SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1997
[ ] 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 0-20743
OPEN PLAN SYSTEMS, INC.
(Exact name of small business issuer as specified in its charter)
Virginia 54-1515256
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4299 Carolina Avenue,
Building C, Richmond, Virginia 23222
(Address of principal executive office) (Zip Code)
(804) 228-5600
(Issuer's telephone number)
_____________________________________________________________
(Former name,former address and former fiscal year,if changed since last report)
Check whether the issuer: (1)filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes _X_ No __.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock, no par value - 4,472,433 shares as of October 31, 1997.
Transitional Small Business Disclosure Format (check one): Yes No X
OPEN PLAN SYSTEMS, INC.
Contents
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1997 (unaudited) 1
and December 31, 1996
Consolidated Statements of Operations- Three months and nine months 2
ended September 30, 1997 and 1996 (unaudited)
Consolidated Statements of Cash Flows - Three months and nine 3
months ended September 30, 1997 and 1996 (unaudited)
Notes to Consolidated Financial Statements - September 30, 1997 5
Item 2. Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of 15
Security Holders
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES
OPEN PLAN SYSTEMS, INC.
PART I
FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Balance Sheets
(amounts in thousands)
September 30, December 31
1997 1996
-------------------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 269 $ 3,066
Trade accounts receivable, net 6,960 5,252
Inventories 9,692 6,807
Prepaids and other 671 431
Refundable income taxes 713 385
Deferred income taxes 141 52
-------------------------------------
Total current assets 18,446 15,993
Property and equipment, net 3,123 2,698
Goodwill, net 4,486 4,621
Other 527 398
-------------------------------------
Total assets $ 26,582 $ 23,710
=====================================
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ $ 1,457
2,452
Accrued compensation 314 247
Other accrued liabilities 262 150
Customer deposits 579 655
Line of credit 2,026 -
Current portion of long-term debt and capital lease
obligations 153 212
-------------------------------------
Total current liabilities 5,786 2,721
Deferred income taxes 131 106
Long-term debt and capital lease obligations, less current
Portion 17 92
-------------------------------------
Total liabilities 5,934 2,919
Stockholders' equity:
Common stock, no par value:
Authorized shares - 50,000
Issued and outstanding shares - 4,472 20,088 20,088
Additional capital 137 137
Retained earnings 423 566
-------------------------------------
Total stockholders' equity 20,648 20,791
-------------------------------------
Total liabilities and stockholders' equity $ 26,582 $ 23,710
=====================================
See accompanying notes.
OPEN PLAN SYSTEMS, INC.
Consolidated Statements of Operations (Unaudited)
(amounts in thousands, except per share)
Three Months ended Nine Months ended
September 30 September 30
1997 1996 1997 1996
---------------------------------------------------------------------
Net sales $ 9,408 $ 4,401 $ 23,009 $ 14,946
Cost of sales 6,864 3,054 16,850 9,962
---------------------------------------------------------------------
Gross profit 2,544 1,347 6,159 4,984
Operating expenses:
Amortization of intangibles 69 - 207 -
Selling and marketing 1,766 730 4,520 2,212
General and administrative 530 390 1,831 1,005
---------------------------------------------------------------------
2,365 1,120 6,558 3,217
---------------------------------------------------------------------
Operating (loss) income 179 227 (399) 1,767
Other (income) expense:
Interest expense 18 7 37 131
Interest income (2) (140) (62) (187)
Other, net (17) (4) (30) (18)
---------------------------------------------------------------------
(1) (136) (55) (75)
---------------------------------------------------------------------
Income (loss) before income taxes 180 363 (344) 1,842
Income tax expense (benefit) 33 147 (201) 169
---------------------------------------------------------------------
Net income (loss) $ 147 $ 216 $ (143) $ 1,673
=====================================================================
Earnings (Loss) per common share $ .03 $ .05 $ (.03)
====================================================
Weighted average common shares outstanding 4,473 4,385 4,473
====================================================
Pro forma income data:
Pro forma income before income taxes $ 1,842
Pro forma provision for income taxes 718
-----------------
Pro forma net income $ 1,124
=================
Pro forma earnings per common share $ .33
=================
Weighted average common shares outstanding 3,411
=================
See accompanying notes.
OPEN PLAN SYSTEMS, INC.
Consolidated Statements of Cash Flows (Unaudited)
(amounts in thousands)
Three Months ended Nine Months ended
September 30 September 30
1997 1996 1997 1996
---------------------------------------------------------------------
Operating activities
Net income (loss) $ 147 $ 216 $ (143) $ 1,673
Adjustments to reconcile net income (loss) to net
cash (used) provided by operating activities:
Provision for losses on receivables 50 2 58 15
Depreciation and amortization 211 74 629 170
(Gain)loss on sale of property - (3) 4 -
Deferred income taxes (17) 11 (63) (6)
Changes in operating assets and liabilities:
Accounts receivable (1,898) (112) (1,800) (510)
Inventories (487) (409) (2,881) (1,340)
Prepaids and other (196) (143) (755) (125)
Trade accounts payable 551 74 1,039 233
Customer deposits (120) 62 (80) 37
Accrued and other liabilities 134 90 157 (97)
---------------------------------------------------------------------
Net cash (used) provided by operating activities (1,625) (138) (3,835) 50
Investing activities
Purchases of property and equipment (388) (535) (862) (1,260)
Proceeds from the sale of property and equipment - - 8 64
Other - (64) - (73)
---------------------------------------------------------------------
Net cash used in investing activities (388) (599) (854) (1,269)
OPEN PLAN SYSTEMS, INC.
Consolidated Statements of Cash Flows (Unaudited) (continued)
(amounts in thousands)
Three Months ended Nine Months ended
September 30 September 30
1997 1996 1997 1996
---------------------------------------------------------------------
Financing activities
Advances to stockholders $ - $ - $ - $ (306)
Repayment of advances to stockholders - 22 - 84
Net (repayments) borrowings on revolving line of
credit 2,026 - 2,026 (2,706)
Principal payments on long-term debt, and capital
lease obligations (45) (244) (134) (341)
Proceeds from sale of common stock - - - 17,560
Distributions to stockholders - - - (3,760)
---------------------------------------------------------------------
Net cash (used) provided by financing activities 1,981 (222) 1,892 10,531
---------------------------------------------------------------------
Increase (Decrease) in cash and cash equivalents (32) (959) (2,797) 9,312
Cash and cash equivalents at beginning of period 301 10,513 3,066 242
---------------------------------------------------------------------
Cash and cash equivalents at end of period $ 269 $ 9,554 $ 269 $ 9,554
=====================================================================
Supplemental disclosures
Interest paid $ 18 $ 7 $ 37 $ 131
=====================================================================
Income taxes paid $ 30 $ 261 $ 136 $ 261
=====================================================================
Summary of non-cash transactions
Distributions offset against advances to stockholders
$ - $ - $ - $ 591
=====================================================================
Notes payable for equipment $ - $ - $ - $ 502
=====================================================================
See accompanying notes.
OPEN PLAN SYSTEMS, INC.
Notes to Consolidated Financial Statements (Unaudited)
September 30, 1997
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB of the Securities
and Exchange Commission. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, these financial statements
reflect all adjustments of a normal recurring nature which the Company considers
necessary for a fair presentation. Historically, the Company's business has been
significantly affected by seasonal factors. The Company typically has greater
sales revenue during the first and fourth quarters. The results for the three
month and nine month periods ending September 30, 1997 are not necessarily
indicative of the results that may be achieved for the entire year ending
December 31, 1997 or for any other interim period.
Certain reclassifications have been made to prior period amounts to conform to
the current period presentation.
2. Inventories
Inventories are in two main stages of completion and consisted of the following
(amounts in thousands):
September 30 December 31
1997 1996
-------------------------------------
(Unaudited)
Components and fabric $5,033 $3,355
Jobs in process and finished goods 4,659 3,452
-------------------------------------
$9,692 $6,807
=====================================
3. Income Taxes
Prior to the Company's initial public offering of common stock in June 1996, the
Company had elected by consent of its stockholders to be taxed under the
provisions of Subchapter S of the Internal Revenue Code. Under these provisions,
the Company did not pay federal and state income taxes on its corporate income.
Instead the Company's income was included in the income of its stockholders for
federal and state income tax purposes. The Company revoked its S-Corporation
election effective May 31, 1996.
3. Indebtedness
During June 1997, the Company renegotiated its revolving line of credit with a
bank. The new credit facility provides for borrowings up to $10,000,000 through
May 1998. The borrowings bear interest at varying amounts depending on the
Company meeting and maintaining certain levels of income for the four most
recent quarters. Outstanding borrowing under the line of credit totaled
$2,026,000 at September 30, 1997 at a rate of 7.937%. Advances under the line
are secured by substantially all assets and are limited to specified percentages
of accounts receivables and inventories. Under the terms of the agreement, the
Company is required to maintain a defined earnings to debt ratio and an interest
coverage ratio. The Company was in compliance with all covenants of the
agreement at September 30, 1997.
4. Pro Forma Information
The accompanying pro forma income data reflects a provision for income taxes as
if the Company's earnings had been subject to federal and state income taxes as
a regular corporation for all periods presented.
Pro forma earnings per common share are based on the weighted average common
shares outstanding for 1996 increased for the average number of shares of common
stock deemed to be outstanding, which represents the approximate number of
common shares deemed sold by the Company at the initial public offering of $10
per share to fund the final S-Corporation distribution of $2,695,000 to the
Company's shareholders.
OPEN PLAN SYSTEMS, INC.
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview Since its inception in 1989, the Company has generated the
majority of revenues from the sale of remanufactured Work Stations and to a
lesser extent from the sale of "as-is" Work Stations and rentals. Additionally,
in 1996, with the acquisition of certain manufacturing equipment from Birum
Corporation, the Company acquired the ability to manufacture "new" Work Stations
in an effort to broaden its customer base. The Company's sales are highly
dependent upon its network of Company-owned sales offices and sales personnel
because the Company sells approximately 80% of its Work Stations directly to
end-users. Sales from these offices have increased each year as the Company has
added sales personnel, as these personnel have gained experience and as the
Company has achieved greater consumer awareness and name recognition. Generally,
branch sales offices do not generate significant sales in their first nine
months to one year of operation.
The Company sells approximately 20% of its Work Stations through its dealer
network. While the Company prefers to sell directly to the end-user through its
own sales offices, it will continue to use dealers in non-exclusive
relationships, in markets that are too small to support a sales office or in
markets where it does not expect to be able to open a sales office in the near
future. Selling through Company-owned sales offices rather than through dealers
increases the Company's selling costs due to increased overhead and salesperson
compensation expenses. However, the Company believes that these increased costs
are more than offset by the portion of the dealer gross profit margin captured
by the Company. The Company believes that the fifty largest metropolitan areas
in the United States are of sufficient size to support a Company sales office. A
core component of the Company's growth strategy is to increase sales by opening
new sales offices and adding additional sales personnel. The Company acquired
the expertise to manufacture new office furniture and Haworth office furniture
through separate acquisitions in 1996.
Historically, the Company's sales volume has been lower in the spring and
summer months and higher in the fall and winter months. The Company believes
that this seasonal increase in sales volume, which generally coincides with the
first and fourth quarters of the Company's fiscal year, is due to the tendency
of customers to expend funds budgeted for office furniture either early in the
calendar year or after the summer vacation season. Because the Company
recognizes revenues upon shipment and typically ships Work Stations within three
weeks of an order, a substantial portion of the Company's revenue in each
quarter results from orders placed by customers during that quarter. As a
result, the Company's revenues and profits are difficult to predict and may
fluctuate from quarter to quarter. The Company typically does not have any
significant backlog of customer orders because it generally ships products
within three weeks of receipt of an order. The Company uses temporary employees
and other measures to increase production capacity during periods of higher
sales while keeping its baseline operating expenses to a minimum during periods
of lower sales.
Results of Operations
The following table sets forth the relationship of costs and expenses as a
percentage of the Company's sales for the periods indicated:
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 73.0 69.4 73.2 66.7
----------- ---------- ---------- -----------
Gross profit 27.0 30.6 26.8 33.3
Amortization of intangibles 0.7 0.0 .9 0.0
Selling and marketing expenses 18.8 16.5 19.6 14.8 14.8
General and administrative expenses 5.6 8.9 8.0 6.7
----------- ---------- ---------- -----------
Operating (loss) income 1.9 5.2 (1.7) 11.8
Other (income) expense 0.0 (3.0) (0.2) (0.5)
----------- ---------- ---------- -----------
Net income (loss) before income taxes 1.9 8.2 (1.5) 12.3
Provision for (benefit from) income taxes 0.3 3.3 (.9) 1.1
----------- ---------- ---------- -----------
Net income (loss) 1.6% 4.9% (.6)% 11.2%
=========== ========== ========== ===========
Comparison of Three Months and Nine Months Ended September 30, 1997 and
September 30, 1996
Sales. Sales for the three months ended September 30, 1997 were $9,408,000,
an increase of approximately $5,007,000 or 113.8% over the same period in 1996.
Sales for the nine months ending September 30, 1997 were $23,009,000, an
increase of $8,063,000 or 53.9% over the same period in 1996. The increase in
the third quarter and year-to-date sales was principally due to the acquisition
of Total Facilities Management (TFM) and the first major installation of a new
panel line in an order that totaled $1.5 million. Sales for the Company's sales
offices which were open in the first three quarters of 1996 and 1997 increased
from prior year levels on a quarter on quarter basis but decreased slightly from
prior year-to-date levels. Certain of the Company's newer sales offices
continued to provide lower than expected results. Additionally, the Company
experienced increased sales discounting pressure during the most recent quarter.
This discounting pressure came primarily from several large projects with
national companies that were completed during the quarter. The Company is in the
process of refining its marketing efforts around its traditional core customer
market where, historically, there has been less discounting pressure. This trend
may continue, however, for the next quarter or two until sales office training
initiatives have been completed The Company purchased certain assets of a Herman
Miller remanufacturer from bankruptcy court in Dallas, Texas during the third
quarter of 1997 and extended the lease on the facilities it occupied. The
Company anticipates reopening the manufacturing facility as the first of its
limited manufacturing hubs, along with a second facility, during the fourth
quarter. Additionally, the Company opened a sales office in Cincinnati, Ohio in
September and opened a sales office in Baltimore during October. The Company
does not expect these branches to significantly impact fourth quarter results.
The Company is also continuing to evaluate the impact that its various marketing
programs are having on sales in each market. Based on information generated from
the programs, the Company is targeting its efforts on the most effective method
of promotion for each market. Additionally, the Company has added salesmen to
branch offices in order to increase the visibility and marketing efforts of
those offices and to increase production from these offices. The Company
believes that while these programs have been initiated, it will take several
quarters for the Company to realize the long-term benefits to be derived from
these strategies. Cost of Sales. The Company's cost of sales includes cost of
raw materials (new and used Work Station components, new fabric, laminate,
paint, and other materials), labor, supplies, freight, utilities, and other
manufacturing related expenses. As discussed in previous quarters, the Company
expanded its strategy of manufacturing component parts that had previously been
purchased from third parties. In September 1996, the Company placed in service
equipment purchased during the second quarter of 1996 from Birum Corporation and
commenced its new part manufacturing operations. This equipment purchase allows
the Company to manufacture all the metal and wood component parts used in the
remanufacturing process and in the Company's line of new Work Stations. Cost of
sales increased by $3,810,000 in the third quarter of 1997 from the $3,054,000
reported in the third quarter of 1996 and increased by $6,888,000 for the first
three quarters of 1997 as compared to the $9,962,000 reported in the comparable
period of 1996. The increase in cost of sales is primarily attributable to sales
volume increases. The gross margin decreased to 27.0% in the third quarter of
1997 from 30.6% in the third quarter of 1996 and decreased to 26.8% for the
first three quarters of 1997 as compared 33.3% for the comparable period in
1996. The gross margin decreased slightly in the third quarter from the 30.1%
reported in the second quarter. These changes are primarily due to the programs
initiated earlier in the year and further discussed below. Upon commencement of
the new part manufacturing operations, the Company immediately began producing a
wide array of component parts for use in the remanufacturing business, and all
the parts necessary to build the Company's line of new Work Stations. As a
result of the rapid implementation, expected manufacturing efficiencies were not
achieved and product costs increased. Additionally, the Company experienced
quality problems and training issues related to the large product mix that was
being manufactured on the plant floor. The Company initiated several new
programs during the first and second quarters of 1997 to address these issues.
Among the actions undertaken by the Company were strategic sourcing initiatives
which determine, on a part by part basis, whether the Company should make or buy
component parts. The Company has determined that there are certain products that
it can manufacture efficiently and others that it should purchase from part
suppliers or in the used furniture market. Accordingly, the Company has reduced
unit costs by limiting manufacturing processes and outsourcing the production of
other component parts. Unit production costs continued to decrease in the
quarter to below historical levels due primarily to these initiatives. Further
cost reductions are expected as these initiatives are completed during the
fourth quarter. These savings were more than offset, however, by the increased
levels of discounting which is discussed above. This, along with the
introduction of the new panel system line, reduced gross margins on certain
large jobs below historical levels.
Operating Expenses. The Company's most significant operating expense is selling
and marketing expense. These costs are primarily related to salesperson
compensation, advertising and other marketing expenses and rents. The Company
compensates its salespeople through a combination of salaries, commissions and
bonuses. While most of these expenses are directly related to the current year's
sales, certain other marketing expenses are incurred to build brand recognition
and generate sales leads that may contribute to sales in later periods.
Selling and marketing expenses for the third quarter of 1997 increased to
$1,766,000 from $730,000 in the third quarter of 1996 and increased to
$4,520,000 for the first three quarters of 1997 from $2,212,000 for the first
three quarters of 1996. The increases were primarily related to the acquisition
of TFM Remanufactured Furniture as well as the opening of seven new sales
offices during the past year. The Company, as a result of its new marketing
initiatives, increased its advertising expense by approximately 39% over prior
year levels. An additional contributing factor in the sales and marketing
increase is that it typically takes several years for new sales offices to
generate enough sales to provide targeted returns. This increases the percentage
of selling expenses to sales since the higher initial costs of these sales
offices have not yet been offset with the increased sales volume expected from
these offices. Additionally, the Company incurred approximately $60,000 in
additional expenses related to the restructuring of its sales office management
structure during the third quarter of 1997.
Additionally during the first quarter of 1997, the Company revised its
marketing strategy from its previous telemarketing efforts to direct mail
advertising targeted to prospective companies in certain of its markets. These
targeted companies are of the size that the Company has been most successful in
its marketing efforts in the past and typically are less sensitive to
discounting pressures, therefore generating higher gross profit margins. The
Company is encouraged by the early responses in markets where the Company's
previous advertising efforts have not succeeded. Sales in those branches
continued to increase quarter over quarter as they had earlier in 1997. The
telemarketing group was disbanded due to the difficulty of reaching potential
purchasers through traditional telemarketing techniques. The Company believes
that the new method will be a more effective manner of advertising in certain
markets than previous methods.
General and administrative expenses increased to $530,000 in the third
quarter of 1997 from the $390,000 reported in the third quarter of 1996 and
increased to $1,831,000 for the first three quarters of 1997 from the $1,005,000
reported in the comparable period of 1996. The increase for the third quarter
and through the first nine months of 1997 was related primarily to investments
made in the Company's infrastructure to handle current and future capacity as
well as certain non-recurring costs. The non-recurring costs, totaling
approximately $190,000 year to date, related to professional expenses in
connection with the evaluation of several potential acquisition candidates.
Ultimately, the Company determined that these acquisitions were not in the best
interests of the Company. General and administrative expenses also increased
during the first half of 1997 due to the effort and expense dedicated to the
annual report, annual meeting and other fees required as a public company that
the Company had not experienced in prior years. As anticipated, the third
quarter administrative expenses decreased as a percentage of sales as compared
to the first and second quarters. The Company will begin the process of
implementing a new management information system in the latter part of this year
and first half of next year which will require the Company to further augment
its internal resources. The Company believes that further reductions of general
and administrative expenses as a percentage of sales will be difficult to
achieve and maintain during this transition period.
Other Non-Operating Income and Expense. Total other income and expense changed
from income of $136,000 and $75,000, for the third quarter and nine months ended
September 30, 1996, respectively, to income of $1,000 and $55,000 for the third
quarter and nine months ended September 30, 1997, respectively. The primary
reason for the decrease is due to cash raised at the Company's initial public
offering in 1996. During 1996, the Company paid off its line of credit debt and
invested excess cash proceeds of the offering to maximize returns.
Income Taxes. The income tax benefit of $201,000 for the nine months ending
September 30, 1997 resulted from pre-tax losses incurred by the Company through
September 30, 1997. Prior to the initial public offering, the Company was
treated as an S-Corporation for federal and state income tax purposes. The
higher marginal tax rate between pro forma taxes and actual 1997 taxes is due to
the non-deductibility of certain intangible assets and life insurance policies
of certain executives.
Liquidity and Capital Resources
Cash Flows from Operating Activities. Net cash used in operating activities was
$1,625,000 and $3,835,000 for the three and nine months ended September 30,
1997, respectively, as compared to cash used by operating activities of $138,000
and $50,000 provided by operations for the third quarter and nine months ended
September 30, 1996 respectively. The increase in cash used by operating
activities for those periods as primarily due to lower profits, increased
working capital needs in 1997 as compared to 1996 and required raw material and
in-process inventories as a result of the Company's new part and component
manufacturing capabilities. Sales volumes have remained consistently strong,
resulting in relatively large inventory balances. The Company continued to
maintain a finished goods stock of approximately one month's volume of panels
and worksurfaces at September 30, 1997 to enable to the Company to respond
quickly to customer orders and to handle orders under the Company's one-week
quick ship program. The Company anticipates that inventories will decrease
somewhat over the next several quarters. Trade accounts receivable increased by
approximately $1.9 million during the third quarter of 1997 due to the strong
sales volume during the quarter. Subsequent to the end of the quarter, the
Company collected substantially all of the increase from the third quarter. The
Company believes that future receivable growth from increased sales volume will
continue to be tempered with decreases in the number of days sales outstanding.
Cash Flows from Investing Activities. Net cash used in investing activities was
$388,000 and $854,000 for the three and nine months ended September 30 1997,
respectively, as compared to $599,000 and $1,269,000 for the three and nine
months ended September 30, 1996, respectively. The decrease in cash used during
the third quarter and through the first nine months is due to the purchase of
equipment from the Birum Corporation in 1996. The 1997 capital expenditures are
primarily due to the growth of the Company over the past year, the purchase of
assets in Dallas, Texas and expenditures on its new information system. The
Company anticipates that capital spending for 1997 will range between $1.2
million and $1.5 million. The source of funds for anticipated capital spending
will be funds from operations as well as borrowings on the Company's $10,000,000
line of credit. At September 30, 1997, the Company had borrowings of $2,026,000
under its line of credit.
Cash Flows from Financing Activities. Net cash provided by financing activities
was $1,981,000 and $1,892,000 during the third quarter and nine months of 1997.
This represented principal payments on outstanding long-term debt and capital
leases more than offset by short-term borrowings on the Company's line of
credit. Net cash used by financing activities of $222,000 and cash provided by
financing activities of $10,531,000 for the third quarter and nine months ended
September 30, 1996, respectively, was primarily the result of the initial public
offering offset by distributions to former stockholders and the payoff of debt
balances.
Expected Future Cash Flows. Cash provided by operating activities should
increase as profitability growth should exceed any growth in receivables and
inventory in the fourth quarter. Additionally, the collection of certain large
receivable balances should substantially increase cash flow in the fourth
quarter. The Company anticipates that current cash balances plus cash flows from
operating activities and borrowings under its credit line will be adequate to
fund its capital expenditures and business acquisition strategy.
The Company plans to continue evaluating future strategic business
combinations to complement the existing business and expand the geographic range
of the business.
Seasonality and Impact of Inflation
Historically, the Company has experienced lower net sales levels in the
second and third quarters of the year and increased levels in the first and
fourth quarters. The Company believes that this seasonal increase in sales
volume is due to the tendency of customers to expend funds budgeted for office
furniture either early in the calendar year or after the summer vacation season.
The Company believes that its new product offerings will enable it to be
somewhat more competitive on a year-round basis by rounding out its product
offerings. Because the Company recognizes revenues upon shipment and typically
ships workstations within three weeks of an order, a substantial portion of the
Company's revenues in each quarter results from orders placed by customers
during that quarter. As a result, the Company's results may vary from quarter to
quarter.
Inflation has not had a material impact on the Company's net sales or
income to date. However, there can be no assurances that the Company's business
will not be affected in the future by inflation.
Impact of New Accounting Standards
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share, which is required to be adopted on December 31,
1997. At that time the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods. Under the
new requirements for calculating primary earnings per share, the dilutive effect
of stock options will be excluded. Had Statement 128 been applied to the period
presented herein,there would have been no material change in earnings per share.
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, Reporting Comprehensive Income, which establishes standards for the
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. This statement requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. The Company is not required
to adopt the provisions of Statement No. 130 until 1998. Management does not
believe the adoption of Statement No. 130 will have a significant impact on its
financial statements.
Forward-Looking Statements
The foregoing discussion contains certain forward-looking statements, which
may be identified by phrases such as "the Company expects" or words of similar
effect. The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements. The Company has identified certain
important factors that in some cases have affected, and in the future could
affect, the Company's actual results and could cause the Company's actual
results for fiscal 1997 and any interim period to differ materially from those
expressed in any forward-looking statements made by, or on behalf of, the
Company. These factors are set forth under the caption "Forward-Looking
Statements" in Item 6 of the Company's Form 10-KSB for the fiscal year ended
December 31, 1996, a copy of which is on file with the Securities and Exchange
Commission. The Company assumes no duty to update any of the statements of this
report.
OPEN PLAN SYSTEMS, INC.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
The registrant has included the following exhibits
pursuant to Item 601 of Regulation S-B.
Exhibit No. Description
------------ ---------------------------------------------------
11 Schedule Re: Computation of Per Share Earnings
27 Financial Data Schedule (filed electronically only)
(b) Reports on Form 8-K
None
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.
OPEN PLAN SYSTEMS, INC.
----------------------------
(Registrant)
Date: November 12, 1997 /s/ Stan A. Fischer
----------------------------
Stan A. Fischer
Chief Executive Officer
Date: November 12, 1997 /s/ Gary M. Farrell
----------------------------
Gary M. Farrell
Chief Financial Officer
Date: November 12, 1997 /s/ Neil F. Suffa
---------------------------
Neil F. Suffa
Corporate Controller
OPEN PLAN SYSTEMS, INC.
EXHIBIT INDEX
Exhibit No. Description
--------------- ---------------------------------------------------
11 Schedule Re: Computation of Per Share Earnings
27 Financial Data Schedule (filed electronically only)
OPEN PLAN SYSTEMS, INC.
EXHIBIT 11 - STATEMENT RE: COMPUTATION
OF PER SHARE EARNINGS
(amounts in thousands, except per share)
Three Months Ended Nine Months ended
September 30 September 30
1997 1996 1997 1996
-------------------------------------------------------------------------------
Weighted average shares outstanding during the
period 4,472 4,385 4,472 3,256
Assumed exercise of options less assumed 1 - 1 -
acquisition of shares
Average number of shares assumed outstanding
during the period approximating the number of
shares sold (at the initial offering price of
$10) to fund the final S-Corporation
distribution - - - 155
-------------------------------------------------------------------------------
Total 4,473 4,385 4,473 3,411
===============================================================================
Net income (loss) used in computation $ 147 $ 216 $ (143)
===========================================================
Earnings (loss) per common share $ .03 $ .05 $ (.03)
===========================================================
Pro forma net income used in computation $ 1,124
====================
Pro forma earnings per common share $ .33
=============