C A N T E R B U R Y
I N F O R M A T I O N
T E C H N O L O G Y , I N C .
1 9 9 6 A n n u a l R e p o r t
Canterbury Information Technology, Inc.
1600 Medford Plaza, Medford, New Jersey 08055
(609) 953-0044 Fax (609) 953-0062
Web site: canterburyxcel.com
(NASDAQ: XCEL)
Visit our Web site for continuing up-to-date information.
Canterburyxcel.com
The Board of Directors has voted to change the Company's name from Canterbury
Corporate Services, Inc. to Canterbury Information Technology, Inc. in order
to make it more representative of the Company's current business. The
Stockholders must, however, vote their approval at the Annual Meeting of
Stockholders scheduled for June 12, 1997. If approved by the Stockholders,
the Company's name will be officially changed by an amendment to the
Certificate of Incorporation. In anticipation of a favorable vote, the
Company has used the new name in this Annual Report since it will be used
throughout this year. The Company's NASDAQ National Market symbol will remain
"XCEL."
Dear Fellow Stockholders:
Canterbury completed a three-year reengineering program in Fiscal 1996. We
have divested all of our non-related businesses and are totally focused on
expansion as an information technology company. Toward this end, our Board of
Directors voted to change our name to Canterbury Information Technology, Inc.
The stockholders must vote their approval at the Annual Meeting of
Stockholders.
In November, we sold our landscaping subsidiary at a substantial profit. This
sale, combined with the profitable sale of the printing subsidiary in late
1995, assuming no pre-payments, will provide Canterbury with more than
$800,000 per year of cash flow for the next nine years. This annuity stream
will balloon in year ten with lump sum payments in excess of $3,500,000.
Canterbury's financial accomplishments in Fiscal 1996 included the following:
Total assets increased to $27,465,000; an increase of $1,765,000.
Term debt was reduced from $5,706,000 to $3,631,000. (We paid back to
the bank $2,459,000.)
Stockholder's equity (net worth) increased to $16,258,000 (an increase of
$3,146,000).
For the second year in a row, cash flow from continuing operations was in
excess of $1,900,000. In 1996, our cash profit from operations was $1,962,000.
Midway through fiscal 1996, Canterbury initiated an aggressive acquisition
search. Our goal was to search out profitable, information technology
companies, with competent on-going management to augment the technology
computer training that CALC/Canterbury is successfully offering to its
corporate customers. Since corporations accessing computer training also need
computer and software consulting, network and systems development, systems
integration, Internet development and application, as well as Intranet
conversions, the Canterbury family of companies will be poised to provide a
fully integrated, comprehensive approach to information technology.
CANTERBURY'S INFORMATION TECHNOLOGY
MERGER/ACQUISITION MODEL
Computer Technical Software Network Systems Internet and
Training Training Consultants and Integrators Intranet
Companies Companies and Systems ----- Installers,
Developers Developers Help Lines Consultants
and and
Installers Developers
CANTERBURY TRAINING AFFILIATES
In Fiscal 1996, many of CALC/Canterbury Corp.'s clients told us that they
wished their nationwide employees could receive the same exceptional quality
computer training that their local employees receive at CALC/Canterbury
Corp.'s facilities in New York City and New Jersey. This request was
implemented and Canterbury Training Affiliates (CTA's) were created.
We spent many months evaluating independent training facilities around the
nation. We personally visited most of the sites to judge their merit. Many
of our CTA members were recommended to us through our fellow members of the
Information Technology Training Association (ITTA).
After careful scrutiny of many independent training companies, we made our
selections and have expanded our computer training capabilities nearly
ten-fold. At the same time, we established a powerful distribution channel
for many other forms of information technology services and products. Every
company that Canterbury acquires will be able to sell their products and
services through this marketing and sales network.
Our 81 CTA's are located in the following cities...
Birmingham, AL Winston-Salem, NC
San Diego, CA Syracuse, NY
San Francisco, CA Rochester, NY
Los Angeles, CA Cleveland, OH
Sacramento, CA Philadelphia, PA
Denver, CO Pittsburgh, PA
Washington, DC Charleston, SC
Jacksonville, Fl Coumbia, SC
Atlanta, GA Greenville, SC
Augusta, GA Memphis, TN
Chicago, IL Nashville, TN
Lexington, KY El Paso, TX
Boston, MA Houston, TX
Baltimore, MD Salt Lake City, UT
Detroit, MI Richmond, VA
Minneapolis, MN Bellevue, WA
St. Louis, MO
Jackson, MS Canada
Charlotte, NC Montreal
Greensboro, NC Ontario
Raleigh, NC
SUBSEQUENT EVENTS:
January 21, 1997 - CALC/Canterbury Corp. and Bluestone, Inc. formed an
alliance to deliver web development training to corporations and web
developers who build business applications to serve the rapid growth of the
Internet, Intranets and Extranets.
March 13, 1997 - Canterbury's Board of Directors voted to change the
Company's name to Canterbury Information Technology, Inc., in order to better
describe Canterbury's current and future business segments. The stockholders
must approve this name change at the next Annual Meeting of Stockholders.
April 15, 1997 - Canterbury reduced its term debt by an additional
$918,000. The $8,300,000 of bank-term debt incurred in June of 1994 at the
acquisition of CALC has been reduced to less than $2,800,000.
April 17, 1997 - Canterbury completed the acquisition of ATM
Technologies, Inc., a software consulting and development company based in
Houston, Texas. ATM has been in business since 1984, specializing in PC-based
tracking systems. ATM is a well-managed, profitable company that fits nicely
within Canterbury's corporate model. ATM will be renamed ATM/Canterbury Corp.
April 21, 1997 - Canterbury signed an investment banking relationship
with H. J. Meyers & Co., Inc. H. J. Meyers is a national, full service
brokerage firm employing approximately 500 account executives in 18 offices
including: Atlanta, GA; Boston, MA; Chicago, IL; Cincinnati, OH; Dallas, TX;
Kansas City, KS; Long Island, NY; Los Angeles, CA; New York City, NY;
Philadelphia, PA; Red Bank, NJ; Richmond, VA; Rochester, NY; San Francisco, CA
and Woodbridge, NJ. H. J. Meyers will also act as a financial consultant and
investment banker to Canterbury as it takes advantage of expansion
opportunities.
We look forward to an exciting and profitable 1997.
Respectfully submitted,
By:/s/Stanton M. Pikus By:/s/Kevin J. McAndrew
---------------------- ----------------------
Stanton M. Pikus Kevin J. McAndrew
President Executive Vice President
Chief Executive Officer Chief Operating Officer
Balance Sheet Information as of November 30, 1996
Cash and cash equivalents $ 440,178
Accounts receivable, net 3,142,024
Prepaid and other current assets 1,620,227
Deferred income tax benefit and refundable taxes 1,228,000
-----------
Total current assets 6,430,429
Property and equipment net 2,752,430
Goodwill, net 8,914,086
Other non-current assets 9,368,074
-----------
Total assets $27,465,019
===========
Accounts payable and accrued expenses $ 604,859
Income taxes payable 424,845
Unearned tuition income 1,198,991
Current portion, long-term debt 2,230,715
-----------
Total current liabilities 4,459,410
Long-term debt and deferred tax liability 6,746,793
Stockholders' equity
Total stockholders' equity $ 16,258,816
------------
Total liabilities and
stockholders' equity $ 27,465,019
============
Please refer to Canterbury Corporate Services, Inc. financial statements in
the November 30, 1996 Form 10-K Report, audited by Ernst & Young, LLP, for
footnotes, schedules and further information.
Years ended November 30, 1996 and 1995
1996 1995
------------ ------------
Net revenues $ 14,082,608 $16,549,014
Costs and expenses 6,441,662 7,261,737
------------ -----------
Gross profit 7,640,946 9,287,277
Selling 2,333,589 2,198,958
General and administrative 4,252,948 4,769,766
Provision for doubtful accounts 1,062,735 1,115,136
------------ -----------
Total operating expenses 7,649,272 8,083,860
Other (income) expenses
Interest income 326,485 70,500
Interest expense (682,251) (951,403)
Other 374,575 (66,772)
------------ -----------
Total other income (expenses) 18,809 (947,675)
Income before provision for income
taxes and discontinued operations 10,483 225,742
Provision/(benefit) for income taxes 4,255 (18,453)
------------ -----------
Income from continuing operations 6,228 274,195
Discontinued operations
Loss from discontinued operations
less applicable income taxes benefits of
($453,904) and ($27,117) (614,832) (53,900)
Gain on sale of discontinued operations
(less applicable income taxes of
$1,681,649 and $1,309,922) 2,275,172 1,493,545
Net income $ 1,666,568 $ 1,713,840
============ ============
Please refer to Canterbury Corporate Services, Inc. financial statements in
the November 30, 1996 Form 10-K Report, audited by Ernst & Young, LLP, for
footnotes, schedules and further information.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Working capital at November 30, 1996 was $1,926,000. During 1996, the Company
and its primary lender, Chase Manhattan Bank, instituted litigation, each
claiming that the other party violated the terms of the credit agreement. As
a result, the debt was declared in default. In February of 1997, the
litigation was settled. All outstanding debt with Chase was restructured and
is now due on December 31, 1997. The Company and Chase agreed that all
alleged defaults under the previous agreements were permanently waived and the
Company would use its best efforts to replace Chase during 1997. The Company
is in the process of replacing Chase as its primary lender and is confident
that this refinancing should be completed before December, 1997.
Management believes that positive cash flow contributions from the Company's
operating segments will be sufficient to cover cash flow requirements for
Fiscal 1997. There was no material commitment for capital expenditures as of
November 30, 1996. Inflation was not a significant factor in the Company's
financial statements.
Cash flow from continuing operations for the year ended November 30, 1996 was
$1,962,000, an increase of $55,000 over the previous year. During the year,
the Company reduced its long-term bank debt by $2,460,000, and is scheduled to
further reduce it by approximately $2,000,000 in 1997.
RESULTS OF OPERATIONS - Fiscal 1996 Compared to Fiscal 1995
Revenues - Revenues decreased by $2,467,000 (15%) in Fiscal 1996 from 1995.
This decrease was primarily attributable to the reduction in vocational
training revenues of $2,179,000. During Fiscal 1996, the Company operated
only two vocational training centers, while in 1995 there were still seven
training centers in operation for all or part of the year. This reduction was
anticipated in conjunction with the decision in 1994 to close, consolidate and
downsize several training centers. It is anticipated that the current level
of revenues from this segment will remain fairly constant in the future.
Costs and Expenses - Costs and expenses decreased in Fiscal 1996 by $820,000
(11%). Again, the primary reason for this reduction is the elimination of
five vocational training centers during Fiscal 1995. Costs and expenses for
the other operating segments remained fairly constant.
Selling expense increased by $134,000 (6%) during Fiscal 1996 over 1995. This
increase was caused by a planned increase in sales and marketing personnel in
the computer software training segment of $217,000. Offsetting this increase
was a reduction in selling expenses for the vocational training segment due to
the reduction in training centers.
General and administrative expense decreased by $517,000 (11%) in Fiscal 1996
from 1995. A reduction in vocational training expense of $426,000 was again
the main reason for the decrease. During 1996, the Company allocated
$1,199,000 of corporate expenses to discontinued operations.
The Company's provision for doubtful accounts decreased by $52,000 (5%) during
Fiscal 1996 over 1995. This was attributable to the reduction in vocational
training centers in operation during the year.
Interest income for 1996 increased by $256,000 (365%). This increase was the
result of the income derived from the Star Label note receivable payments
received during the year. For Fiscal 1997 it is anticipated that interest
income will increase significantly again due to the payments from the note
receivable generated by the sale of Landscape Maintenance Services, Inc. in
November, 1996. Interest expense decreased by $269,000 (28%) in Fiscal 1996
over 1995. The reduction in the outstanding borrowings on the term loan
associated with the purchase of CALC/Canterbury is the major cause for this
reduction.
Other income increased by $308,000 in 1996 over 1995. The Company revised its
estimate regarding future lease termination payments.
In November, 1996 the Company sold its business maintenance segment for cash
and notes. As a result of this sale, the Company recognized a gain of
$2,275,000, which is net of applicable taxes.
Interest expense for 1995 increased by $394,000 (71%). This is due primarily
to the full year interest expense for the CALC/Canterbury acquisition debt
being reflected in Fiscal 1995. Only six months of interest expense was
incurred in Fiscal 1994 after the June, 1994 acquisition.
In November, 1995 the Company sold its specialty printing segment for cash and
notes. As a result of this sale, the Company recognized a gain of $1,493,000,
which is net of applicable taxes.
CORPORATE INFORMATION
BOARD OF DIRECTORS
Stanton M. Pikus - Chief Executive Officer, President, Chairman of the Board
of Directors
Kevin J. McAndrew, CPA - Executive Vice President, Chief Operating Officer,
Chief Financial Officer, Treasurer, Director
Alan Manin - Vice President, Marketing; Director
Jean Zwerlein Pikus - Vice President, Operations; Secretary, Director
Stephen M. Vineberg - Director
Paul L. Shapiro - Director
Frank A. Cappiello - Director
EXECUTIVE OFFICERS
Stanton M. Pikus - Chief Executive Officer, President, Chairman of the Board
of Directors
Kevin J. McAndrew, CPA - Executive Vice President, Chief Operating Officer,
Chief Financial Officer, Treasurer, Director
Alan Manin - Vice President, Marketing; Director
Jean Zwerlein Pikus - Vice President, Operations; Secretary, Director
CORPORATE HEADQUARTERS
1600 Medford Plaza, Medford, New Jersey 08055; (609)953-0044;(Fax)609-953-0062
CORPORATE COUNSEL
Levy & Levy, P.A.
Suite 309, Plaza 1000, Main Street, Voorhees, New Jersey 08043
TRANSFER AGENT
American Stock Transfer Trust & Company
6201 Fifteenth Avenue, Brooklyn, New York 11219
INVESTMENT BANKER
J. Meyers & Co., Inc., 1895 Mount Hope Avenue, Rochester, New York 14620
and 40 Fulton Street, Tenth Floor, New York, New York 10038
AUDITORS
Ernst & Young, LLP
2 Commerce Sq., 2001 Market St., Suite 4000, Philadelphia, PA 19103
SEC FORM 10-K
The Company's annual report to the Securities and Exchange Commission on Form
10-K and other financial information such as interim and annual reports to
stockholders are available, without charge to stockholders, upon written
request to:
CANTERBURY INFORMATION TECHNOLOGY, INC.
1600 Medford Plaza, Medford, New Jersey 08055
(609) 953-0044 Fax (609) 953-0062
Web Site: canterburyxcel.com