UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1997
Commission file Number 1-4591
FAIRMOUNT CHEMICAL CO., INC.
(Exact name of registrant as specified in its charter.)
New Jersey 22-0900720
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
117 Blanchard Street, Newark, NJ 07105
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201)-344-5790
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES [ X ] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
Common Stock, $1 Par Value - 8,292,866 shares as of May 13, 1997.
PART I. FINANCIAL INFORMATION
FAIRMOUNT CHEMICAL CO., INC.
Statements Of Income (Loss) and Accumulated Deficit
For The Three Months Ended March 31, 1997 and 1996
(Unaudited)
(Dollar amounts rounded to hundreds, except per share data)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Net Sales $3,156,800 $3,219,000
Cost of goods sold 2,742,000 2,585,100
- -------------------------------------------------------------------
Gross Profit 414,800 633,900
Research 116,600 120,000
Selling, general and
administrative expense 509,000 456,100
- -------------------------------------------------------------------
Operating Income (Loss) (210,800) 57,800
Interest (Income) Expense 17,200 17,300
Other (Income) Expense 2,700 (45,700)
- -------------------------------------------------------------------
Net (Loss)/Income (230,700) 86,200
Accumulated Deficit
Balance December 31 (14,570,000) (14,292,900)
- -------------------------------------------------------------------
Accumulated Deficit
Balance March 31 $(14,800,700) $(14,206,700)
===================================================================
(Loss)/Income per share $ (.02) $ .01
===================================================================
See Accompanying Notes to Financial Statements
</TABLE>
<TABLE>
<CAPTION>
FAIRMOUNT CHEMICAL CO., INC.
Balance Sheets
(Dollar amounts rounded to hundreds)
March 31, 1997 December 31, 1996
-------------- -----------------
(Unaudited)
Assets
<S> <C> <C>
Current Assets:
Cash $ 349,500 $ 427,900
Accounts receivable-trade 2,068,800 2,091,000
Inventories (Note 5) 1,969,300 1,662,400
Prepaid expenses 264,200 263,700
Other current assets 46,500 57,900
- -----------------------------------------------------------------------------------------------
Total Current Assets 4,698,300 4,502,900
- -----------------------------------------------------------------------------------------------
Property, plant and equipment
less accumulated depreciation of
$11,129,900 and $10,986,100 4,748,300 4,775,000
Deferred costs and other assets 56,000 56,000
- -----------------------------------------------------------------------------------------------
Total Assets $9,502,600 $9,333,900
===============================================================================================
Liabilities and
Stockholders' Equity
Current Liabilities:
Accounts payable $ 934,800 $ 563,500
Accrued compensation 125,100 73,100
Other accrued liabilities 232,600 243,800
Short-term bank borrowings (Note 5) 60,000 60,000
- -----------------------------------------------------------------------------------------------
Total Current Liabilities 1,352,500 940,400
- -----------------------------------------------------------------------------------------------
Accrued interest to affiliated party (Note 4) 491,600 491,600
Long-term notes payable to affiliated party (Note 4) 1,080,000 1,080,000
Long-term bank borrowings (Note 5) 99,000 111,700
Accrued pension liability (Note 7) 353,400 353,400
Stockholders' Equity
Preferred stock, par value $1 per share
authorized - 10,000,000 shares; 5,400,000
shares issued and outstanding (Note 10) 5,400,000 5,400,000
Common stock, par value $1 per share
authorized - 15,000,000 shares; 8,293,366 shares
issued and outstanding in 1997 and 1996 8,293,400 8,293,400
Less: Treasury stock (at cost) - 500 shares (500) (500)
Capital in excess of par value 7,316,000 7,316,000
Accumulated deficit (14,800,700) (14,570,000)
Additional minimum liability (Note 7) (82,100) (82,100)
- -----------------------------------------------------------------------------------------------
Total Stockholders' Equity 6,126,100 6,356,800
- -----------------------------------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity $ 9,502,600 $ 9,333,900
===============================================================================================
See accompanying Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FAIRMOUNT CHEMICAL CO., INC.
Statements of Cash Flows
For The Three Months Ended March 31, 1997 and 1996
(Unaudited)
(Dollar amounts rounded to hundreds)
1997 1996
------------ -------------
<S> <C> <C>
Cash Flow From Operating Activities:
Net (loss)/Income $ (230,700) $ 86,200
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 143,800 210,000
Increase (decrease) from changes in:
Accounts receivable-trade 22,200 (100,700)
Inventories (306,800) 53,900
Prepaid expenses (500) (29,400)
Other assets 11,400 5,000
Accounts payable 371,300 158,100
Accrued compensation 52,000 7,300
Other liabilities (11,300) 29,100
- ---------------------------------------------------------------------------------------
Cash Flow Provided by Operating Activities 51,400 419,500
- ---------------------------------------------------------------------------------------
Cash Flow Used in Investing Activities:
Capital expenditures (117,100) (33,200)
- ---------------------------------------------------------------------------------------
Cash Flow From Financing Activities:
Capitalized Lease Obligations -- (42,200)
Bank borrowings (12,700) --
Credit facility -- --
- ---------------------------------------------------------------------------------------
Net Cash (Used) in/Provided by Financing Activities (12,700) (42,000)
- ---------------------------------------------------------------------------------------
Decrease in Cash (78,400) 344,100
Cash at Beginning of Period 427,900 432,800
- ---------------------------------------------------------------------------------------
Cash at End of Period $ 349,500 $ 776,900
=======================================================================================
Supplemental Disclosure of Cash Flow Information:
Interest paid $ 17,500 $ 21,500
========= =========
Income taxes paid $ -- $ --
========= =========
See accompanying Notes to Financial Statements.
</TABLE>
FAIRMOUNT CHEMICAL CO., INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
Note 1. Summary of Significant Accounting Policies
ORGANIZATION
The accompanying financial statements, which should be read in
conjunction with the financial statements of Fairmount Chemical Co.,
Inc. ("the Company") included in the 1996 Annual Report filed on Form
10-KSB, are unaudited but have been prepared in the ordinary course of
business for the purpose of providing information with respect to the
interim period. The Company believes that all adjustments (none of
which were other than normal recurring accruals) necessary for a fair
presentation for such periods have been included.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
1997 presentation.
REVENUE
Revenue is recognized on the date of invoice to a customer (invoices
are prepared on or after the date of shipment).
INCOME TAXES
The Company accounts for income taxes in accordance with the asset
and liability method. Under the asset and liability method, deferred
tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.
FINANCIAL STATEMENTS
The statements of income (loss) and accumulated deficit for the three
months ended March 31, 1997 and 1996, the statements of cash flows for
the three months ended March 31, 1997 and 1996, and the balance sheet as
of March 31, 1997 are unaudited. The balance sheet as of December 31,
1996 is audited.
Note 2. Income (Loss) Per Share
Net income (loss) per share is based on earnings divided by the
weighted average number of shares of common stock outstanding adjusted
for dilutive common stock equivalents. Common stock equivalents include
shares outstanding under stock option plans and preferred stock, as
converted to common stock in the ratio of one-to-one. At March 31,
1997 and 1996, the share base was 13,693,366 respectively.
Note 3. Long Term Debt To Affiliated Parties
A. As of January 1, 1993 the Company owed William E. Leistner
$5,603,700 (the "Leistner Loan"). At the Board of Directors Meeting
following the 1993 Annual Meeting, the board approved the sale of
5,400,000 shares of cumulative convertible Preferred Stock, $1.00 par
value per share, in a private transaction to Leistner, the Company's
principal stockholder, in consideration of retirement of debt owed to
Leistner of $5,400,000. The balance of the Leistner Loan was paid out
of corporate funds of approximately $203,700 during May, 1993. This
transaction retired the principal of the Leistner Loan.
Beginning on April 1, 1992, the Leistner Loan had an interest rate
equal to one percent above the prime rate as announced by First Fidelity
Bank, Newark, New Jersey. Accrued interest payable for the Leistner
Loan is $491,600 for March 31, 1997 and 1996, respectively. The
Leistner Loan is controlled by the co-executors of the Estate of
Leistner ("Leistner Estate"). The executors of the Leistner Estate have
agreed to extend repayment of the interest until April 1, 1998.
B. The balance of Notes Payable to Affiliated Parties as of March
31, 1997 and 1996 was $1,080,000, respectively, which represents
borrowings under a separate financing, the Credit Facility Loan
Agreement ("Credit Facility"). On March 20, 1992, the Credit Facility
was created with monies contributed to a fund (the "Fund") by Leistner
and the Estate of Olga H. Knoepke. The Fund is now controlled by the
co-executors of the Estate of Leistner. At that date, the Fund provided
the Company with a $2,494,000 credit facility under which all borrowings
bear interest at the rate of 5% per annum. There have been no
borrowings from the Credit Facility since 1995. Repayment of the Credit
Facility indebtedness has been extended to April 1, 1998 by the
executors of the Estate of Leistner.
All loans payable and future borrowings under the Credit Facility
have been collateralized by the accounts receivable and machinery and
equipment of the Company.
Note 4. Majority Stockholder
The Estate of William E. Leistner owns approximately 57.8% of the
common stock of the Company. The estate also owns all 5,400,000
outstanding shares of the cumulative convertible preferred stock.
Note 5. Inventory
Inventories at March 31, 1997 and December 31, 1996
consisted of the following:
March 31, 1997 December 31, 1996
--------------- -----------------
Finished Goods $ 1,469,300 $ 1,455,100
Raw Material 500,000 207,300
------------- ------------
$ 1,969,300 $ 1,662,400
============= ============
Note 6. Contingencies
The Company has received notice from the New Jersey Department of
Environmental Protection ("NJDEP") that the NJDEP is investigating
whether any material from the Company has caused or contributed to the
contamination detected at the Ciuba landfill property in Newark. The
NJDEP alleges that there is a possibility that during the 1970's the
Company disposed of waste generated at the Company's facility through
contracts with certain garbage removal companies located at the Ciuba
landfill. The Company has also received notice from the United States
Environmental Protection Agency ("USEPA") that the USEPA has information
indicating that hazardous substances from the Company may have been
discharged into the Passaic River. It is the Company's understanding
that these allegations by the EPA are related to historical rather than
present events. The Company has taken the position that its material
neither caused nor contributed to the contamination of the Passaic River
and that it has not discharged hazardous substances into the Passaic
River. In both cases, it is possible that potentially responsible
parties will bring claims against Fairmount alleging that it is at least
partially responsible for the contamination.
FAIRMOUNT CHEMICAL CO., INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
March 31, 1997
Liquidity and Capital Resources
To meet its liquidity requirements, including its capital program,
the Company accesses funds generated from operations, its available cash
balances, its bank line of credit and its Credit Facility.
The Company has accrued interest payable of $491,600 as of March 31,
1997 on a loan from the Estate of Leistner. The principal of this loan
has been repaid. The executors of the Estate of Leistner have agreed to
extend repayment of the interest until April 1, 1998.
The Company's working capital decreased $216,700 in the first three
months of 1997 compared to an increase of $351,000 for the same period
in 1996. The decrease was primarily due to an increase in accounts
payable; partially offset by higher inventory.
The Company's capital expenditures in 1997 have been for the purchase
and installation of production equipment.
Results of Operations
Net sales for the first three months of 1997 were $3,156,800, a
decrease of $62,200 or 1.9% over the same period in 1996. The decrease
in net sales was primarily due to a decrease in sales volumes of imaging
chemicals - $444,800 and hydrazine blends - $118,300; partially offset
by higher volumes of specialty chemicals - $269,200, hydrazine
derivatives - $209,600 and polymer additives - $22,100.
The gross profit for the first three months of 1997 decreased
$219,100 or 34.6% versus the same period in 1996. The decrease was
mainly due to the lower sales volumes of higher margin imaging
chemicals, lower volumes of hydrazine blends and lower prices on polymer
additives; partially offset by higher volumes of specialty chemicals and
higher volumes of polymer additives and hydrazine derivatives.
Selling, general and administrative expenses increased due to the
addition of a salesman during the second quarter of 1996 coupled with
higher environmental expenses.
PART II - OTHER INFORMATION
Reports on Form 8-K
No reports have been filed on Form 8-K during this quarter.
FAIRMOUNT CHEMICAL CO., INC.
----------------------------
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
FAIRMOUNT CHEMICAL CO., INC.
----------------------------
Registrant
May 16, 1997 /s/William E. Setzler
- ------------ -----------------------
Date William E. Setzler
Chairman of the Board,
Chief Executive Officer
May 16, 1997 /s/Sondra Jacoby
- ----------- -------------------------
Date Sondra Jacoby
Chief Financial Officer &
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
TOTAL-TEL USA COMMUNICATIONS, INC.
Exhibit 27 - FINANCIAL DATA SCHEDULE
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF
MARCH 31, 1997 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THREE MONTHS ENDED MARCH 31, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1996
<CASH> 349,500
<SECURITIES> 0
<RECEIVABLES> 2,068,800
<ALLOWANCES> 0
<INVENTORY> 1,969,300
<CURRENT-ASSETS> 4,698,300
<PP&E> 15,878,200
<DEPRECIATION> 11,129,900
<TOTAL-ASSETS> 9,502,600
<CURRENT-LIABILITIES> 1,352,500
<BONDS> 0
<COMMON> 8,293,400
0
5,400,000
<OTHER-SE> (7,567,300)
<TOTAL-LIABILITY-AND-EQUITY> 9,502,600
<SALES> 3,156,800
<TOTAL-REVENUES> 3,156,800
<CGS> 2,742,000
<TOTAL-COSTS> 2,742,000
<OTHER-EXPENSES> 628,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,200
<INCOME-PRETAX> (230,700)
<INCOME-TAX> 0
<INCOME-CONTINUING> (230,700)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (230,700)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.02)
</TABLE>
