<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 June 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
-------------------------------------------------------
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 -2,027,264 shares at August 8, 1996.
---------------------------------------------------
<PAGE>
SBM INDUSTRIES, INC.
--------------------
INDEX
-----
JUNE 30, 1996
-------------
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
-------
<S> <C> <C>
ITEM 1.
Consolidated Balance Sheet
June 30, 1996 1 & 2
Consolidated Statements of Income -
Six Months Ended June 30, 1996 and 1995 3
Consolidated Statements of Income -
Three Months Ended June 30, 1996 and 1995 4
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1996 and 1995 5
Notes to Consolidated Financial Statements -
June 30, 1996 6
ITEM 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations - June 30, 1996 7 & 8
PART II. OTHER INFORMATION 9 & 10
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
SBM INDUSTRIES, INC.
--------------------
CONSOLIDATED BALANCE SHEET - UNAUDITED
--------------------------------------
JUNE 30, 1996
-------------
A S S E T S
-----------
<TABLE>
<CAPTION>
CURRENT ASSETS:
- --------------
<S> <C>
Cash and Cash Equivalents $ 168,000
Accounts Receivable, Less Allowance for Doubtful
Accounts of $205,000 1,854,000
Inventories 3,464,000
Prepaid Expenses and Other Current Assets 236,000
----------
TOTAL CURRENT ASSETS 5,722,000
-------------------- ----------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
- --------------------------------------
Land, Building and Improvements 1,246,000
Machinery and Equipment 1,192,000
----------
2,438,000
Less: Accumulated Depreciation 650,000
----------
PROPERTY, PLANT AND EQUIPMENT, NET 1,788,000
----------
INTANGIBLE ASSETS AND GOODWILL, NET 3,229,000
- ----------------------------------- ----------
OTHER ASSETS:
- ------------
Note Receivable 250,000
----------
TOTAL ASSETS $ 10,989,000
==========
</TABLE>
- 1 -
<PAGE>
SBM INDUSTRIES, INC.
--------------------
CONSOLIDATED BALANCE SHEET - UNAUDITED
--------------------------------------
JUNE 30, 1996
-------------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
----------------------------------------
<TABLE>
<CAPTION>
CURRENT LIABILITIES:
- -------------------
<S> <C>
Borrowings Under Line of Credit $ 1,100,000
Accounts Payable and Accrued Expenses 1,685,000
Deferred Income 802,000
Current Portion of Notes Payable 332,000
----------
TOTAL CURRENT LIABILITIES 3,919,000
----------
OTHER LIABILITIES:
- -----------------
Notes Payable 1,224,000
----------
TOTAL LIABILITIES 5,143,000
----------------- ----------
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 (708,000)
----------
TOTAL SHAREHOLDERS' INVESTMENT 5,666,000
------------------------------ ----------
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 10,989,000
---------------------------------------------- ==========
</TABLE>
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<PAGE>
SBM INDUSTRIES, INC.
--------------------
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
---------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
-----------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
NET SALES $ 8,912,000 $ 8,157,000
- ---------
Cost of Sales 5,275,000 4,503,000
--------- ---------
GROSS PROFIT ON SALES 3,637,000 3,654,000
--------------------- --------- ---------
OPERATING EXPENSES:
- ------------------
Selling, General and Administrative 3,603,000 3,376,000
Depreciation and Amortization 265,000 248,000
--------- ---------
TOTAL OPERATING EXPENSES 3,868,000 3,624,000
------------------------ --------- ---------
OPERATING INCOME (LOSS) (231,000) 30,000
-----------------------
OTHER INCOME (EXPENSES):
- -----------------------
Interest Expense, Net (101,000) (68,000)
Gain on Sale of Marketable Securities, Net (Note 1) ----- 43,000
Minority Interest in Subsidiary ----- 67,000
---------- ---------
Income (Loss) Before Income Taxes (332,000) 72,000
Provision For Income Taxes (Note 3) ----- -----
---------- ---------
NET INCOME (LOSS) $ (332,000) $ 72,000
----------------- ---------- ---------
PER SHARE (Note 1)
- ---------
NET INCOME (LOSS) $ (.16) $ .04
----------------- ---------- ---------
</TABLE>
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<PAGE>
SBM INDUSTRIES, INC.
--------------------
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
---------------------------------------------
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
-------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
NET SALES $ 4,294,000 $ 3,938,000
- ---------
Cost of Sales 2,470,000 2,190,000
--------- ---------
GROSS PROFIT ON SALES 1,824,000 1,748,000
--------------------- --------- ---------
OPERATING EXPENSES:
- ------------------
Selling, General and Administrative 1,848,000 1,658,000
Depreciation and Amortization 134,000 125,000
--------- ---------
TOTAL OPERATING EXPENSES 1,982,000 1,783,000
------------------------ --------- ---------
OPERATING LOSS (158,000) (35,000)
--------------
OTHER INCOME (EXPENSES):
- -----------------------
Interest Expense, Net (54,000) (38,000)
Gain on Sale of Marketable Securities, Net (Note 1) ----- 5,000
Minority Interest in Subsidiary ----- 39,000
--------- ---------
Loss Before Income Taxes (212,000) (29,000)
Benefit For Income Taxes (Note 3) ----- 2,000
--------- ---------
NET LOSS $ (212,000) $ (27,000)
-------- --------- ---------
PER SHARE (Note 1)
- ---------
NET LOSS $ (.10) $ (.01)
-------- --------- ---------
</TABLE>
- 4 -
<PAGE>
SBM INDUSTRIES, INC.
--------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
-------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
-----------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (332,000) $ 72,000
---------- ---------
Adjustments to reconcile net income (loss) to cash
used in operating activities:
Depreciation and amortization $ 265,000 $ 248,000
Gain related to marketable securities ----- (43,000)
Minority Interest ----- (67,000)
Changes in operating assets and liabilities:
Accounts receivable (21,000) 341,000
Inventories 363,000 (81,000)
Prepaid expenses and other current assets (12,000) (123,000)
Accounts payable and accrued expenses (478,000) (920,000)
Deferred Income (32,000) 83,000
Other (2,000) 5,000
---------- ---------
Total Adjustments $ 83,000 $ (557,000)
---------- ---------
NET CASH USED IN OPERATING ACTIVITIES $ (249,000) $ (485,000)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets $ (101,000) $ (119,000)
Sale of Marketable Securities ----- 563,000
---------- ---------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES $ (101,000) $ 444,000
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Revolving Line of Credit $ 350,000 $ 50,000
Payment on Notes Payable (53,000) (127,000)
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES $ 297,000 $ (77,000)
--------- ---------
NET DECREASE IN CASH & CASH EQUIVALENTS (53,000) $ (118,000)
CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD $ 221,000 287,000
--------- ---------
CASH & CASH EQUIVALENTS AT END OF PERIOD $ 168,000 $ 169,000
--------- ---------
</TABLE>
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<PAGE>
SBM INDUSTRIES, INC.
--------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JUNE 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 (which
included only normal recurring adjustments) necessary to fairly state the
consolidated financial statements for the interim periods presented.
Marketable securities, as a group, has been valued in accordance with Statement
of Financial Accounting Standards No. 115 "Accounting for Certain Investments in
Debt and Equity Securities." The Company considered all marketable securities to
be trading securities.
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 2,028,000 for 1996 and 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 14,100 shares have been granted
pursuant to the 1992 Plan.
(3) Income Taxes
The Company has available booked net operating losses to offset tax liabilities
associated with future operating income.
(4) Contingencies
Securities litigation is pending in the United States District Court for the
Southern District of New York against the Company and some of its directors.
This is a consolidated action in which plaintiffs, allegedly suing on behalf of
all shareholders similarly situated, allege securities fraud as to the Company's
originally published reports of earnings for the first three quarters of 1994.
The alleged classes of plaintiffs consist of persons who purchased the Company's
stock between specified dates in May 1994 and February 1995. As the matter is in
the early stages, and no discovery has been made, it is too soon to assess the
outcome. The Company intends to defend itself vigorously.
- 6 -
<PAGE>
SBM INDUSTRIES, INC.
--------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1996
--------------------------------------
SIX MONTHS ENDED JUNE 30, 1996
------------------------------
COMPARED TO
-----------
SIX MONTHS ENDED JUNE 30, 1995
------------------------------
Sales. Sales from continuing operations increased $755,000, or 9.3%, to
$8,912,000 in the first six months of 1996. Star Struck's sales for the period
were $6,698,000, up $264,000, or 4.1%, from $6,434,000 for the first six months
of 1995. Carlton Press Corp.'s sales of $1,162,000 were down $86,000, or 6.9%,
from 1995's first six month's sales of $1,248,000. RC Manufacturing, Inc.'s
sales of $1,052,000 showed an increase of $577,000 over sales for the first six
months of 1995 of $475,000.
Gross Profit. Gross profit decreased by $17,000 to $3,637,000 in the first six
months of 1996. Gross margin decreased to 40.8% in the first six months of 1996
compared to 44.8% for the same period in 1995. For the first six months of 1996,
Star Struck had a gross margin of 38.6%, while Carlton Press and RC
Manufacturing showed gross margins of 47.9% and 47.0%, respectively. These
figures represent a 2.8% and 17.9% decrease in gross margin for Star Struck and
Carlton Press, respectively, and an 11.6% 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 $227,000 to $3,603,000 in the first six months
of 1996. As a percentage of sales, selling, general and administrative expenses
decreased to 40.4% in the first six months of 1996 compared to 41.4% for the
same period in 1995. For the first six months of 1996, Star Struck's selling,
general and administrative expenses represented 27.1% of total sales. Carlton
Press Corp.'s selling, general and administrative expenses of $804,000 were 9.0%
of total sales, while RC Manufacturing's and SBM's expenses were 3.9% and .4% of
total sales, respectively, for the first six months of 1996.
Operating Profit. Operating profit decreased $261,000 to show a loss of $231,000
for the first six months of 1996.
Net Income. Net income for the first six months of 1996 decreased $404,000 to
show a loss of $332,000.
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<PAGE>
SBM INDUSTRIES, INC.
--------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1996
--------------------------------------
THREE MONTHS ENDED JUNE 30, 1996
--------------------------------
COMPARED TO
-----------
THREE MONTHS ENDED JUNE 30, 1995
--------------------------------
Sales. Total sales for the Company in the second quarter of 1996 increased
$356,000, or 9%, to $4,294,000. Star Struck's sales for the period were
$3,022,000, down 3.5% from $3,130,000 for the second quarter of 1995. Carlton
Press Corp.'s sales of $651,000 were up 11.1% over 1995's second quarter sales
of $586,000. During the second quarter of 1996, a decrease in the backlog at
Carlton Press Corp. caused a shift in the production status of manuscripts in
house and resulted in a $110,000 decrease in deferred revenues. RC
Manufacturing, Inc.'s sales of $621,000 were up $399,000 over 1995's second
quarter sales of $222,000 and contributed 14.5% to the Company's total gross
revenues for the second quarter.
Gross Profit. Gross profit increased $76,000 in the second quarter of 1996.
Gross margin decreased to 42.5% in the second quarter of 1996 compared to 44.4%
for the same period in 1995. For the second quarter of 1996, Star Struck had a
gross margin of 39.6%, while Carlton Press and RC Manufacturing showed gross
margins of 55.5% and 42.7%, respectively. These figures represent a 1.6% and
6.8% decrease in gross margin for Star Struck and Carlton Press, respectively,
and a .4% increase in gross margin for RC Manufacturing, Inc., compared to the
second quarter of 1995.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $190,000 to $1,848,000 in the second quarter
of 1996. As a percentage of sales, selling, general and administrative expenses
increased to 43.0% in the second quarter of 1996 compared to 42.1% for the same
period in 1995. For the second quarter of 1996, Star Struck's selling, general
and administrative expenses represented 28.5% of sales. Carlton Press Corp.'s
selling, general and administrative expenses of $433,000 were 10.1% of total
sales, while RC Manufacturing's and SBM's expenses were 4.1% and .3% of total
sales, respectively, for the second quarter of 1996.
Operating Profit. Operating profit decreased $123,000 to show a loss of $158,000
for the second quarter of 1996.
Net Income. Net income for the second quarter of 1996 decreased $185,000 to show
a loss of $212,000.
Liquidity and Capital Resources. The Company has line of credit agreements with
two of its banks. At June 30, 1996, the Company had used $1,100,000 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 $332,000 in long-term debt
which will mature in the next twelve months.
At June 30, 1996 net working capital was $1,803,000.
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<PAGE>
PART II - OTHER INFORMATION
---------------------------
SBM INDUSTRIES, INC.
--------------------
JUNE 30, 1996
-------------
Item 1. Legal Proceedings
In March 1995, four alleged class action complaints were
filed in the United States District Court for the Southern District of New
York against the Company and some of its directors. The complaints allege
violations of the federal securities laws in connection with the financial
information contained in the Company's quarterly financial reports issued
in 1994. The alleged classes of plaintiffs consist of persons who purchased
the Company's stock between specified dates in May 1994 and February 1995.
As the matter is in the early stages, it is too soon to assess the outcome.
The Company intends to defend itself vigorously.
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
See attached
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 June 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: August 9, 1996 By:/s/ Peter Nisselson
--------------------------
Peter Nisselson, President
Date: August 9, 1996 By:/s/ Lawrence Goldstein
--------------------------
Lawrence Goldstein, Vice-President, Treasurer
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<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 4-SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
----------------------------------------------------------
SBM INDUSTRIES, INC.
--------------------
JUNE 30, 1996
-------------
a) Annual meeting held May 7, 1996
b) Directors elected at the Meeting:
Peter M. Nisselson
Lawrence J. Goldstein
Kenneth Karlan
Robert J. Morris
Arthur Salzfass
Keith Sessler
Michael Sweedler
c) Other matters voted on:
None
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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 JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 168,000
<SECURITIES> 0
<RECEIVABLES> 2,059,000
<ALLOWANCES> 205,000
<INVENTORY> 3,464,000
<CURRENT-ASSETS> 5,722,000
<PP&E> 2,438,000
<DEPRECIATION> 650,000
<TOTAL-ASSETS> 10,989,000
<CURRENT-LIABILITIES> 3,919,000
<BONDS> 0
<COMMON> 2,027,000
0
0
<OTHER-SE> 3,639,000
<TOTAL-LIABILITY-AND-EQUITY> 10,989,000
<SALES> 8,912,000
<TOTAL-REVENUES> 8,912,000
<CGS> 5,275,000
<TOTAL-COSTS> 3,868,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101,000
<INCOME-PRETAX> (332,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (332,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (332,000)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> 0
</TABLE>
