Page 1
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q SB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended APRIL 30, 1997
------------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-19056
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NORTHSTAR COMPUTER FORMS, INC.
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(Exact name of registrant as specified in its charter)
MINNESOTA 41-0882640
- ------------------------------- ---------------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Numbers)
7130 NORTHLAND CIRCLE N BROOKLYN PARK, MINNESOTA 55428
- ------------------------------------------------------- -------------
(Address or Principal Executive Offices) Zip Code
Registrant's telephone number, including area code (612) 531-7340
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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. Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT MAY 27, 1997
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Common Stock, $.05 par value 1,733,721 Shares
Page 2
Part 1. Financial Information
Item 1. Financial Statements
NORTHSTAR COMPUTER FORMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
April 30, October 31,
1997 (Unaudited) 1996
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ASSETS
Current assets:
Cash and cash equivalents $ 3,748,605 $ 2,378,105
Accounts receivable, less
allowance for doubtful
accounts of $178,000 at
April 30, 1997 and
$144,000 at October 31, 1996 6,056,982 4,728,735
Inventories 1,326,875 2,292,057
Other current assets 468,791 216,280
Deferred income taxes 158,170 148,796
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Total current assets 11,759,423 9,763,973
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Property, plant and equipment 29,074,216 27,730,780
Accumulated depreciation and
amortization (13,044,717) (11,561,128)
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Property, plant and
equipment, net 16,029,499 16,169,652
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Notes receivable, less current
portion 875,783 990,060
Goodwill 1,858,552 1,959,305
Other assets 489,149 518,442
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Total assets $ 31,012,406 $ 29,401,432
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See accompanying notes to unauditied Condensed
Consolidated Financial Statements
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NORTHSTAR COMPUTER FORMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
April 30, October 31,
1997 (Unaudited) 1996
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-
term debt $ 1,950,000 $ 1,029,825
Accounts payable 2,174,735 2,103,537
Accrued liabilities 1,764,141 1,249,388
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Total current liabilities 5,888,876 4,382,750
Deferred compensation 737,925 775,199
Deferred income taxes 1,221,931 1,039,773
Long-term debt, less
current portion 9,240,550 10,565,175
Commitments
Stockholders' equity:
Common stock, $ .05 par value
authorized, 5,000,000 shares; issued
and outstanding, 1,723,871 at April
30, 1997 and 1,716,571 at October
31, 1996 86,194 85,828
Additional paid-in capital 2,042,388 1,995,177
Retained earnings 11,794,542 10,557,530
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Total stockholders'
equity 13,923,124 12,638,535
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Total liabilities and
stockholders' equity $ 31,012,406 $ 29,401,432
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See accompanying notes to unauditied Condensed
Consolidated Financial Statements
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NORTHSTAR COMPUTER FORMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended Six Months Ended
April 30 April 30
1997 1996 1997 1996
---- ---- ---- ----
Net Sales $ 11,740,931 $ 5,922,005 $23,349,688 $11,525,902
Cost of goods sold 8,116,094 4,843,777 16,635,816 9,574,730
-------------- ------------- ------------ --------------
Gross profit 3,624,837 1,078,228 6,713,872 1,951,172
Selling, general and
administrative expenses 2,113,784 808,968 4,026,663 1,532,705
-------------- ------------- ------------ --------------
Operating income 1,511,053 269,260 2,687,209 418,467
Other income (expense):
Interest expense (217,878) (38,398) (448,234) (79,268)
Other, net, principally
interest income 30,168 26,483 37,061 43,882
Gain (loss) on sale of assets 3,266 (1,638) 3,266 (1,638)
-------------- ------------- ------------ --------------
(184,444) (13,553) (407,907) (37,024)
-------------- ------------- ------------ --------------
Earnings before
income taxes 1,326,609 255,707 2,279,302 381,443
Provision for income taxes 531,000 105,500 913,000 148,500
-------------- ------------- ------------ --------------
Net earnings $ 795,609 $ 150,207 $ 1,366,302 $ 232,943
-------------- ------------- ------------ --------------
Net earnings
per common share: $ 0.44 $ 0.09 $ 0.75 $ 0.14
-------------- ------------- ------------ --------------
Weighted average common and
common equivalent shares
outstanding 1,827,599 1,738,232 1,825,276 1,738,232
-------------- ------------- ------------ --------------
-------------- ------------- ------------ --------------
Dividends paid $ 0.075 $ 0.065 $ 0.075 $ 0.065
-------------- ------------- ------------ --------------
-------------- ------------- ------------ --------------
See accompanying notes to unauditied Condensed
Consolidated Financial Statements
Page 5
NORTHSTAR COMPUTER FORMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
for the six months ended April 30, 1997 and 1996
1997 1996
---- ----
Cash flows from operating activities:
Net earnings $ 1,366,302 $ 232,943
Adjustments to reconcile net earnings to
net cash provided by operating
activities
Depreciation and amortization 1,326,822 753,970
Provision for losses on receivables 27,600 27,600
(Gain) loss on sale of property and
equipment (3,266) 1,638
Net changes in operating assets and
liabilities 84,430 553,631
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Net cash provided by operating activities 2,801,888 1,569,782
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Cash flows from investing activities:
Capital expenditures and equipment deposits (1,038,838) (339,813)
Proceeds from sale of property and equipment 8,900 225
Notes receivable repayments 89,213 48,534
Other (4,500)
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Net cash used in investing activities (945,225) (291,054)
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Cash flows from financing activities:
Principle payment on long-term debt (404,450)
Dividends paid (129,290) (111,510)
Stock options exercised 47,577
Redemption of common stock (2,723)
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Net cash used in financing activities (486,163) (114,233)
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Net increase in cash and cash equivalents 1,370,500 1,164,495
Cash and cash equivalents at
beginning of period 2,378,105 1,180,788
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Cash and cash equivalents at end of period $ 3,748,605 $ 2,345,283
--------------- ---------------
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Supplemental disclosure of cash flow:
Cash paid during the period for:
Income taxes $ 489,900 $ 138,650
Interest 459,914 79,268
See accompanying notes to unauditied Condensed
Consolidated Financial Statements
Page 6
NORTHSTAR COMPUTER FORMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1997
(Unaudited)
1. Basis of Presentation
The condensed consolidated financial statements included in this Form
10-QSB have been prepared by Northstar Computer Forms, Inc. (the Company),
without audit, 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
these rules and regulations. The year end balance sheet was derived from
audited financial statements, but does not include all disclosure required
by generally accepted accounting principles. These consolidated financial
statements should be read in conjunction with the financial statements and
related notes included in the Company's 1996 Annual Report on Form 10-KSB
as filed with the Securities and Exchange Commission.
The consolidated financial statements presented herein as of April 30, 1997
and for the six months then ended reflect, in the opinion of management,
all adjustments (which include only normal, recurring adjustments)
necessary for a fair presentation of financial position and results of
operations for the period presented. The results of operations for any
interim period are not necessarily indicative of results for the full year.
2. Earnings per share
Earnings per common and common equivalent share are computed using the
weighted average number of common and common equivalent shares outstanding.
Common equivalent shares are the result of dilutive stock options.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, a new standard for computing and presenting earnings per share.
The Company is required to adopt the new standard in the first quarter of
fiscal 1998; earlier adoption is not permitted. The Company expects that
earning per share computed under the new standard will approximate earnings
per share currently reported.
3. Acquisition of Assets of a Division of Deluxe Corporation
In July 1996, the Company purchased substantially all of the assets of the
Financial Forms Division of Deluxe Corporation. The Company renamed the
division Northstar Financial Forms. The purchase price of $9,200,000 cash
and $124,754 of direct acquisition costs was financed with a $9,000,000
term loan. The assets acquired consist principally of manufacturing
equipment. Northstar Financial Forms manufactures internal bank forms
which is the same product line manufactured by the Company's subsidiary,
General Financial Supply, Inc.
The division's financial results are included in the Statement of Earnings
for the three and six months ended April 30, 1997. The Company's results
of operations for the three and six months ended April 30, 1996 on a pro
forma basis as though the division had been acquired as of November 1, 1995
are as follows:
Three Months Ended April 30 Six Months Ended April 30
Sales $10,893,035 $21,467,962
Net earnings 401,732 735,993
Net earnings per
common share .23 .42
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4. Stock Options
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation." This statement
establishes financial accounting and reporting standards for stock-based
employee compensation plans. The Company intends to follow the option that
permits entities to continue to apply current accounting standards to
stock-based employee compensation arrangements. Effective with fiscal
year-end 1997 reporting, the Company will disclose pro forma net income and
earnings per share amounts as if Statement No. 123 accounting were applied
to the Company's stock compensation programs.
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NORTHSTAR COMPUTER FORMS, INC.
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations of
Interim Financial Data
Results of Operations
The following table sets forth, for the periods indicated, certain items in the
Company's unaudited condensed consolidated statements of earnings as a
percentage of net sales and the percentage changes of the dollar amounts of such
items as compared with the prior period.
Three Months Ended April 30
Increase
Percentage of Net Sales 1997 vs
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1997 1996 1996
---- ---- ------
Net Sales ................... 100.0% 100.0% 98.3%
Cost of Goods Sold .......... 69.1 81.8 67.6
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Gross Profit ........... 30.9 18.2 236.2
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Selling, General and
Administrative Expenses ... 18.0 13.7 161.3
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Operating Income ............ 12.9 4.5 461.2
Net Earnings .............. 6.8 2.5 429.7
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Six Months Ended April 30
Increase
Percentage of Net Sales 1997 vs
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1997 1996 1996
---- ---- ------
Net Sales ................... 100.0% 100.0% 102.6%
Cost of Goods Sold .......... 71.2 83.1 73.7
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Gross Profit ........... 28.8 16.9 244.1
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Selling, General and
Administrative Expenses .. 17.3 13.3 162.7
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Operating Income ............ 11.5 3.6 542.2
Net Earnings .............. 5.9 2.0 486.5
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The following table sets forth the sales for the periods indicated the
internal bank forms, general business forms and consolidated sales of the
Company.
INTERNAL GENERAL CONSOLIDATED
BANK FORMS % BUSINESS FORMS % SALES
---------- --- -------------- --- -------------
Current Quarter
1997 $8,689,240 74 $3,051,691 26 $ 11,740,931
1996 $3,229,326 55 $2,692,679 45 $ 5,922,005
Increase 5,459,914 359,012 5,818,926
Percentage Increase 169.1% 13.3% 98.3%
Six Months
1997 $17,114,838 73 $6,234,850 27 $ 23,349,688
1996 $ 6,412,876 56 $5,113,026 44 $ 11,525,902
Increase 10,701,962 1,121,824 11,823,786
Percent Increase 166.9% 21.9% 102.6%
Approximately 80 percent of the internal bank form sales increase for the three
and six months ended April 30 was sales from the new division, Northstar
Financial Forms. The remaining increase occurred mainly due to growth in
standard bank form orders.
In the general business forms business, the sales increase is due to an increase
in orders from existing customers. Sales in one product line increased
approximately $493,000 for the second quarter of 1997 and $829,000 for the six
months, accounting for approximately 74 percent of the year to date sales
increase in general business forms.
Gross profit for the second quarter of 1997 increased from 18.2 percent in 1996
to 30.9 percent in 1997. For the six months, gross profit increased from 16.9
percent to 28.8 percent in 1997. The gross profit of Northstar Financial Forms
is typically higher than the other manufacturing plants because this division
sell on a retail basis. This higher gross profit is offset by higher sales and
administrative expense in this division. Generally, retail sales require a
larger sales and administrative staff than is required by facilities which sell
to distributors and printers. Without the contribution of the new division,
gross profit for the second quarter would have been 23.4 percent. During 1997,
variable manufacturing costs, exclusive of material, remained relatively
constant as a percentage of sales. Material costs decreased during the six
months due to certain paper price declines and the increased volumes improved
the absorption of fixed costs.
Approximately $177,000 or 81 percent of the second quarter interest expense
relates to the $9,000,000 term loan incurred in July 1996 to acquire the new
division. Earnings before income taxes were $1,326,609 or 11.3 percent of sales
in the second quarter of 1997, compared with $255,707 or 4.3 percent of sales in
the second quarter of 1996. For the six months, earnings before income taxes
were $2,279,302 or 9.8 percent of sales in 1997 compared with $381,443 or 3.3
percent of sales in 1996. Earnings per share for the six months were $ .75 in
1997 and $ .14 in 1996.
Financial Condition
The Company's long-term debt consists of the acquisition term loan and Variable
Rate Demand Industrial Development Revenue Bonds. The Company's obligation to
repay the bonds is collateralized by an irrevocable, direct-pay letter of
credit. The term loan and the bonds are collateralized by the Company's
property, plant and equipment, inventories and accounts receivable. The term
loan principal is payable in quarterly installments beginning July 31, 1997 and
from annual excess cash flow as defined in the loan agreement (estimated at
$950,000 and included in current liabilities) with any remaining principal
balance due on July 31, 2003. Interest is payable monthly. The bonds require
annual principal payments and monthly interest payments at a variable rate based
upon comparable tax-exempt issues. Both the term loan and the bonds specify
limits on capital expenditures and dividends. Both also specify working
capital, net worth and certain financial ratios that the Company must maintain.
Page 10
The Company continues to expand its manufacturing capacity by the acquisition of
equipment. Capital expenditures for equipment during the six months ended April
30, 1997 were $1,038,838 compared to $339,813 for the comparable period of 1996.
The Company anticipates capital expenditures of approximately $2,000,000 in
fiscal 1997.
Net cash provided by operations was $2,801,888 for the six months ended April
30, 1997 compared to $1,569,782 for the same period in 1996. The Company's
working capital was $5.9 million on April 30, 1997 compared to $5.4 million on
October 31, 1996. If necessary to finance operations, the Company has available
a bank line of credit for $1.5 million at an interest rate equal to the bank's
reference rate.
The Company believes its existing financial resources are adequate to fund its
fiscal year 1997 capital expenditures and dividend payments and foresees no
events or uncertainties that are likely to have a material impact on its
liquidity. The Company expects to be able to generate sufficient cash flow from
operations to avoid relying on external sources of financing, beyond the
financing sources already in existence.
Outlook
The acquisition of the financial forms division continues to have a significant
impact on the Company's business. Management continues to focus on integrating
operations, developing computer reporting systems and implementing marketing
plans. This integration continues to improve the operating efficiency between
manufacturing locations.
The Company is not aware of any trends, events or other uncertainties that will
have a significant impact on its financial condition or results of operations.
New Accounting Pronouncement
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, a new standard for computing and presenting earnings per share. The
Company is required to adopt the new standard in the first quarter of fiscal
1998; earlier adoption is not permitted. The Company expects that earning per
share computed under the new standard will approximate earnings per share
currently reported.
Page 11
NORTHSTAR COMPUTER FORMS, INC.
PART II. - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The registrant held its Annual Meeting of Stockholder on April 3,
1997.
(a) The shareholders re-elected the incumbent Board of Directors: Roger T.
Bredesen, John G. Mutschler, J.S. Braun, Kenneth E. Overstreet, Roy W.
Terwilliger and Dr. Lester A. Wanninger.
(b) The shareholders approved the re-appointment of Coopers & Lybrand,
independent certified public accountants, to audit the consolidated
financial statements of the Company and its subsidiary for the year to
end October 31, 1997.
1,337,236 shares were voted affirmatively.
Item 6. Exhibits and Reports on Form 8-K - None.
None of the other items contained in Part II of Form 10-QSB is applicable to the
Company for the quarter ended April 30, 1997.
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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.
Northstar Computer Forms, Inc.
(Registrant)
Date: May 27, 1997 By: Mary Ann Morin
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Mary Ann Morin
Chief Financial Officer
(Principal Financial Officer)