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 March 31, 1996, 376,251 shares of common stock of the
registrant were outstanding.
<TABLE>
Results of Operations
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS
AND RETAINED EARNINGS
(UNAUDITED)
For the three months
ended
March 31,
1996 1995
--------- ---------
<S> <C> <C>
Net sales 6,143,443 7,115,634
Cost of sales 4,658,042 4,864,367
--------- ---------
Gross profit 1,485,401 2,251,267
Selling, general and
administrative expenses 1,462,693 1,541,132
--------- ---------
Operating income 22,708 710,135
Other income(expense)
Gain on sale of assets 3,053 374
Interest income 20,741 32,796
Interest expense (17,938) (20,578)
--------- ---------
5,856 12,592
--------- ---------
Earnings before income taxes 28,564 722,727
Income tax expense 11,426 289,091
--------- ---------
Net earnings 17,138 433,636
Retained earnings at
beginning of period 14,407,554 13,842,541
Less: cash dividends paid
($.12 per share in 1996
and $.10 in 1995) (45,294) (39,079)
---------- ----------
Retained earnings
at end of period 14,379,398 14,237,098
========== ==========
Earnings per common share 0.05 1.11
========== ==========
Common shares outstanding
(weighted average) 377,151 390,812
========== ==========
</TABLE>
Note 1. Net sales were down by 13.7% for the first quarter of 1996
as compared to the same period of 1995.
Note 2. The consolidated financial data as of March 31, 1996 and
1995 and for the three month periods ended March 31, 1996
and 1995 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 three months ended March 31, 1996
is not necessarily indicative of the results of operations
that might be expected for the entire year ending December
31, 1996.
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
March 31, December 31,
1996 1995
------------ -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents 1,241,313 2,329,027
Accounts receivable, net of
allowance for doubtful
accounts of $33,997 and
$45,733 in 1996 and 1995,
respectively) 2,664,881 1,649,357
Inventories:
Raw materials 913,000 942,831
Work in process 57,000 14,051
Finished goods 2,987,034 2,800,550
Prepaid income taxes 33,274 294,291
Deferred income taxes - 99,623
Prepaid expenses and
other current assets 88,023 295,917
------------ -----------
Total current assets 7,984,525 8,425,647
------------ -----------
PROPERTY, PLANT AND
EQUIPMENT, at cost 30,766,324 30,215,369
Less accumulated
depreciation 24,673,088 24,520,285
------------ -----------
Net property, plant and
equipment 6,093,236 5,695,084
Deferred income taxes 226,523 103,440
OTHER ASSETS 1,078,795 1,078,795
------------ -----------
15,383,079 15,302,966
============ ===========
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS EQUITY
March 31, December 31,
1996 1995
------------ -----------
<S> <C> <C>
CURRENT LIABILITIES:
Current installments of
long-term debt - 775,000
Short-term debt 1,000,000 -
Accounts payable 504,913 727,306
Accrued expenses 554,064 419,641
------------ -----------
2,058,977 1,921,947
OTHER LIABILITIES 4,951,125 4,956,185
------------ -----------
Total liabilities 7,010,102 6,878,132
STOCKHOLDERS' EQUITY:
Common stock at par value $.20
per share. Authorized
1,500,000 shares;
issued 863,995 shares 172,799 172,799
Additional paid in capital 898,036 898,036
Retained earnings 14,379,398 14,407,554
------------ -----------
15,450,233 15,478,389
Less cost of common shares
in treasury - 487,744 shares
in 1996 and 486,544 shares
in 1995 7,077,256 7,053,555
------------ -----------
Total stockholders' equity 8,372,977 8,424,834
TOTAL 15,383,079 15,302,966
============ ===========
</TABLE>
Note 2. The consolidated financial data as of March 31, 1996 and
1995 and for the three month periods ended March 31, 1996
and 1995 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 three months ended March 31, 1996
is not necessarily indicative of the results of operations
that might be expected for the entire year ending December
31, 1996.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
1996 1995
------------ -----------
<S> <C> <C>
Cash flows from operating
activities:
Net earnings 17,138 433,636
Adjustments to reconcile net
earnings to net cash by used
in operating activities:
Depreciation and amortization 152,803 134,458
Deferred income taxes (23,460) -
Changes in assets and
liabilities:
Increase in accounts
receivable, net (1,015,524) (1,321,150)
Increase in inventories (199,602) (345,746)
Decrease in prepaid
income taxes 261,017 -
Decrease (increase) in
prepaid expenses and other
current assets 207,894 (41,271)
(Decrease) increase in
accounts payable (222,393) 4,042
Increase in accrued expenses 134,423 223,086
Decrease in accrued
income taxes - (164,306)
Increase (decrease) in
other liabilities (5,060) 65,625
------------ -----------
Net cash used in
operating activities (692,764) (1,011,626)
------------ -----------
Cash flows from investing
activities:
Additions to plant and
equipment (550,956) (150,673)
------------ -----------
Net cash used in investing
activities (550,956) (150,673)
------------ -----------
Cash flows from financing
activities:
Proceeds from issuance of
long-term debt 1,000,000 -
Repayment of short-
term debt (775,000) (3,591)
Repayment of long-
term debt - (37,500)
Cash dividends paid (45,294) (39,079)
Proceeds form sale of
treasury stock - 7,425
Purchase of treasury stock (23,700) (11,099)
------------ -----------
Net cash provided by (used
in) financing activities: 156,006 (83,844)
------------ -----------
Net increase (decrease) in
cash and cash equivalents (1,087,714) (1,246,143)
Cash and cash equivalents
at beginning of period 2,329,027 3,385,630
------------ -----------
Cash and cash equivalents
at end of period 1,241,313 2,139,487
============ ===========
Supplemental information:
Cash paid during period for:
Interest 17,939 20,578
============ ===========
Income taxes 2,500 455,334
============ ===========
</TABLE>
FORM 10-Q
HOMASOTE COMPANY AND SUBSIDIARY
March 31, 1996
NOTE # 1
Management's analysis of material change by quarter as noted
RESULTS OF OPERATIONS
Net sales for the three-month period ended March 31, 1996 were
$6,143,443, as compared to $7,116,634 for the three-month period
ended March 31, 1995, a decrease of 13.7%. Net income decreased to
$17,100 for the three-month period ended March 31, 1996, from
$433,600 for the three month period ended March 31, 1995. These
decreases are a result of a flattening of the economy with regard
to home construction with a resultant decline in demand for the
Company's products occuring in the second quarter of 1995, and
continuing through the first quarter of 1996
The cost of sales as a percentage of sales, was 75.8% for the
three-month period ended March 31, 1996, as compared to 68.4% for
the three-month period ended March 31, 1995. This increase in the
cost of sales as a percentage of sales is due to the ineffeciencies
of lower production levels which followed falling demand.
Amounts in the consolidated balance sheet at March 31, 1996
for cash and cash equivalents decreased by approximately $1.0
million and accounts receivable, net of allowance for doubtful
accounts, increased by approximately $1.0 million, from the
balances at December 31, 1995, due to the extended terms which were
granted to customers placing orders during the winter trade shows
held in January and February of 1996.
Interest income decreased by 36.8% to $20,700 for the three-month period
ended March 31, 1996, as compared to $32,800, for the
same period ended March 31, 1995, due to lower rate of interest on
a decreased amount of assets held for investment.
Interest expense on debt decreased by 12.8% to $17,900 for the
three-month period ended March 31, 1996 as compared $20,600 to for
the three-month period ended March 31, 1995, on a greater average
balance of debt outstanding, due to a lower rate of interest.
LIQUIDITY AND CAPITAL RESOURCES
In February 1992, the Company refinanced $1.0 million of
existing debt and borrowed an additional $700,000. The final
payment of $762,500 was paid on February 12, 1996. On February 20,
1996, the Company entered into a $2.0 million unsecured line of
credit agreement with a bank, to cover extended terms which are
granted to customers placing orders during the winter trade shows.
The note is payable on demand and bears interest at the bank's
index rate less .25% As of March 31, 1996, the Company had $1.0
million outstanding under these loan arrangements
Capital expenditures for new and improved facilities and
equipment, which are financed primarily through internally
generated funds and debt, were $551,000 in 1996 and $900,000 in
1995, and are expected to be approximately $3.5 million for the
remaining nine (9) months of 1996
In November 1995, the Company entered into a contract with a
manufacturer for the purchase of a new gas fired board dryer. The
entire expansion project, which will include the dryer, renovations
to plant and equipment to install the dryer, rerouting conveyers
and rebuilding and replacing molds is expected to take
approximately eighteen months, at a cost to the Company of
approximately $5.0 million. Current costs for the expansion are
being funded through the use of internally generated operating
funds, while negotiations are taking place for financing through
either a conventional bank loan or a bond placement.
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 those factors and the economic condition warrant.
OTHER DEVELOPMENTS
During 1994, demand for wastepaper, the primary raw material
for the Company's products, surpassed supply for the first time.
This situation was due primarily to demand by new industries
created to handle the volume of wastepaper generated by mandated
municipal recycling, and as a result, effective September 29, 1994,
the Company entered into purchase agreement contracts, to purchase
readily available wastepaper from two suppliers. Under the terms
of the contracts, the Company is required to make purchases at a
minimum price per ton, as defined, or at the prevailing market
price, whichever is greater. The contracts do not require minimum
quantity purchases by the Company. Purchases in 1996 and 1995
aggregated approximately $225,000 and $1,147,000, respectively.
The contracts expire in 2009.
RECENT ACCOUNTING PRONOUNCEMENTS
In March, 1995, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards (SFAS)
No. 121, "Accounting for the Impairment of Long-Lived Assets to be
Disposed of", which is effective for the fiscal years beginning
after December 15, 1995.will change the method of disclosure and
accounting for financial instruments. FAS No. 107, 'Disclosures
about the Fair Market Value of Financial Instruments', is effective
for financial statements issued for the fiscal years ending after
December 15, 1995. In October, 1995, FASB issued SFAS No. 123,
"Accounting for Stock Based Compensation", which is effective for
the fiscal years beginning after December 15, 1995.These standards
are not expected to have a significant effect on either the results
of operations or the financial position of the Company.
Part 2
OTHER INFORMATION
March 31, 1996
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 three months ended March 31, 1996.
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)
5/14/96 Neil F Bacon, Treasurer
Date (Chief Financial Officer)
(Signature)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,241
<SECURITIES> 0
<RECEIVABLES> 2,699
<ALLOWANCES> 34
<INVENTORY> 3,957
<CURRENT-ASSETS> 7,985
<PP&E> 30,766
<DEPRECIATION> 24,673
<TOTAL-ASSETS> 15,383
<CURRENT-LIABILITIES> 2,059
<BONDS> 0
<COMMON> 376
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 15,383
<SALES> 6,143
<TOTAL-REVENUES> 6,167
<CGS> 4,658
<TOTAL-COSTS> 1,463
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18
<INCOME-PRETAX> 28
<INCOME-TAX> 11
<INCOME-CONTINUING> 17
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
