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, 1997, 376,251 shares of common stock of the
registrant were outstanding.
<TABLE>
Results of Operations
<CAPTION>
Homasote Company and Subsidiary
CONSOLIDATED STATEMENT OF OPERATIONS
AND RETAINED EARNINGS
(UNAUDITED)
For the three months
ended
March 31,
1997 1996
--------- ---------
<S> <C> <C>
Net sales 6,730,921 6,143,443
Cost of sales 4,877,107 4,658,042
--------- ---------
Gross profit 1,853,814 1,485,401
Selling, general and
administrative expenses 1,667,315 1,462,693
--------- ---------
Operating income 186,499 22,708
Other income(expense):
Gain on sale of assets 11,817 3,053
Interest income 21,169 14,742
Bond interest income 34,664 -
Interest expense - (17,938)
Bond interest expense (37,497) -
Other Income 9,403 5,999
--------- ---------
39,556 5,856
--------- ---------
Earnings before income taxes 226,055 28,564
Income tax expense 97,203 11,426
--------- ---------
Net earnings 128,852 17,138
Retained earnings at
beginning of period 14,950,349 14,407,554
less: cash dividends paid
($.12 per share in 1997
and $.12 in 1996) (45,150) (45,294)
---------- ----------
Retained earnings at
end of period 15,034,051 14,379,398
========== ==========
Earnings per common share 0.34 0.05
========== ==========
Common shares outstanding
(weighted average) 376,251 377,151
========== ==========
</TABLE>
Note 1. Net sales were up by 9.6% for the first quarter of 1997
as compared to the same period of 1996.
Note 2. The consolidated financial data as of March 31, 1997 and
1996 and for the three month periods ended March 31, 1997
and 1996 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, 1997
is not necessarily indicative of the results of operations
that might be expected for the entire year ending
December 31, 1997.
<TABLE>
<CAPTION>
Homasote Company and Subsidiary
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
March 31, December 31,
1997 1996
------------ -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,589,781 $ 2,680,061
Accounts receivable (net
of allowance for doubtful
accounts of $28,038 and
$59,776 in 1997 and 1996,
respectively) 2,647,912 1,873,340
Inventories 3,332,477 3,085,886
Deferred income taxes 102,760 102,760
Prepaid expenses and
other current assets 45,416 241,253
------------ -----------
Total current assets $ 7,718,346 $ 7,983,300
------------ -----------PROPERTY, PLANT AND
EQUIPMENT, at cost 33,388,471 32,625,166
Less accumulated
depreciation 25,299,129 25,085,690
------------ -----------
Net property plant and
equipment 8,089,342 7,539,476
------------ -----------
OTHER ASSETS
Deferred income taxes 57,864 57,864
Debt acquisition costs, net 200,912 226,697
Restricted cash 2,452,374 2,957,373
Other assets 1,302,492 1,302,492
------------ -----------
$ 19,821,330 $ 20,067,202
============ ===========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, December 31,
1996 1995
------------ -----------
<S> <C> <C>
CURRENT LIABILITIES
Current installments of
long-term debt $ 250,000 $ 152,500
Accounts payable 697,887 986,662
Accrued income taxes 195,145 329,228
Accrued expenses 626,242 582,929
------------ -----------
Total current liabilities $ 1,769,274 $ 2,051,319
LONG-TERM DEBT, excluding
current installments 3,890,000 3,987,500
OTHER LIABILITIES 5,134,425 5,084,454
------------ -----------
Total liabilities 9,024,425 11,123,273
------------ -----------
STOCKHOLDERS' EQUITY
Common stock, 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 15,034,051 14,950,349
------------ -----------
16,104,886 16,021,184
Less cost of common shares
in treasury - 487,744
shares in 1997 and 1996. 7,077,255 7,077,225
------------ -----------
Total stockholders' equity 9,027,631 8,943,929
------------ -----------
$ 19,821,330 $ 20,067,202
============ ===========
</TABLE>
Note 2. The consolidated financial data as of March 31, 1997 and
1996 and for the three month periods ended March 31, 1997
and 1996 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, 1997
is not necessarily indicative of the results of operations
that might be expected for the entire year ending December
31, 1997.
<TABLE>
<CAPTION>
Homasote Company and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating
activities:
Net earnings $ 128,852 $ 17,138
Adjustments to reconcile
net earnings to net cash
provided by operating
activities:
Depreciation and amortization 268,929 152,803
Gain on disposal of fixed assets (10,888) -
Deferred income taxes - (23,460)
Changes in assets and
Liabilities:
Increase in accounts
receivable, net (774,572) (1,015,524)
Increase in inventories (246,591) (199,602)
Decrease in other assets 25,785 -
Decrease in restricted cash 504,999 -
Decrease in prepaid income taxes - 261,017
Decrease in prepaid expenses
and other current assets 195,837 207,894
Increase in accounts payable (288,775) (222,393)
Increase in accrued expenses 43,313 134,423
Decrease in accrued income taxes (134,083) -
Increase (decrease) in other
liabilities 49,971 (5,060)
---------- ----------
Net cash used in
operating activities (237,223) (692,764)
---------- ----------
Cash flows from investing
activities:
Proceeds from sale of
equipment 10,888 -
Additions to plant and
equipment (818,795) (550,956)
---------- ----------
Net cash used in investing
activities (807,907) (550,956)
---------- ----------
Cash flows from financing
activities:
Proceeds from issuance of
short-term debt - 1,000,000
Repayment of short-term debt - (775,000)
Cash dividends paid (45,150) (45,294)
Purchase of treasury stock - (23,700)
---------- ---------
Net cash (used in) provided
by financing activities: (45,150) 156,006
---------- ---------
Net decrease in cash and
cash equivalents (1,090,280) (1,087,714)
Cash and cash equivalents
at beginning of year 2,680,061 2,329,027
---------- ----------
Cash and cash equivalents
at end of year $ 1,589,781 $ 1,214,313
========== ==========
Supplemental disclosures of
cash flow information:
Cash paid during the years for:
Interest $ 37,497 $ 17,939
---------- ----------
Income taxes $ 240,515 $ 2,500
---------- ----------
</TABLE>
FORM 10-Q
HOMASOTE COMPANY AND SUBSIDIARY
March 31, 1997
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, 1997 of
$6,730,921, increased by $587,478, or 9.6%, when compared to net
sales of $67143,443 for the three-month period ended March 31,
1996. Net income increased to $128,852 for the three-month period
ended March 31, 1997, from $17,138 for the three month period ended
March 31, 1996. These increases are a result of changes in the
Companys method of sales.
The cost of sales as a percentage of sales, was 72.5% for the
three-month period ended March 31, 1997, as compared to 75.8% for
the three-month period ended March 31, 1996. This decrease in the
cost of sales as a percentage of sales is due to efficiencies of
changes in production volume
Interest income increased to $65,236 for the three-month
period ended March 31, 1997, as compared to $20,741 for the three
month period ended March 31, 1996, due primiarly to interest earned
on the restricted cash account.
Interest expense on debt increased to $37,491 for the three-month period
ended March 31, 1997, as compared to $17,938 for the
three-month period ended March 31, 1996. All enterest expense in
the first quarter of 1997 was incurred on the Economic Growth Bonds
with relation to the new dryer project. As of March 31, 1997 the
Company had no other debt outstanding.
LIQUIDITY AND CAPITAL RESOURCES
Capital expenditures for new and improved facilities and
equipment, which are financed primarily through internally
generated funds and debt, were $.8 million in 1997 and $2.4 million
in 1996 and are expected to approximate $2.2 million for the
remaining nine (9) months of 1997.
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 conveyors
and rebuilding and replacing molds is expected to be completed in
June 1997, at a total cost to the Company of approximately $5.0
million.
In November 1996, the Company entered into a loan agreement
(the "Agreement") and promissory note with the New Jersey Economic
Development Authority (the "Authority"). Under the Agreement, the
Authority loaned the Company $4,140,000 out of the proceeds from
the issuance of the Authority's Economic Growth Bonds (Greater
Mercer County Composite Issue) 1996 Series E (the Bonds) to be used
in connection with specified capital expenditures described in the
Agreement. Interest is charged at the variable rate of interest due
on the Bonds (3.2% at March 31, 1997). In connection with the
Agreement, the Authority also entered into a trust indenture with
a bank to serve as trustee and tender agent for the loan proceeds.
Principal and interest are payable monthly to the trustee in
varying amounts through 2006. The funds held by the bank amounted
to $2,452,374 at March 31, 1997 and are classified as a restricted
non-current asset in the accompanying 1997 and 1996 consolidated
balance sheets. The Company believes these funds will be
sufficient to cover its remaining capital expenditure commitments
in 1997. The trust indenture is secured in part by the Agreement
and by a direct pay Letter of Credit facility issued by another
bank in the face amount of $4,209,000. The Letter of Credit
facility contains financial and other restrictive covenants
including minimum tangible net worth and other financial ratios.
In order to reduce its risks from interest rate fluctuations under
the agreement, the Company entered into a five-year interest rate
cap agreement with a bank. The agreement entitles the Company to
receive, on a monthly basis, the amounts, if any, by which the
interest payments on the Bond exceed 4.5% per annum. The aggregate
maturities of long-term debt are as follows: 1997, $152,500, 1998,
$391,250, 1999, $405,833, 2000, $416,250, 2001, $431,250,
thereafter $2,342,917.
The Company has a $2.0 million unsecured line of credit
agreement with a bank on which interest is charged at the bank's
index rate (8.5% at March 31, 1997) less .25%. As of March 31,
1997 there was no balance outstanding under the line of credit.
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
The Company's primary basic raw material, wastepaper, is
generally readily available from two suppliers with which the
Company has purchase contracts that expire in 2009. 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 1997 and 1996
aggregated approximately $238,000 and $929,000, respectively.
In September 1996, the Company signed an agreement with
Weyerhauser Corporation for the joint marketing and distribution of
the Company's products.
On February 21, 1997, the Board of Directors of the Company
authorized the retention of a financial advisor to assist in the
investigation of alternatives to enhance the value of the Company's
common stock to the shareholders. The board is not aware of any
presently proposed transactions, but believes that such
alternatives may include stock repurchases, a going private
transaction, a merger, acquisition or other combination or
reorganization of the Company, an issuer or third party tender
offer, or a combination of two or more of the foregoing
transactions or other transactions.
RECENT ACCOUNTING PRONOUNCEMENTS
Financial Accounting Standards Board Statement No. 107
"Disclosures about the Fair Value of Financial Instruments",
defines the fair value of a financial instrument as the amount
which the instrument could be exchanged in a current transaction
between willing parties. The carrying amounts of the Company's
financial instruments at December 31, 1996 and 1995 approximate
fair value because of the short maturity of those instruments and
with respect to the Bonds (see note 4) since their issuance was
late in the year 1996.
Effective January 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets to Be Disposed Of" (SFAS 121).
This statement requires that long-lived assets and certain
identifiable intangibles held and used by the Company be reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. SFAS
121 also requires that assets to be disposed of be reported at the
lower of the carrying amount or the fair value less costs to sell.
Adoption of this statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
Part 2
OTHER INFORMATION
March 31, 1997
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, 1997.
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)
5/14/97 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-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,590
<SECURITIES> 0
<RECEIVABLES> 2,676
<ALLOWANCES> 28
<INVENTORY> 3,332
<CURRENT-ASSETS> 7,718
<PP&E> 33,338
<DEPRECIATION> 25,299
<TOTAL-ASSETS> 19,821
<CURRENT-LIABILITIES> 1,769
<BONDS> 0
<COMMON> 376
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 19,821
<SALES> 6,731
<TOTAL-REVENUES> 6,807
<CGS> 4,877
<TOTAL-COSTS> 1,667
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37
<INCOME-PRETAX> 226
<INCOME-TAX> 97
<INCOME-CONTINUING> 129
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 129
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
