<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended Dec. 31, 1996
-------------
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
Commission File Number 1-8912
------
SBM INDUSTRIES, INC.
---------------------------------------------
(Name of Small Business Issuer in it Charter)
Delaware 36-1805030
- -------------------------------------- -------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1865 Palmer Avenue
Larchmont, New York 10538
- -------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
(914) 833-0649
--------------
(Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock, $1.00 par value American Stock Exchange
- ----------------------------- -----------------------
Securities registered pursuant to Section 12(g) of the Act: None
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 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
----- ------
<PAGE>
Check if disclosure of no delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year were
$15,693,000.
Based on the closing sales price on March 18, 1996, the aggregate
market value of the voting stock held by non-affiliates of the registrant was
approximately $2,221,850.
The number of shares outstanding of the registrant's common stock
was 2,027,234 at March 18, 1997.
DOCUMENTS INCORPORATED BY REFERENCE: Part III - Definitive Proxy
Statement relating to May 13, 1997 Annual Meeting of Shareholders. Parts I and
II - Annual Report to Shareholders for the year ended December 31, 1996.
-2-
<PAGE>
PART I
Item I. Description of Business
-----------------------
General
- -------
SBM Industries, Inc. (the "Company") is a holding company whose
operating subsidiary corporations are engaged in the distribution of watch
batteries and related products. The Company was organized in 1935 as an
Illinois corporation, was reincorporated as a Delaware corporation in 1985, and
changed its name from Speed-O-Print Business Machines Corporation in 1992. The
Company's principal executive offices have been located in Larchmont, New York
since 1992.
Star Struck, Inc.
- -----------------
The Company's principal operating subsidiary is Star Struck, Inc.,
a Connecticut corporation ("SSI"), whose principal offices are in Bethel,
Connecticut. SSI is a distributor throughout the United States of watch
batteries. SSI also sells alkaline, photo and hearing aid batteries, jewelry
findings, tools, supplies, and plastic bags and manufactures and sells watch
straps.
SSI made three acquisitions in 1994 that expanded its business. SSI
acquired assets relating to the distribution and manufacture of watch straps
from Freedman & Sons Corp. in August 1994 and from R. C. Manufacturing, Inc. in
September 1994. On October 1, 1994, SSI also acquired assets relating to the
distribution of watch batteries from Time Craft Industries, Incorporated. The
aggregate of the purchase prices of these three acquisitions was approximately
$1.3 million.
SSI sells its products through direct mail and telemarketing to
jewelry stores, discount store chains and other retail vendors.
SSI competes in a competitive, but highly fragmented industry.
SSI's business does not depend on the availability of raw
materials. SSI distributes watch batteries for Sony, Eveready, Maxell, Renata,
Rayovac and Varta under the manufacturer's and SSI's private label. SSI sells
its watch straps under the Sahara, Town & Country, Downing and R. C.
Manufacturing tradenames.
-3-
<PAGE>
SSI has approximately 8000 active customers. SSI's two largest
customers account for 15% and 11% of its sales, respectively.
Governmental regulation is not a specific influence on the
business of SSI, and generally compliance with environmental regulations have
not been burdensome to SSI.
SSI has approximately 70 full-time employees, and 1 part-time
employee.
Carlton Press, Inc.
- -------------------
Carlton Press Corp. ("Carlton"), which the Company acquired in
December 1953, became the subject of a voluntary bankruptcy proceeding under
Chapter 7 of the Bankruptcy Code on December 3, 1996. Carlton ceased
operations on November 14, 1996.
Prior to the bankruptcy, Carlton was a subsidy book publisher. It
published manuscripts submitted by authors for which it charged the authors a
publishing fee. Although most of its revenue derived from the contracts with
the authors, Carlton also received royalty revenues from sales of the books.
The Company wrote off its entire investment in Carlton in the
third and fourth quarters of 1996.
Radio Broadcasting Business
- ---------------------------
On January 31, 1994, the Company's subsidiary WWMY-FM Broadcasting
Inc. ("WWMY") sold all of its assets used in connection with its FM radio
station in Eden, North Carolina. Prior to the sale, WWMY had derived all of
its revenues from a brokerage agreement under which the broadcasting facilities
had been made available to Voyager Communications, Inc. After the sale, WWMY
engaged in no further business activity and became dormant.
Investments
- -----------
The Company generally holds its liquid assets in government
securities. Government securities include only such securities as defined in
the Investment Company Act of 1940, as amended.
-4-
<PAGE>
General
- -------
The Company does not hold any patents, trademarks, licenses,
franchises or concessions in connection with its business, except as described
above.
The Company expended no money on research and development in 1995
or 1996.
Item 2. Properties.
----------
The Company leases offices in Larchmont, New York for use as its
executive offices.
SSI owns property located in the Francis J. Clarke Industrial Park
at 8 Francis J. Clarke Circle in Bethel, Connecticut. The property consists of
2.344 acres of land and a warehouse/office building. The building, as
originally constructed in 1990, comprised 10,500 square feet. A 10,000
square-foot addition to the building was completed in May 1994. Approximately
sixty percent of the building is used as a warehouse and remaining forty
percent is used as offices by SSI. The warehouse space contains a loading
dock. The property is encumbered by a mortgage.
SSI's subsidiary, R. C. Manufacturing, Inc., leases a
manufacturing and office facility in St. Petersburg, Florida, comprising
approximately 5,000 square feet.
Carlton, which is now in bankruptcy, leases approximately 5,000
square feet of office space in New York, New York for use as executive and
editorial offices.
Item 3. Legal Proceedings.
-----------------
A consolidated action by shareholders alleging securities fraud as
to the Company's originally published reports of earnings for the first three
quarters of 1994, was dismissed as against the Company and certain individual
defendants and voluntarily dismissed as to the remaining individual defendants
in the fourth quarter of 1996.
Item 4. Submission of Matters to a Vote of Security
Holders.
-------------------------------------------
None.
-5-
<PAGE>
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters.
------------------------------------
The principal United States market in which the Company's common
stock is traded is the American Stock Exchange. See page 14 of the Company's
1996 Annual Report to Shareholders, in the section entitled "Market and
Dividend Information", which is incorporated herein by reference, for
information concerning the high and low sales prices for the Company's common
stock for each quarter of 1995 and 1996. As of March 18, 1997, the Company had
approximately 800 shareholders of common stock. No dividends were paid by the
Company during the 1995 and 1996 fiscal years.
Item 6. Management's Discussion and Analysis or
Plan of Operation.
---------------------------------------
See pages 12 through 13 of the Company's 1996 Annual Report to
Shareholders, which is incorporated herein by reference.
Item 7. Financial Statements and Supplementary Data.
-------------------------------------------
See pages 2 through 11 of the Company's 1996 Annual Report to
Shareholders, which are incorporated herein by reference.
Item 8. Changes in and Disagreements on Accounting
and Financial Disclosure.
------------------------------------------
None.
PART III
Item 9. Directors and Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
---------------------------------------------------------------
See the sections entitled "Nominees for Election as Directors" and
"Executive Officers and Executive Compensation" and "Compliance with Section
16(a) of the Exchange Act" in the Company's Proxy Statement for the Annual
Meeting of Shareholders to be held on May 13, 1997 which are incorporated
herein by reference, for information concerning directors, executive officers,
promoters and control persons of the Company.
-6-
<PAGE>
Item 10. Executive Compensation.
----------------------
See the section entitled "Executive Officers and Executive
Compensation" in the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held on May 13, 1997, which is incorporated herein by
reference, for information concerning executive compensation.
Item 11. Security Ownership of Certain Beneficial Owners
and Management.
-----------------------------------------------
See the sections entitled "Executive Officers and Executive
Compensation -- Stock Options," "Security Ownership of Management" and "Other
Principal Holders of Voting Securities" in the Company's Proxy Statement for
the Annual Meeting of Shareholders to be held on May 13, 1997 which are
incorporated herein by reference.
Item 12. Certain Relationships and Related Transactions.
----------------------------------------------
See the section entitled "Nominees for Election as Directors --
Additional Information" in the Company's Proxy Statement for the Annual Meeting
of Shareholders to be held on May 13, 1997, which is incorporated herein by
reference.
Item 13. Exhibits, Lists and Reports on Form 8-K.
---------------------------------------
(a) 1. & 2. Financial Statements.
--------------------
A copy of the Company's Annual Report to Shareholders for the year
ended December 31, 1996 has been furnished as an exhibit to this Annual Report
on Form 10-KSB. Pages 1 through 11 of such Annual Report to Shareholders contain
the Consolidated Balance Sheet as of December 31, 1996, and the Consolidated
Statements of Operations, Shareholders' Investment and Cash Flows and Notes to
Consolidated Financial Statements for each of the two years ended December 31,
1996 and 1995, and the Auditors' Report covering the aforementioned financial
statements. These Financial Statements and the Auditors' Report thereon are
incorporated herein by reference.
(a) Exhibits
--------
(3) The Articles of Incorporation and Bylaws of the Company, as
amended, filed as Exhibit to a report on Form 8, Amendment No. 1 to the
Company's Form 10-K for the fiscal year ended December 31, 1988 and filed May
26, 1989, are incorporated herein by reference, and Amendment to the Articles
of Incorporation of the Company, changing the name of the Company, filed as an
exhibit to the Company's report
-7-
<PAGE>
on 8-K dated September 15, 1992 and filed September 29, 1992, is incorporated
herein by reference.
(4) Certificate of Rights, Designations and Preferences relating
to the 1992 Series A Preferred Stock, filed as Exhibit (4) to the Company's
report on Form 8-K dated September 15, 1992 and filed September 29, 1992, is
incorporated herein by reference.
(10) Material Contracts.
(a) Employment Agreements, each dated September 15, 1992
by and between the Company and each of Kenneth Karlan
and Keith Sessler respectively, filed as Exhibit
(10)(b) to the Company's report on Form 10-KSB for the
fiscal year ended December 31, 1992, filed March 31,
1993, are incorporated herein by reference.
(b) 1992 Incentive Stock Option Plan of the Company, an
Exhibit to the Company's Notice of Annual Meeting of
Shareholders and Proxy Meeting for Annual Meeting to
be held August 25, 1992, and filed August 13, 1992, is
incorporated herein by reference.
(c) Term Loan Agreement, dated July 6, 1995, between Star
Struck, Inc. and First Fidelity Bank, filed as Exhibit
10(c) to the Company's report on Form 10-KSB for the
fiscal year ended December 31, 1995, filed with
Amendment No. 1 thereto on April 3, 1996, is
incorporated herein by reference.
(d) Guaranty and Suretyship Agreement, dated July 6, 1995
from the Company to First Fidelity Bank, filed as
Exhibit 10(d) to the Company's report on Form 10-KSB
for the fiscal year ended December 31, 1995, filed
with Amendment No. 1 thereto on April 3, 1996, is
incorporated herein by reference.
(e) Mortgage, Assignment of Lease and Security Agreement,
dated July 6, 1995, between Star Struck, Inc., as
mortgagor, and First Fidelity Bank, as mortgagee, in
the amount of
-8-
<PAGE>
$800,000.00, secured by property known as 8 Francis J.
Clarke Circle, Bethel, Connecticut, filed as Exhibit
10(e) to the Company's report on Form 10-KSB for the
fiscal year ended December 31, 1995, filed with
Amendment No. 1 thereto on April 3, 1996, is
incorporated herein by reference.
(f) Pledge Agreement, dated December 6, 1993, between SBM
Industries, Inc. and Michael Sheldon and Carlton
Press, Inc., filed as Exhibit 10(h) to the Company's
report on Form 10-KSB for the year ended December 31,
1993, filed March 31, 1994.
(g) Consulting Agreement, dated December 6. 1993, between
SBM Acquisition Corp. and Carlton Press, Inc., filed
as Exhibit 10(i) to the Company's report on Form
10-KSB for the year ended December 31, 1993, filed
March 31, 1994.
(h) Non-Compete Agreement, dated December 6, 1993, among
Michael Sheldon, SBM Press Acquisition Corp. and SBM
Industries, Inc., filed as Exhibit 10(j) to the
Company's report on Form 10-KSB for the year ended
December 31, 1993, filed March 31, 1994.
(11) Statement re: Computation of Per Share Earnings. See page
2 of the Company's 1996 Annual Report to Shareholders for a description of the
computation of the Company's per share earnings, which description is
incorporated herein by reference.
(13) 1996 SBM Industries, Inc. Annual Report to Shareholders
(which, except for those portions thereof incorporated by reference in this
Form 10-KSB Annual Report, is furnished for the information of the Commission,
but is not deemed to be "filed" as part of this report).
(21) List of Subsidiaries of Registrant, filed as Exhibit 21 to
the Company's report on Form 10-KSB for the year ended December 31, 1994, filed
March 31, 1995.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the last quarter of the
period covered by this report.
-9-
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SBM INDUSTRIES INC.
/s/ Peter Nisselson
By:____________________________
Peter Nisselson, President,
Secretary and Chief Executive
Officer, March 21, 1997
/s/ Lawrence J. Goldstein
By:____________________________
Lawrence J. Goldstein,
Vice President and Treasurer
March 21, 1997
Dated: March 21, 1997
In accordance with the Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
/s/ Peter Nisselson
_____________________________________
Peter Nisselson, March 21, 1997
(Director)
/s/ Lawrence J. Goldstein
_____________________________________
Lawrence J. Goldstein, March 21, 1997
(Director)
/s/ Robert Morris
_____________________________________
Robert Morris, March 21, 1997
(Director)
/s/ Arthur Salzfass
_____________________________________
Arthur Salzfass, March 21, 1997
(Director)
/s/ Kenneth Karlan
_____________________________________
Kenneth Karlan, March 21, 1997
(Director)
-10-
<PAGE>
/s/Keith Sessler
_____________________________________
Keith Sessler, March 21, 1997
(Director)
/s/Michael Sweedler
_____________________________________
Michael Sweedler, March 21, 1997
(Director)
-11-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
-------
(3) The Articles of Incorporation and *
Bylaws of the Company, as amended, filed as Exhibit
to a report on Form 8, Amendment No. 1 to the
Company's Form 10-K for the fiscal year ended
December 31, 1988 and filed May 26, 1989, are
incorporated herein by reference, and Amendment to the
Articles of Incorporation of the Company, changing the
name of the Company, filed as an exhibit to the
Company's report on Form 8-K dated September 15, 1992
and filed September 29, 1992, is incorporated herein
by reference.
(4) Certificate of Rights, Designations *
and Preferences relating to the 1992 Series A Preferred
Stock, filed as Exhibit (4) to the Company's
report on Form 8-K dated September 15, 1992 and filed
September 29, 1992, is incorporated herein by reference.
(10) Material Contracts.
(a) Employment Agreements, each *
dated September 15, 1992
by and between the Company
and each of Kenneth Karlan
and Keith Sessler respectively,
filed as Exhibit (10)(b) to the
Company's report on Form 10-KSB
for the fiscal year ended December
31, 1992, filed March 31, 1993, is
incorporated herein by reference.
(b) 1992 Incentive Stock Option Plan of *
the Company, an Exhibit to the
Company's Notice of Annual Meeting
of Shareholders and Proxy Meeting
for Annual Meeting to be held August
25, 1992, and filed August 13, 1992,
is incorporated herein by reference.
-12-
<PAGE>
(c) Term Loan Agreement, dated July 6, *
1995, between Star Struck, Inc. and
First Fidelity Bank, filed as Exhibit
10(c) to the Company's report on Form
10-KSB for the fiscal year ended
December 31, 1995, is incorporated
herein by reference.
(d) Guaranty and Suretyship Agreement, *
dated July 6, 1995, from the Company to
First Fidelity Bank, filed as Exhibit
10(d) to the Company's report on Form
10-KSB for the fiscal year ended
December 31, 1995, is incorporated herein
by reference.
(e) Mortgage, dated July 6, 1995, Star Struck, *
Inc., as mortgagor, and First Fidelity
Bank, in the amount of $800,000.00, secured
by property known as 8 Francis J. Clarke
Circle, Bethel, Connecticut, filed as
Exhibit 10(e) to the Company's report on
Form 10-KSB for the fiscal year ended
December 31, 1995, is incorporated herein
by reference.
(f) Pledge Agreement, dated December 6, *
1993, between SBM Industries, Inc. and
Michael Sheldon and Carlton Press, Inc.,
filed as Exhibit 10(h) to the Company's
report on Form 10-KSB for the year ended
December 31, 1993, filed March 31, 1994.
(g) Consulting Agreement, dated December 6, *
1993, between SBM Acquisition Corp. and
-13-
<PAGE>
Carlton Press, Inc., filed as Exhibit
10(I) to the Company's report on Form
10-KSB for the year ended December 31,
1993, filed March 31, 1994.
(h) Non-Compete Agreement, dated December *
6, 1993, among Michael Sheldon, SBM
Press Acquisition Corp. and SBM
Industries, Inc., filed as Exhibit
10(j) to the Company's report on
Form 10-KSB for the year ended
December 31, 1993, filed March 31, 1994.
(11) Statement re: Computation of Per Share Earnings. *
See page 2 of the Company's 1996 Annual Report to Shareholders for
a description of the computation of the Company's per share earnings,
which description is incorporated herein by reference.
(13) 1996 SBM Industries, Inc. Annual Report to *
Shareholders (which, except for those portions thereof
incorporated by reference in this Form 10-KSB Annual Report, is
furnished for the information of the Commission, but is not deemed
to be "filed" as part of this report).
(21) List of Subsidiaries of Registrant, filed as *
Exhibit 21 to the Company's report on Form 10-KSB for the year
ended December 31, 1994, filed March 31, 1995.
___________________________
* Incorporated by reference.
-14-
<PAGE>
SBM
INDUSTRIES
1.9.9.6
ANNUAL
REPORT
<PAGE>
SBM Industries, Inc.
To Our Shareholders 1
Selected Financial Information 2
Consolidated Statements of Income 3
Consolidated Balance Sheet 4
Consolidated Statements of Shareholders' Investment 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7-10
Report of Independent Public Accountants 11
Management's Discussion and Analysis 12-13
Shareholder Information 14
Officers and Directors 15
<PAGE>
SBM Industries, Inc.
To Our Shareholders
- --------------------------------------------------------------------------------
Sales from continuing operations were $15,693,000 in 1996 versus $14,026,000
in 1995. Earnings from continuing operations were $121,000 or 6c per share in
1996 versus a loss of ($343,000) or (17c) per share in 1995. These results do
not include losses of ($2,248,000) in 1996 and ($364,000) in 1995 resulting from
the Company's discontinued subsidy publishing business. Please see the
accompanying financial statements for details.
The Company made several acquisitions in 1993 and 1994. Two of the acquired
businesses were in the watch battery and watch strap product areas. They turned
out to be worthwhile. However, the purchase of a subsidy publishing company late
in 1993 turned out to be a mistake. The performance of the business deteriorated
sharply last year and began to severely drain cash. Management decided to close
it down before it could critically affect the entire Company.
Today we are a more focused company with a core business which distributes
watch batteries and watch straps for the replacement market to jewelry stores
and other retailers servicing consumers' periodic needs. The Company also
manufactures watch straps for both the original equipment and replacement
markets.
Our overall performance in these main lines was steady in 1996. Of course,
the fact that management's time was spent in our major problem area did not help
our traditional business. We expect our refocusing will be positively reflected
in the Company's performance from hereon.
Very truly yours,
/s/ Peter Nisselson
Peter Nisselson
President
March 21, 1997
one
<PAGE>
SBM Industries, Inc.
Selected Financial Information
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1996 1995 1994 1993 1992
- ------------------------------------ ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Net sales
Income (loss) from continuing $15,693,000 $14,026,000 $11,802,000 $7,823,000 $5,641,000
operations before income taxes
and extraordinary item $ 121,000 $ (337,000) $ 596,000 $ 196,000 $( 132,000)
Income (loss) from continuing
operations after taxes $ 121,000 $ (343,000) $ 531,000 $ 185,000 $ (147,000)
Net income (loss) $(2,127,000) $ (707,000) $ 1,119,000 $ 40,000 $ (294,000)
per share $ (1.05) $ (.35) $ .55 $ .02 $ (.14)
Shareholders' investment $ 3,871,000 $ 6,001,000 $ 6,708,000 $5,706,000 $5,666,000
per share $ 1.91 $ 2.96 $ 3.31 $ 2.81 $ 2.79
- ------------------------------------- ---------- ---------- ---------- --------- ---------
Total assets $ 8,463,000 $11,537,000 $11,715,000 $8,878,000 $7,045,000
- ------------------------------------- ---------- ---------- ---------- --------- ---------
Long-term debt $ 1,103,000 $ 1,333,000 $ 1,233,000 $1,301,000 $ 801,000
- ------------------------------------- ---------- ---------- ---------- --------- ---------
Cash dividends per share $ .00 $ .00 $ .00 $ .00 $ .00
- ------------------------------------- ---------- ---------- ---------- --------- ---------
</TABLE>
two
<PAGE>
SBM Industries, Inc.
Consolidated Statements of Income
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the years ended December 31, 1996 1995
- -------------------------------------------------------------- ----------- ------------
<S> <C> <C>
NET SALES $15,693,000 $14,026,000
Cost of Sales 9,573,000 8,383,000
------------ ------------
Gross Profit on Sales 6,120,000 5,643,000
------------ ------------
OPERATING EXPENSES 5,486,000 5,654,000
Selling, General and Administrative
Depreciation and Amortization 327,000 309,000
------------ ------------
Total Operating Expenses 5,813,000 5,963,000
------------ ------------
Operating Income (Loss) 307,000 (320,000)
------------ ------------
OTHER INCOME (EXPENSES)
Interest Expense, Net (186,000) (108,000)
Gain on Sale of Marketable Securities, Net (Note 3) ----------- 44,000
Minority Interest in Subsidiary ----------- 47,000
------------ ------------
(186,000) (17,000)
------------ ------------
Income (Loss) from Continuing Operations
Before Income Taxes 121,000 (337,000)
Provision for Income Taxes (Note 7) ----------- 6,000
------------ ------------
Income (Loss) from Continuing Operations 121,000 (343,000)
------------ ------------
Loss from Discontinued Operations (2,248,000) (364,000)
------------ ------------
Net Loss $(2,127,000) $ (707,000)
------------ ------------
PER SHARE (Note 1)
Income (Loss) from Continuing Operations $ .06 $ (.17)
------------ ------------
Loss from Discontinued Operations (1.11) (.18)
------------ ------------
Net Loss $ (1.05) $ (.35)
------------ ------------
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 2,027,000 2,028,000
------------ ------------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
three
<PAGE>
SBM Industries, Inc.
Consolidated Balance Sheet
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1996
- --------------------------------------------------------------------------------------- -----------
<S> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 129,000
Accounts Receivable, Less Allowance for Doubtful Accounts of $175,000 2,432,000
Inventories (Note 1) 3,141,000
Prepaid Expenses and Other Current Assets 173,000
-----------
Total Current Assets 5,875,000
-----------
Property, plant and equipment, at cost (Note 1):
Land, Building and Improvements 1,235,000
Machinery and Equipment 1,029,000
-----------
2,264,000
Less - Accumulated Depreciation 654,000
-----------
1,610,000
===========
Intangible Assets and Goodwill, Net (Note 1) 978,000
===========
Total Assets $ 8,463,000
===========
LIABILITIES & SHAREHOLDERS' INVESTMENT
Current Liabilities:
Borrowings Under Line of Credit (Note 5) $ 1,125,000
Accounts Payable and Accrued Expenses (Note 2) 2,050,000
Deferred Income 18,000
Current Portion of Notes Payable (Note 6) 296,000
-----------
Total Current Liabilities 3,489,000
-----------
Other Liabilities:
Notes Payable (Note 6) 1,103,000
===========
Total Liabilities 4,592,000
===========
Commitments and Contingencies (Notes 11 and 12)
Shareholders' Investment:
Preferred Shares, $1 Par Value - 500,000 Shares Authorized; Issued and Outstanding -
0 shares in 1996 ----------
Common Shares, $1 Par Value - 5,000,000 Shares Authorized; Issued and Outstanding -
2,027,234 shares in 1996 2,027,000
Paid in Surplus 4,347,000
Accumulated Deficit (2,503,000)
===========
Total Shareholders' Investment 3,871,000
===========
Total Liabilities and Shareholders' Investment $ 8,463,000
===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this balance sheet.
four
<PAGE>
SBM Industries, Inc.
Consolidated Statements of Shareholders' Investment
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the years ended December 31, 1996 1995
- --------------------------------------- ------------ ------------
<S> <C> <C>
COMMON SHARES
Balance at beginning of year $ 2,028,000 $2,028,000
Changes during year (1,000) 0
============ ===========
Balance at End of Year $ 2,027,000 $2,028,000
============ ===========
PAID IN SURPLUS
Balance at beginning of year $ 4,349,000 $4,349,000
Redemption of common stock (2,000) 0
------------ -----------
Balance at End of Year $ 4,347,000 $4,349,000
============ ===========
RETAINED EARNINGS (ACCUMULATED DEFICIT)
Balance at beginning of year $ (376,000) $ 331,000
Net Loss (2,127,000) (707,000)
============ ===========
Balance at End of Year $(2,503,000) $ (376,000)
============ ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
five
<PAGE>
SBM Industries, Inc.
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the years ended December 31, 1996 1995
- ----------------------------------------------------- ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Loss $(2,127,000) $(707,000)
Adjustments to reconcile net loss
to cash used in operating activities:
Depreciation and amortization 327,000 309,000
Provision for losses on receivables --------- 55,000
Gain related to marketable securities --------- (44,000)
Loss from discontinued operations 2,649,000 364,000
Gain on disposal of discontinued operations (401,000) --------
Minority Interest -------- (47,000)
Changes in operating assets and liabilities:
Accounts receivable (658,000) 300,000
Inventories 619,000 (834,000)
Prepaid expenses and other current assets 40,000 (93,000)
Accounts payable and accrued expenses 146,000 (75,000)
Deferred income (2,000) 20,000
Changes in discontinued operations (1,399,000) (40,000)
Other (1,000) 1,000
- ----------------------------------------------------- ------------ ----------
Total Adjustments 1,320,000 (84,000)
- ----------------------------------------------------- ------------ ----------
Net Cash Used In Operating Activities (807,000) (791,000)
===================================================== ============ ==========
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Fixed Assets (105,000) (194,000)
Net Proceeds from Sale of Marketable Securities -------- 569,000
===================================================== ============ ==========
Net Cash Provided By (Used In) Investing Activities (105,000) 375,000
===================================================== ============ ==========
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Notes Payable 567,000 803,000
Proceeds from Revolving Line of Credit 375,000 425,000
Payment of Deferred Financing Fees -------- (15,000)
Redemption of Common Stock (3,000) --------
Payment on Notes Payable (119,000) (863,000)
===================================================== ============ ==========
Net Cash Provided By Financing Activities 820,000 350,000
===================================================== ============ ==========
Net Decrease in Cash & Cash Equivalents (92,000) (66,000)
===================================================== ============ ==========
Cash & Cash Equivalents at Beginning of Year 221,000 287,000
===================================================== ============ ==========
Cash & Cash Equivalents at End of Year $ 129,000 $ 221,000
===================================================== ============ ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
six
<PAGE>
SBM Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. Summary of Major Accounting Policies:
Principles of Consolidation
The consolidated financial statements include the accounts of SBM Industries,
Inc. (the "Company") and its subsidiaries, Star Struck, Inc. ("SSI") and RCM,
Inc. ("RCM"). The Carlton Press Corp. ("CPC") business is accounted for as a
discontinued operation (See Note 8). SSI is 100% owned by the Company, while RCM
is an 80% owned subsidiary. As a result of the minority shareholders'
proportionate share of the deficiency of RCM, the Company will recognize the
first $19,000 of RCM's net income, if any, before recording any funds due to the
minority stockholders. All intercompany transactions have been eliminated.
Utilization of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Inventories
Inventories, with the exception of gold, are stated at the lower of cost (first-
in, first-out) or market. Gold inventory is valued at market. Inventories
consist principally of finished goods.
Property, Plant and Equipment
The company provides for depreciation generally using the straight-line method
for financial reporting and an accelerated method for income tax purposes.
Estimated useful lives are as follows:
Assets Life
------ ----
Office Equipment 5-7 Years
Machinery and Equipment 7 Years
Building and Improvements 31.5-39 Years
Repair and maintenance costs are expensed as incurred. Renewals and betterments
are capitalized. Upon retirement or other disposition of property, the cost and
related depreciation or amortization are removed from the accounts. Gains and
losses on such retirements are included in income.
Income Taxes
Income taxes have been provided using the liability method in accordance with
Financial Accounting Standards Board ("FASB") Statement No. 109, "Accounting for
Income Taxes."
Net Income/(Loss) Per Share
Net income/(loss) per share is computed based on the weighted average number of
shares outstanding during each year.
Revenue Recognition
Revenue is recognized upon shipment of merchandise to customers.
Amortization of Intangibles
Goodwill is being amortized on a straight-line basis over fifteen, twenty, or
forty years. Subsequent to its acquisitions, the Company continually evaluates
whether later events and circumstances have occurred that indicate the remaining
estimated useful life of goodwill may warrant revision or that the remaining
balance of goodwill may not be recoverable. When factors indicate that goodwill
should be evaluated for possible impairment, the Company uses an estimate of the
related business segments undiscounted net income over the remaining life of the
goodwill in measuring whether the goodwill is recoverable.
Major components of intangibles are as follows:
<TABLE>
<CAPTION>
Amortization
Amounts in thousands Period (Years) 1996
-------------- ----
<S> <C> <C>
Non-compete agreements 7-10 $ 981
Other intangibles and goodwill 15-40 375
----- -----
1,356
Accumulated amortization 378
======
$ 978
======
</TABLE>
Stock Options
The Company currently follows the provisions of Accounting Principles Board
Opinions 25, "Accounting for Stock Issued to Employees" (APB 25), which requires
compensation expense for the Company's options to be recognized only if the
market price of the underlying stock exceeds the exercise price on the date of
the grant. Accordingly, the Company has not recognized compensation expense for
its options granted. (See Note 4)
Reclassifications
Certain 1995 balances have been reclassified to conform with the 1996
presentation.
Recent Accounting Pronouncements
Subsequent to December 31,1996, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per
Share." This statement establishes standards for computing and presenting
earnings per share (EPS), replacing the presentation of currently required
primary EPS with a presentation of basic EPS. For entities with complex capital
structures, the statement requires the dual presentation of both basic EPS and
diluted EPS on the face of the statement of operations. Under this new
standard, basic EPS is computed based on weighted average shares outstanding and
excludes any potential dilution. Diluted EPS reflects potential dilution from
the exercise or conversion of securities into common stock or from other
contracts to issue common stock and is similar to the currently required fully
diluted EPS. SFAS 128 is effective for financial statements issued for years
ending after December 15, 1997, including periods within that year, and earlier
application is not permitted. When adopted, the Company will be required to
restate its EPS data for all prior periods presented. The Company does not
expect the impact of the adoption of this statement to be material to previously
reported EPS amounts.
seven
<PAGE>
SBM Industries, Inc.
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
2. Accounts Payable and Accrued Expenses
A breakdown of significant accounts payable and accrued expenses at December 31,
1996, is as follows:
<TABLE>
<CAPTION>
Amounts in thousands 1996
- -------------------- -----
<S> <C>
Accounts payable 1,689
Accrued expenses 361
=====
2,050
=====
</TABLE>
3. Marketable Securities
At December 31, 1995, the Company had sold all marketable securities. The gain
on the sale of such securities has been reflected in the statement of income for
the year ended December 31, 1995.
4. Stock Options
The 1992 Incentive Stock Option Plan of SBM Industries, Inc. is a qualified plan
which reserved 100,000 shares of the Company's unissued common stock for
issuance to officers and salaried employees at option prices not less than 100%
of the fair market value on the date of grant. Options are exercisable after the
date of grant and expire five years from the date of grant.
Shares authorized, granted and available under the Stock Option Plan are as
follows:
<TABLE>
<CAPTION>
Authorized Granted Option Price Available
---------- ------- ------------ ---------
<S> <C> <C> <C> <C>
Balance at
December 31, 1992 100,000 2,500 $ 4.00
Canceled in 1993 (500)
Granted in 1993 5,500 $ 3.31
Granted in 1994 3,300 $ 7.50
Granted in 1995 25,000 $ 6.00
Canceled in 1995 (1,400)
Granted in 1996 4,900 $ 4.63
Canceled in 1996 (25,900) 86,600
</TABLE>
After a one year waiting period twenty-five percent of the options granted may
be exercised in each of the next four years.
4675 of the shares granted are exercisable at December 31, 1996 at option prices
ranging from $3.31 to $7.50 per share.
FASB Statement No. 123, "Accounting for Stock Based Compensation," proforma
disclosures are not presented because they do not have a material effect on the
Company's financial position or results of operations.
5. Borrowings Under Line of Credit
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 31,
1997 and January 1998, respectively. Borrowings under the lines bear interest at
the prime rate plus one percent (9.25% at December 31, 1996). The agreements
contain certain financial covenants, the most restrictive of which requires SSI
to increase tangible net worth from that of the prior year. At December 31,
1996, SSI did not comply with the tangible net worth covenant of the $1,000,000
line of credit agreement. Accordingly, SSI received a waiver with respect to
such covenant from the lender for periods up to and including the expiration
date of May. As of December 31, 1996, the Company had $1,125,000 outstanding
under these lines of credit.
6. Notes Payable
The Company's outstanding long-term debt as of December 31, 1996, is summarized
as follows:
<TABLE>
<CAPTION>
1996
----
<S> <C>
Variable rate mortgage payable, due in monthly
installments to 2003; the current annual rate is
9%. $ 743,000
Promissory note payable, due in monthly
installments from 1999 through 2000, net of
$25,000 discount. Interest imputed at 6%. 125,000
Promissory note payable, due in monthly
installments from 1996 through 1999. Interest imputed at 6%. 430,000
7% promissory note payable, due in monthly
installments to 1997. 11,000
9.75% promissory note payable, due in monthly
installments to 1998. 10,000
7.75% promissory note payable, due in 1997. 80,000
----------
1,399,000
----------
Less Current Portion 296,000
==========
$1,103,000
==========
</TABLE>
Scheduled maturities of all long-term debt instruments are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 296,000
1998 212,000
1999 215,000
2000 93,000
2001 40,000
Thereafter 543,000
----------
$1,399,000
----------
</TABLE>
Total interest expense was $247,000 and $162,000 in 1996 and 1995, respectively.
Land, building and improvements include a building with a cost of $674,000,
which has a $743,000 mortgage balance at December 31, 1996.
eight
<PAGE>
SBM Industries, Inc.
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
7. Income Taxes
Deferred income taxes result from timing differences in recording of certain
expenses for financial reporting and tax purposes. The source of these
differences and the tax effects are as follows:
<TABLE>
<CAPTION>
Amounts in thousands 1996 1995
- -------------------------------------- ------- -----
<S> <C> <C>
Net operating loss carryforward $ 1,219 $ 465
Excess of financial depreciation over
tax depreciation 51 32
Bad debt reserves 54 70
Alternative minimum tax 0 13
------- -----
1,324 580
Valuation Allowance (1,324) (580)
------- -----
$ 0 $ 0
------- -----
</TABLE>
Reconciliations between actual tax expense and the amount computed by applying
the statutory U.S. Federal Income tax rate to income (loss) from continuing
operations are as follows:
<TABLE>
<CAPTION>
1996 1995
------------------ -----------------
% of % of
Pre-Tax Pre-Tax
Amounts in thousands Amount Income Amount Income
- -------------------------------- ------- --------- ------ --------
<S> <C> <C> <C> <C>
Tax at statutory
Federal Income tax rate $(723) (34.0%) $(238) (34.0%)
Current tear addition
to Net Operating Loss 723 34.0 238 34.0
State and local taxes, and other 0 0 6 1.0
------ --------- ------ --------
$ 0 0 $ 6 1%
------ --------- ------ --------
</TABLE>
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.
8. Discontinued Operations
In December 1996, the Company's 80% owned subsidiary, CPC, filed a voluntary
petition under chapter 7 of the United States Bankruptcy Code. The gain on
discontinuance of $401,000 and the loss from operations of $2,649,000 have been
recognized as discontinued operations in the 1996 consolidated statement of
income.
In 1996 and 1995 net sales for CPC were $1,666,000 and $2,505,000, respectively.
9. Business Segments
The Company's operations by business segment for the year ended December 31,
1996 were as follows:
<TABLE>
<CAPTION>
Battery & Watch Strap Watch Strap
Distribution Manufacturing Total
--------------------- ------------- -----------
<S> <C> <C> <C>
Net Sales $13,379,000 $2,314,000 $15,693,000
Operating Income $ 134,000 $ 173,000 $ 307,000
Identifiable Assets $ 8,062,000* $ 401,000 $ 8,463,000
Depreciation
& Amortization $ 292,000 $ 35,000 $ 327,000
Capital Expenditures $ 43,000 $ 62,000 $ 105,000
</TABLE>
*Includes corporate assets amounting to $31,000.
The majority of the customers in the battery and watch strap distribution line
of business are small retail jewelers nationwide. The watch strap manufacturing
sales are made to watch strap distributors in the United States and Hong Kong.
nine
<PAGE>
SBM Industries, Inc.
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
10. Major Customers
During 1996 and 1995, 13% and 16%, respectively, of the Company's total sales
were made to a single customer in the battery and watch strap distribution line
of business. Additionally, in 1996 and 1995, 9% and 13%, respectively, of the
Company's total sales were made to another customer in the same line of
business.
11. Commitments
The Company leases certain property and equipment under operating leases
expiring on various dates through 2000. Total rent expense amounted to $131,623
and $188,268 in 1996 and 1995, respectively. Aggregate future minimum rent
payments under the terms of non-cancelable leases as of December 31 are as
follows:
1997 $83,000
1998 66,000
1999 26,000
2000 12,000
In 1996, the Company entered into a consulting agreement which includes annual
payments of $10,000 for three years.
12. Contingencies
A consolidated action by shareholders alleging securities fraud as to the
Company's originally published reports of earnings for the first three quarters
of 1994, was dismissed as against the Company and certain individual defendants
and voluntarily dismissed as to the remaining individual defendants in the
fourth quarter of 1996.
The Company has contingent liabilities with respect to litigation and claims
arising in the ordinary course of business. In the opinion of management, such
contingent liabilities are not likely to result in any loss that would have a
material adverse effect on the Company's operating results or financial
condition.
ten
<PAGE>
SBM Industries, Inc.
Report of Independent Public Accountants
- --------------------------------------------------------------------------------
To the Shareholders of SBM Industries, Inc.:
We have audited the accompanying consolidated balance sheet of SBM Industries,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1996, and the
related consolidated statements of income, shareholders' investment and cash
flows for each of the two years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SBM Industries, Inc., and
subsidiaries as of December 31, 1996, and the results of their operations and
their cash flows for each of the two years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
March 7, 1997
eleven
<PAGE>
SBM Industries, Inc.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
1996
- ----
In December 1996, SBM Industries, Inc.'s ("SBM" or the Company) 80% owned
subsidiary, Carlton Press Corp. ("CPC") filed a voluntary petition under chapter
7 of the United States Bankruptcy Code. The gain on discontinuance of $401,000
and the loss from operations of $2,649,000 have been recognized as discontinued
operations in the 1996 consolidated statement of income.
Net Sales
Total sales for SBM from continuing operations in 1996 increased 12% to
$15,693,000 from $14,026,000 in 1995. These sales, as well as the sales and
earnings from continuing operations for the five years covered by the foregoing
financial statements and selected financial data, are primarily attributable to
SBM's Star Struck, Inc. ("SSI") subsidiary.
Sales for SSI were $13,379,000, up 2% from $13,094,000 in 1995.
RCM, Inc. ("RCM"), SBM's 80% owned watch strap manufacturer, had sales of
$2,314,000. This $1,382,000 increase over 1995 sales of $932,000 can be
attributed to the additional revenue obtained from a new customer relationship
that was established late in 1995 and grew during 1996.
Gross Profit
Gross profit, as a percentage of sales, decreased to 39% in 1996 from 40% in
1995.
SSI's gross profit on sales of 39% was down 2% from 41% in 1995. This decrease
is attributable to more competitive pricing offered to customers in the market
place.
RCM's gross profit on sales increased 17% to 40% from 23% in 1995. 1996's gross
margin is more indicative of RCM's performance than that of 1995, as it includes
only minimal start up costs associated with establishing new business.
Selling, General and
Administrative Expenses
Selling, general and administrative expenses, as a percentage of sales,
decreased to 35% in 1996 as compared with 40% in 1995 for the Company. RCM's
expenses were 5% of total sales in 1996 as opposed to 4% of total sales in 1995,
while SSI decreased its expenses from 36% of total sales in 1995 to 30% of total
sales in 1996. SSI's decrease is a combination of several items. A consulting
agreement, as a result of a prior year acquisition, expired in 1996 and
commission agreements with salesrepresentatives have been modified to maintain
profitability in specific product lines.
Operating Income (Loss)
Operating income increased by $627,000 from 1995's loss of $320,000 to show a
profit of $307,000. Reflected in 1996's operating profit were SSI's and RCM's
operating profits of $201,000 and $173,000, respectively, which were offset by
SBM's corporate loss of $67,000.
Interest Expense
Net interest expense was $186,000 in 1996, up $77,000 from $109,000 in 1995.
Approximately $102,000 in interest expense related to the additional borrowings
on the Company's lines of credit was recorded in 1996. Interest on a mortgage
that was refinanced in 1995 totaled approximately $70,000.
Net Income
The Company showed a net loss of $2,127,000, or $(1.05) per share in 1996
compared to a net loss of $707,000, or $(.35) per share in 1995. Income from
continuing operations increased $464,000 to show a profit of $121,000, or $.06
per share in 1996, as compared to a loss from continuing operations of $343,000,
or $(.17) per share in 1995.
1995
- ----
Net Sales
Total sales for SBM from continuing operations in 1995 increased 19% to
$14,026,000 from $11,802,000 in 1994. These sales, as well as the sales and
earnings from continuing operations for the years covered by the foregoing
financial statements and selected financial data, are primarily attributable to
SBM's SSI subsidiary.
Sales for SSI were $13,094,000, up 13% from $11,560,000 in 1994. This increase
is due to the inclusion of a full year of Freedman & Sons, Corp. ("Freedman")
and Timecraft Industries, Inc. ("TCI") sales, as well as consistent growth of
existing product lines.
RCM had sales of $932,000. This $691,000 increase over 1994 sales of $241,000
can be attributed to the additional revenue obtained from a major new customer
and the inclusion of a full year of sales, as opposed to 1994 sales which only
reflected three months of activity.
twelve
<PAGE>
SBM Industries, Inc.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
Gross Profit
Gross profit from continuing operations, as a percentage of sales, decreased to
40% in 1995 compared to 42% in 1994.
SSI's gross profit on sales of 41% was consistent with that of prior years.
RCM's gross profit on sales decreased 20% to 23% from 43% in 1994. This decrease
is attributable to start up costs incurred in the production of a sample line
for RCM's new customer which were only slightly offset by volume purchase
discounts for its increased level of inventory.
Selling, General and
Administrative Expenses
Selling, general and administrative expenses from continuing operations, as a
percentage of sales, increased to 40% in 1995 as compared with 37% in 1994 for
the Company. This increase is a combination of several items. Salaries increased
in each entity with the Company's commitment to growth in hiring additional
personnel. Prior years' acquisitions continue to increase selling, general and
administrative expenses through consulting and sales commission agreements.
During 1995, approximately $163,000 in consulting fees and $159,000 in sales
commissions were recorded relative to continuing operations.
Operating Income (Loss)
Operating income decreased by $811,000 to show a loss of $320,000 from a profit
of $491,000 in 1994. Reflected in 1995's operating loss was SSI's profit of
$102,000, which was offset by RCM's operating loss of $341,000 and SBM's
corporate loss of $81,000.
Liquidity and Capital Resources
The net decrease in cash and cash equivalents of $92,000 is attributable to the
$807,000 used in operating activities. The combined accounts receivable of SSI
and RCM increased $658,000 or 34%, in 1996 over 1995's combined accounts
receivable balance for the two entities. Investing activities used $105,000 for
the purchase of fixed assets in 1996. During 1996, the Company repaid $119,000
of its outstanding debt. As guarantor for two of CPC's outstanding notes
payable, the Company assumed $567,000 in new debt as a result of CPC's chapter 7
bankruptcy filing.
The Company has line of credit agreements with two of its banks. The Company has
$1,225,000 available under the lines of credit, of which $1,125,000 was used at
December 31, 1996.
The Company believes that it has adequate funds available to conduct and
continue its business and to repay the approximately $296,000 in long-term debt
which will mature in 1997.
thirteen
<PAGE>
SBM Industries, Inc.
Shareholder Information
- --------------------------------------------------------------------------------
Market and Dividend Information
The following table shows the quarterly per share sales price ranges of the
Company's common stock on the American Stock Exchange for 1996 and 1995. No
dividends were paid during this period. On March 18, 1997 there were 2,027,234
shares of common stock outstanding.
<TABLE>
<CAPTION>
1996 1995
---------------- -----------------
High Low High Low
<S> <C> <C> <C> <C>
First Quarter $5.375 $3.938 $13.750 $6.125
Second Quarter 5.188 4.000 7.250 5.500
Third Quarter 5.250 4.188 6.063 5.250
Fourth Quarter 4.438 3.125 5.250 3.875
</TABLE>
Annual Meeting
The Annual Meeting of Shareholders of SBM Industries, Inc. will be held on May
13, 1997.
Availability of Form 10-KSB
A copy of SBM Industries, Inc's. 1996 Annual Report to the Securities and
Exchange Commission Form 10-KSB will be furnished without charge to shareholders
upon written request to the Corporate Secretary.
Capital Stock Listing
American Stock Exchange
Symbol: SBM
Transfer Agent and Registrar
Harris Trust and Savings Bank, Chicago
Auditors
Arthur Andersen LLP, New York
fourteen
<PAGE>
SBM Industries, Inc.
Officers and Directors
Lawrence J. Goldstein
Vice President and Director; General
Partner, Santa Monica Partners
Kenneth Karlan
Vice President and Director
Robert J. Morris
Director; President of Dunhill
Personnel of Manhattan
Peter Nisselson
President and Director
Arthur Salzfass
Director; Chairman, MicroInfo
Keith Sessler
Vice President and Director
Michael J. Sweedler
Director; Partner, Darby and Darby,
P.C.
fifteen
<PAGE>
SBM
---
Industries
1865 Palmer Avenue
Larchmont, NY 10538
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SBM
INDUSTRIES, INC.'S ANNUAL REPORT TO STOCKHOLDERS FOR THE PERIOD ENDED DECEMBER
31, 1996.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> DEC-31-1996 DEC-31-1995
<CASH> 129,000 0
<SECURITIES> 0 0
<RECEIVABLES> 2,607,000 0
<ALLOWANCES> 175,000 0
<INVENTORY> 3,141,000 0
<CURRENT-ASSETS> 5,875,000 0
<PP&E> 2,264,000 0
<DEPRECIATION> 654,000 0
<TOTAL-ASSETS> 8,463,000 0
<CURRENT-LIABILITIES> 3,489,000 0
<BONDS> 0 0
0 0
0 0
<COMMON> 2,027,000 0
<OTHER-SE> 1,844,000 0
<TOTAL-LIABILITY-AND-EQUITY> 8,463,000 0
<SALES> 15,693,000 14,026,000
<TOTAL-REVENUES> 15,693,000 14,026,000
<CGS> 9,573,000 8,383,000
<TOTAL-COSTS> 5,813,000 5,963,000
<OTHER-EXPENSES> 0 (91,000)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 186,000 108,000
<INCOME-PRETAX> 121,000 (337,000)
<INCOME-TAX> 0 6,000
<INCOME-CONTINUING> 121,000 (343,000)
<DISCONTINUED> (2,248,000) (364,000)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,127,000) (707,000)
<EPS-PRIMARY> (1.05) (.35)
<EPS-DILUTED> 0 0
</TABLE>
