<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, 1997
-------------------------------------------
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period
from____________________to______________________________________________________
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.)
1865 Palmer 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 - 2,026,144 shares at August 5, 1997.
-----------------------------------------------------
<PAGE>
SBM INDUSTRIES, INC.
--------------------
INDEX
-----
JUNE 30, 1997
-------------
PART I. FINANCIAL INFORMATION Page No.
--------
ITEM 1.
Consolidated Balance Sheet
June 30, 1997 1 & 2
Consolidated Statements of Income-
Six Months Ended June 30, 1997 and 1996 3
Consolidated Statements of Income-
Three Months Ended June 30, 1997 and 1996 4
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1997 and 1996 5
Notes to Consolidated Financial Statements -
June 30, 1997 6
ITEM 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations -
June 30, 1997 7 & 8
PART II. OTHER INFORMATION 9 & 10
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
SBM INDUSTRIES, INC.
--------------------
CONSOLIDATED BALANCE SHEET - UNAUDITED
--------------------------------------
JUNE 30, 1997
-------------
A S S E T S
-----------
CURRENT ASSETS:
- ---------------
Cash and Cash Equivalents $ 66,000
Accounts Receivable, Less Allowance for Doubtful
Accounts of $175,000 1,531,000
Inventories 2,779,000
Prepaid Expenses and Other Current Assets 174,000
----------
TOTAL CURRENT ASSETS 4,550,000
-------------------- ---------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
- --------------------------------------
Land, Building and Improvements 1,235,000
Machinery and Equipment 1,075,000
---------
2,310,000
Less: Accumulated Depreciation 745,000
---------
PROPERTY, PLANT AND EQUIPMENT, NET 1,565,000
---------------------------------- ---------
INTANGIBLE ASSETS AND GOODWILL, NET 903,000
- ----------------------------------- ---------
TOTAL ASSETS $ 7,018,000
------------ ==========
- 1 -
<PAGE>
SBM INDUSTRIES, INC.
--------------------
CONSOLIDATED BALANCE SHEET - UNAUDITED
--------------------------------------
JUNE 30, 1997
-------------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
----------------------------------------
CURRENT LIABILITIES:
- --------------------
Borrowings Under Line of Credit $ 925,000
Accounts Payable and Accrued Expenses 1,230,000
Current Portion of Notes Payable 290,000
----------
TOTAL CURRENT LIABILITIES 2,445,000
------------------------- ----------
OTHER LIABILITIES:
- -----------------
Notes Payable 1,001,000
----------
TOTAL LIABILITIES 3,446,000
----------------- ---------
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 -
2,026,000 Shares 2,026,000
Paid-in Surplus 4,345,000
Accumulated Deficit (2,799,000)
----------
TOTAL SHAREHOLDERS' INVESTMENT 3,572,000
------------------------------ ---------
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 7,018,000
---------------------------------------------- ==========
- 2 -
<PAGE>
SBM INDUSTRIES, INC.
--------------------
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
---------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
-----------------------------------------------
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
NET SALES $6,251,000 $7,750,000
- ---------
Cost of Sales 3,870,000 4,669,000
---------- ----------
GROSS PROFIT ON SALES 2,381,000 3,081,000
--------------------- ---------- ----------
OPERATING EXPENSES:
- -------------------
Selling, General and Administrative 2,409,000 2,799,000
Depreciation and Amortization 166,000 161,000
---------- ----------
TOTAL OPERATING EXPENSES 2,575,000 2,960,000
------------------------ ---------- ----------
OPERATING INCOME (LOSS) (194,000) 121,000
------------------------
OTHER INCOME (EXPENSES):
- ------------------------
Interest Expense, Net (102,000) (81,000)
---------- ----------
Income (Loss) from Continuing Operations Before Income Taxes (296,000) 40,000
Provision For Income Taxes (Note 2) ----- -----
---------- ----------
Income (Loss) from Continuing Operations (296,000) 40,000
Loss from Discontinued Operations ----- (372,000)
---------- ----------
NET LOSS $ (296,000) $ (332,000)
-------- ---------- ----------
PER SHARE (Note 1)
- ---------
Income (Loss) from Continuing Operations $ (.14) $ .02
Loss from Discontinued Operations ---- (.18)
---------- ----------
NET LOSS $ (.14) $ (.16)
-------- ---------- ----------
</TABLE>
- 3 -
<PAGE>
SBM INDUSTRIES, INC.
--------------------
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
---------------------------------------------
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996
-------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
NET SALES $3,390,000 $3,643,000
- ---------
Cost of Sales 2,220,000 2,180,000
---------- ----------
GROSS PROFIT ON SALES 1,170,000 1,463,000
--------------------- ---------- ----------
OPERATING EXPENSES:
- ------------------
Selling, General and Administrative 1,245,000 1,415,000
Depreciation and Amortization 84,000 81,000
---------- ----------
TOTAL OPERATING EXPENSES 1,329,000 1,496,000
------------------------ ---------- ----------
OPERATING INCOME (LOSS) (159,000) (33,000)
------------------------
OTHER INCOME (EXPENSES):
- -----------------------
Interest Expense, Net (52,000) (44,000)
---------- ----------
Income (Loss) from Continuing Operations Before Income Taxes (211,000) (77,000)
Provision For Income Taxes (Note 2) ----- -----
---------- ----------
Income (Loss) from Continuing Operations (211,000) (77,000)
Loss from Discontinued Operations ----- (135,000)
---------- ----------
NET LOSS $ (211,000) $ (212,000)
-------- ---------- ----------
PER SHARE (Note 1)
- ---------
Income (Loss) from Continuing Operations $ (.10) $ (.04)
Loss from Discontinued Operations ---- (.06)
---------- ----------
NET LOSS $ (.10) $ (.10)
-------- ---------- ----------
</TABLE>
- 4 -
<PAGE>
SBM INDUSTRIES, INC.
--------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
-------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
----------- -----------------------------------
<TABLE>
<CAPTION>
1997 1996
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(296,000) $(332,000)
---------- ---------
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization 166,000 161,000
Loss from discontinued operations ----- 372,000
Changes in operating assets and liabilities:
Accounts receivable 901,000 5,000
Inventories 362,000 398,000
Prepaid expenses and other current assets (1,000) (14,000)
Accounts payable and accrued expenses (820,000) (607,000)
Deferred Income (18,000) 56,000
Changes in discontinued operations ----- (330,000)
---------- ---------
Total Adjustments 590,000 41,000
---------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 294,000 (291,000)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets (46,000) (59,000)
---------- ---------
NET CASH USED IN INVESTING ACTIVITIES (46,000) (59,000)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (Payment on) Revolving Line of Credit (200,000) 350,000
Redemption of Common Stock (3,000) (3,000)
Payment on Notes Payable (108,000) (50,000)
---------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (311,000) 297,000
---------- ---------
NET DECREASE IN CASH & CASH EQUIVALENTS (63,000) (53,000)
CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 129,000 221,000
---------- ---------
CASH & CASH EQUIVALENTS AT END OF PERIOD $ 66,000 $ 168,000
---------- ---------
</TABLE>
-5 -
<PAGE>
SBM INDUSTRIES, INC.
--------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JUNE 30, 1997
-------------
(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 1997 and 2,028,000 for 1996.
The profit and loss information for the interim periods presented are not
necessarily indicative of results to be expected for the year.
(2) Income Taxes
------------
The Company has available book net operating losses to offset tax liabilities
associated with future operating income. At December 31, 1996, for tax
reporting purposes, the Company had approximately $3,580,000 of operating loss
carryforwards. The tax operating loss carryforwards will begin expiring in
2005.
(3) Recent Accounting Pronouncements
--------------------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share." This Statement
establishes standards for computing and presenting earnings per share ("EPS")
and applies to all entities with publicly held common stock or potential common
stock. This statement replaces the presentation of primary EPS and fully
diluted EPS with a presentation of basic EPS and diluted EPS, respectively.
Basic EPS excludes dilution and is computed by dividing earnings available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Similar to fully diluted EPS, diluted EPS reflects the
potential dilution of securities that could share in the earnings. The
Statement is not expected to have a material effect on SBM's reported EPS
amounts. This Statement is effective for SBM's financial statements for the
year ended December 31, 1997.
(4) Discontinued Operations
-----------------------
In December 1996, the Company's 80% owned subsidiary, Carlton Press Corp.
("CPC"), filed a voluntary petition under chapter 7 of the United States
Bankruptcy Code. The results from operations of CPC for prior periods have been
accounted for as discontinued operations.
- 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, 1997
--------------------------------------
SIX MONTHS ENDED JUNE 30, 1997
------------------------------
COMPARED TO
------------
SIX MONTHS ENDED JUNE 30, 1996
------------------------------
SALES. Sales from continuing operations decreased $1,499,000, or 19.3%, to
$6,251,000 in the first six months of 1997. Star Struck's sales for the period
were $5,623,000, down $1,075,000, or 16%, from $6,698,000 for the first six
months of 1996. RC Manufacturing, Inc.'s sales of $628,000 showed a decrease of
$424,000, or 40%, from sales for the first six months of 1996 of $1,052,000.
GROSS PROFIT. Gross profit decreased by $700,000 to $2,381,000 in the first six
months of 1997. Gross margin decreased to 38.1% in the first six months of 1997
compared to 39.8% for the same period in 1996. For the first six months of
1997, Star Struck had a gross margin of 41.1%, while RC Manufacturing showed a
gross margin of 11.5%. These figures represent a 2.5% increase in gross margin
for Star Struck and a 35.5% decrease in gross margin for RC Manufacturing, Inc.,
compared to the same period in 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $390,000 to $2,409,000 in the first six months
of 1997. As a percentage of sales, selling, general and administrative expenses
increased to 38.5% in the first six months of 1997 compared to 36.1% for the
same period in 1996. For the first six months of 1997, Star Struck's selling,
general and administrative expenses represented 34.2% of total sales, while RC
Manufacturing, Inc.'s and SBM's expenses were 3.9% and .4% of total sales,
respectively, for the first six months of 1997.
OPERATING PROFIT. Operating profit decreased $315,000 to show a loss of
$194,000 for the first six months of 1997.
NET INCOME. Income from continuing operations for the first six months of 1997
decreased $336,000 to show a loss of $296,000. Net income increased $36,000
from 1996's first six month's loss of $332,000 to show a loss of $296,000 for
the same period in 1997.
- 7 -
<PAGE>
SBM INDUSTRIES, INC.
--------------------
ITEM 2, MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
FOR THE THREE MONTHS ENDED JUNE 30, 1997
----------------------------------------
THREE MONTHS ENDED JUNE 30, 1997
--------------------------------
COMPARED TO
------------
THREE MONTHS ENDED JUNE 30, 1996
--------------------------------
SALES. Sales from continuing operations decreased $253,000, or 6.9%, to
$3,390,000 in the second quarter of 1997. Star Struck's sales for the period
were $3,088,000, up $66,000, or 2%, from $3,022,000 for the second quarter of
1996. RC Manufacturing, Inc.'s sales of $302,000 showed a decrease of $319,000,
or 51%, from sales for the second quarter of 1996 of $621,000.
GROSS PROFIT. Gross profit decreased by $293,000 to $1,170,000 in the second
quarter of 1997. Gross margin decreased to 34.5% in the second quarter of 1997
compared to 40.2% for the same period in 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $170,000 to $1,245,000 in the second quarter
of 1997. As a percentage of sales, selling, general and administrative expenses
decreased to 36.7% in the second quarter of 1997 compared to 38.8% for the same
period in 1996. For the second quarter of 1997, Star Struck's selling, general
and administrative expenses represented 32.8% of total sales, while RC
Manufacturing's and SBM's expenses were 3.6% and .3% of total sales,
respectively, for the second quarter of 1997.
OPERATING PROFIT. Operating profit decreased $126,000 to show a loss of
$159,000 for the second quarter of 1997.
NET INCOME. Income from continuing operations for the second quarter of 1997
decreased $134,000 to show a loss of $211,000. Net income increased $1,000
from 1996's second quarter loss of $212,000 to show a loss of $211,000 for the
same period in 1997.
LIQUIDITY AND CAPITAL RESOURCES. The Company has $1,225,000 available in line
of credit agreements with two of its banks. These agreements for $1,000,000 and
$225,000 extend through May 1998 and January 1998, respectively. At June 30,
1997, the Company had used $925,000 of the funds available under these line of
credit agreements.
The Company believes that it has adequate funds available to conduct and
continue its business and to repay the approximate $290,000 in long-term debt
which will mature in the next twelve months.
At June 30, 1997 net working capital was $2,105,000.
- 8 -
<PAGE>
PART II - OTHER INFORMATION
---------------------------
SBM INDUSTRIES, INC.
--------------------
JUNE 30, 1997
-------------
Item 1. Legal Proceedings
Not applicable
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, 1997
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 8, 1997 By:/s/Peter Nisselson
----------------------------
Peter Nisselson, President
Date: August 8, 1997 By:/s/ Kenneth Karlan
----------------------------
Kenneth Karlan, Vice-President
-9 -
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 4-SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
----------------------------------------------------------
SBM INDUSTRIES, INC.
--------------------
JUNE 30, 1997
-------------
a) Annual meeting held May 13, 1997
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
-10 -
<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, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> JUN-30-1997 JUN-30-1996
<CASH> 66,000 0
<SECURITIES> 0 0
<RECEIVABLES> 1,706,000 0
<ALLOWANCES> 175,000 0
<INVENTORY> 2,779,000 0
<CURRENT-ASSETS> 4,550,000 0
<PP&E> 2,310,000 0
<DEPRECIATION> 745,000 0
<TOTAL-ASSETS> 7,018,000 0
<CURRENT-LIABILITIES> 2,445,000 0
<BONDS> 0 0
0 0
0 0
<COMMON> 2,026,000 0
<OTHER-SE> 1,546,000 0
<TOTAL-LIABILITY-AND-EQUITY> 7,018,000 0
<SALES> 6,251,000 7,750,000
<TOTAL-REVENUES> 6,251,000 7,750,000
<CGS> 3,870,000 4,669,000
<TOTAL-COSTS> 2,575,000 2,960,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 102,000 81,000
<INCOME-PRETAX> (296,000) 40,000
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (296,000) 40,000
<DISCONTINUED> 0 (372,000)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (296,000) (332,000)
<EPS-PRIMARY> (.14) (.16)
<EPS-DILUTED> 0 0
</TABLE>
