UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 September 30, 1997.
Commission File Number: 0-12661
Exact Name of Registrant as Specified in its Charter: IMTEC, Inc.
State of Incorporation: Delaware
I.R.S. Employer Identification Number: 03-0283466
Address of Principal Executive Offices: One Imtec Lane
Bellows Falls, VT 05101
Registrant's Telephone Number: 802-463-9502
Indicate by check mark whether the registrant (1) has filled 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 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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common shares outstanding as of October 29, 1997: 1,553,088
<PAGE>
IMTEC, INC.
INDEX
Page #
Part I Financial Information
Condensed Balance Sheets -
September 30, 1997 and June 30, 1997 3 - 4
Condensed Statements of Operations -
Three Months Ended
September 30, 1997 and 1996 5
Condensed Statements of Cash Flows
Three Months Ended
September 30, 1997 and 1996 6
Notes to Condensed Financial Statements 7 - 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 11
Part II Other Information
Item 2 Changes in Securities 12
Item 4 Submission of Matters to a Vote of
Security Holders 12
Item 6 Exhibits and Reports on Form 8-K 12
Signatures 13
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
IMTEC, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
September 30, June 30,
1997 1997 .
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 262,199 $ 1,352,562
Marketable investment securities 92,590 92,999
Accounts receivable:
less allowance for doubtful accounts:
September 30, 1997 - $177,204
June 30, 1997 - $175,000 1,886,803 1,499,283
Inventories 1,814,801 1,402,318
Prepaid expenses and deferred charges 90,654 45,423
Deferred income taxes 159,508 159,508
----------- ----------
Total Current Assets 4,306,555 4,552,093
------------ ------------
Property and equipment - net 1,425,787 1,234,488
Deposits 51,515 48,991
Computer software - net 86,055 94,759
Goodwill - net 1,648,216
Other intangibles - net 241,738 222,032
----------- -----------
$ 7,759,866 $ 6,152,363
========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
IMTEC, INC.
CONDENSED BALANCE SHEETS (CONTINUED)
(Unaudited)
September 30, June 30,
1997 1997 .
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
<S> <C> <C>
Notes payable - bank $ 99,922 $ 0
Current installments of long term debt 185,051 0
Accounts payable 675,388 324,651
Income tax payable 155,224 223,935
Accrued liabilities
Salaries and wages 118,561 191,502
Commissions 166,907 95,229
Other 293,507 351,275
----------- -----------
Total Current Liabilities 1,694,560 1,186,592
Long term debt less current installments 898,154 -
Total liabilities 2,592,714 1,186,592
----------- ----------
Stockholder's equity:
Common stock - $.01 par value;
authorized 5,000,000 shares, issued and outstanding:
1,553,088 shares September 30, 1997
1,553,088 shares June 30, 1997 15,531 15,531
Additional paid-in capital 2,489,674 2,489,674
Retained Earnings 2,661,947 2,460,566
----------- -----------
Total Stockholder's Equity 5,167,152 4,965,771
----------- -----------
$ 7,759,866 $ 6,152,363
======== ========
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
IMTEC, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30,
1997 1996
---- ----
<S> <C> <C>
Net Sales $2,619,525 $2,100,143
Cost of Sales 1,378,508 1,038,799
----------- -----------
Gross Profit 1,241,017 1,061,344
Selling, general and
administrative expenses 776,655 667,334
Research and development
expenses 133,789 142,674
--------- ---------
Operating Income 330,573 251,336
Other Income (Expenses):
Miscellaneous income
and other expenses 10,724 12,264
Interest Expense (7,825)
--------- ---------
Income (Loss) Before
Income Taxes 333,472 263,600
--------- ---------
Income Tax Expense 132,088 104,954
Net Income $ 201,384 $ 158,646
======= =======
Weighted average number of
common shares and common
shares equivalents outstanding 1,628,326 1,600,112
Earnings per common share and
common share equivalents $ .12 $ .10
======= =======
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
IMTEC, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30,
1997 1996
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income $201,384 $158,646
Adjustment to reconcile net income to
net cash provided by operating activities:
Depreciation & amortization of property,
plant, equipment and other assets 164,714 155,423
Increase (decrease) in cash from:
Accounts receivable (390,044) 116,091
Income tax refundable 87,086
Inventory (412,483) (59,120)
Marketable securities 409
Prepaid expenses and other assets (45,231) 127,924
Accounts payable 350,734 (217,246)
Income tax payable (68,711) 17,542
Accrued liabilities (59,031) (39,538)
---------- ----------
Net cash provided by operating activities (258,668) 425,884
Cash flows from investment activities:
Expenditures for property & equipment,
computer software and other
intangible assets (2,015,231) (449,984)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes 99,922
Principal notes payable to bank 1,200,000
Principal payments on long term debt (116,795)
Proceeds from issuance of stock ________ _______
Net cash provided by financing
activities 1,183,127 0
--------- ---------
Net increase (decrease) in cash (1,090,772) (24,100)
Cash at the beginning of period 1,352,562 806,633
--------- ---------
Cash at the end of period $ 262,199 $ 782,533
========= =========
Supplemental Information Disclosures:
Interest paid $ 7,825
Income tax paid $ 200,800
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
<PAGE>
IMTEC, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1 - Basis of Presentation
The financial information included herein is unaudited: however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim periods.
The results of operations for the three-month period ended September
30, 1997 are not necessarily indicative of the results to be expected for the
full year.
2 - Inventories
<TABLE>
<CAPTION>
Inventories consist of:
September 30, June 30,
1997 1997
<S> <C> <C>
Finished Products $ 13,780 $ 78,263
Work in Process 162,624 145,391
Purchased Components 1,638,397 1,178,664
----------- -----------
1,814,801 1,402,318
========== ==========
</TABLE>
Inventory cost consisted of the cost of purchased components and
supplies, manufacturing labor and manufacturing overhead.
3 - Liability for Estimated Product Warranty
On September 30, 1997 and June 30, 1997, the Company had provided
$188,317 and $149,306 respectively, against future product warranties based on
its experience with customer claims. Warranty expenses charged to income
amounted to approximately $22,615 for the three month period ended September 30,
1997 and $18,405 for the three-month period ended September 30, 1996.
<PAGE>
4 - Earnings per Common Share
Primary earnings per share were computed by dividing net earnings by
the weighted average number of shares of common stock equivalents outstanding
during the year, if dilutive. Common stock equivalents (stock options and
warrants) are assumed to be exercised when they are issued and the proceeds used
to repurchase outstanding shares of the Company's common stock at the average
price during the period.
The fully-diluted computation is performed using the same method as for
the primary computation, except that the proceeds from exercised stock options
and warrants are assumed to be used to repurchase outstanding shares of the
Company's common stock at the higher of the average or September 30, market
price.
The average number of common share and common share equivalents
entering into the calculation of primary and fully diluted earnings per share
are as follows:
<TABLE>
<CAPTION>
Three months ended September 30,
1997 1996
<S> <C> <C>
Common shares 1,553,088 1,545,088
Options 71,685 53,857
Warrants -- --
--------- ---------
Total for primary calculation 1,624,773 1,598,945
Options 3,553 1,167
Warrants -- --
--------- ---------
Total for fully-diluted calculation 1,628,326 1,600,112
========= =========
</TABLE>
5 - Pro forma Information
On August 12, 1997, IMTEC acquired the Customark division of Markem
Corp. The following pro forma reflects operations had Customark been a part of
IMTEC since 7/1/96.
<TABLE>
<CAPTION>
Period Ended September 30, 1997 September 30, 1996
-----------------------------------------------------------------------
<S> <C> <C>
Revenues $2,814,129 $2,596,934
Net Income 212,455 201,754
Earnings per share $0.13 $0.13
</TABLE>
The unaudited pro forma results are not necessarily indicative of the
actual results of operations that would have occurred had the acquisition
actually been made at the beginning of fiscal 1996
<PAGE>
IMTEC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995
The statements contained in the following Management's Discussion and
Analysis of Financial Condition and Results of Operations which are not
historical are "forward looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 31E of the Securities
Exchange Act of 1934, as amended. These forward looking statements represent the
Company's present expectations or beliefs concerning future events, however the
Company cautions that such statements are qualified by important factors. Such
factors, could cause actual results to differ materially from those indicated in
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1997
as compared to Three Months Ended September 30, 1996
Revenues for the three months ended September 30, 1997 increased
approximately 24.7% from the corresponding period in 1996.
Revenues from Bar Code labels and printing supplies were $1,860,862 for
the quarter ended September 30, 1997 compared to $1,502,539 for the same period
last year. Bar Code labels and printing supplies represented 71.0% of total
revenue for the three months ended September 30, 1997 compared to 71.5% for the
same period last year
Revenues from the sales of Industrial Bar Code Equipment were $758,663
for the three months ended September 30, 1997 compared to $597,604 for the same
period in 1996. Industrial Bar Code Equipment sales represented 29.0% of total
revenue for the three months ended September 30, 1997 compared to 28.5% for the
same period last year. The increase in bar code equipment sales in the three
months ended September 30, 1997, when contrasted with the same period in 1996,
is primarily attributable to the introduction of eight new equipment products
during the prior twelve months. Management believes that the upward trend in
Industrial Bar Code Equipment sales will continue due to expanded partnering and
distribution relationships, new product offerings and expanded use of
technology.
Total backlog, for all products, as of September 30, 1997 was
approximately $1,547,000 of which all is scheduled to ship by June 30, 1998.
Total backlog as of September 30, 1996 was $1,927,000.
Cost of sales for the three months ended September 30, 1997 were 52.6%,
up from 49.5% for the same period in 1996. This increase is directly related to
the product mix.
Selling, general and administrative expenses were $776,655 for the
quarter ended September 30, 1997 as compared to $667,334 for the quarter ended
September 30, 1996. This represents a 16.4% increase in these expenses. While
this is an increase in dollars, this is a decrease in percentage of revenues,
from 31.6% at September 30, 1996 to 29.6% at September 30, 1997. The increase in
the dollars is the result of the addition of five new associates, two in
Marketing and three in sales. This is consistent with management's focus on
increasing sales.
Research and development expenses for the quarter ended September 30,
1997 were $133,789 (5.1% of sales) compared to $142,674 (6.8% of sales) for the
same period last year.
The Company's effective tax rate was approximately 40% for all periods
presented, and is based on the Company's estimated effective tax rate for the
full year.
Net income for the quarter ended September 30, 1997 was $201,384
compared to $158,646 for the quarter ended September 30, 1996. The major reason
for this increase is the increase in revenues.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES:
As of September 30, 1997, the Company's principal available sources of
liquidity were, respectively, from operations, a $1,000,000 bank line of credit
(of which $900,078 was available at September 30, 1997) and a five year term
bank loan for $1,200,000, with a remaining balance of $1,083,205 at September
30, 1997. The purpose of the term loan was the acquisition of Customark,
discussed in the Company's 8-K filing on August 26, 1997.
Accounts receivable increased from $1,499,283 at June 30, 1997 to
$1,886,803 at September 30, 1997, a direct result of the increase in sales
revenues.
Inventories increased from $1,402,318 at June 30, 1997 to $1,814,801 at
September 30, 1997. This increase is the result of the increase in the sales
activity.
The Company's capital commitments for fiscal 1998 are expected to be at
the same level as fiscal 1997.
The Company believes that it will be able to offset the effects of
inflation by selected price increases in its products, although it can give no
assurances in this regard.
The Company anticipates that cash flows from operations, together with
current cash and marketable securities balances and funds available under the
Company's line of credit, will be sufficient to meet the Company's working
capital and capital equipment expenditure requirements for the foreseeable
future.
<PAGE>
Recent Accounting Pronouncements
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share," which will be effective for interim and annual periods ending after
December 15, 1997. SFAS No. 128 will require the Company to restate all
previously reported earnings per share information to conform to the new
pronouncement's requirements.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information." SFAS No. 130 establishes standards for reporting and
display of comprehensive income and its components (revenues, expenses, gains
and losses) in a full set of general-purpose financial statements. SFAS No. 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. Both
standards will be adopted by the Company during the first quarter of fiscal 1999
and are not expected to have a material effect on its financial position,
results of operations or financial statement disclosures.
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
Not applicable
Item 3 - Defaults upon Senior Securities
None
Item 4 - Submission if Matters to a Vote of Security Holders
A. October 27, 1997 - Annual Meeting of Stockholders
B. Election of Directors - all nominees elected
C. Proposal to adopt the Company's 1997 Stock Option Plan
Results of vote; for, 916,198; against, 6,805;
abstained, 2,622; unvoted, 525,914.
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
8-K, filed August 26, 1997; Items 2 and 7; Financial Statements
included in Item 7: Financial Statements, Pro Forma
Financial Statements and Exhibits:
(a) Financial Statements
Attached audited Statements of Income for years ended December
31, 1996 and 1995 and for the six-month period ended June 30,
1997
(b) Pro Forma Financial Information
(i) Unaudited pro forma condensed balance sheet of Registrant
as of June 30, 1997, giving effect to the acquisition of
Customark.
(ii) Unaudited pro forma consolidated statement of income for
the year ended June 30, 1997, giving effect to the acquisition
of Customark.
(c) Exhibits
Inapplicable
<PAGE>
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 hereunto duly authorized.
IMTEC, INC.
BY:____/s/ Richard L. Kalich___________
Richard L. Kalich
President & Chief Executive Officer
BY:____/s/ George S. Norfleet III______
George S. Norfleet III
Secretary / Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
IMTEC, Inc., EX-27, FDS for 10-Q, September 30, 1997
</LEGEND>
<CIK> 0000730045
<NAME> IMTEC, Inc.
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<S> <C>
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</TABLE>
