from fiscal 1999. Comparable Year 2000 selling,
general and administrative expenses in the nine months ended February 28, 1999
were $1,930,000.
Research and Development
- ------------------------
Research and development costs of $278,000 in the nine months ended February 28,
1999 represent amounts expended by the Company to expand Catch/21, the Company's
Year 2000 compliance solution, product offerings including XRAY/2000 which
stands for Examination, Repair, and Audit for Year 2000 Compliance, and various
testing utilities. There were no research and development expenses in the nine
months ended February 29, 2000.
Income from Operations
- ----------------------
In the nine months ended February 29, 2000, the computer programming consulting
service business contributed $4,291,000 or 79.8% of the income from operations,
while the Year 2000 business contributed the remaining $1,083,000 or 20.2%. In
the prior year period, the computer programming consulting service business
contributed $4,397,000 or 72.3% of income from operations and the Year 2000
business $1,686,000 or 27.7%. The Company is not rendering any further Year 2000
services and it does not expect Year 2000 services to materially contribute to
income from operations for the balance of its 2000 fiscal year or beyond. The
Company believes that growth in contract computer programming services will,
over time, offset the loss of income from operations from Year 2000 services.
Other Income
- ------------
Other income resulted primarily from interest and dividend income which
increased by $62,000 to $314,000 due to higher average available investable
funds in the nine months ended February 29, 2000. Additionally, the Company also
had a net gain of $10,000 from marketable securities due to mark to market
adjustments of its equity portfolio as compared to an unrealized loss of $8,000
in the prior year period. The Company also had a gain of $24,000 from sales of
fixed assets.
Income Taxes
- ------------
The effective income tax rate decreased to 43.2% in the nine months ended
February 29, 2000 from 43.5% in the nine months ended February 28, 1999 because
of lower state and local taxes.
Page 10
<PAGE>
Liquidity, Capital Resources and Changes in Financial Condition
- ---------------------------------------------------------------
The Company expects that cash flow generated from operations together with its
cash and marketable securities will be sufficient to provide the Company with
adequate resources to meet its cash requirements.
At February 29, 2000, the Company had working capital of $14,496,000 and cash
and cash equivalents of $979,000 as compared to working capital of $17,303,000
and cash and cash equivalents of $2,235,000 at May 31, 1999. Working capital
decreased primarily due to the Company's purchase of $6,024,000 of treasury
stock of the Company in the nine months ended February 29, 2000.
The Company had positive net cash flow of $3,955,000 from operations during the
nine months ended February 29, 2000 as compared to positive net cash flow from
operations of $5,342,000 in the nine months ended February 28, 1999. The Company
had net income of $3,251,000, in the nine months ended February 29, 2000 versus
$3,576,000 in the prior year period. The Company also had additional cash flow
as a result of the decrease in accounts receivable of $1,410,000. The decrease
in accounts receivable occurred primarily because the rate of collections
exceeded the rate of revenue growth. Depreciation and amortization decreased to
$106,000 from $714,000 in the prior year period due to the accelerated write-off
of Catch/21 Year 2000 fixed assets in the prior year. Additionally, accounts
payable and accrued expenses used cash flow of $717,000 due to the decrease in
accounts payable and accrued payroll associated with the lower number of
consultants on billing as compared to May 31, 1999 and the completion of the
Company's Catch/21Year 2000 projects.
Cash flow provided by investing activities resulted primarily from the maturity
of United States Treasury Bills in the current period.
Cash flow used in financing activities of $6,024,000 in the nine months ended
February 29, 2000 resulted from the repurchase of 757,000 shares of common stock
of the Company. As of February 29, 2000, the Company has repurchased a total of
1,333,000 shares at an average price of $7.66 or a total cost of $10,218,000.
The Company has completed the initial buy back authorization of 600,000 shares.
The Company's board of directors has authorized the repurchase of up to an
additional 500,000 shares of its common stock in June 1999 and another 500,000
in January 2000. No time limit has been placed on the duration of the share
repurchases. Subject to applicable securities laws, such purchases will be at
times and in amounts as the Company deems appropriate and may be discontinued at
any time. The Company has no obligation or commitment to repurchase all or any
portion of the shares covered by the authorization.
The Company's capital resource commitments at February 29, 2000 consisted of
lease obligations on its branch and corporate facilities. The Company intends to
finance these lease commitments from cash flow provided by operations, available
cash and short-term marketable securities.
The Company's cash and marketable securities were sufficient to enable it to
meet its cash requirements during the nine months ended February 29, 2000. The
Company has available a revolving line of credit of $5,000,000 with a major
money center bank, which the Company believes provides sufficient financing if
the need arose. As of February 29, 2000 no amounts were outstanding under this
line of credit.
Page 11
<PAGE>
Item 3. Quantitative and Qualitative Disclosure About Market Risk
---------------------------------------------------------
The Company's earnings and cash flows are subject to fluctuations due to changes
in interest rates primarily from its investment of available cash balances in
money market funds and marketable securities. Under its current policies, the
Company does not use interest rate derivative instruments to manage exposure to
interest rate changes.
Forward-Looking Statements
- --------------------------
Certain statements contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations", including statements concerning
the Company's future prospects, the anticipated increase in consutling projects
in 2000, and the Company's future cash flow requirements are forward looking
statements, as defined in the Private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those projections in the forward
looking statements which statements involve risks and uncertainties, including
but not limited to the following: risks relating to the competitive nature of
the markets for computer programming consulting services, the extent to which
growth in the Company's contract computer programming services will offset the
anticipated loss of Year 2000 profits, concentration of the Company's business
with certain customers and uncertainty as to the Company's ability to bring in
new customers.
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
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.
TSR, INC.
---------------------------------------------
(Registrant)
Date: April 6, 2000
/s/ J.F. HUGHES
---------------------------------------------
J.F. Hughes, Chairman, President
and Treasurer
Date: April 6, 2000
/s/ JOHN G. SHARKEY
---------------------------------------------
John G. Sharkey, Vice President, Finance
Page 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
TSR, INC. AND SUBSIDIARIES
Exhibit 27, Financial Data Schedule to Report
on Form 10Q,February 29, 2000
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-END> FEB-29-2000
<CASH> 978,536
<SECURITIES> 4,961,430
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0
0
<COMMON> 60,783
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<TOTAL-LIABILITY-AND-EQUITY> 19,957,755
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