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 LAST 90 DAYS. (X) YES ( )NO
AT JUNE 30, 1995, 384,285 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 six
months
March 31, June 30,
1995 1994
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
NET SALES 6,328,621 6,700,519 13,444,255 13,117,501
COST OF SALES 4,707,028 5,003,448 9,571,394 9,777,339
--------- --------- --------- ---------
GROSS PROFIT 1,621,593 1,697,071 3,872,861 3,340,162
SG&A EXPENSES 1,446,120 1,539,942 2,987,252 2,922,897
--------- --------- --------- ---------
OPERATING INCOME 175,473 157,129 885,609 417,265
OTHER INCOME(EXPENSE)
GAIN ON SALE
OF ASSETS 1,303 1,758 1,677 3,074
INTEREST INCOME 45,382 15,586 78,178 26,160
INTEREST EXPENSE (20,170) (19,101) (40,748) (36,315)
--------- --------- --------- ---------
EARNINGS BEFORE
INCOME TAXES 201,988 155,372 924,716 410,184
INCOME TAXES 80,796 62,149 369,886 164,074
--------- --------- --------- ---------
NET EARNINGS 121,192 93,223 554,830 246,110
RETAINED EARNINGS
AT BEGINNING OF
PERIOD 14,237,100 12,926,482 13,842,541 12,814,772
LESS: CASH DIVIDENDS
PAID (46,114) (39,621) (85,193) (80,798)
---------- ---------- ---------- ----------
RETAINED EARNINGS
AT END OF PERIOD 14,312,178 12,980,084 14,312,178 12,980,084
EARNINGS APPLICABLE
TO COMMON STOCK 121,192 93,233 554,830 246,110
COMMON SHARES
WEIGHTED AVERAGE 386,165 400,066 388,172 405,128
EARNINGS PER SHARE 0.31 0.23 1.43 0.61
CASH DIVIDENDS PER
SHARE DECLARED AND PAID 0.10 0.10 0.22 0.20
</TABLE>
Note 1. Net sales were down by 5.5% for the second quarter of 1995
as compared to the same period of 1994.
Note 2. The consolidate financial data as of June 30, 1995 and
1994 and for the three and six month periods ended June 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 six months ended June 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
June 30, December 31,
1995 1994
---------- ----------
<S> <C> <C>
CURRENT ASSETS
CASH IN BANKS 1,359,414 3,385,630
ACCOUNTS RECEIVABLE, NET 2,679,464 1,658,266
INVENTORIES
RAW MATERIALS 1,182,762 763,768
WORK IN PROCESS 69,349 38,740
FINISHED GOODS 2,641,434 2,834,659
PREPAID AND DEFERRED
INCOME TAXES 585,784 226,523
PREPAID EXPENSES AND
OTHER CURRENT ASSETS 514,575 237,136
---------- ----------
TOTAL CURRENT ASSETS 9,032,782 9,144,722
PROPERTY, PLANT AND
EQUIPMENT 29,965,525 29,406,435
LESS ACCUMULATED
DEPRECIATION 24,303,000 24,064,677
---------- ----------
NET PROPERTY PLANT
AND EQUIPMENT 5,662,525 5,341,758
OTHER ASSETS 1,014,554 1,014,554
---------- ----------
15,709,861
15,501,034
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1995 1994
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES:
CURRENT INSTALLMENT
OF LONG TERM DEBT 150,000 153,591
ACCOUNTS PAYABLE TRADE 809,852 644,995
ACCRUED EXPENSES 776,085 555,346
INCOME TAXES 0 588,751
---------- ----------
1,735,937 1,942,683
LONG-TERM DEBT,
EXCLUDING CURRENT
INSTALLMENT 700,000 775,000
OTHER LIABILITIES 4,814,620 4,683,370
---------- ----------
TOTAL LIABILITIES 7,250,557 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 14,312,178 13,842,541
---------- ----------
15,383,013 14,913,376
LESS: TREASURY STOCK
AT COST, 473,288
SHARES IN 1995 AND
473,039 IN 1994 6,923,709 6,813,395
---------- ----------
TOTAL STOCKHOLDERS'
EQUITY 8,459,304 8,099,981
---------- ----------
TOTAL 15,709,861 15,501,034
</TABLE>
Note 2. The consolidated financial data as of June 30, 1995 and
1994 and for the three and six month periods ended June 31, 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 six months ended June 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 STATEMENTS OF CASH
FLOWS
FOR THE THREE MONTHS ENDED MARCH
31,
(UNAUDITED)
1995
1994
_________
__________
<S> <C>
<C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
NET EARNINGS 554,830
246,110
ADJUSTMENTS TO RECONCILE
NET EARNINGS TO NET
CASH USED IN OPERATING
ACTIVITIES:
DEPRECIATION 268,957
237,153
GAIN ON DISPOSAL OF FIXED
ASSETS (1,000)
(500)
CHANGE IN ASSETS AND
LIABILITIES:
INCREASE IN ACCOUNTS
RECEIVABLE, NET (1,021,198) (612,242)
(INCREASE) DECREASE
IN INVENTORIES (256,378)
782,769
INCREASE IN PREPAID
AND DEFERRED INCOME
TAXES (359,261)
(94,263)
INCREASE IN PREPAID
EXPENSES AND OTHER
CURRENT ASSETS (277,439) (74,724)
INCREASE (DECREASE)
IN ACCOUNTS PAYABLE 164,858 (325,545)
INCREASE IN ACCRUED
EXPENSES 220,739
541,905
INCREASE IN OTHER
LIABILITIES 131,250
0
DECREASE IN ACCRUED
INCOME TAXES (588,751)
(33,384)
_________
__________
TOTAL ADJUSTMENTS (1,718,223)
421,169
_________
__________
NET CASH PROVIDED BY
(USED IN) OPERATING
ACTIVITIES (1,163,393)
667,279
--------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
PROCEEDS FROM SALE
OF EQUIPMENT 1,000
500
ADDITIONS TO PLANT
AN EQUIPMENT (589,725)
(96,296)
_________
__________
(588,725)
(95,796)
_________
__________
CASH FLOWS FROM FINANCING
ACTIVITIES:
REPAYMENT OF SHORT-
TERM DEBT (3,591)
0
REPAYMENT OF LONG-
TERM DEBT (75,000)
(95,407)
CASH DIVIDENDS PAID (85,193) (80,798)
PROCEEDS FROM SALE OF
TREASURY STOCK 2,975
3,000
PURCHASE OF TREASURY
STOCK (113,289)
(243,049)
_________
__________
NET CASH USED IN
FINANCING ACTIVITIES: (274,098) (416,254)
_________
__________
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS (2,026,216)
155,229
CASH AND CASH
EQUIVALENTS AS OF
BEGINNING OF PERIOD 3,385,630 2,061,779
_________
__________
CASH AND CASH EQUIVALENTS
AS OF END OF PERIOD 1,359,414 2,217,008
_________
__________
SUPPLEMENTAL INFORMATION:
CASH PAID DURING PERIOD FOR:
INTEREST 40,748
36,315
_________
__________
INCOME TAXES 911,864
295,719
_________
__________
</TABLE>
Form 10-Q
HOMASOTE COMPANY AND SUBSIDIARY
JUNE 30, 1995
NOTE # 1
MANAGEMENT'S ANALYSIS OF MATERIAL CHANGE
BY QUARTER AS NOTED
RESULTS OF OPERATIONS
Net sales increased by 2.5% for the six month period ended
June 30, 1995 as compared to the same period ended June 30, 1994,
and decreased 5.5% for the three month period ended June 30, 1995,
as compared to the same period ended June 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
June 30, 1995, as compared to the three month period ended June 30,
1994 and the three month period ended March 31, 1995.
The cost of sales as a percentage of sales was 74.4% and
71.2%, respectively, for the three and six month periods ended June
30, 1995, as compared to 74.7% and 74.5%, respectively, for the
three and six month periods ended June 30, 1994. This 3% decrease
in the cost of sales as a percentage of sales for the six month
period ended June 30, 1995 over the same period ended June 30, 1994
and the three month period ended March 31, 1995, is attributable
the efficiencies created by increased production levels brought
about by an increased demand for Homasote products during the three
month period ended March 31, 1995. Demand for Homasote products
slowed during the three month period ended June 30, 1995,
decreasing net sales and slowing production levels.
Net earnings increased by 30.0%, from $93,223 to $121,192, for
the three month periods ended June 30, 1995 and 1994, respectively,
and 125.44% from $246,110 to $554,830 respectively, for the six
month periods ended June 30, 1995 and 1994. This increase in net
earnings is attributed to a reduced cost of goods sold, Millboard
sales department restructuring and the economic improvement.
Interest income increased by 191.2% and 198.9% respectively,
for three and six month period ended June 30, 1995, as compared to
the same periods ended June 30. 1994. These increase are due to a
rising rate of interest on an greater amount of assets held for
investment. Interest expense increased by 5.6% and 12.2%
respectively for the three and six month periods ended June 30,
1995 as compared to 1994, due to increasing interest rates in a
reduced balance of debt outstanding.
LIQUIDITY AND CAPITAL RESOURCES
Capital expenditures for new and improved facilities and
equipment were $590,000 in 1995 and $190,000 in 1994. Capital
expenditures are financed primarily through internally generated
funds and debt, and are expected to be approximately $ 500,000 for
the remaining six (6) months of 1995. In February 1992,
the Company renegotiated with its bank, short term and long term
lines of credit in the amounts of $1.0 million and $2.5 million
respectively. As of December 31, 1994, the Company had $887,500
outstanding against the long-term line of credit for the purposes
of consolidating existing debt, equipment renovation and other
working capital requirements. The short term line of credit was
retired in February 1993 with a payment in the amount $0.5
Million.
Repayment of borrowing on the $2.5 million line of credit began in
March 1993, with the first of 35 monthly installment payments. The
last in final payment against this long-term line of credit is
due in February 1996. Loans outstanding under this line of credit
are subject to Financial Covenants relating to cash flow, working
capital, net worth and the environment. 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 June 30, 1995,
the Company is in compliance with the loan covenants.
On June 23, 1995, the Company made a short-term load to Warren
L. Flicker, President and CEO of Homasote Company in the amount of
$656,000, for the purpose of purchasing a principle residence and
obtaining a mortgage. Interest is due monthly, at a rate of 6% or
at the federal short-term lending rate, whichever is greater, with
the entire amount of the loan due in full in 90 days. As of the
latest balance sheet date of June 30, 1995, the entire balance of
$656,00 was outstanding. The effect of this transaction, as well
as that of normal business operations is reflected in the reduction
in cash of $2.0 million and the increase in accounts receivable of
1.0 million, from December 31, 1994 to June 30, 1995.
OTHER DEVELOPMENTS
During 1994, demand for wastepaper, the primary raw
material
for 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 a result, effective the third quarter
of 1994, the Company began purchasing wastepaper at current
prevailing market rates.
INFLATION AND ECONOMY
While the economic outlook has improved, 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
JUNE 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 SIX MONTHS ENDED JUNE 30,
1995.
OTHER INFORMATION
ALL OTHER SCHEDULES ARE OMITTED AS THE REQUIRED
INFORMATION
IS INAPPLICABLE AR THE INFORMATION IS PRESENTED IN
THE
CONSOLIDATED FINANCIAL STATEMENTS OR RELATED NOTES.
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 thereto authorized.
HOMASOTE COMPANY
(Registrant)
8/12/95 Neil F Bacon, Treasurer
Date (Chief Financial
Officer)
(Signature)
