<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
..X.. QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period from _________to _________
Commission File Number 1-3410
UNITED STATES BANKNOTE CORPORATION
A Delaware I.R.S. Employer
Corporation No. 13-0460520
51 West 52nd Street, New York, New York 10019
Telephone - Area Code 212-582-9200
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 for the past 90 days. Yes X No
At April 28, 1995 - 19,100,763 shares of common stock were outstanding.
<PAGE>
<PAGE>
UNITED STATES BANKNOTE CORPORATION
FORM 10-Q
I N D E X
PAGE
NO.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements - Unaudited
Condensed Consolidated Balance Sheets
March 31, 1995 and December 31, 1994 . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations
For the three months ended March 31, 1995 and 1994 . . . . 4
Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, 1995 and 1994 . . . . 5
Condensed Consolidated Statement of Stockholders' Equity
For the three months ended March 31, 1995. . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . 12
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . 14
<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNITED STATES BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except for share data)
<TABLE>
<CAPTION>
March December
31, 1995 31, 1994
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents. . . . . . . . . . . . . $ 29,206 $ 31,658
Accounts receivable, net of allowance for
doubtful accounts of $588 and $471. . . . . . . . 36,169 43,783
Other receivables. . . . . . . . . . . . . . . . . 5,701 4,767
Inventories. . . . . . . . . . . . . . . . . . . . 22,798 20,497
Deferred income tax benefits . . . . . . . . . . . 6,908 5,685
Prepaid expenses . . . . . . . . . . . . . . . . . 2,589 2,971
Total current assets . . . . . . . . . . . . 103,371 109,361
Property, plant and equipment, at cost,
net of accumulated depreciation and
amortization of $47,533 and $44,517. . . . . . . . 213,927 215,859
Other assets . . . . . . . . . . . . . . . . . . . 23,610 23,985
Excess of cost of investment in subsidiaries
over net assets acquired, net of accumulated
amortization of $2,151 and $1,851. . . . . . . . . 33,445 33,745
$ 374,353 $ 382,950
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portions of long-term debt . . . . . . . . $ 262 $ 359
Accounts payable and accrued expenses. . . . . . . 36,189 43,115
Total current liabilities. . . . . . . . . . 36,451 43,474
Long-term debt, net of unamortized discount
of $1,198 and $1,221 . . . . . . . . . . . . . . . 191,216 191,192
Other liabilities. . . . . . . . . . . . . . . . . . 15,203 16,188
Deferred income taxes . . . . . . . . . . . . . . . 69,319 69,319
312,189 320,173
Commitments and Contingencies
Stockholders' equity
Preferred Stock, authorized 5,000,000 shares,
no shares issued or outstanding . . . . . . . . . - -
Common Stock, par value $.01 per share,
authorized 50,000,000 shares; issued
19,381,763 shares and 19,289,888 shares . . . . . 194 193
Capital surplus. . . . . . . . . . . . . . . . . . 67,066 66,883
Retained earnings (deficit). . . . . . . . . . . . (3,843) (3,046)
Treasury stock, at cost (281,000 shares) . . . . . (1,253) (1,253)
Total stockholders' equity . . . . . . . . . 62,164 62,777
$ 374,353 $ 382,950
</TABLE>
See notes to condensed consolidated financial statements.<PAGE>
<PAGE>
UNITED STATES BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1995 1994
<S> <C> <C>
Sales . . . . . . . . . . . . . . . $ 49,068 $ 43,614
Costs and expenses
Cost of goods sold. . . . . . . . . 31,949 24,967
Selling and administrative . . . . 9,948 9,093
Depreciation and amortization . . . 3,245 3,206
45,142 37,266
3,926 6,348
Other (expense) income
Interest expense. . . . . . . . . . (5,768) (4,086)
Foreign exchange gain
(loss), net . . . . . . . . . . . 68 (4,439)
Other, net. . . . . . . . . . . . . 467 349
(5,233) (8,176)
Loss before income taxes. . . . . . (1,307) (1,828)
Income tax benefit . . . . . . . . . (510) (859)
NET LOSS. . . . . . . . . . . . . . $ (797) $ (969)
Weighted average number of
common and common equivalent
shares outstanding. . . . . . . . 19,010 19,060
Net loss per share. . . . . . . . $ (.04) $ (.05)
</TABLE>
See notes to condensed consolidated financial statements.<PAGE>
<PAGE>
UNITED STATES BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(Amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1995 1994
<S> <C> <C>
Operating Activities
Net cash from operations, after adjustments to
reconcile net loss to net cash
provided by operating activities. . . . . . . . $ 1,880 $ 6,787
Changes in operating assets and liabilities
Accounts and other receivables. . . . . . . . . 6,177 (1,897)
Inventories . . . . . . . . . . . . . . . . . . (2,549) (4,498)
Prepaid and other assets. . . . . . . . . . . . 359 (425)
Accounts payable and accrued expenses . . . . . (6,370) (2,797)
Other . . . . . . . . . . . . . . . . . . . . . (859) (44)
Net cash used in Operating Activities. . . . . . . (1,362) (2,874)
Investing Activities
Capital expenditures, net . . . . . . . . . . . . (1,012) (2,128)
Net cash used in Investing Activities. . . . . . . (1,012) (2,128)
Financing Activities
Proceeds from issuance of Common Stock . . . . . . - 122
Payment of other long-term obligations
and other . . . . . . . . . . . . . . . . . . . (97) (144)
Net cash used in Financing Activities. . . . . . . (97) (22)
Effect of foreign currency exchange rate
changes on cash and cash equivalents . . . . . . . 19 (68)
Decrease in cash and cash equivalents. . . . . . . . (2,452) (5,092)
Cash and cash equivalents - beginning of period. . . 31,658 15,437
Cash and cash equivalents - end of period . . . . . $ 29,206 $ 10,345
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
<PAGE>
UNITED STATES BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - UNAUDITED
THREE MONTHS ENDED MARCH 31, 1995
(Amounts in thousands)
<TABLE>
<CAPTION>
Retained
Common Stock Capital Earnings Treasury Total
Shares Amount Surplus (Deficit) Stock Equity
<S> <C> <C> <C> <C> <C> <C>
Balance -
January 1, 1995 19,290 $193 $66,883 $(3,046) $(1,253) $62,777
Issuance of common
shares 92 1 183 184
Net loss . . . . . . . (797) (797)
______ ____ _______ _______ _______ _______
Balance -
March 31, 1995 19,382 $194 $67,066 $(3,843) $(1,253) $62,164
</TABLE>
See notes to condensed consolidated financial statements.<PAGE>
<PAGE>
UNITED STATES BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
do not contain all disclosures required by generally accepted accounting
principles. Reference should be made to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994. The accompanying
unaudited condensed consolidated financial statements reflect all
adjustments (consisting of normal recurring adjustments) which are, in
the opinion of management, necessary for a fair statement of the results
of the interim periods presented and are not necessarily indicative of
the results which may be expected for a full fiscal year.
Primary and fully-diluted income (loss) per share are the same.
Cash tax payments for the three months ended March 31, 1995 and 1994,
amounted to approximately $0.2 million and $0.5 million, respectively.
Cash interest payments for the three months ended March 31, 1995 and 1994
amounted to approximately $3.9 million and $0.7 million, respectively.
In addition, a net cash interest payment of $0.3 million was made in the
three months ended March 31, 1995 versus the receipt of net cash interest
of $0.7 million in the three months ended March 31, 1994 under interest
rate swap agreements.
The Company estimates that the fair value of its swap agreements
constituted a net payable position of approximately $1.8 million as of
March 31, 1995, primarily related to the interest swap agreements'
payable position, as a result of the current LIBOR rates, reduced by the
positive value of the cap agreement.
Note B - Inventories
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
March December
31, 1995 31, 1994
<S> <C> <C>
Work in process. . . . . . . . . . . . . $ 14,566 $ 12,963
Raw materials and supplies . . . . . . . 8,232 7,534
Total inventories. . . . . . . . . . . $ 22,798 $ 20,497
</TABLE>
<PAGE>
<PAGE>
UNITED STATES BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note C - Senior Debt
Senior debt consists of the following (in thousands):
<TABLE>
<CAPTION>
March December
31, 1995 31, 1994
<S> <C> <C>
10-3/8% Senior Notes,
due June 1, 2002 . . . . . . . . . . . $ 126,500 $ 126,500
11-5/8% Senior Notes,
due August 1, 2002,
net of unamortized discount
of $1,198 and $1,221 . . . . . . . . . 63,802 63,779
Other long-term obligations. . . . . . . 1,176 1,272
Less current portion . . . . . . . . . . (262) (359)
Total senior debt. . . . . . . . . . . $ 191,216 $ 191,192
</TABLE>
Note D - Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following (in
thousands):
<TABLE>
<CAPTION>
March December
31, 1995 31, 1994
<S> <C> <C>
Accounts payable . . . . . . . . . . . . $ 7,725 $ 10,633
Accrued expenses . . . . . . . . . . . . 6,591 9,924
Customers' advances. . . . . . . . . . . 5,218 6,656
Salaries and wages . . . . . . . . . . . 4,436 5,645
Restructuring and merger -
related accruals . . . . . . . . . . . 4,227 4,202
Interest payable . . . . . . . . . . . . 4,979 3,550
Other . . .. . . . . . . . . . . . . . . 3,013 2,505
Total accounts payable
and accrued expenses . . . . . . . $ 36,189 $ 43,115
</TABLE>
Note E - Commitments and Contingencies
The Company is involved in various litigations (reference is made to
"Part II - Other Information, Item 1. Legal Proceedings" herein), the
adverse determination of which would have a material adverse effect on
the financial condition or results of operations of the Company. The
Company believes, however, that it has good and meritorious defenses to
the litigations and intends to vigorously defend against such actions.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Comparison of Results of The Three Months Ended March 31, 1995
with the Three Months Ended March 31, 1994
Sales in 1995 increased by $5.5 million (12.5%) from 1994.
Government, Holographics and Corporate and Commercial sales increased
$2.6 million, $2.4 million and $0.5 million, respectively. The increase
in Government sales is primarily due to increases in food coupons ($1.6
million), currency ($0.9 million), drivers licenses and automobile
vouchers ($1.3 million) offset by decreases in U.S. Postal and other
products ($1.2 million). The increase in Holographics sales is primarily
due to increases in credit cards ($1.8 million) and product
authentication ($0.6 million). The increase in Corporate and Commercial
sales is primarily due to increases in commercial products ($2.0
million), telephone cards ($2.6 million), credit cards and other products
($1.0 million) offset by decreases in stock and bond ($3.4 million),
travelers cheques ($0.7 million) and personalized checks ($1.0 million).
The change in various components of sales, particularly Government sales,
is affected by the timing of contract awards and delivery requirements of
customers. Increased sales of food coupons, a major component of
Government sales during the first quarter, was primarily a result of the
timing of orders and is not representative of a sales trend which can be
expected for future periods. See "Liquidity and Capital Resources."
Cost of goods sold for 1995 increased $7.0 million (28.0%) from 1994
and as a percentage of sales was 65.1% in 1995 as compared to 57.2% in
1994. The increase in cost of goods sold in absolute dollars and as a
percentage of sales is due to several factors. Higher sales contributed
to the increase in dollars. Improving economic conditions in Brazil,
stemming from the country's July 1994 Real stabilization plan resulted in
a $4.5 million reduction in foreign exchange translation losses. In prior
years, Brazilian margins were higher because sales included inflationary
price adjustments which have now been eliminated. Reduced margins have
been offset by a reduction in translation losses which in many instances,
exceeded inflationary price adjustments. The product mix in any given
period is not indicative of the expected product mix which can be
expected in future periods.
Selling and administrative expenses in 1995 increased by $0.9 million
from 1994 (9.4%) primarily as a result of increased commission expense in
Brazil. As a percentage of sales, selling and administrative expenses
decreased to 20.3% from 20.8%.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - Continued
Interest expense increased $1.7 million in 1995 primarily due to the
issuance of $65 million 11 5/8% Senior Notes during May 1994 at a higher
rate of interest than the $40 million of bank debt it replaced. As a
result of higher interest rates, the Company incurred a net expense ($0.1
million) in 1995 versus income ($0.3 million) in 1994 under its interest
rate swap agreements, which is included in interest expense.
Foreign exchange translation loss, net, is a result of the Company's
translation of Brazilian local currency financial statements into dollars
in accordance with Statement of Financial Accounting Standards ("SFAS")
No. 52 "Foreign Currency Translation." As a result, the translation
adjustment is recorded as a period item. During 1995, the Company
experienced a small translation gain primarily due to reduced inflation
in Brazil. In 1994, the Company experienced a translation loss due to
the high inflation rate in Brazil. See "Impact of Inflation."
Income taxes (benefits) are based on income (loss). The benefit rate
was lower than 1994, primarily due to differences in the estimated annual
effective tax rates and limitations on deducting certain expenses and the
projected utilization of foreign tax credits.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended March 31, 1995, the Company's net cash
used in operating activities was approximately $1.4 million. The net
loss of $0.8 million was adjusted by $2.7 million to reconcile the net
loss to net cash from operations before changes in operating assets and
liabilities (principal non-cash adjustments consisted of depreciation and
amortization of $3.5 million).
The net decrease in accounts and other receivables of $6.2 million
and prepaid expenses of $0.4 million provided cash during the period.
Cash was used to reduce accounts payable and accrued expenses by $6.4
million, increase in inventories by $2.5 million and to reduce other
liabilities, net, by $0.9 million. Net cash used in investing activities
totalled $1.0 million as a result of capital expenditures for new
equipment. Net cash used by financing activities amounted to $0.1
million resulting from payments of long-term debt.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES - continued
At March 31, 1995, the Company had approximately $29.2 million in
cash and cash equivalents, $126.5 million of 10 3/8% Senior Notes
outstanding, $65 million of 11 5/8% Senior Notes outstanding, and
approximately $15.1 million of availability under the Credit Agreement,
after giving effect to $4.9 million of outstanding letters of credit.
The Company is currently negotiating an extension of its Credit Agreement
which expires on May 26, 1995.
Certain states are continuing the evaluation of the feasibility of
utilizing electronic benefit transfer ("EBT") programs which replace the
traditional methods of distribution of public assistance benefits to
recipients, including replacing food coupons with debit-type cards. Food
coupon production constitutes a significant component of the Company's
sales and earnings. While sales of food coupons have increased in recent
years, recent reforms proposed by Congress as well as EBT programs and
high inventory will reduce the Company's volume of food coupon production
for 1995 and in future years. The USDA is currently soliciting bids for
the future printing of food coupons at substantially lower volumes than
in prior years. Reference is made to the Company's Annual Report on Form
10-K for the year ended December 31, 1994.
Management of the Company believes that cash flows from operations of
the Company, together with its cash balances and available borrowings,
will be sufficient to service its working capital and debt service
requirements for the foreseeable future and to fund the capital
expenditures.
NEW ACCOUNTING STANDARD
In March 1995, SFAS No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of," was issued and
contains changes to current accounting practices and must be adopted for
fiscal years beginning after December 15, 1995. Management estimates
that the adoption of this Standard will not have a material effect on the
Company's financial statements and will be adopted in 1996.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES - continued
IMPACT OF INFLATION
The Company's domestic operations are not significantly affected by
inflation. ABN-Brazil sales for 1995 contributed a significant portion
of consolidated sales of the Company (36%).
Reference is made to the Company's Form 10-K for the year ended
December 31, 1994 "Impact of Inflation."
On July 1, 1994 the Brazilian government introduced a new currency,
the "Real" as part of the government's economic stabilization program
designed to reduce the country's hyperinflation. Prior to the
introduction of the Real, the Brazilian government created a new monetary
unit (the "URV") as a transition mechanism. During this period prices
were re-negotiated in URV's. From April 1 to June 30, 1994 inflation
increased over pre URV levels, resulting in higher than anticipated
translation losses. However, in the second half of 1994, the inflation
rate decreased substantially (to approximately 1.4% per month in March
1995 versus 35% per month in March 1994) and the Company realized a
translation gain. The Company cannot predict what impact, if any, such
initiatives will have on the Brazilian economy or on ABN-Brazil's results
of operations.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit
Number
27 Article 5 Financial Data Schedule
(b) Reports on Form 8-K
a) NONE
<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNITED STATES BANKNOTE CORPORATION
By: /s/ John T. Gorman
---------------------------
John T. Gorman
Executive Vice President,
Chief Financial Officer and
Chief Accounting Officer
Date: May 15, 1995<PAGE>
<PAGE>
Exhibit Index
List of Exhibits Pursuant to Item 601 of Regulation S-K: Exhibit
Page #
Exhibit
27 Article 5 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial
information extracted from the financial
statements contained in the body of the
accompanying Form 10-Q and is qualified in its
entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> MAR-31-1995
<CASH> 29206
<SECURITIES> 0
<RECEIVABLES> 36757
<ALLOWANCES> 588
<INVENTORY> 22798
<CURRENT-ASSETS> 103371
<PP&E> 261460
<DEPRECIATION> 47533
<TOTAL-ASSETS> 374353
<CURRENT-LIABILITIES> 36451
<BONDS> 191216
<COMMON> 194
0
0
<OTHER-SE> 61970
<TOTAL-LIABILITY-AND-EQUITY> 374353
<SALES> 49068
<TOTAL-REVENUES> 49068
<CGS> 31949
<TOTAL-COSTS> 45142
<OTHER-EXPENSES> (535)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5768
<INCOME-PRETAX> (1307)
<INCOME-TAX> (510)
<INCOME-CONTINUING> (797)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (797)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
