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, 1999.
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, 1999: 1,595,513
<PAGE>
IMTEC, INC.
INDEX
Part I Financial Information Page #
Item 1 Condensed Financial Statements
Condensed Balance Sheets -
September 30, 1999 and June 30, 1999 3 - 4
Condensed Statements of Operations -
Three Months Ended
September 30, 1999 and 1998 5
Condensed Statements of Cash Flows
Three Months Ended
September 30, 1999 and 1998 6
Notes to Condensed Financial Statements 7 - 9
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 11
Item 3 Quantitative and Qualitative Disclosures about
Market Risk 12
Part II Other Information 13
Signatures 14
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
ITEM 1 - CONDENSED FINANCIAL INFORMATION
IMTEC, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
September 30, June 30,
1999 1999 .
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $114,309 $ 55,260
Accounts receivable, net of allowance for
doubtful accounts of $276,000 and
$260,000 as of September 30, 1999
and June 30, 1999, respectively 2,253,078 3,166,970
Inventories, net 2,378,533 2,465,372
Prepaid expenses and deferred charges 243,750 143,149
Deferred tax asset 160,570 160,570
---------- ----------
Total current assets 5,150,240 5,991,321
----------- ------------
Property and equipment - net 2,321,967 2,346,727
Construction-in-progress 805,608 -
Computer software - net 61,164 65,987
Other intangibles - net 1,658,498 1,683,481
----------- -----------
$ 9,997,477 $ 10,087,516
========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
IMTEC, INC.
CONDENSED BALANCE SHEETS (CONTINUED)
(Unaudited)
September 30, June 30,
1999 1999 .
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
<S> <C> <C>
Note payable - bank $ - $ 794,253
Current portion of long-term debt 257,155 257,155
Accounts payable 726,811 750,302
Income taxes payable 81,976 120,989
Accrued liabilities:
Salaries and wages 172,640 204,503
Commissions 58,119 77,376
Other 483,479 514,328
---------- -----------
Total current liabilities 1,780,180 2,718,906
Long-term capital lease obligation 805,608 -
Long-term deferred tax liability 119,368 119,368
Long-term debt less current portion 223,365 309,291
--------- ---------
Total long-term liabilities 1,148,341 428,659
Stockholders' equity:
Common stock - $.01 par value;
authorized 5,000,000 shares; issued and outstanding:
1,586,713 shares September 30, 1999 and
1,587,313 shares June 30, 1999 15,873 15,873
Additional paid-in capital 2,599,163 2,599,163
Retained earnings 4,453,920 4,324,915
----------- -----------
Total stockholders' equity 7,068,956 6,939,951
----------- -----------
$ 9,997,477 $ 10,087,516
======== ========
</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,
1999 1998
<S> <C> <C>
Net sales $3,179,833 $2,849,387
Cost of sales 1,921,896 1,658,054
----------- -----------
Gross profit 1,257,937 1,191,333
Selling, general and
administrative expenses 918,511 860,898
Research and development
expenses 113,575 122,271
----------- -----------
Operating income 225,851 208,164
Other income (expense):
Miscellaneous income
and other expenses 25 825
Interest expense (19,702) (17,477)
------------ ------------
Income before income taxes and
cumulative effect of accounting change 206,174 191,512
Income tax expense 77,169 75,865
------------ ------------
Income before cumulative effect of
accounting change 129,005 115,647
Cumulative effect of accounting change,
net of income tax benefit - 51,240
----------- -----------
Net income $129,005 $64,407
=========== ===========
Basic net income per common share before
cumulative effect of accounting change $ .08 $ .07
Cumulative effect of accounting change - .03
----------- -----------
Basic net income per common share $ .08 $ .04
=========== ===========
Diluted net income per common share before
cumulative effect of accounting change $ .08 $ .07
Cumulative effect of accounting change - .03
----------- -----------
Diluted net income per common share $ .08 $ .04
=========== ===========
Weighted shares for basic computation 1,587,809 1,585,735
Weighted shares for diluted computation 1,634,511 1,665,419
The accompanying notes are an integral part of these
condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IMTEC, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30,
1999 1998
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income $129,005 $64,407
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation & amortization of property
and equipment and other assets 202,757 142,799
Cumulative effect of accounting change - 51,240
Increase (decrease) in cash from:
Accounts receivable 913,892 504,106
Inventories 86,839 (77,691)
Prepaid expenses and other assets (100,601) (31,374)
Accounts payable (23,491) (29,839)
Income taxes payable (39,013) 57,056
Accrued liabilities (81,969) (467,147)
---------- ---------
Net cash provided by operating activities 1,087,419 213,557
Cash flows from investing activities:
Expenditures for property and equipment
and other assets (148,191) (318,320)
--------- --------
Cash flows from financing activities:
Proceeds from issuance of notes - 110,875
Repayment of note payable to bank (794,253)
Repayment of long term-debt (85,926) (77,193)
Proceeds from issuance of stock - 3,753
--------- --------
Net cash provided by (used in) financing
activities (880,179) 37,435
---------- --------
Net increase (decrease) in cash 59,049 (67,328)
Cash and cash equivalents at the beginning of period 55,260 84,100
--------- --------
Cash and cash equivalents at the end of period $ 114,309 $ 16,772
========= ========
Supplemental information disclosures:
Interest paid $ 19,702 $ 17,477
Income tax paid $116,182 $ 18,009
</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, 1999 are not necessarily indicative of the results to be expected for the
full year.
2 - Newly Adopted Accounting Pronouncement
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities," which requires that all start-up activities and organizational
costs be expensed as incurred. SOP 98-5 is effective for fiscal years beginning
after December 15, 1998, however, early adoption is encouraged. The Company
adopted this SOP in the fourth quarter of Fiscal 1999. The Company has reflected
the adoption of this standard in the results of operations for the three months
ended September 30, 1998 as though this standard had been adopted as of the
beginning of Fiscal 1999. The adoption of this statement resulted in a charge of
$51,240 (net of an income tax benefit of $33,609), which is included in the
Consolidated Statement of Operations as a cumulative effect of accounting
change. The cumulative effect of the adoption of SOP 98-5 is calculated as if
the new statement was adopted as of the beginning of the year.
3 - Inventories
<TABLE>
<CAPTION>
Inventories consist of:
September 30, June 30,
1999 1999
<S> <C> <C>
Finished products $ 94,994 $ 72,325
Work in process 308,417 397,520
Purchased components 1,975,122 1,995,527
----------- -----------
$ 2,378,533 $ 2,465,372
=========== ===========
</TABLE>
Inventory cost consisted of the cost of purchased components and
supplies, manufacturing labor and manufacturing overhead.
<PAGE>
4 - Liability for Estimated Product Warranty
As of September 30, 1999 and June 30, 1999, the Company had provided
$138,000 and $137,000, respectively, against future product warranties based on
its experience with customer claims. Warranty expenses charged to income
amounted to approximately $17,400 for the three-month period ended September 30,
1999 and $22,600 for the three-month period ended September 30, 1998.
5 - Income per Common Share
Basic income per share was computed by dividing net income by the
weighted average number of shares of common stock outstanding during each period
presented. Dilutive income per share reflects 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>
Three months ended September 30,
1999 1998
<S> <C> <C>
Weighted average shares - basic 1,587,809 1,585,735
Dilutive effect of options 46,702 79,684
--------- ---------
Weighted average shares - diluted 1,634,511 1,665,419
========= =========
</TABLE>
Options to purchase 95,200 and 0 shares of common stock were
outstanding as of September 30, 1999 and 1998, respectively, but were not
included in the computation of diluted earnings per share because the options'
exercise prices were greater than the average market price of the common stock
and, therefore, their effect would be antidilutive.
6 - Capital Lease Obligation
The Company has entered into an agreement to lease a 56,000 square foot
facility in Keene, NH that is currently under construction. During the
construction period, the Company has guaranteed the developer's construction
loan. This lease will be accounted for as a capital lease. Accordingly, the
Company has recognized an asset as construction-in-progress and the
corresponding long-term liability as a capital lease obligation for the
construction costs incurred to-date of $805,608. Total construction costs are
anticipated to be $2,400,000.
<PAGE>
7 - Segment Information
The Company has identified two distinct and reportable segments: the
Hardware and the Media segments. The Company considers these two segments
reportable under the requirements of Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
criteria as they are managed separately and the operating results of each
segment are regularly reviewed and evaluated separately by the Company's chief
decision-maker.
The Hardware segment provides printers, high-performance applicators
and laminators of labels for industrial environments. The Media segment provides
the high-performance label material for industrial environments.
The following is a summary of information about the Company's
operations by segment for the three months ended September 30:
<TABLE>
<CAPTION>
Hardware Media Total
Three months ended September 30, 1999
<S> <C> <C> <C>
Net sales $787,816 $2,392,017 $3,179,833
Cost of sales 441,348 1,480,548 1,921,896
Gross profit 346,468 911,469 1,257,937
Selling, general & administrative (1) 291,679 626,832 918,511
Research & development 76,375 37,200 113,575
---------- ---------- ----------
Operating income ($21,586) $247,437 $225,851
Three months ended September 30, 1998
Net sales $760,926 $2,088,461 $2,849,387
Cost of sales 467,752 1,190,302 1,658,054
Gross profit 293,174 898,159 1,191,333
Selling, general & administrative (1) 225,203 635,695 860,898
Research & development 81,308 40,963 122,271
---------- ---------- ----------
Operating income ($13,337) $221,501 $208,164
(1) Management allocates general and administrative expenses to the two segments.
</TABLE>
Depreciation and amortization for the Hardware and Media segments for the
three-month period ended September 30, 1999 were $37,777 and $164,979,
respectively, and for the three month period ended September 30, 1998 were
$51,385 and $90,658, respectively.
<PAGE>
IMTEC, INC.
Item 2. 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, 1999 as compared to Three Months Ended
September 30, 1998
Revenues for the three months ended September 30, 1999 increased
approximately 11.6% from the corresponding period in 1998.
Revenues from Bar Code labels and printing supplies were $2,392,017 for
the quarter ended September 30, 1999 compared to $2,088,461 for the same period
last year. Bar Code labels and printing supplies represented 75.2% of total
revenue for the three months ended September 30, 1999 compared to 73.3% for the
same period last year .
Revenues from the sales of Industrial Bar Code Equipment were $787,816
for the three months ended September 30, 1999 compared to $760,926 for the same
period in 1998. Industrial Bar Code Equipment sales represented 24.8% of total
revenue for the three months ended September 30, 1999 compared to 26.7% for the
same period last year.
Total backlog, for all products, as of September 30, 1999 was
approximately $5,114,000, all of which is scheduled to ship by June 30, 2000.
Total backlog as of September 30, 1998 was $3,305,000. The increase is the
result of an order announced on September 7, 1999 in excess of $2 million from
Intermec Technologies Corporation. The order is for 216 Model 4420E-1 automated
printer-applicators.
Cost of sales as a percentage of net sales for the three months ended
September 30, 1999 was 60.4%, up from 58.2% for the same period in 1998. This
increase is directly related to the product mix and an increased portion of
sales through indirect channels.
Selling, general and administrative ("SG&A") expenses were $918,511 for
the quarter ended September 30, 1999 as compared to $860,898 for the quarter
ended September 30, 1998. This represents a 6.7% increase in these expenses.
While this represents an increase in dollars, SG&A as a percentage of revenues
decreased to 28.9% as of September 30, 1999 from 30.2% as of September 30, 1998.
Research and development expenses for the quarter ended September 30,
1999 were $113,575 (3.6% of sales) compared to $122,271 (4.3% of sales) for the
same period last year.
The Company's effective tax rate was approximately 37% and 40% for the
three months ended September 30, 1999 and 1998, respectively, and is based on
the Company's estimated effective tax rate for the full year.
Net income for the quarter ended September 30, 1999 was $129,005
compared to $64,407 for the quarter ended September 30, 1998. The major reason
for this increase is the increase in revenues and the adoption of SOP 98-5,
which is reflected in the Consolidated Statement of Operations for the three
months ended September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, the Company's principal available sources of
liquidity were operations and a $2,000,000 bank line of credit (all of which was
available as of September 30, 1999).
Accounts receivable decreased from $3,166,970 as of June 30, 1999 to
$2,253,078 as of September 30, 1999, a direct result of the increased efforts at
collections of past due accounts.
Inventories decreased from $2,465,372 as of June 30, 1999 to $2,378,533
as of September 30, 1999.
The Company's capital commitments for fiscal 2000 are expected to be at
the same level as fiscal 1999. The Company has entered into an agreement to
lease a 56,000 square foot facility in Keene, NH that is currently under
construction. During the construction period, the Company has guaranteed the
developer's construction loan. This lease will be accounted for as a capital
lease. Accordingly, the Company has recognized an asset as
construction-in-progress and the corresponding long-term liability as a capital
lease obligation for the construction costs incurred to-date of $805,608. Total
constructions costs are anticipated to be $2,400,000.
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
In Fiscal 1999, the Company adapted SOP 98-5, "Reporting on the Costs
of Start-Up Activities." In April 1998, the American Institute of Certified
Public Accountants issued Statement of Position ("SOP") 98-5, "Reporting on the
Costs of Start-Up Activities," which requires that all start-up activities and
organizational costs be expensed as incurred. SOP 98-5 is effective for fiscal
years beginning after December 15, 1998, however, early adoption is encouraged.
The Company adopted this SOP in the fourth quarter of Fiscal 1999. The Company
has reflected the adoption of this standard in the results of operations for the
three months ended September 30, 1998 as though this standard had been adopted
as of the beginning of Fiscal 1999. The adoption of this statement resulted in a
charge of $51,240 (net of an income tax benefit of $33,609), which is included
in the Consolidated Statement of Operations as a cumulative effect of accounting
change. The cumulative effect of the adoption of SOP 98-5 is calculated as if
the new statement was adopted as of the beginning of the year.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities,"
subsequently amended in June 1999, and effective for fiscal years, including
fiscal quarters, beginning after June 15, 2000. 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 recognizes all derivatives as either assets or
liabilities in the balance sheet and measures those instruments at fair value.
The Company will adopt SFAS No. 133 in the first quarter of fiscal 2001. The
Company is currently analyzing the impact this statement will have 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 effected 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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's outstanding short-term debt as of September 30, 1999
bears interest at a variable rate; 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, 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
None
Item 3 - Defaults upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
A. November 1, 1999 - 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
The Company filed no reports on form 8-K during the quarter
Exhibit 27 - Financial Data Schedule
<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/ Steven D. Anton____________
Steven D. Anton
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, 1999
</LEGEND>
<CIK> 0000730045
<NAME> IMTEC Inc.
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
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<CASH> 114309
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<RECEIVABLES> 2529078
<ALLOWANCES> 276000
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<PP&E> 9496087
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<CURRENT-LIABILITIES> 1780180
<BONDS> 1148341
0
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</TABLE>
