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, 1999.
Commission File Number: 0-12661
Exact Name of Registrant as Specified in its Charter: IMTEC, Inc.
State of Incorporation: Delaware
IRS 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 shorted 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 April 28, 1999, 1,587,313
<PAGE>
IMTEC, INC.
INDEX
Page #
Part I Item 1 Unaudited Financial Information
Condensed Balance Sheets -
March 31, 1999 and June 30, 1998 3 - 4
Condensed Statements of Income -
Three Months and Nine Months Ended
March 31, 1999 and 1998 5
Condensed Statements of Cash Flows
Three Months and Nine Months Ended
March 31, 1999 and 1998 6
Notes to Condensed Financial Statements 7 - 8
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3 Quantitative and Qualitative Disclosures about 11
Market Risk
Part II Other Information
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>
PART I - FINANCIAL INFORMATION
ITEM 1 UNAUDITED FINANCIAL INFORMATION
IMTEC, INC.
CONDENSED BALANCE SHEETS (Unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
1999 1998 .
ASSETS
Current Assets:
<S> <C> <C>
Cash $ 39,099 $ 84,100
Accounts receivable
Trade, less allowance for doubtful accounts:
March 31, 1999 - $213,000
June 30, 1998 - $198,000 2,611,243 2,259,107
Inventories 2,472,717 2,286,123
Prepaid expenses and deferred charges 83,495 60,725
Deferred income tax 85,941 85,941
----------- -----------
Total Current Assets 5,292,495 4,775,996
---------- ----------
Plant and equipment - net 2,167,103 1,587,914
Other assets:
Deposits 73,805 60,347
Computer software - net 69,254 97,469
Other intangibles - net 1,773,460 1,832,023
----------- -----------
$ 9,376,117 $ 8,353,749
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE>
IMTEC, INC.
CONDENSED BALANCE SHEETS (Unaudited) (CONTINUED)
<TABLE>
<CAPTION>
March 31, June 30,
1999 1998 .
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
<S> <C> <C>
Notes payable - bank $ 520,956 $ 0
Current installments of long term debt 235,567 235,567
Accounts payable 650,206 469,972
Income tax payable 168,748 33,323
Accrued liabilities
Salaries and wages 240,950 486,555
Commissions 227,850 68,375
Other 287,187 432,165
---------- ---------
Total current liabilities 2,330,964 1,725,957
Long term debt less current installments 373,403 575,118
Stockholders' equity:
Common stock - $.01 par value;
authorized 5,000,000 shares, issued and outstanding:
1,587,313 shares March 31, 1999
1,585,713 shares June 30, 1998 15,873 15,857
Additional paid-in capital 2,599,163 2,591,629
Retained earnings 4,056,714 3,445,188
---------- ----------
Total stockholders' equity 6,671,750 6,052,674
---------- ----------
$ 9,376,117 $ 8,353,749
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE>
IMTEC, INC.
CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
March 31, March 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 9,949,040 $ 8,588,595 $ 3,736,654 $ 3,184,630
Cost of sales 5,687,331 4,528,000 2,059,691 1,707,777
----------- ----------- ----------- -----------
Gross profit 4,261,709 4,060,595 1,676,963 1,476,853
Selling, general and
administrative expenses 2,845,365 2,520,861 1,105,089 929,142
Research and development
expenses 352,444 439,561 109,027 149,548
---------- ---------- ---------- ----------
Operating profit 1,063,900 1,100,173 462,847 398,163
Other Income (Expense)
Other income 2,984 31,936 66 6,953
Interest expense (55,591) (56,807) (16,354) (21,917)
------------ ----------- ----------- -----------
Income before income taxes 1,011,293 1,075,302 446,559 383,199
Income tax expense 399,749 425,886 172,695 151,715
---------- ---------- --------- ---------
Net income $ 611,544 $ 649,416 $ 273,864 $ 231,484
======= ======= ======= =======
Earnings per share - Basic $ 0.39 $ 0.42 $ 0.17 $ 0.15
======= ======= ======= ======
Earnings per share - Diluted $ 0.37 $ 0.40 $ 0.17 $ 0.14
======= ====== ======= ======
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE>
IMTEC, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
1999 1998
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income $ 611,544 $ 649,416
Adjustments to reconcile net income to
net cash provided by operating activities-
Depreciation & amortization 408,401 402,257
Increase ( decrease) in cash from:
Accounts receivable (365,594) (312,060)
Marketable securities - 40,999
Inventory (186,594) (863,238)
Prepaid expenses and other assets (22,770) (50,133)
Accounts payable 180,234 73,354
Income tax payable 135,425 77,712
Accrued liabilities (231,608) (23,122)
----------- ----------
Net cash provided by (used in)
operating activities 529,038 (4,815)
Cash flows from investment activities-
Expenditures for property & equipment,
computer software and other
intangible assets (900,833) (2,322,269)
--------- -----------
Cash flows from financing activities:
Net borrowing under line of credit 520,956 -
Proceeds from long term debt - 1,200,000
Principal payments on long term debt (201,715) (221,878)
Proceeds from issuance of stock 7,553 102,281
---------- --------
Net cash provided by (used in) finance
activities 326,794 1,080,400
--------- ---------
Net increase (decrease) in cash (45,001) (1,246,684)
Cash at the beginning of period 84,100 1,352,562
-------- ---------
Cash at the end of period $ 39,099 $ 105,878
======= =======
Supplemental Information Disclosures:
Interest paid $ 55,591 $ 56,807
Income taxes paid $ 144,324 $ 548,175
======= =======
</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.
This financial statement should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended June 30, 1998, which
includes financial statements and notes thereto for the years ended June 30,
1998, 1997, 1996.
The results of operations for the nine-month period ended March 31,
1999 may not necessarily be indicative of the results to be expected for the
full year.
<TABLE>
<CAPTION>
2 - Inventories
Inventories consist of:
March 31, June 30,
1999 1998
<S> <C> <C>
Finished Products $ 115,590 $ 158,907
Work in Process 472,227 190,122
Purchased Components 2,084,900 1,937,094
----------- -----------
$ 2,472,717 $ 2,286,123
======== ========
</TABLE>
3 - Liability for Estimated Product Warranty
On March 31, 1999 and June 30, 1998, the Company had provided
approximately $141,000 and $125,000, respectively, against future product
warranties based on its experience with customer claims. Warranty expenses
amounted to approximately $61,000 for the nine-month period ended March 31, 1999
and $58,000 for the nine-month period ended March 31, 1998.
<PAGE>
4 - Earnings per Common Share
Basic earnings per share was computed by dividing net earnings by the
weighted average number of shares of common stock outstanding during the year.
Dilutive earnings per share reflect the effects of the Company's outstanding
options (using the treasury stock method at the average price during the period)
except where such items would be antidilutive.
A reconciliation of weighted average shares used for the basic
calculation and that used for the diluted calculation was as follows:
<TABLE>
<CAPTION>
Nine months ended March 31,
1999 1998
<S> <C> <C>
Weighted average shares - basic 1,586,788 1,560,998
Dilutive effect of options 59,224 82,128
---------- ----------
Weighted average shares - diluted 1,646,012 1,643,126
======= =======
Three months ended March 31,
1999 1998
Weighted average shares - basic 1,587,313 1,577,171
Dilutive effect of options 46,148 75,456
---------- ----------
Weighted average shares - diluted 1,633,461 1,652,627
======= =======
</TABLE>
5 - Pro Forma Information
On August 12, 1997, IMTEC acquired the Customark division of Markem
Crop. The following pro forma information reflects operations had Customark been
a part of IMTEC since July 1, 1997.
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
March 31, March 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $9,949,040 $8,783,199 $3,736,654 $3,184,630
Net Income $611,544 $660,487 $273,864 $231,484
Diluted Earnings per Share $0.37 $0.40 $0.17 $0.14
</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 1998.
<PAGE>
Item 2 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 and Nine Months Ended March 31, 1999
as compared to Three Months and Nine Months Ended March 31, 1998
Revenues for the three months and nine months ended March 31, 1999
increased approximately 17.3% and 15.8% respectively over the corresponding
periods in 1998.
Revenues from labels and printing supplies were $2,516,016 and
$6,945,896 for the three-month and nine-month periods ended March 31, 1999
compared to $2,278,074 and $6,302,998, respectively, for the same periods last
year. Revenue from labels and printing supplies represented 67.3% and 69.8% of
total revenue for the three month and nine month periods ended March 31, 1999
compared to 71.5% and 73.4%, respectively, for the same periods last year.
Management believes that the increase in sales of labels and printing supplies
is attributable to an increase in the bredth of the product line, the sales
force and production capacity.
Revenues from the sales of Industrial Equipment were $1,220,638 and
$3,003,144 for the three and nine-month periods ended March 31, 1999 compared to
$906,556 and $2,285,597 for the same periods in 1998. Industrial Equipment sales
represented 32.7% and 30.2% of total revenue for the three month and nine month
periods ended March 31, 1999 compared to 28.5% and 26.6%, respectively, for the
same periods last year. Management believes that this trend in Industrial
Equipment sales will continue for the proximate future due to new products and
an increase in the number of resellers of the product line and the geographic
coverage. Equipment backlog was $376,400 at March 31, 1999 compared to $620,000
at March 31, 1998.
Total backlog, for all products, as of March 31, 1999 was approximately
$3,713,000, of which approximately $1,829,000 is shipable by June 30, 1999,
compared to $2,414,000 as of March 31, 1998.
Cost of sales as a percentage of revenue for the three months and nine
months ended March 31, 1999 were 55.1% and 57.2%, respectively, compared to
53.6% and 52.7% for the same periods in 1998. The increase in the cost of goods
is related to the significant increase in large volume sales.
<PAGE>
Selling, general and administrative expenses were approximately
$1,105,000 for the three months ended March 31, 1999 and approximately
$2,845,000 for the nine months ended March 31, 1999, as compared to
approximately $929,000 and approximately $2,521,000, respectively, for the
corresponding periods ended March 31, 1998. The increase for the 1999 periods is
primarily attributable to increased sales and marketing activity.
Research and development expenses for the three months and nine months
ended March 31, 1999 were approximately $109,000 (2.9% of revenue) and
approximately $352,000 (3.5% of revenue) compared to approximately $150,000
(4.7% of revenue) and approximately $440,000 (5.2% of revenue), respectively,
for the same periods last year.
The Company's effective tax rate was approximately 40% for all periods
presented, and are based on the Company's estimated effective tax rate for the
full year.
Net income for the three months and nine months ended March 31, 1999
was $273,864 and $611,544, respectively, compared to $231,484 and $649,416,
respectively, for the same periods ended March 31, 1998.
At the beginning of the fourth quarter, the Company's Board of
Directors appointed Steve Anton as President and CEO. The Company will expense,
in the fourth quarter, the severance fee of his predecessor, relocation cost and
search fees. The total amount to be expensed will be approximately $265,000, or
about $0.10 per dilutied share, after tax.
LIQUIDITY AND CAPITAL RESOURCES:
As of March 31, 1999, the Company's principal available sources of
liquidity were, respectively, operations, a $2,000,000 bank line of credit, of
which $1,479,044 was available as of March 31, 1999 and a five year term loan
for $1,200,000, with a remaining balance of $608,970 at March 31, 1999.
Accounts receivable increased by $352,136, from $2,259,107 at June 30,
1998 to $2,611,243 at March 31, 1999, a direct result of the increase in sales
revenues
Inventories increased by $186,594, from $2,286,123 at June 30, 1998 to
$2,472,717 at March 31, 1999, as a result of increasing levels of business in
the sales of labels and printing supplies.
The Company's capital commitments for fiscal 1999 are expected to be at
the same level as fiscal 1998.
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 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
Statements of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," was adopted by the Company during the first quarter and
it had no effect upon the Company's financial position, results of operation or
financial statement disclosures as it does not have any element of comprehensive
income. SFAS No. 131, "Disclosure About Segments of an Enterprise & Related
Information," will be adopted for the Company's fiscal 1999 annual financial
statements. The Company is currently evaluating the effect that the new standard
will have on disclosures in its annual financial statements.
In June 1998, The Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivatives Instruments and Hedging Activities." SFAS No.
133 establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. SFAS No. 133 is effective for all fiscal quarters of fiscal years
that begin after June 15, 1999. The Company is currently accessing the impact,
but does not anticipate that the adoption of this statement will have a material
effect on its financial statements.
Year 2000
The Company has reviewed the issue of Year 2000. All of the
manufacturing and accounting software has been brought into compliance,
effective June 16,1998. There are neither internal clocks nor dating mechanisms
within the Company's products that would be affected by changing dates. The
Company is confident that its products and services will continue uninterrupted
into the new millennium. No material additional costs are anticipated at this
time.
The Company's contingency plan in the event other parties should be
unable to provide Year 2000 compliant electronic data is to revert to paper
documentation from these parties. However, to the extent that customers, vendors
or other entities with which the Company has material relationships do not
adequately address Year 2000 issues, the Company could experience payment
delays.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's outstanding long-term and short-term debt at March 31,
1999 bears interest at variable rates; therefore, the Company's results of
operations would be affected by interest rate changes to the extent of the notes
outstanding. Due to the short term nature and insignificant amount of the
Company's notes payable and the decreasing amounts of the long-term debt, an
immediate 10 percent change in interest rates would not have a material effect
on the Company' results of operations over the next fiscal year.
<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 of Matters to a Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
The Company filed no reports on Form 8-K during the quarter.
<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.
May 14, 1999
BY:_______/s/ Steven D. Anton___________
Steven D. Anton
President & Chief Executive Officer
BY:______/s/ George S. Norfleet III_________
George S. Norfleet III
Secretary / Treasurer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
IMTEC, Inc., EX-27, FDS for 10-Q, March 31, 1999
</LEGEND>
<CIK> 0000730045
<NAME> IMTEC, Inc.
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
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<CASH> 39099
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0
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</TABLE>
