INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED
ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15 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. (X)YES ( )NO
AT SEPTEMBER 30, 1995, 377,541 SHARES OF COMMON STOCK OF THE
REGISTRANT WERE OUTSTANDING.
<TABLE>
Results of Operations
<CAPTION>
Consolidated Statement of Operations and Retained Earnings
(Unaudited)
In thousands, except for share amounts
For the three months For the nine months
ended ended
September 30, September 30,
1995 1994
--------- --------- ---------- ----------<S>
<C> <C> <C> <C>
NET SALES 6,315,545 6,758,275 19,759,800 19,875,776
COST OF SALES 4,785,581 4,998,193 14,356,976 14,775,531
--------- --------- ---------- ----------
GROSS PROFIT 1,529,964 1,760,082 5,402,824 5,100,245
SG&A EXPENSES 1,354,438 1,453,775 4,341,690 4,376,673
--------- --------- ---------- ----------
OPERATING INCOME 175,526 306,307 1,061,134 723,572
OTHER INCOME(EXPENSE)
GAIN ON SALE
OF ASSETS 30,094 342 50,847 3,416
INTEREST INCOME 28,168 26,633 87,271 52,793
INTEREST EXPENSE (18,955) (19,856) (59,702) (56,171)
--------- --------- ---------- ----------
EARNINGS BEFORE
INCOME TAXES 214,833 313,426 1,139,550 723,610
INCOME TAXES 85,933 125,370 455,820 289,444
--------- --------- ---------- ----------
NET EARNINGS 128,900 188,056 683,730 434,166
RETAINED EARNINGS
AT BEGINNING OF
PERIOD 14,312,178 12,980,084 13,842,541 12,814,772
LESS: CASH
DIVIDENDS PAID (45,305) (39,553) (130,498) (120,351)
---------- ---------- ---------- ----------
RETAINED EARNINGS
AT END OF PERIOD 14,395,773 13,128,587 14,395,772 13,128,587
---------- ---------- ---------- ----------
EARNINGS APPLICABLE
TO COMMON STOCK 128,900 188,056 683,730 434,166
COMMON SHARES
WEIGHTED AVERAGE 380,913 400,066 385,657 402,313
EARNINGS PER SHARE 0.34 0.47 1.77 1.08
CASH DIVIDENDS PER SHARE
DECLARED AND PAID 0.12 0.10 0.34 0.30
</TABLE>
Note 1. Net sales were down by 6.6% for the third quarter of 1995
as compared to the same period of 1994.
Note 2. The consolidated financial data as of September 31, 1995
and 1994 and for the three and nine month periods ended September
30, 1995 and 1994 includes, in the opinion of management, all
adjustments (none of which were non-recurring) necessary for a fair
presentation of such periods. The consolidated financial data for
the nine months ended September 30, 1995 is not necessarily
indicative of the results of operations that might be expected for
the entire year ending December 31, 1995.
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
September 30, December 31,
1995 1994
------------ -----------
<S> <C> <C>
CURRENT ASSETS
CASH IN BANKS 2,724,300 3,385,630
ACCOUNTS RECEIVABLE, NET 2,042,327 1,658,266
INVENTORIES
RAW MATERIALS 950,000 763,768
WORK IN PROCESS 50,000 38,740
FINISHED GOODS 2,367,588 2,834,659
PREPAID AND DEFERRED
INCOME TAXES 502,724 226,523
PREPAID EXPENSES AND
OTHER ASSETS 487,124 237,136
------------ -----------
TOTAL CURRENT ASSETS 9,124,063 9,144,722
------------ -----------PROPERTY AND
EQUIPMENT 29,971,169 29,406,435
LESS ACCUMULATED
DEPRECIATION 24,422,633 24,064,677
------------ -----------
NET PROPERTY AND
EQUIPMENT 5,548,536 5,341,758
OTHER ASSETS 1,014,554 1,014,554
------------ -----------
15,687,153 15,501,034
------------ -----------
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS EQUITY
September 30, December 31,
1995 1994
------------ -----------
<S> <C> <C>
CURRENT LIABILITIES
CURRENT INSTALLMENT OF
LONG-TERM DEBT 150,000 153,591
ACCOUNTS PAYABLE TRADE 636,159 644,995
ACCRUED EXPENSES 953,065 555,346
INCOME TAXES - 588,751
------------ -----------
1,739,224 1,942,683
LONG-TERM DEBT,
EXCLUDING CURRENT
INSTALLMENT 662,500 775,000
OTHER LIABILITIES 4,870,666 4,683,370
------------ -----------
TOTAL LIABILITIES 7,272,390 7,401,053
STOCKHOLDERS' EQUITY
COMMON STOCK AT $.20 PAR
VALUE-AUTHORIZED 1,500,000
SHARES-ISSUED 863,995 SHARES
IN 1995 AND 1994 172,799 172,799
ADDITIONAL PAID IN CAPITAL 898,036 898,036
RETAINED EARNINGS 14,395,773 13,842,541
------------ -----------
15,466,608 14,913,376
LESS TREASURY STOCK AT COST,
486,454 SHARES IN 1995 AND
473,039 SHARES IN 1994 7,051,845 6,813,395
------------ -----------
TOTAL STOCKHOLDERS' EQUITY 8,414,763 8,099,981
TOTAL 15,687,153 15,501,034
</TABLE>
Note 2. The consolidated financial data as of September 31, 1995
and 1994 and for the three and nine-month periods ended September
30, 1995 and 1994 includes, in the opinion of management, all
adjustments (none of which were non-recurring) necessary for a fair
presentation of such periods. The consolidated financial data for
the nine months ended September 30, 1995 is not necessarily
indicative of the results of operations that might be expected for
the entire year ending December 31, 1995.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
1995 1994
------------ -----------
<S> <C> <C>
CASH FLOWS FOR OPERATING
ACTIVITIES:
NET EARNINGS 683,730 434,166
ADJUSTMENTS TO RECONCILE
NET EARNINGS TO NET
CASH USED IN OPERATING
ACTIVITIES:
DEPRECIATION 402,592 396,465
GAIN ON DISPOSAL OF FIXED
ASSETS (2,000) (500)
CHANGES IN ASSETS AND
LIABILITIES:
INCREASE IN ACCOUNTS
RECEIVABLE, NET (384,061) (913,353)
DECREASE IN INVENTORIES 269,579 1,121,897
INCREASE IN PREPAID
AND DEFERRED INCOME TAXES (276,201) (12,359)
INCREASE IN PREPAID AND
OTHER CURRENT ASSETS (249,988) (9,862)
DECREASE IN ACCOUNTS PAYABLE (8,836) (14,725)
INCREASE IN ACCRUED EXPENSES 397,719 868,880
INCREASE IN OTHER LIABILITIES 187,296 -
DECREASE IN ACCRUED INCOME
TAXES (588,751) (33,384)
------------ -----------
TOTAL ADJUSTMENTS (252,651) 1,363,059
------------ -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 431,079 1,797,225
------------ -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
PROCEEDS FROM SALES OF
EQUIPMENT 2,000 500
ADDITIONS TO PLANT AND
EQUIPMENT (609,369) (121,343)
------------ -----------
NET CASH USED IN OPERATING
ACTIVITIES (607,369) (120,843)
------------ -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
REPAYMENT OF SHORT-
TERM DEBT (3,591) -
REPAYMENT OF LONG-
TERM DEBT (112,500) (146,851)
CASH DIVIDENDS PAID (130,498) (120,351)
PROCEEDS FROM SALE OF
TREASURY STOCK 2,975 7,425
PURCHASE OF TREASURY
STOCK (241,425) (253,124)
------------ -----------
NET CASH USED IN
FINANCING ACTIVITIES: (485,039) (512,901)
------------ -----------
NET INCREASE (DECREASE)
IN CASH AND CASH (661,330) 1,163,481
EQUIVALENTS AS OF
BEGINNING OF PERIOD 3,385,560 2,061,779
------------ -----------
CASH AND CASH EQUIVALENTS
AS OF END OF PERIOD 2,724,300 3,225,260
------------ -----------
SUPPLEMENTAL INFORMATION:
CASH PAID DURING PERIOD FOR:
INTEREST 59,702 56,171
------------ -----------
INCOME TAXES 911,864 299,932
------------ -----------
</TABLE>
FORM 10-Q
HOMASOTE COMPANY AND SUBSIDIARY
SEPTEMBER 30, 1995
NOTE # 1
MANAGEMENT'S ANALYSIS OF MATERIAL CHANGE
BY QUARTER AS NOTED
RESULTS OF OPERATIONS
Net Sales decreased by 0.6% for nine-month period ended
September 30, 1995, as compared to September 30. 1994, and
decreased by 6.6% for the three-month period ended September 30,
1995, as compared to the same period ended September 30, 1994.
These changes are due to a slowing down of the economy and a
resultant decrease in demand for Homasote products in the three-
month period ended September 30, 1995, as compared to the three-
month periods ended March 31, and June 30, 1995.
The cost of sales, as a percentage of sales, was 75.8% and
72.7%, respectively for the three and nine-month periods ended
September 30, 1995, as compared to 74.0% and 74.3%, respectively
for the three and nine-month periods ended September 30, 1994.
This 1.6% decrease in the cost of sales as a percentage of sales
for the nine-month period ended September 30, 1995 over the nine-
month period ended September 30, 1994, is attributable to the
efficiencies created by increased production levels brought about
by increased demand for Homasote products during the first quarter
of 1995. The 3.1% increase in cost of sales as a percentage of
sales for the nine-month period ended September 30, 1995 over the
same period ended September 30, 1994 is due to the slowing of
demand for Homasote products after the three month period ended
March 30, 1995. The resultant loss of efficiencies brought about
by the slowing of production levels, impacted upon net earnings,
which decreased 31.5% from $188,000 to $129,000, respectively, for
the three-month periods ended September 30, 1995 and 1994, and
increased 57.5% from $434,000 to $684,000, respectively, for the
nine-month periods ended September 30, 1995 and 1994.
Interest income increased 5.7% and 65.3%, respectively, for
the three and nine-month periods ended September 30, 1995, as
compared to the same three and six month periods ended September
30, 1994. These increases are due to a higher rate of interest and
a greater amounts of assets held for investment. Interest expense
decreased 4.5% for the three-month period ended September 30, 1995,
as compared to the same period in 1994, due to a declining balance
of debt outstanding. Interest expense increased 6.3% for the nine-
month period ended September 30, 1995, as compared to the same
period in 1994 due to increasing prime rate, which peaked in the
period ended June 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
Capital expenditures for new and improved facilities and
equipment were $609,000 in 1995 and $190,000 in 1994. Funds for
capital expenditures are financed primarily through internally
generated funds and debt, and are expected to be approximately
$300,000 for the remaining three (3) months of 1995. In February
1992 the Company renegotiated with its bank, a long-term line of
credit in the amount of $2.5 million. As of September 30, 1995,
the Company had $812,000 outstanding against this line, for the
purposes of consolidating existing debt, equipment renovation and
other working capital requirements. Repayment of the borrowing
began in March 1993, with the final payment due in February 1996.
Loans outstanding under the credit line are subject to Financial
Covenants relating to the environment, cash flow, working capital
and net worth. The bank, at their option, may remedy default under
any of the financial covenants with a waiver. As of the latest
balance sheet date of September 30, 1995, the Company was in
compliance with the loan covenants.
On June 23, 1995 the Company made a short-term loan to Warren
L Flicker, President and COO of Homasote Company in the amount of
$656,000 for the purpose of purchasing a principle residence and
obtaining a mortgage. Interest was paid monthly, at a rate of 6%,
or at the federal short-term lending rate, whichever was greater.
The loan was repaid in full on September 18, 1995.
OTHER DEVELOPMENTS
During 1994, demand for wastepaper, the primary raw material
for the Homasote Company products, surpassed the supply for the
first time. This situation is due primarily to demand by new
industries created to handle the volume of wastepaper generated by
mandated municipal recycling, and as result, effective the third
quarter of 1994, the Company began purchasing wastepaper at the
current prevailing market rates.
INFLATION AND THE ECONOMY
The Company will continue to maintain a policy of constantly
monitoring such factors as demand and costs, and adjusting prices
as these factors and the economic condition warrant.
RECENT ACCOUNTING PRONOUNCEMENTS
In 1991, the Financial Accounting Standards Board issued a
statement that will change the method of disclosure and accounting
for financial instruments. FAS No. 107, "Disclosures about the
Fair Value of Financial Instruments", is effective for financial
statements issued for the fiscal years ending after December 15,
1995. It requires the Company to disclose the fair value of
certain on-and off-balance-sheet financial instruments in the
audited financial statements. Statement 107 is not expected to
have an adverse effect on the operating results of future periods
or on the financial position of the Company.
Part 2
OTHER INFORMATION
SEPTEMBER 30, 1995
ITEM 9
EXHIBITS AND REPORTS ON FORM 8-K
(b) REPORTS ON FORM 8-K - THERE ARE NO REPORTS ON FORM
8-K FILED FOR THE NINE MONTHS ENDED FOR SEPTEMBER 30,
1995.
OTHER INFORMATION
ALL OTHER SCHEDULES ARE OMITTED, AS THE REQUIRED
INFORMATION IS INAPPLICABLE OR THE INFORMATION IS
PRESENTED IN THE CONSOLIDATED FINANCIAL STATEMENTS OR
RELATED NOTES.
Pursuant of 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 thereto
authorized.
HOMASOTE COMPANY
(Registrant)
11/13/95 Neil F Bacon, Treasurer
Date (Chief Financial Officer)
(Signature)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-31-1995
<CASH> 2,139
<SECURITIES> 0
<RECEIVABLES> 2,979
<ALLOWANCES> 60
<INVENTORY> 3,983
<CURRENT-ASSETS> 9,607
<PP&E> 29,557
<DEPRECIATION> 24,199
<TOTAL-ASSETS> 15,979
<CURRENT-LIABILITIES> 2,002
<BONDS> 0
<COMMON> 391
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 15,979
<SALES> 7,116
<TOTAL-REVENUES> 7,149
<CGS> 4,864
<TOTAL-COSTS> 1,541
<OTHER-EXPENSE> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21
<INCOME-PRETAX> 723
<TAX> 289
<INCOME-CONTINUING> 434
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 434
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.11
</TABLE>
