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 December 31, 1998.
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 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 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 January 29, 1999; 1,587,313
<PAGE>
IMTEC, INC.
INDEX
Page #
Part I Financial Information
Condensed Balance Sheets -
December 31, 1998 and June 30, 1998 3 - 4
Condensed Statements of Income -
Three Months and Six Months Ended
December 31, 1998 and 1997 5
Condensed Statements of Cash Flows
Three Months and Six Months Ended
December 31, 1998 and 1997 6
Notes to Condensed Financial Statements 7 - 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
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>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
IMTEC, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
December 31, June 30
1998 1998 .
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 57,897 $ 84,100
Accounts receivable:
Trade, less allowance for doubtful accounts:
December 31, 1998 - $211,000
June 30, 1998 - $198,000 1,904,271 2,259,107
Inventories 2,351,885 2,286,123
Prepaid expenses and other 98,411 60,725
Deferred income tax 85,941 85,941
---------- ----------
Total Current Assets 4,498,405 4,775,996
----------- -----------
Plant and equipment - net 2,044,247 1,587,914
Other Assets:
Deposits 65,355 60,347
Computer software - net 77,273 97,469
Other intangibles - net 1,790,781 1,832,023
------------ ------------
$ 8,476,061 $ 8,353,749
========= =========
</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)
December 31, June 30,
1998 1998 .
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
<S> <C> <C>
Notes payable - bank $ 135,676 $ 0
Current installments of long term debt 235,567 235,567
Accounts payable 624,580 469,972
Income tax payable 144,053 33,323
Accrued liabilities:
Salaries and wages 159,530 486,555
Commissions 47,815 68,375
Other 273,908 432,165
------------ ------------
Total Current Liabilities 1,621,129 1,725,957
Long term debt less current installments 457,052 575,118
Stockholders' equity:
Common stock - $.01 par value;
authorized 5,000,000 shares, issued and outstanding:
1,587,313 shares December 31, 1998
1,585,713 shares June 30, 1998 15,873 15,857
Additional paid-in capital 2,599,163 2,591,629
Retained Earnings 3,782,844 3,445,188
----------- -----------
Total Stockholders' Equity 6,397,880 6,052,674
----------- -----------
$ 8,476,061 $ 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>
Six Months Ended Three Months Ended
December 31, December 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $6,212,386 $5,403,964 $3,363,003 $2,784,440
Cost of Sales 3,627,650 2,820,221 1,969,587 1,441,709
----------- ----------- ----------- -----------
Gross Profit 2,584,736 2,583,743 1,393,416 1,342,731
Selling, general and
administrative expenses 1,740,273 1,587,204 877,372 810,554
Research and development
expenses 243,417 290,015 121,146 156,229
----------- ----------- ----------- -----------
Operating Profit 601,046 706,524 394,898 375,948
Other Income:
Miscellaneous income
and other expenses 2,918 20,463 2,093 9,740
Interest Expense (39,236) (34,890) (21,758) (27,065)
----------- ----------- ----------- -----------
Income Before Income Taxes 564,728 692,097 375,233 358,623
Income Tax Expense 227,054 274,171 151,989 142,083
--------- --------- --------- ----------
Net Income $ 337,674 $ 417,926 $ 223,244 $ 216,540
======= ======= ======= =======
Earnings per share - Basic $ .21 $ .27 $ .14 $ .14
====== ====== ====== ======
Earnings per share - Diluted $ .20 $ .25 $ .14 $ .13
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE>
IMTEC, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1998 1997
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net Income $337,674 $417,926
Adjust, to reconcile net income to,
net cash provided by operating activities:
Depreciation & amortization 287,998 300,137
Increase (decrease) in cash from:
Accounts receivable 349,810 (280,894)
Inventory (65,762) (677,403)
Marketable securities 0 40,812
Prepaid expenses and other assets (37,686) (36,191)
Accounts payable 154,608 126,453
Income tax payable 110,730 73,372
Accrued liabilities (505,842) (99,201)
--------- ---------
Net cash provided by (used in )
operating activities 631,530 (134,989)
-------- ---------
Cash flows from investment activities -
Expenditures for property & equipment,
computer software and other
intangible assets (682,896) (301,050)
Acquisition of Customark 0 (1,900,000)
-------- ----------
Net cash used in investment activities (682,896) (2,201,050)
Cash flows from financing activities:
Net borrowing under line of credit 135,676 143,524
Proceeds from new long term debt 0 1,200,000
Principal payments on long term debt (118,066) (168,060)
Proceeds from issuance of stock 7,553 0
-------- ---------
Net cash provided by (used in) finance
activities 25,163 1,175,464
-------- ---------
Net increase (decrease) in cash (26,203) (1,160,575)
Cash and cash equlivants at the beginning of period 84,100 1,352,562
-------- ---------
Cash and cash equlivants at the end of period $ 57,897 $ 191,987
======== =========
Supplemental Information Disclosures:
Interest paid $ 39,236 $ 34.890
Income tax paid $116,334 $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 six-month period ended December 31,
1998 are not necessarily indicative of the results to be expected for the full
year.
2 - Inventories
<TABLE>
<CAPTION>
Inventories consist of:
December 31, June 30,
1998 1998
---- ----
<S> <C> <C>
Finished Products $ 33,055 $ 158,907
Work in Process 364,377 190,122
Purchased Components 2,054,453 1,937,094
----------- -----------
$ 2,351,885 $ 2,286,123
=========== ===========
</TABLE>
Inventory cost consisted of the cost of purchased components and
supplies, manufacturing labor and manufacturing overhead.
3 - Liability for Estimated Product Warranty
On December 31, 1998 and June 30, 1998, the Company had provided
$114,899 and $124,570 respectively, against future product warranties based on
its experience with customer claims. Warranty expenses amounted to approximately
$19,000 for the six-month period ended December 31, 1998 and $36,000 for the
six-month period ended December 31, 1997.
<PAGE>
4 - Earnings per Share
Basic earnings per share were computed by dividing net earnings by the
weighted average number of shares of common stock outstanding during the year.
The diluted computation is performed by dividing net income by the
weighted average number of shares of common stock and 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 average number of common share and common share equivalents
entering into the calculation of basic and diluted earnings per share are as
follows:
<TABLE>
<CAPTION>
Six months ended December 31,
1998 1997
<S> <C> <C>
Weighted average shares - Basic 1,586,966 1,553,088
Dilutive effect of options 66,525 84,919
--------- ---------
Weighted average shares - diluted 1,653,491 1,638,007
========= =========
Three months ended December 31,
1998 1997
Weighted average shares - Basic 1,587,220 1,553,088
Dilutive effect of options 53,473 96,932
--------- ---------
Weighted average shares - diluted 1,640,693 1,650,020
========= =========
</TABLE>
5 - Pro Forma Information
On August 12, 1997, IMTEC acquired the Customark division of Markem
Crop. The following pro froma reflects operations had Customark been a part of
IMTEC since July 1, 1997.
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
December 31, December 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $6,212,386 $5,598,568 $3,363,003 $2,784,440
Net Income 337,674 428,997 223,244 216,540
Diluted Income per Share $0.20 $0.26 $0.14 $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 1997.
<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 and Six Months Ended December 31, 1998
as compared to Three Months and Six Months Ended December 31, 1997
Revenues for the three months and six months ended December 31, 1998
increased approximately 20.8% and approximately 15.0%, respectively, over the
corresponding periods in 1997.
Revenues from Bar Code labels and printing supplies were $2,341,428 and
$4,429,879 for the three month and six month periods ended December 31, 1998
compared to $2,164,062 and $4,024,923, respectively, for the same periods last
year. Bar Code labels and printing supplies represented 69.6% and 71.3% of total
revenue for the three month and six month periods ended December 31, 1998
compared to 77.7% and 74.5%, respectively, for the same periods last year.
Revenues from the sales of Industrial Bar Code Equipment were
$1,021,585 and $1,782,507 for the three and six month periods ended December 31,
1998 compared to $620,317 and $1,379,041 for the same periods in 1997.
Industrial Bar Code Equipment sales represented 30.4% and 28.7% of total revenue
for the three month and six month periods ended December 31, 1998 compared to
22.3% and 25.5%, respectively, for the same periods last year. Management
believes that the trend in Industrial Bar Code Equipment sales will continue to
move upward due to expanded partnering and distribution relationships, new
product offerings and expanded use of technology.
Total backlog for all products as of December 31, 1998 was
approximately $3,621,253, the majority of which is scheduled to ship by June 30,
1999, compared to approximately $2,048,580 as of December 31, 1997.
Cost of sales for the three months and six months ended December 31,
1998 were 58.6% and 58.4% respectively, compared to 51.8% and 52.2% for the same
periods in 1997. The increase from the prior year is related to two major
factors. The first is product mix particularly caused by the increase in
Equipment sales noted above. The second is an increase in factory overhead
caused by the startup of another Media production facility.
<PAGE>
Selling, general and administrative expenses were $877,372 for the
quarter ended December 31, 1998 and $1,740,273 for the six months ended December
31, 1998, as compared to $810,554 and $1,587,204, respectively, for the
corresponding periods ended December 31, 1997. This increase is the result of
increased Sales and Marketing activity.
Development and engineering expenses for the three months and six
months ended December 31, 1998 were $121,146 (3.6% of sales) and $243,417 (3.9%
of sales) compared to $156,229 (5.6% of sales) and $290,015 (5.4% of sales),
respectively, for the same periods last year. The Company anticipates that the
level of the dollars spent for development and engineering will remain constant.
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.
LIQUIDITY AND CAPITAL RESOURCES:
As of December 31, 1998, the Company's principal available sources of
liquidity were, respectively, from operations and a $1,000,000 bank line of
credit, of which $864,324 was available as of December 31, 1998.
Accounts receivable decreased from $2,259,107 at June 30, 1998 to
$1,904,271 at December 31, 1998, as a direct result of the decrease in sales
revenues from the fourth quarter of Fiscal 1998 ($3,921,961) to the second
quarter of Fiscal 1999 ($3,363,003).
Inventories increased from $2,286,123 at June 30, 1998 to $2,351,885 at
December 31, 1998. This increase is the result of the anticipated increase in
sales activity.
The Company's capital commitments for fiscal 1999 are expected to be at
approximately 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
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, "Disclosures
about Segments of an Enterprise and 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 and 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. SAFS No. 133 is effective for all fiscal
quarters of fiscal years that begin after June 15, 1999. The Company does not
anticipate the adoption of this statement to have a material effect on its
financial statements.
Year 2000
The Company has reviewed the issue of Year 2000. All of its
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 December 31,
1998 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 its long-term debt, an
immediate 10 percent change in interest rates would not have a material effect
on the Company's 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
A. October 26, 1998 - Annual Meeting of Stockholders
B. Election of Directors - all nominees elected
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.
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, December 31, 1998
</LEGEND>
<CIK> 0000730045
<NAME> IMTEC, Inc.
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
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<CASH> 57897
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0
0
<COMMON> 15873
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</TABLE>
