<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
-------------------------------------------------
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to
---------------- --------------------------------
Commission File Number 1-8912
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SBM INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 36-1805030
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two Madison Avenue
Larchmont, NY 10538
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (914) 833-0649
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SAME
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS: Check whether the registrant filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares outstanding of
each of the issuer's classes of common equity, as of the latest practicable
date: $1.00 par value - 2,027,240 shares at November 8, 1996.
-------------------------------------------------------
<PAGE>
SBM INDUSTRIES, INC.
-------------------
INDEX
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SEPTEMBER 30, 1996
------------------
PART I. FINANCIAL INFORMATION Page No.
--------
ITEM 1.
Consolidated Balance Sheet
September 30, 1996 1 & 2
Consolidated Statements of Income-
Nine Months Ended September 30, 1996 and 1995 3
Consolidated Statements of Income-
Three Months Ended September 30, 1996 and 1995 4
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1996 and 1995 5
Notes to Consolidated Financial Statements -
September 30, 1996 6
ITEM 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations -
September 30, 1996 7 & 8
PART II. OTHER INFORMATION 9
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
SBM INDUSTRIES, INC.
--------------------
CONSOLIDATED BALANCE SHEET - UNAUDITED
--------------------------------------
SEPTEMBER 30, 1996
------------------
ASSETS
------
CURRENT ASSETS:
- ---------------
Cash and Cash Equivalents $ 111,000
Accounts Receivable, Less Allowance for Doubtful
Accounts of $205,000 2,087,000
Inventories 3,362,000
Prepaid Expenses and Other Current Assets 221,000
----------
TOTAL CURRENT ASSETS 5,781,000
-------------------- ----------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
- --------------------------------------
Land, Building and Improvements 1,253,000
Machinery and Equipment 1,168,000
----------
2,421,000
Less: Accumulated Depreciation 663,000
----------
PROPERTY, PLANT AND EQUIPMENT, NET 1,758,000
---------------------------------- ----------
INTANGIBLE ASSETS AND GOODWILL, NET 1,272,000
- ----------------------------------- ----------
OTHER ASSETS:
- ------------
Note Receivable 250,000
----------
TOTAL ASSETS $ 9,061,000
------------ ----------
- 1 -
<PAGE>
SBM INDUSTRIES, INC.
--------------------
CONSOLIDATED BALANCE SHEET - UNAUDITED
--------------------------------------
SEPTEMBER 30, 1996
------------------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
----------------------------------------
CURRENT LIABILITIES:
- -------------------
Borrowings Under Line of Credit $ 1,075,000
Accounts Payable and Accrued Expenses 1,995,000
Deferred Income 733,000
Current Portion of Notes Payable 321,000
----------
TOTAL CURRENT LIABILITIES 4,124,000
------------------------- ----------
OTHER LIABILITIES:
- -----------------
Notes Payable 1,174,000
----------
TOTAL LIABILITIES 5,298,000
----------------- ----------
MINORITY INTEREST 180,000
- ----------------- ----------
SHAREHOLDERS' INVESTMENT:
- ------------------------
Preferred Shares, $1 Par Value - 500,000 Shares
Authorized; Issued and Outstanding - 0 Shares --
Common Shares, $1 Par Value - 5,000,000 Shares
Authorized; Issued and Outstanding -
2,027,000 Shares 2,027,000
Paid-in Surplus 4,347,000
Accumulated Deficit (2,791,000)
----------
TOTAL SHAREHOLDERS' INVESTMENT 3,583,000
------------------------------ ----------
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 9,061,000
---------------------------------------------- ==========
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<PAGE>
SBM INDUSTRIES, INC.
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CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
---------------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
-----------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
NET SALES $13,380,000 $12,409,000
- ---------
Cost of Sales 8,085,000 6,998,000
--------- ---------
GROSS PROFIT ON SALES 5,295,000 5,411,000
--------------------- --------- ---------
OPERATING EXPENSES:
- ------------------
Selling, General and Administrative 5,282,000 5,141,000
Depreciation and Amortization 399,000 376,000
Write-Down of Goodwill (Note 4) 1,876,000 --
--------- ---------
TOTAL OPERATING EXPENSES 7,557,000 5,517,000
------------------------ --------- ---------
OPERATING LOSS (2,262,000) (106,000)
--------------
OTHER INCOME (EXPENSES):
- -----------------------
Interest Expense, Net (153,000) (101,000)
Gain on Sale of Marketable Securities, Net -- 43,000
Minority Interest in Subsidiary -- 110,000
--------- ---------
Loss Before Income Taxes (2,415,000) (54,000)
Provision For Income Taxes (Note 3) -- --
--------- ---------
NET LOSS $(2,415,000) $ (54,000)
--------
PER SHARE (Note 1)
- ---------
NET LOSS $ (1.19) $ (.02)
-------- --------- ---------
</TABLE>
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<PAGE>
SBM INDUSTRIES, INC.
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CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
---------------------------------------------
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
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<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
NET SALES $ 4,468,000 $4,252,000
- ---------
Cost of Sales 2,810,000 2,495,000
--------- ---------
GROSS PROFIT ON SALES 1,658,000 1,757,000
--------------------- --------- ---------
OPERATING EXPENSES:
- ------------------
Selling, General and Administrative 1,679,000 1,765,000
Depreciation and Amortization 134,000 128,000
Write-Down of Goodwill (Note 4) 1,876,000 --
--------- ---------
TOTAL OPERATING EXPENSES 3,689,000 1,893,000
------------------------ --------- ---------
OPERATING LOSS (2,031,000) (136,000)
--------------
OTHER INCOME (EXPENSES):
- -----------------------
Interest Expense, Net (53,000) (33,000)
Minority Interest in Subsidiary -- 43,000
--------- ---------
Loss Before Income Taxes (2,084,000) (126,000)
Provision For Income Taxes (Note 3) -- --
--------- ---------
NET LOSS $(2,084,000) $ (126,000)
--------
PER SHARE (Note 1)
- ---------
NET LOSS $ (1.03) $ (.06)
-------- --------- ---------
</TABLE>
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<PAGE>
SBM INDUSTRIES, INC.
--------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
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FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
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<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (2,415,000) $ (54,000)
---------- ----------
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization 399,000 376,000
Write-down of goodwill 1,876,000 --
Gain related to marketable securities -- (43,000)
Minority Interest -- (110,000)
Changes in operating assets and liabilities:
Accounts receivable (254,000) (202,000)
Inventories 465,000 (34,000)
Prepaid expenses and other current assets 3,000 (207,000)
Accounts payable and accrued expenses (168,000) (447,000)
Deferred Income (101,000) 119,000
Other -- 4,000
---------- ----------
Total Adjustments 2,220,000 (544,000)
---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (195,000) (598,000)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets (123,000) (163,000)
Sale of Marketable Securities -- 563,000
Purchase of Marketable Securities -- (125,000)
---------- ----------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (123,000) 275,000
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Revolving Line of Credit 325,000 250,000
Payment on Notes Payable (114,000) (13,000)
Payment for Redemption and Cancellation of Stock (3,000) --
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 208,000 237,000
---------- ----------
NET DECREASE IN CASH & CASH EQUIVALENTS (110,000) (86,000)
CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 221,000 287,000
---------- ----------
CASH & CASH EQUIVALENTS AT END OF PERIOD $ 111,000 $ 201,000
---------- ----------
</TABLE>
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<PAGE>
SBM INDUSTRIES, INC.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 1996
------------------
(1) Summary of Major Accounting Policies
------------------------------------
The consolidated financial statements heretofore presented have been prepared by
SBM Industries, Inc. ("the Company" or "SBM"), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. It is suggested that these consolidated financial statements be
read in conjunction with the financial statements and the notes thereto included
in the Company's latest annual report on Form 10-KSB. The interim figures
presented are unaudited and are subject to any adjustments which may result from
the year-end examination of the Company's financial statements. However, in the
opinion of management, the information furnished reflects all adjustments
necessary to fairly state the consolidated financial statements for the interim
periods presented.
Net income per share is computed based on the weighted average number of shares
outstanding during each period. The average number of shares used in the
computation of earnings per share was 2,027,000 for 1996 and 2,028,000 for 1995.
The profit and loss information for the interim periods presented are not
necessarily indicative of results to be expected for the year.
(2) Stock Options
-------------
On March 10, 1992, the Board of Directors of the Company adopted the 1992
Incentive Stock Option Plan providing for the issuance of 100,000 shares. The
shareholders of the Company approved the 1992 Plan at the Annual Meeting of
Shareholders held on August 25, 1992. Options on 13,900 shares have been
granted pursuant to the 1992 Plan.
(3) Income Taxes
------------
The Company has available book net operating losses to offset tax liabilities
associated with future operating income.
(4) Write-Down of Goodwill
----------------------
During the quarter ended September 30, 1996, the Company determined that the
goodwill associated with the acquisition of Carlton Press Corp. was not
recoverable. In accordance with SFAS No. 121, the Company has written off the
remaining goodwill balance of approximately $1,900,000. The Company will
continue to evaluate the recoverability of its other intangibles, as well as its
future plans for Carlton Press Corp.
(5) Contingencies
-------------
On August 9, 1996, in the consolidated class action by certain shareholders, the
Court granted the Company's motion for judgment on the pleadings and dismissed
the complaint as against the Company and all but two of the individual
defendants.
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<PAGE>
SBM INDUSTRIES, INC.
--------------------
ITEM 2, MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
--------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1996
------------------------------------
COMPARED TO
-----------
NINE MONTHS ENDED SEPTEMBER 30, 1995
------------------------------------
Sales. Sales from continuing operations increased $971,000, or 7.8%, to
$13,380,000 in the first nine months of 1996. Star Struck's sales for the
period were $9,967,000, up $190,000, or 1.9%, from $9,777,000 for the first nine
months of 1995. Carlton Press Corp.'s sales of $1,666,000 were down $244,000,
or 12.8%, from 1995's first nine month's sales of $1,910,000. RC Manufacturing,
Inc.'s sales of $1,747,000 showed an increase of $1,025,000 over sales for the
first nine months of 1995 of $722,000.
Gross Profit. Gross profit decreased by $116,000 to $5,295,000 in the first
nine months of 1996. Gross margin decreased to 39.6% in the first nine months
of 1996 compared to 43.6% for the same period in 1995. For the first nine
months of 1996, Star Struck had a gross margin of 39.5%, while Carlton Press and
RC Manufacturing showed gross margins of 41.8% and 38.1%, respectively. These
figures represent a 1.3% and 18.8% decrease in gross margin for Star Struck and
Carlton Press, respectively, and a 1.3% increase in gross margin for RC
Manufacturing, Inc., compared to the same period in 1995.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $141,000 to $5,282,000 in the first nine
months of 1996. As a percentage of sales, selling, general and administrative
expenses decreased to 39.5% in the first nine months of 1996 compared to 41.4%
for the same period in 1995. For the first nine months of 1996, Star Struck's
selling, general and administrative expenses represented 26.5% of total sales.
Carlton Press Corp.'s selling, general and administrative expenses of $1,152,000
were 8.6% of total sales, while RC Manufacturing's and SBM's expenses were 4.0%
and .4% of total sales, respectively, for the first nine months of 1996.
Operating Profit. Operating profit decreased $2,156,000 to show a loss of
$2,262,000 for the first nine months of 1996. During the quarter ended
September 30, 1996, the Company determined that the goodwill associated with the
acquisition of Carlton Press Corp. was not recoverable. In accordance with SFAS
No. 121, the Company has written off the remaining goodwill balance of
approximately $1,900,000.
Net Income. Net income for the first nine months of 1996 decreased $2,361,000
to show a loss of $2,415,000.
- 7 -
<PAGE>
SBM INDUSTRIES, INC.
--------------------
ITEM 2, MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
--------------------------------------------
THREE MONTHS ENDED SEPTEMBER 30, 1996
-------------------------------------
COMPARED TO
-----------
THREE MONTHS ENDED SEPTEMBER 30, 1995
-------------------------------------
Sales. Total sales for the Company in the third quarter of 1996 increased
$216,000, or 5%, to $4,468,000. Star Struck's sales for the period were
$3,269,000, down 2.2% from $3,344,000 for the third quarter of 1995. Carlton
Press Corp.'s sales of $504,000 were down 23.9% from 1995's third quarter sales
of $662,000. RC Manufacturing, Inc.'s sales of $695,000 were up $449,000 over
1995's third quarter sales of $246,000 and contributed 15.6% to the Company's
total gross revenues for the third quarter.
Gross Profit. Gross profit decreased $99,000 in the third quarter of 1996.
Gross margin decreased to 37.1% in the third quarter of 1996 compared to 41.3%
for the same period in 1995. For the third quarter of 1996, Star Struck had a
gross margin of 41.2%, while Carlton Press and RC Manufacturing showed gross
margins of 27.9% and 24.5%, respectively. These figures represent a 15.1% and
22.2% decrease in gross margin for RC Manufacturing, Inc. and Carlton Press
Corp., respectively, and a 1.6% increase in gross margin for Star Struck,
compared to the third quarter of 1995.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $86,000 to $1,679,000 in the third quarter of
1996. As a percentage of sales, selling, general and administrative expenses
decreased to 37.6% in the third quarter of 1996 compared to 41.5% for the same
period in 1995. For the third quarter of 1996, Star Struck's selling, general
and administrative expenses represented 25.2% of sales. Carlton Press Corp.'s
selling, general and administrative expenses of $348,000 were 7.8% of total
sales, while RC Manufacturing's and SBM's expenses were 4.2% and .4% of total
sales, respectively, for the third quarter of 1996.
Operating Profit. Operating profit decreased $1,895,000 to show a loss of
$2,031,000 for the third quarter of 1996. During the quarter ended September
30, 1996, the Company determined that the goodwill associated with the
acquisition of Carlton Press Corp. was not recoverable. In accordance with SFAS
No. 121, the Company has written off the remaining goodwill balance of
approximately $1,900,000.
Net Income. Net income for the third quarter of 1996 decreased $1,958,000 to
show a loss of $2,084,000.
Liquidity and Capital Resources. The Company and its subsidiaries have line of
credit agreements with two of their banks. At September 30, 1996, the Company
had used $1,075,000 of the $1,225,000 available under these agreements, which
were renewed in May 1996 and will expire in May 1997.
The Company believes that it has adequate funds available to conduct and
continue its business and to repay the approximate $321,000 in long-term debt
which will mature in the next twelve months.
At September 30, 1996 net working capital was $1,657,000.
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<PAGE>
PART II - OTHER INFORMATION
---------------------------
SBM INDUSTRIES, INC.
--------------------
SEPTEMBER 30, 1996
------------------
Item 1. Legal Proceedings
On August 9, 1996, in the consolidated class action by certain
shareholders, the Court granted the Company's motion for judgment on
the pleadings and dismissed the complaint as against the Company and
all but two of the individual defendants.
Item 2. Changes in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27-Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 1996
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.
SBM INDUSTRIES, INC.
Date: November 12, 1996 By:/s/Peter Nisselson
------------------------------
Peter Nisselson, President
Date: November 12, 1996 By:/s/Lawrence Goldstein
------------------------------
Lawrence Goldstein, Vice-President, Treasurer
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SBM
Industries, Inc.'s Quarterly Report to Stockholders for the quarterly period
ended September 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> SEP-30-1996 SEP-30-1995
<CASH> 111,000 0
<SECURITIES> 0 0
<RECEIVABLES> 2,292,000 0
<ALLOWANCES> 205,000 0
<INVENTORY> 3,362,000 0
<CURRENT-ASSETS> 5,781,000 0
<PP&E> 2,421,000 0
<DEPRECIATION> 663,000 0
<TOTAL-ASSETS> 9,061,000 0
<CURRENT-LIABILITIES> 4,124,000 0
<BONDS> 0 0
0 0
0 0
<COMMON> 2,027,000 0
<OTHER-SE> 1,556,000 0
<TOTAL-LIABILITY-AND-EQUITY> 9,061,000 0
<SALES> 13,380,000 12,409,000
<TOTAL-REVENUES> 13,380,000 12,409,000
<CGS> 8,085,000 6,998,000
<TOTAL-COSTS> 7,557,000 5,517,000
<OTHER-EXPENSES> 0 (153,000)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 153,000 101,000
<INCOME-PRETAX> (2,415,000) (54,000)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,415,000) (54,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,415,000) (54,000)
<EPS-PRIMARY> (1.19) (0.02)
<EPS-DILUTED> 0 0
</TABLE>
