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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT #1
____________________
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1993
OR
[ ] 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 0-3797
BURNUP & SIMS INC.
______________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 59-1259279
_____________________________________________ ________________
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
One North University Drive, Ft. Lauderdale, FL 33324
______________________________________________ _________
(Address of principal executive offices) (Zip Code)
(305) 587-4512
____________________________________________________
(Registrant's telephone number, including area code)
Not Applicable
____________________________________________________
(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 report), and (2) has been subject to such filing requirements
for the past 90 days.
X
Yes _______ No _______
Indicate the number of share outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class of Common Stock Outstanding as of December 1, 1993
_____________________ __________________________________
$ .10 par value 8,768,339
Page 1 of 18
Exhibit Index on Page 17
BURNUP & SIMS INC.
Form 10-Q/A
AMENDMENT #1
October 31, 1993
Index
Page
PART I FINANCIAL INFORMATION
Item 1 - Unaudited Condensed Consolidated Statements
of Income for the Three and Six Month
Periods Ended October 31, 1993
and 1992. . . . . . . . . . . . . . . . . . . 3
Unaudited Condensed Consolidated Balance
Sheets as of October 31, 1993 and
April 30, 1993 . . . . . . . . . . . . . . . 4
Unaudited Condensed Consolidated Statements
of Cash Flows for the Six Month Periods
Ended October 31, 1993 and 1992 . . . . . . . 5
Notes to Condensed Consolidated
Financial Statements (Unaudited). . . . . . . 6
Item 2 - Management's Discussion and Analysis
of Results of Operations and
Financial Condition . . . . . . . . . . . . . 14
PART II OTHER INFORMATION
Item 1 - Legal Proceedings. . . . . . . . . . . . . . . 17
Item 5 - Other Information. . . . . . . . . . . . . . . 17
Item 6 - Exhibits and Reports on Form 8-K . . . . . . . 17
Signature Page. . . . . . . . . . . . . . . . . . . . . 18
Page 2 of 18
BURNUP & SIMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts)
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
1993 1992 1993 1992
-------- -------- -------- --------
(Unaudited)
Revenues $ 34,557 $ 36,020 $ 72,004 $ 73,834
-------- -------- -------- --------
Costs and Expenses
Costs of Revenues* 31,185 30,074 63,360 62,106
General and Administrative 4,327 4,358 8,137 8,144
Depreciation and Amortization 1,260 1,632 2,526 3,189
Interest Expense 976 1,239 2,043 2,402
Interest and Dividend Income (980) (1,030) (1,957) (2,050)
Other (592) (653) (3,299) (731)
-------- -------- -------- --------
Total Costs and Expenses 36,176 35,620 70,810 73,060
-------- -------- -------- --------
Income (Loss) Before Income Taxes (1,619) 400 1,194 774
Provision (Credit) for Income Taxes (615) 149 284 286
-------- -------- -------- --------
NET INCOME (LOSS) $ (1,004) $ 251 $ 910 $ 488
======== ======== ======== ========
Average Shares Outstanding 8,768 8,768 8,815 8,768
Earnings (Loss) Per Share $ (0.11) $ 0.03 $ 0.10 $ 0.06
*exclusive of depreciation and amortization
See Notes to Condensed Consolidated Financial Statements.
Page 3 of 18
BURNUP & SIMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands) OCTOBER 31, APRIL 30,
1993 1993
(Unaudited)
--------- ---------
ASSETS
Current Assets
Cash and Cash Equivalents $ 6,853 $ 9,612
Accounts Receivable-Net and Unbilled Revenues 19,300 22,886
Inventories 3,658 4,246
Deferred and Refundable Income Taxes 4,865 4,310
Other 2,656 1,566
--------- ---------
Total Current Assets 37,332 42,620
--------- ---------
Preferred Stock and
Long-Term Notes Receivable-NBC 31,134 31,184
--------- ---------
Property-At Cost 73,591 74,854
Accumulated Depreciation (55,687) (56,818)
--------- ---------
Property-Net 17,904 18,036
--------- ---------
Excess of Costs Over Equity of Businesses Acquired 3,209 3,279
--------- ---------
Real Estate Investments and Other Assets 13,814 13,798
--------- ---------
TOTAL ASSETS $ 103,393 $ 108,917
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current Maturities of Debt $ 4,006 $ 3,873
Accounts Payable 6,363 9,821
Accrued Insurance 3,165 2,839
Accrued Compensation 1,710 1,970
Accrued Interest 1,349 1,499
Accrued and Deferred Income Taxes 162 57
Other 6,357 6,362
--------- ---------
Total Current Liabilities 23,112 26,421
--------- ---------
Other Liabilities 13,622 12,076
--------- ---------
Long-Term Debt 10,210 12,256
--------- ---------
Convertible Subordinated Debentures 21,875 24,500
--------- ---------
Shareholders' Equity
Common Stock 1,602 1,602
Capital Surplus 72,860 72,860
Retained Earnings 34,252 33,342
Treasury Stock (74,140) (74,140)
--------- ---------
Total 34,574 33,664
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 103,393 $ 108,917
========= =========
See Notes to Condensed Consolidated Financial Statements.
Page 4 of 18
BURNUP & SIMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
SIX MONTHS ENDED
OCTOBER 31,
(Unaudited)
1993 1992
--------- ---------
Cash Flows from Operating Activities:
Net Income $ 910 $ 488
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Depreciation and Amortization 2,526 3,189
Gain on Sale of Assets (2,763) (354)
Gain on Repurchase of Debentures (295) (291)
Changes in Working Capital:
Accounts Receivable-Net and Unbilled Revenues 3,586 (1,621)
Inventories and Other Current Assets (1,056) (23)
Accounts Payable and Accrued Expenses (3,398) (2,134)
Interest and Income Taxes (47) (351)
Other Current Liabilities (240) (774)
Other-Net 1,723 357
--------- ---------
Net Cash Provided (Used) by Operating Activities 946 (1,514)
--------- ---------
Cash Flows from Investing Activities:
Capital Expenditures (1,133) (2,680)
Proceeds from Sale of Assets 3,914 447
--------- ---------
Net Cash Provided (Used) by Investing Activities 2,781 (2,233)
--------- ---------
Cash Flows from Financing Activities:
Debt Borrowings 0 135
Debt Repayments (6,486) (3,088)
--------- ---------
Net Cash Provided (Used) by Financing Activities (6,486) (2,953)
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents (2,759) (6,700)
Cash and Cash Equivalents - Beginning of Period 9,612 13,335
--------- ---------
Cash and Cash Equivalents - End of Period $ 6,853 $ 6,635
========= =========
Cash Paid (Refunded) During the Period:
Interest $ 2,192 $ 2,551
Income Taxes (41) 81
See Notes to Condensed Consolidated Financial Statements.
Page 5 of 18
BURNUP & SIMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1993 (Unaudited)
1. CONSOLIDATION AND PRESENTATION
The accompanying unaudited condensed consolidated financial
statements of Burnup & Sims Inc. (the "Company" or "Burnup &
Sims") have been prepared in accordance with generally accepted
accounting principles for interim financial information and
with the instructions for Form 10-Q and Rule 10-01 of
Regulation S-X. They do not include all information and notes
required by generally accepted accounting principles for
complete financial statements. The information furnished
reflects all adjustments which are, in the opinion of
management, necessary for a fair statement of the results for
the periods presented. The results of operations are not
necessarily indicative of results which might be expected for
the entire fiscal year. The condensed consolidated financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended April
30, 1993. Certain prior year amounts have been reclassified
to conform to the current presentation.
2. PREFERRED STOCK AND NOTES RECEIVABLE - NBC
Preferred Stock and Notes Receivable - NBC is comprised of the
following:
Oct. 31, April 30,
(Dollars in Thousands) 1993 1993
_________________________________________________________________
Series C 7% Preferred Stock
150,000 shares $12,700 $12,700
14% Subordinated Debenture
due 1994 through 2000,
net of discount 17,291 17,265
Promissory Note due
April 30, 1998 1,448 1,524
_________________________________________________________________
Total 31,439 31,489
Less: Current Portion* (305) (305)
_________________________________________________________________
Preferred Stock and Long-Term
Notes Receivable - NBC $31,134 $31,184
_________________________________________________________________
*Included in Other Current Assets
National Beverage Corp. ("NBC") owns approximately 36% of the
Company's outstanding common stock. Nick A. Caporella, Chairman of
the Board, President and Chief Executive Officer of the Company and
NBC, beneficially owns approximately 76% of the common stock of
NBC. (See Note 9 for certain information relating to NBC's
investment in the Company.)
Page 6 of 18
BURNUP & SIMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1993 (Unaudited)
3. OTHER LIABILITIES
Other Liabilities are summarized as follows:
Oct. 31, April 30,
(Dollars in Thousands 1993 1993
__________________________________________________________________
Deferred Income Taxes $ 4,390 $ 3,612
Accrued Interest - Non-Current 2,187 2,187
Accrued Insurance 7,045 6,277
__________________________________________________________________
$13,622 $12,076
__________________________________________________________________
4. DEBT
Debt is summarized as follows:
Oct. 31, April 30,
(Dollars in Thousands) 1993 1993
__________________________________________________________________
Term Loan payable to Bank,
at Prime plus 1/2% (6 1/2% at Oct. 31, $ 9,263 $12,849
1993)
Capital Leases and Other, at Interest
Rates from 9% to 13% due in Installments
through 2000 2,328 655
12% Convertible Subordinated Debentures
due 2000 24,500 27,125
__________________________________________________________________
Total Debt 36,091 40,629
Less Current Maturities 4,006 3,873
__________________________________________________________________
Non-Current Debt $32,085 $36,756
__________________________________________________________________
The indenture under which the 12% convertible subordinated
debentures (the "Debentures") are issued requires an annual payment
to a sinking fund, which commenced November 15, 1990, calculated to
retire 75% of the issue prior to maturity. The Company has the
option to redeem all or part of the Debentures prior to the
due date by paying the principal amount at face value. Other
income includes gains of approximately $295,000 and $291,000 for
the three and six-month periods ended October 31, 1993 and 1992,
respectively, from the repurchase of $2,625,000 face amount of
Debentures acquired to meet sinking fund requirements. The
Debentures are convertible into Common Stock at a conversion price
of $16.79 per share. At October 31, 1993, approximately 1,459,000
shares were reserved for conversion.
Page 7 of 18
BURNUP & SIMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1993 (Unaudited)
In accordance with the Company's term loan agreement, during the
quarter ended July 31, 1993, net proceeds of approximately $2.9
million from the sale of theatre property which had been pledged as
collateral for the term loan was applied to the non-current balance
of the term loan.
Debt agreements contain, among other things, restrictions on the
payment of dividends and require the maintenance of certain
financial covenants. Pursuant to its loan agreements, the Company
is currently prohibited from declaring or paying dividends.
During the six months ended October 31, 1993, the Company acquired
approximately $2,049,000 of assets under capital leases.
5. EARNINGS PER SHARE AND CAPITAL STOCK
Earnings per share is based on the weighted average number of
common shares and dilutive stock options outstanding. Fully
diluted earnings per share (assuming conversion of the Debentures
with corresponding adjustments for interest expense, net of tax) is
not presented as the effect is anti-dilutive or not material.
At October 31, 1993 and April 30, 1993, the Company had 25,000,000
shares of $.10 par value common stock (the "Common Stock")
authorized and 8,768,339 shares outstanding. Additionally, at
October 31, 1993 and April 30, 1993, the Company had 5,000,000
shares of authorized but unissued preferred stock and 7,253,000
shares of Common Stock held in treasury.
6. STOCK OPTION PLANS
The Company has two non-qualified stock option plans (the "1976
Plan" and the "1978 Plan") which provide for the granting of
options to purchase Common Stock to key employees at prices equal
to the fair market value on the date of grant. The 1976 Plan
expires in August, 1994 and the 1978 Plan expired in November 1993.
The 1976 Plan generally provides that options may be exercised in
four increments beginning eighteen months subsequent to the date of
grant. Upon exercise of the option, the Company will reduce the
optionee's purchase price by an amount equal to the increase in the
fair market value of such shares on the date the option was
granted. The purchase price, however, cannot exceed 85% of the
fair market value of such shares on the exercise date, and in no
event can the exercise price be less than $.10 per share. The
holder of the option has the alternative right to cancel such
option and instead to exercise a stock appreciation right entitling
the holder to receive cash under certain circumstances, subject to
certain maximum limitations.
Page 8 of 18
BURNUP & SIMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1993 (Unaudited)
The 1978 Plan provides that options may be exercised in four
increments beginning one year subsequent to the date of grant.
There is no subsequent adjustment of the purchase price.
During the quarter ended July 31, 1993, options to purchase
approximately 238,000 shares which were outstanding under the 1976
Plan with an average exercise price of $5.93 were canceled and
replaced with options to purchase 114,000 shares granted at an
exercise price of $2.00. Such replacement options were 50%
exercisable at the date of grant and the remainder are exercisable
at December 2, 1993. Additionally, during the quarter ended July
31, 1993, options to purchase 138,000 shares were granted under
both plans at an option price of $2.00. At October, 31, 1993,
options to purchase approximately 252,000 shares at an option price
of $2.00 per share were outstanding under both the 1976 and 1978
plans, of which approximately 57,000 shares were exercisable.
7. INCOME TAXES
The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes," effective May 1,
1993. This Statement superseded SFAS No. 96, "Accounting for
Income Taxes," which was adopted by the Company in the fiscal year
ended April 30, 1988. The adoption of SFAS No. 109 did not impact
the Company's statement of income or the components of income tax
expense for the period ended October 31, 1993.
Deferred income taxes reflect the net tax effects of (a) temporary
differences between carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes, and (b) operating loss and tax credit carryforwards. The
tax effects of significant items comprising the Company's net
deferred tax liability as of May 1, 1993 are as follows (in
thousands of dollars):
Deferred tax liabilities:
_________________________________________________________________
Differences between book and tax basis of property $5,968
Other 2,505
_________________________________________________________________
8,473
_________________________________________________________________
Deferred tax assets:
_________________________________________________________________
Reserves not currently deductible (4,652)
Operating loss carryforwards (490)
Tax credit carryforwards (112)
_________________________________________________________________
(5,254)
_________________________________________________________________
Valuation allowance 309
_________________________________________________________________
Net deferred tax liability $3,528
Page 9 of 18
BURNUP & SIMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1993 (Unaudited)
There was no change in the valuation allowance for the periods
ended October 31, 1993.
8. SALE OF PROPERTY
Net income for the six months ended October 31, 1993 includes a
gain from the sale of theatre property of approximately $1.6
million, net of tax, or $.19 per share.
9. CERTAIN TRANSACTIONS
Pursuant to an agreement dated as of October 15, 1993, (the
"Acquisition Agreement") as amended, by and among the Company and
the stockholders of Church & Tower, Inc. ("CT") and Church & Tower
of Florida, Inc. ("CTF"), the Company will acquire (the
"Acquisition") all of the issued and outstanding capital stock of
CT and CTF in exchange for 10,250,000 shares of Common Stock,
representing approximately 65% of the outstanding Common Stock
following consummation of the Acquisition and the Redemption
discussed below.
The Acquisition remains subject to a number of conditions,
including the following (i) approval by stockholders, (ii) receipt
of a written fairness opinion from the financial advisor to the
Special Transaction Committee, (iii) termination or expiration of
the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, (iv) the consent of the
Company's lender under its existing term loan and (v) the execution
of an Agreement between the Company and NBC providing for the
elimination of NBC's ownership of shares of Common Stock of the
Company (the "Redemption"). On November 26, 1993, the Company
announced that its Board of Directors had approved the exchange of
all Common Stock of the Company owned by NBC for the 14%
subordinated debenture in the principal amount of $17,500,000 (book
value of $17,291,000) and $593,000 of indebtedness under a
promissory note due April 30, 1998 owed by NBC. The Board of
Directors of NBC has not yet approved this transaction.
Immediately following the closing of the Acquisition, the
Board of Directors of the Company will be expanded from five to
seven members, four designees of CT and CTF shall be appointed to
the Board, and Messrs. Nick A. Caporella and Leo J. Hussey will
resign from the Board of Directors. In addition, Jorge Mas,
President of CT, will be elected President and Chief Executive
Officer of the Company.
Page 10 of 18
BURNUP & SIMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1993 (Unaudited)
The Acquisition Agreement also provides, among other things,
that upon termination of employment with the Company under certain
circumstances, the vesting period for all options held by the
terminated employees shall be accelerated. In addition, the
Acquisition Agreement contains provisions relating to
representations and warranties, covenants (including the limitation
of certain capital expenditures to $500,000) and rights with
respect to indemnification.
The Company's Board of Directors fixed a tentative date for
the annual and special meetings of stockholders of February 3,
1994; the date is subject to modification to accommodate the time
necessary for the Securities and Exchange Commission to review the
Company's proxy statement. The preliminary proxy statement was
filed on November 24, 1993.
10. LITIGATION
Albert H. Kahn v. Nick A. Caporella, et al., Civil Action No. 11890
was filed in December 1990 by a stockholder of the Company in the
Court of Chancery of the State of Delaware in and for New Castle
County against the Company, the members of the Board of Directors,
and against NBC, as a purported class action and derivative
lawsuit. In May 1993, plaintiff amended its class action and
shareholder derivative complaint (the "Amended Complaint"). The
class action claims allege, among other things, that the Board of
Directors, and NBC as its largest stockholder, breached their
respective fiduciary duties in approving (i) the distribution to
the Company's stockholders of all of the common stock of NBC owned
by it (the "Distribution") and (ii) the exchange by NBC of
3,846,153 shares of Common Stock for certain indebtedness of NBC
held by the Company (the "Exchange") (the Distribution and the
Exchange are hereinafter referred to as the "1991 Transaction"), in
allegedly placing the interests of NBC ahead of the interests of
the other stockholders of the Company. The derivative action
claims allege, among other things, that the Board of Directors has
breached its fiduciary duties by approving executive officer
compensation arrangements, by financing NBC's operations on a
current basis, and by permitting the interests of the Company to be
subordinated to those of NBC. In the lawsuit, plaintiff seeks to
rescind the 1991 Transaction and to recover damages.
The Amended Complaint alleges that the Special Transaction
Committee that approved the 1991 Transaction was not independent
and that, therefore, the 1991 Transaction was not protected by the
business judgment rule or in accordance with a settlement agreement
(the "1990 Settlement") entered into in 1990 pertaining to certain
prior litigation. The Amended Complaint also makes other
allegations which involve (i) further violations of the 1990
Page 11 of 18
BURNUP & SIMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1993 (Unaudited)
Settlement by the Company's engaging in certain transactions not
approved by the Special Transaction Committee; (ii) the sale of a
subsidiary of the Company to a former officer of the Company, (iii)
the timing of the 1991 Transaction and (iv) the treatment of
executive stock options in the 1991 Transaction.
In November 1993, plaintiff filed a class action and
derivative complaint (the "1993 Complaint") against the Company,
the members of the Board of Directors, CT, CTF, Jorge Mas Canosa,
Jorge Mas and Juan Carlos Mas (CT, CTF, Jorge Mas Canosa, Jorge Mas
and Juan Carlos Mas are referred to as the "CT Defendants"). The
1993 Complaint alleges, among other things, that (i) the Board of
Directors of the Company and of NBC, as the Company's largest
stockholder, breached their respective fiduciary duties by
approving the Acquisition Agreement and the Redemption which,
according to the allegations of the 1993 Complaint, benefits Mr.
Caporella at the expense of the Company's stockholders, (ii) the CT
Defendants had knowledge of the fiduciary duties owed by NBC and
the Board of Directors and knowingly and substantially participated
in their breaches thereof, and (iii) the Special Transaction
Committee of the Board of Directors which approved the Acquisition
Agreement and Redemption was not independent and, as such, was not
in accordance with the 1990 Settlement. The 1993 Complaint also
claims derivatively that each member of the Board of Directors
engaged in mismanagement, waste and breach of their fiduciary
duties in managing the Company's affairs. On November 29, 1993,
plaintiff filed a motion for an order preliminarily and permanently
enjoining the Acquisition and the Redemption, which motion has not
yet been set for a hearing date.
The Company believes that the allegations in the complaint,
the Amended Complaint and the 1993 Complaint are without merit, and
intends to vigorously defend these actions.
William C. Deviney, Jr. v. Burnup & Sims Inc., et al. Civil
Action No. 152350 was filed in the Chancery Court of the First
Judicial District of Hines County, Mississippi on May 3, 1993. The
plaintiff in this action filed suit seeking specific performance of
alleged obligations of the Company pursuant to a stock purchase
agreement and related agreements entered into in 1988. Pursuant to
the agreements, the Company sold to plaintiff a minority interest
in a telephone services subsidiary and granted to plaintiff an
option to purchase the remaining stock if certain conditions were
satisfied. Alternatively, plaintiff seeks unspecified damages for
breach of contract and for alleged breaches of fiduciary duties,
and seeks an award of punitive damages and attorneys' fees for
alleged bad faith conduct in connection with the stock purchase
agreement and related matters. The Company believes that the
allegations in the complaint are without merit and is vigorously
defending this action. Additionally, the Company
Page 12 of 18
BURNUP & SIMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1993 (Unaudited)
has filed counterclaims which, among other things, seek a
declaratory judgment that the plaintiff's failure to satisfy
certain material conditions terminated his rights under the stock
purchase agreement. The evidentiary portion of the trial
proceedings relative to these actions concluded on November 19,
1993 and the court has not yet rendered a verdict.
The Company and its subsidiaries are parties to various legal
proceedings, including suits in which it is a defendant.
In the opinion of management, the ultimate outcome of the legal
proceedings will not have a material adverse effect on the financial
position of the Company.
Page 13 of 18
BURNUP & SIMS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OCTOBER 31, 1993
RESULTS OF OPERATIONS
Three Months Ended October 31, 1993 (Second Quarter of the Fiscal
Year Ending April 30, 1994) vs. Three Months Ended October 31, 1992
(Second Quarter of the Fiscal Year Ended April 30, 1993)
- -------------------------------------------------------------------
Revenues for the second quarter of the current year decreased
approximately 4% primarily as a result of the closing of certain
telephone services areas of operation during the latter half of the
prior fiscal year. The decline in revenues was mitigated by
certain telephone services contracts which commenced in the third
quarter of 1993 as well as sales in offshore U.S. territories.
Costs of revenues approximated 90% and 83% of revenues for the
second quarter of fiscal 1994 and 1993, respectively, due primarily
to operating inefficiencies and losses incurred on a telephone
services contract which commenced in the latter portion of fiscal
year 1993 as well as mobilization expenses related to changes in
geographical areas of operation. Additionally, start-up costs
caused by the diversification of commercial printing services
offered by the Company contributed to the decrease in gross
margins.
Operating profit (loss) which is comprised of revenues less costs and
expenses excluding interest and dividend income, general corporate
expenses, interest expense, income taxes, and the gain on the sale of
theatre property, approximates ($.5) million and $2.0 million for the
three months ended October 31, 1993 and 1992, respectively.
General and administrative expenses includes stock option
compensation expense of approximately $460,000 which was accrued
by the Company as of October 31, 1993 based upon the increase in
the market value of the Common Stock.
Depreciation and amortization decreased to 3.6% of revenues from
4.5% of revenues as a result of the write-off of certain costs in
excess of equity of businesses acquired (goodwill) in the fourth
quarter of fiscal 1993, the effect of asset disposals, and reduced
levels of capital expenditures by the Company in certain prior
periods. Interest expense decreased for the quarter due to reduced
levels of outstanding debt. Additionally, other income includes
gains of approximately $295,000 and $291,000 for the three months
ended October 31, 1993 and 1992, respectively, from the Company's
repurchase of its Debentures. (See Note 4 to the Condensed
Consolidated Financial Statements.)
Operations of the Company are somewhat seasonal and this has
historically resulted in reduced revenues during the third quarter
(November, December and January) relative to other quarters.
During winter months, inclement weather in certain areas reduces
the volume and efficiencies of outside service activities.
Additionally, certain utility customers may reduce expenditures for
plant construction and maintenance during the latter part of their
budgetary year, which typically ends in December.
Page 14 of 18
BURNUP & SIMS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OCTOBER 31, 1993
Six Months Ended October 31, 1993 vs. Six Months
Ended October 31, 1992
- -----------------------------------------------------------------
Revenues for the six months ended October 31, 1993 decreased
approximately $1.8 million or 2.5% when compared to the six months
ended October 31, 1992. The decrease is principally the result of
the completion of certain cable television projects and utility
service contracts included in last year's results. The increase in
cost of revenues and respective decrease in gross margins primarily
results from certain operating inefficiencies, contract losses,
mobilization expenses and start-up costs as further discussed
above. Decreases in depreciation and amortization and interest
expense are due primarily to the reasons cited above.
The six months ended October 31, 1993 includes a gain from the sale
of theatre property of approximately $2.4 million (included in
other income) net of income taxes of approximately $800,000.
The Company's effective tax rate decreased to 24% from 37% of
pretax income due to the effect on taxable income of dividend
income, certain state income taxes and reduced permanent
differences resulting from the fiscal 1993 goodwill write-off.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
October 31, 1993 vs. April 30, 1993
- -----------------------------------------------------------------
The Company's cash position decreased to $6.9 million at October
31, 1993 from $9.6 million at April 30, 1993. Cash of $946,000
was provided by operating activities (due primarily to changes in
various components of working capital and other liabilities during
the year) and cash provided (used) by investing and financing activities
approximated $2,781,000 (resulting from sales of assets offset by
capital expenditures) and ($6,486,000) (resulting from debt repayments)
respectively, for the six months ended October 31, 1993.
Debt agreements contain, among other things, restrictions on the
payment of dividends and require the maintenance of certain
financial covenants. Pursuant to such covenants, the Company is
currently prohibited from declaring or paying dividends.
Long-term debt decreased during the period since, in accordance
with the Company's term loan agreement, net proceeds of
approximately $2.9 million from the sale of certain theatre
property which had been pledged as collateral for the term loan was
applied to the final installments due under the Company's bank term
loan.
Page 15 of 18
BURNUP & SIMS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OCTOBER 31, 1993
Additionally, the Company repurchased $2.6 million face amount of
Debentures during the second quarter. (See Note 4 to the Condensed
Consolidated Financial Statements.)
The Company adopted Statement of Financial Accounting Standards No.
109 ("SFAS 109"), "Accounting for Income Taxes" effective May 1,
1993. The adoption had no impact on income for the six months ended
October 31, 1993. Prior year's financial statements have not been
restated to apply the provisions of SFAS No. 109. The October 31,
1993 balance sheet includes increases in current assets and
other liabilities of $555,000 and $778,000, respectively, and a
decrease in accrued and deferred income taxes of $223,000 resulting
from the implementation of SFAS 109.
The Company currently anticipates that for fiscal year 1994,
operating cash requirements, capital expenditures and debt service
will substantially be funded from cash flow generated by operations
and dividend and interest income.
The Company has entered into an agreement to acquire Church &
Tower, Inc. and Church & Tower of Florida, Inc. (See Note 9 to the
Condensed Consolidated Financial Statements.)
Page 16 of 18
BURNUP & SIMS INC.
PART II - OTHER INFORMATION
OCTOBER 31, 1993
Item 1. Legal Proceedings
See Note 10 to the Condensed Consolidated Financial
Statements.
Item 5. Other Information
The Company has entered into an Agreement to acquire
Church & Tower, Inc. and Church & Tower of Florida,
Inc. (See Note 9 to the Condensed Consolidated
Financial Statements.)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
10.1 Amendment to loan agreement dated August 23,
1993 between Burnup & Sims Inc. and First Union
National Bank of Florida (filed herewith beginning
on page 19.)
10.2 Agreement dated as of October 15, 1993, among
Burnup & Sims Inc. and the stockholders of Church
& Tower, Inc. and Church & Tower of Florida, Inc.
and First Amendment dated as of November 23, 1993,
filed as Appendix A to the Preliminary Proxy
Statement of Burnup & Sims Inc. filed with the
Securities and Exchange Commission on November 24,
1993 (incorporated by reference.)
(b) Reports on Form 8-K
Not Applicable
Page 17 of 18
FORM 10-Q/A
AMENDMENT #1
BURNUP & SIMS INC.
SIGNATURES
Pursuant to the requirement 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.
Burnup & Sims Inc.
Registrant
Date: February 7, 1994 \s\ George R. Bracken
________________ __________________________
George R. Bracken
Vice President & Treasurer
(Principal Financial Officer)
and
Authorized Officer of the
Registrant
Page 18 of 18