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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 12, 1997
Geographics, Inc.
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(Exact name of registrant as specified in its charter)
Wyoming
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(State or other jurisdiction of incorporation or organization)
000-26756 87-0305614
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(Commission File Number) (I.R.S. Employer Identification No.)
1555 Odell Road, P.O. Box 1750, Blaine, WA 98231
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(Address of principal executive offices)
(360) 332-6711
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(Registrant's telephone number, including area code)
Page 1 of 3 pages.
Exhibit Index at page 3.
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Item 5. Other Events
On June 12, 1997, Geographics, Inc. (the "Company") issued a press
release disclosing announcing preliminary results for the year ended March
31, 1997. The text of that press release is included with this report as
Exhibit 99.1.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
99.1 Press release dated June 12, 1997.
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 hereunto duly authorized.
GEOGRAPHICS, INC.
Dated: June 12, 1997 By: /s/ Ronald S. Deans
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Ronald S. Deans
President, Chief Executive Officer,
Chief Financial Officer and Secretary
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GEOGRAPHICS, INC.
EXHIBIT INDEX
to Interim Report on Form 8-K
99.1 Press release dated June 12, 1997.
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GEOGRAPHICS, INC. ANNOUNCES PRELIMINARY RESULTS FOR
FISCAL 1997
Blaine, Washington, June 12, 1997 -- Ronald S. Deans, Chairman, President and
CEO of GEOGRAPHICS, INC. (NASDAQ/NNM: GGIT) (TSE: GGI) announced today that
the Company expects to report revenues for the fiscal year ended March 31,
1997 of approximately $24 million, compared with $22.6 million for the year
ended March 31, 1996. The Company expects to report revenues for the quarter
ended March 31, 1997 of approximately $5 million compared with $6.1 million
for the quarter ended March 31, 1996.
The Company also announced that it expects to report a net loss for the year
ended March 31, 1997 of at least $6.5 million, compared with net income of
$1.2 million for the year ended March 31, 1996. The loss is attributable to
a decline in gross margin, an expected write down in the range of $500,000
to $750,000 of certain assets related to the Company's information systems, a
reserve for write down of potentially obsolete inventory and other matters.
Without regard to any additional reserves for obsolete inventory, the Company
expects to report gross margin in the range of $4.5 million (18% of net
revenue) to $5.5 million (23% of net revenue) for the year ended March 31,
1997, down from $8.4 million (37.2% of net revenue) for the year ended March
31, 1996. Actual results for the year, including the reserve for obsolete
inventory, are subject to further management review and completion of the
Company's audit, with final results expected to be announced by June 30,
1997.
Without regard to any additional reserves for obsolete inventory, the
anticipated lower gross margin is primarily attributable to a decline in
selling prices for the Company's paper products coupled with modest cost
increases and a continuing shift in mix of sales to lower margin products.
Planned efficiency improvements in the manufacture of its paper products were
not realized during the year due to delays and extra expenses incurred
during implementation of automated production machinery. As a result the
Company experienced increases in both the direct labor and overhead elements
of its product costs. In addition, the Company experienced modest raw
material cost increases during the second half of fiscal 1997.
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The Company has determined that certain accounting procedures and historical
estimates used during fiscal 1997 resulted in an overstatement of gross
margin and inventories on an interim basis. Although the precise allocations
by quarter have not been determined, it may be necessary to issue restated
financial statements for two or more previously reported quarters to reflect
lower gross margin and inventories and lower net income than previously
reported. The Company expects that the cumulative effect of any such
restatements would be a reduction in both inventories and gross margin in the
range of $4.5 to $5.5 million. If restated, such restatements would be
reflected in amendments to previously filed quarterly reports.
These results and write downs cause the Company to be out of compliance with
several covenant provisions, including the borrowing base limitations, of its
working capital line of credit, which is the Company's principal source of
working capital. The Company is engaged in discussions with its lender to
obtain a temporary increase in the amount of available borrowings and waivers
of covenant violations, although as of the date of this release no formal
agreement had been reached. Even if the lender agrees to a temporary increase
in available borrowings, the Company expects that available working capital
will be lower than it had anticipated when developing its fiscal 1998 plan.
As a result, the Company is developing a plan to reduce costs to a level
consistent with available operating capital. Mr. Deans noted that the Company
is pleased with the level of continuing support shown by its principal lender
and is looking forward to concluding an arrangement for a temporary increase
in available borrowings as soon as possible.
Mr. Deans stated, "GEOGRAPHICS, INC. remains committed to improving its
production systems and operations with a view toward supporting the Company's
continued growth. Our current goals include improving the Company's
efficiencies of production, lowering product costs and improving gross
margins in order restore overall profitability."
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GEOGRAPHICS, INC. is a manufacturer of value added and designer stationery
paper, lettering, signage, and graphic art products. GEOGRAPHICS, INC.
distributes its products in the U.S., Canada, Australia, Europe, Israel and
Mexico. The Company employs 253 employees and has facilities in Whatcom
County, Washington, as well as Geographics (Europe) LTD, with facilities
located near London, England and Geographics Australia Pty. LTD in Australia.
Forward Looking Statements: Statements in this report concerning future
events including the outcome of discussions with the Company's principal
lender, future improvements in operating efficiencies, growth in sales,
reductions in operating costs, improved gross margins and any other guidance
on future periods, are forward looking statements, the occurrence of which
are subject to a number of risks and uncertainties which might cause actual
results or achievements to differ materially from those expressed or implied
by such statements. These include the risks and uncertainties described under
the caption "Risk Factors" in the Company's registration statement on Form
S-1, registration number 333-10051, in the Company's Annual Report on Form
10-K and those identified from time to time in the Company's other filings
with the Securities and Exchange Commission and other communications.
