SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended October 1, 1995
Commission File Number 0-12948
CHEMFAB CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 03-0221503
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
701 Daniel Webster Highway
Merrimack, New Hampshire 03054
(Address of principal executive office) (Zip Code)
Registrant's telephone number including
area code: (603) 424-9000
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 requirements for the past 90 days.
YES X NO_____.
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
Class Outstanding at November 10, 1995
Common Stock, $ .10 par value 5,271,221 shares
CHEMFAB CORPORATION
INDEX
Part I - Financial Information: Page No.
Item 1 - Financial Statements
Consolidated Balance Sheets at October 3 - 4
1, 1995 and June 30, 1995
Consolidated Statements of Income for 5
the Three Months Ended October
1, 1995 and October 2, 1994
Consolidated Statements of Cash Flows 6
for the Three Months Ended October 1, 1995
and October 2, 1994
Notes to Consolidated Financial Statements 7 - 8
Item 2 - Management's Discussion and Analysis 8 - 10
of Financial Condition and Results
of Operations
Part II - Other Information: 10
Item 6(a) - Exhibits 10
Signatures 11
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PART I - FINANCIAL INFORMATION
------------------------------
CHEMFAB CORPORATION
CONSOLIDATED BALANCE SHEETS
Oct. 1, June 30,
1995 1995
------------- -------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 3,280,000 $ 3,780,000
Receivables:
Trade 14,875,000 16,009,000
Retainages 148,000 148,000
Other 220,000 324,000
Costs and estimated earnings in excess of
billings on uncompleted contracts 1,036,000 692,000
Inventories 13,582,000 13,110,000
Prepaid expenses, and other 1,218,000 901,000
Deferred tax assets 1,203,000 1,152,000
------------ ------------
Total current assets 35,562,000 36,116,000
Property, plant and equipment at cost 37,387,000 36,869,000
Less accumulated depreciation
and amortization 17,722,000 17,036,000
------------ ------------
19,665,000 19,833,000
Goodwill, net 11,955,000 12,260,000
Investments in joint ventures and
other assets 2,414,000 2,410,000
------------ ------------
Total assets $ 69,596,000 $ 70,619,000
============ ============
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See accompanying Notes to Consolidated Financial Statements
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CHEMFAB CORPORATION
CONSOLIDATED BALANCE SHEETS
Oct. 1, June 30,
1995 1995
------------- -------------
(Unaudited)
Current liabilities:
Accounts payable and accrued
expenses $ 8,068,000 $ 8,757,000
Accrued income taxes 831,000 1,736,000
Billings in excess of costs and
estimated earnings on
uncompleted contracts 135,000 122,000
------------- -------------
Total current liabilities 9,034,000 10,615,000
Long - term debt 7,085,000 8,132,000
Deferred income taxes 1,526,000 1,551,000
Shareholders' equity:
Preferred stock, par value $.50:
authorized - 1,000,000 shares,
none issued - -
Common stock, par value $.10:
authorized - 15,000,000 shares;
issued and outstanding - 5,271,221
at October 1, 1995 and 5,235,646
at June 30, 1995 527,000 524,000
Additional paid-in capital 16,968,000 16,609,000
Retained earnings 34,910,000 33,551,000
Foreign currency translation
adjustment (454,000) (363,000)
------------- -------------
Total shareholders' equity 51,951,000 50,321,000
------------- -------------
Total liabilities and shareholders' equity $ 69,596,000 $ 70,619,000
============ ============
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See accompanying Notes to Consolidated Financial Statements
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CHEMFAB CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
-----------------------------
Oct. 1, 1995 Oct. 2, 1994
------------ ------------
Net sales $ 18,466,000 $ 13,722,000
Cost of sales 12,567,000 9,359,000
----------- -----------
Gross Profit 5,899,000 4,363,000
Selling, general and
administrative expenses 3,261,000 2,776,000
Research and development expenses 545,000 482,000
Other (income), net (1,000) (6,000)
Interest expense 183,000 7,000
Interest income (45,000) (87,000)
Results of equity operations 0 23,000
----------- -----------
Income before income taxes 1,956,000 1,168,000
Provision for income taxes 597,000 345,000
----------- -----------
Net income $ 1,359,000 $ 823,000
=========== ===========
Weighted average common and
common equivalent shares 5,421,000 5,287,000
=========== ===========
Earnings per common share $0.25 $0.16
===== =====
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See accompanying Notes to Consolidated Financial Statements.
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CHEMFAB CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
-------------------------
Oct.1, 1995 Oct.2, 1994
----------- -----------
Cash flows from operating activities:
Net income $ 1,359,000 $ 823,000
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation and amortization 1,039,000 730,000
Results of equity operations 0 23,000
Change in assets and liabilities:
Receivables 1,173,000 724,000
Costs and estimated earnings in excess
of billings on uncompleted contracts, net (344,000) 58,000
Inventories (504,000) (2,158,000)
Prepaid expenses and other (318,000) (73,000)
Other assets long-term (98,000) (71,000)
Accounts payable and accrued expenses (562,000) (358,000)
Accrued income taxes (901,000) (57,000)
Deferred tax liabilities (25,000) 0
Deferred tax assets (51,000) 0
----------- -----------
Total adjustments (591,000) (1,182,000)
----------- -----------
Net cash provided by operations 768,000 (359,000)
Cash flows from investing activities:
Capital expenditures (net) (555,000) (361,000)
----------- -----------
Net cash used in investing activities (555,000) (361,000)
Cash flows from financing activities:
Repayment of long-term debt (1,067,000) 0
Proceeds from exercise of stock options 365,000 89,000
----------- -----------
Net cash (used in) provided by financing activities (702,000) 89,000
Effect of exchange rate changes on cash (11,000) 123,000
----------- -----------
Net decrease in cash and cash equivalents (500,000) (508,000)
Cash and cash equivalents at beginning of year 3,780,000 7,923,000
----------- -----------
Cash and cash equivalents at end of period $ 3,280,000 $ 7,415,000
=========== ===========
Interest paid $ 190,000 $ 7,000
Income taxes paid $ 936,000 $ 511,000
</TABLE>
See accompanying notes to the Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 The consolidated financial statements of Chemfab
Corporation (the Company) included in this report
reflect all adjustments (consisting of only normally
recurring accruals) which, in the opinion of
management, are necessary for a fair presentation of
the consolidated financial position at October 1,
1995 and June 30, 1995 and the consolidated
statements of income and cash flows for the three
months ended October 1, 1995 and October 2, 1994.
The unaudited results of operations for the interim
periods reported are not necessarily indicative of
results to be expected for the year.
Certain notes and other information have been condensed or
omitted from these interim financial statements. The
statements, therefore, should be read in conjunction with
the consolidated financial statements and related notes
included in the Chemfab Corporation Annual Report on Form
10-K for the year ended June 30, 1995 (file no. 0-12948).
Note 2 Inventories consist of the following:
October 1, 1995 June 30,1995
--------------- ------------
Finished Goods $ 3,806,000 $3,953,000
Work in Process 5,230,000 5,089,000
Raw Materials 4,546,000 4,068,000
__________ __________
$13,582,000 $13,110,000
Note 3 In connection with obtaining incentive grants from
the Industrial Development Authority of Ireland, to
subsidize investments in plant and equipment in Ireland the
Company's Irish subsidiary, Chemfab Europe, has agreed to
restrict repatriation of 410,000 Irish pounds (U.S.
$663,000) of its retained earnings to fund repayment of the
grants in the event of default under the agreement. Chemfab
Corporation has also provided a parent company guarantee in
the event that the subsidiary's equity so restricted is not
sufficient to repay any amount due.
Various lawsuits and claims are pending or have been
asserted against the Company, including the matter
previously disclosed by the Company involving the Bennington
Landfill Superfund site, in Bennington Vermont. Although
the outcome of such matters cannot be predicted with
certainty and some lawsuits or claims may be disposed of
unfavorably to the Company, management believes their
disposition, to the extent not covered by insurance, will
not have a material adverse effect on the Company's
financial condition and results of operations.
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Three Months Ended October 1, 1995
Net Sales
The Company's consolidated net sales for the three months
ended October 1, 1995, the first quarter of fiscal 1996,
increased 35% to $18,466,000 from $13,722,000 for the same
period in the prior year. Measured on the basis of constant
foreign currency exchange rates, current year first quarter
sales would have increased 34% over sales for the same
quarter a year ago. Revenue growth was achieved in both the
U.S. and European business operations and reflected the
positive impact of the Company's February 1995 acquisition
of the Tygaflor fluoropolymer products business based in
England.
Engineered Products - U.S. Sourced sales (which include all
non-architectural product sales from the Company's U.S.
manufacturing plants; principal geographic markets are the
Americas and the Far East) decreased 3% to $8,909,000 from
$9,187,000 for the same period in the prior year. This
sales decline resulted principally from relative softness in
aerospace, energy/environment and lab test/healthcare
markets during the quarter. It is expected that revenues
from U.S. Sourced - Engineered Products will strengthen over
the remainder of the current fiscal year.
Engineered Products - Europe Sourced sales (which include
product sales from the Company's European manufacturing
plants; principal geographic markets are Western Europe,
Africa and the Middle East) increased 83% to $6,270,000
from $3,418,000 for the same period in the prior year. Had
foreign currency exchange rates remained unchanged from the
first quarter of fiscal 1995, current year first quarter
sales would have increased 81% over the same quarter in the
prior year. This increase was due primarily to the February
1995 acquisition of the Tygaflor business. Without the
benefit of the acquisition, it is estimated that revenues
would have increased approximately 6-8%.
Architectural Product sales increased 194% to $3,287,000
from $1,117,000 for the first quarter of the prior fiscal
year. Architectural products were principally sold to the
Company's Japanese joint venture company, Nitto Chemfab Co.,
Ltd., during the first quarter of fiscal 1996.
Architectural product sales are expected to continue to be
strong for the remainder of the current year due primarily
to continued strong demand in the Japanese market.
Gross Profit Margins
Gross profit margins as a percentage of net sales were 32%,
unchanged from the first quarter of the prior year.
Selling, Administrative, Research and Development Expenses
Selling, general and administrative expenses increased 17%
to $3,261,000 from $2,776,000 for the first quarter of
fiscal 1995. Increased expenditures were principally the
result of the combined effects of the acquisition of the
Tygaflor business and a somewhat higher cost structure to
support the growth of the underlying business. Absent the
impact of the Tygaflor business, selling, general and
administrative expenses would have increased approximately
8% over the level of the first quarter of last year. The
percentage of selling, general and administrative expenses
to total revenues, decreased to 18% as compared to 20% for
the first quarter of fiscal 1995.
Research and development expenses were $545,000, an increase
of 13% from last year's level of $482,000. This level of
spending, at approximately 3% of total revenues, is
consistent with recent, as well as planned, levels of
research and development spending.
Interest Expense (Income)
The Company had net interest expense of $138,000 for the
three month period ended October 1, 1995, compared to net
interest income of $80,000 for the same period in the prior
year. This change was principally due to the use of
previously invested cash and the issuance of long-term debt
to finance the acquisition of the Tygaflor business in
February, 1995.
Liquidity and Capital Resources
During the three month period ended October 1, 1995, the
Company generated $768,000 of cash from operations. The
Company invested $555,000 in property, plant and equipment
additions and repaid $1,067,000 of its long-term debt. The
Company also received $365,000 in proceeds from the exercise
of stock options during this period.
Working capital increased to $26,528,000 as compared to
$25,501,000 at the end of fiscal 1995. As of October 1,
1995, the Company had approximately $6.6 million of
additional credit available under its domestic and
international borrowing facilities. Management believes
that the combination of cash on hand, cash expected to be
generated from operations, and available credit facilities,
will be adequate to finance operations during fiscal 1996
and to deal with any liabilities or contingencies described
in Note 3 to the Consolidated Financial Statements.
PART II - OTHER INFORMATION
ITEM 6 - Exhibits and Reports on Form 8-K
6(a) Exhibits
None
6(b) Reports on Form 8-K
None.
CHEMFAB CORPORATION
SIGNATURES
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 THEREUNTO DULY
AUTHORIZED.
CHEMFAB CORPORATION
(Registrant)
by:/S/ Duane C. Montopoli
Duane C. Montopoli
President and Chief Executive Officer
by:/S/ William H. Everett
William H. Everett
Vice President-Finance and Administration
(Principal Financial Officer)
by:/S/ Laurence E. Richard
Laurence E. Richard
Controller
(Principal Accounting Officer)
Date: November 14, 1995
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