SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended September 29, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES ACT OF 1934 (NO FEE
REQUIRED) For the transition period from
_________ to __________
Commission file number 0-22978
STIMSONITE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3718658
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization ) Identification Number)
7542 N. Natchez Avenue
Niles, Illinois 60714
(Address of principal executive offices) (Zip Code)
(847) 647-7717
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for 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 [ ]
The number of shares of the registrant's common stock, $.01 par value,
outstanding as of October 31, 1996 was 8,773,150.
<PAGE>
<TABLE>
<CAPTION>
STIMSONITE CORPORATION
Index
<S> <C> <C>
Page
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Balance Sheets 4-5
Consolidated Statement of Cash Flows 6
Notes to Condensed Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-16
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
</TABLE>
<PAGE>
STIMSONITE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Information)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended Year Ended
----------------------------- ------------------------------ ------------------------------
September 29, October 1, September 29, October 1, September 29, October 1,
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Net sales $28,834 $26,298 $66,499 $50,320 $84,298 $64,652
Cost of goods sold 18,113 15,722 42,242 29,344 54,523 36,516
-------------- ------------ --------------- ------------ --------------- ------------
Gross profit 10,721 10,576 24,257 20,976 29,775 28,136
Operating expenses:
Selling and administrative 3,958 3,910 11,456 9,787 14,818 13,140
Research and development 689 803 2,099 2,345 2,843 3,005
Amortization of intangibles 711 704 2,130 2,103 2,842 2,791
-------------- ------------ --------------- ------------ --------------- ------------
Total operating expenses 5,358 5,417 15,685 14,235 20,503 18,936
-------------- ------------ --------------- ------------ --------------- ------------
Operating income 5,363 5,159 8,572 6,741 9,272 9,200
Joint venture partnership loss --- 19 --- 108 3 187
Interest expense 660 756 2,074 1,888 2,792 2,416
Other income --- --- --- --- --- (206)
-------------- ------------ --------------- ------------ --------------- ------------
Income before provision for income
taxes and extraordinary item 4,703 4,384 6,498 4,745 6,477 6,803
Provision for income taxes 1,913 1,750 2,636 1,898 2,852 2,899
Income before extraordinary item 2,790 2,634 3,862 2,847 3,625 3,904
Loss from extraordinary item,
net of tax benefit 332 --- 332 --- 332 ---
-------------- ------------ --------------- ------------ --------------- ------------
Net income $2,458 $2,634 $3,530 $2,847 $3,293 $3,904
============== ============ =============== ============ =============== ============
Income per common and
common equivalent shares
- ------------------------
Income before extraordinary item $0.31 $0.29 $0.43 $0.31 $0.40 $0.43
Loss from extraordinary item,
net of tax benefit $0.04 --- $0.04 --- $0.04 ---
-------------- ------------ --------------- ------------ --------------- ------------
Net income $0.27 $0.29 $0.39 $0.31 $0.36 $0.43
============== ============ =============== ============ =============== ============
Average number of common and
common equivalent shares
outstanding 8,971,462 9,125,636 9,007,052 9,125,818 9,029,517 9,115,698
</TABLE>
See Accompanying Notes
<PAGE>
STIMSONITE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
9/29/96 12/31/95
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $387 $251
Trade accounts receivable less allowance for doubtful
account of $1,276 and $895 28,713 18,144
Inventories 13,076 14,848
Prepaid expenses and other 955 901
Deferred tax assets 1,365 1,365
-------------- ------------
Total current assets 44,496 35,509
Property, plant and equipment, net 17,909 11,890
Intangible assets, net 14,849 16,884
Deferred financing costs, net 402 892
Long term deferred tax assets and other 2,543 2,421
-------------- ------------
Total Assets $80,199 $67,596
============== ============
</TABLE>
See Accompanying Notes
<PAGE>
STIMSONITE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
9/29/96 12/31/95
(Unaudited) (Audited)
LIABILITIES
<S> <C> <C>
Current liabilities:
Accounts payable $6,363 $7,008
Current maturities of long-term debt 2,500 3,243
Accrued income taxes 4,106 1,527
Other accrued expenses 4,881 4,254
-------------- -------------
Total current liabilities 17,850 16,032
Accrued postretirement benefits 631 631
Long-term debt 32,400 24,703
-------------- -------------
Total liabilities 50,881 41,366
STOCKHOLDERS' EQUITY
Total stockholders' equity 29,318 26,230
-------------- -------------
Total Liabilities and Stockholders' Equity $80,199 $67,596
============== =============
</TABLE>
See Accompanying Notes
<PAGE>
STIMSONITE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousand)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
------------------------- -------------------------
9/29/96 10/1/95 9/29/96 10/1/95
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $3,530 $2,847 $3,293 $3,904
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 2,370 1,737 3,199 2,231
Amortization of intangibles, deferred financing
costs and discount on long term debt 2,750 1,071 4,891 1,678
Provision for uncollectible accounts 481 96 688 259
Deferred income taxes - - (1,204) (145)
Extraordinary item 332 - - -
Joint venture partnership loss - 108 3 187
Changes in assets and liabilities:
Trade account receivables (11,050) (4,672) (5,059) (4,093)
Inventories 1,772 (4,292) 1,695 (4,009)
Prepaid expense and other (54) 137 (272) (124)
Accounts payable (1,483) 608 (3,324) 680
Other accrued expenses (6) 550 (768) 3,053
Accrued income taxes 3,097 692 2,063 437
Accrued employee benefits 519 359 (715) (1,105)
Accrued warranty 102 177 135 (210)
------------ ------------ ------------ -------------
Net cash provided by (used in)
operating activities 2,360 (582) 4,625 2,743
------------ ------------ ------------ -------------
Cash flows from investing activities:
Purchase of property, plant and equipment (8,389) (3,892) (8,249) (4,411)
Acquisition of Pave-Mark (97) (6,949) (1,109) (6,949)
Investment in joint venture partnership (25) (83) (53) (159)
Other - 472 (575) 184
------------ ------------ ------------ -------------
Net cash used in investing activities (8,511) (10,452) (9,986) (11,335)
Cash flows from financing activities:
Proceeds from the issuance of common stock, net of
offering expenses 56 23 148 23
Payment to reacquire common stock (686) - (1,180) -
Payments on notes receivable on common stock - 61 - 61
Proceeds from long-term debt 41,200 12,800 41,200 13,300
Payments on long-term debt (34,246) (1,736) (35,605) (5,916)
Cash overdraft - - 926 -
Financing fees paid in connection with debt refinancing (225) - (376) 69
------------ ------------ ------------ -------------
Net cash provided by (used in) financing
activities 6,099 11,148 5,113 7,537
Effect of exchange rate changes on cash 188 (124) 282
Net increase (decrease) in cash and cash equivalents 136 (10) 34 (1,055)
Cash and cash equivalents, beginning of year 251 363 353 1,408
------------ ------------ ------------ -------------
Cash and cash equivalents, end of period $387 $353 $387 $353
============ ============ ============ =============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $1,870 $1,888 $2,210 $2,329
============ ============ ============ =============
Cash paid during the period for income taxes $1,139 $1,316 $3,555 $2,777
============ ============ ============ =============
</TABLE>
See Accompanying Notes
<PAGE>
Notes to Condensed Consolidated
Financial Statements
(Dollars in thousands except per share information)
(Unaudited)
Note 1 - Financial Information
The consolidated financial statements included herein have been prepared
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 condensed or omitted pursuant to or as permitted by such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. In the opinion of management, the
financial information presented reflects all adjustments that are necessary to a
fair statement of results for the interim periods presented. These financial
statements should be read in conjunction with the consolidated financial
statements and footnotes thereto contained in the Company's Annual Report on
Form 10-K for the year ended December 31, 1995 (the "1995 Form 10-K").
The Company's business is seasonal and accordingly comparative full year
information is provided. The financial information included herein at September
29, 1996 and for the periods ended September 29, 1996 and October 1, 1995 is
unaudited and, in the opinion of the Company, reflects all adjustments (which
include normal recurring adjustments) necessary for the fair presentation of
financial position as of those dates and the results of operations for those
periods. The information in the condensed consolidated balance sheet at December
31, 1995 was derived from the Company's consolidated financial statements
included in the 1995 Form 10-K.
Note 2 - Inventories
Inventories consist of the following:
September 29, 1996 December 31, 1995
(Unaudited) (Audited)
Raw materials $3,956 $4,735
Work in process 1,985 4,062
Finished goods 7,135 6,051
------- -------
$13,076 $14,848
====== ======
<PAGE>
Note 3 - Income Taxes
The differences between the statutory federal income tax rate and the effective
tax rates for the quarters, nine months and years ended September 29, 1996 and
October 1, 1995 are as follows:
<TABLE>
<CAPTION>
Nine Months Nine Months
Qtr Ended Ended Year Ended Qtr Ended Ended Year Ended
September 29, 1996 October 1, 1995
----------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal statutory rate 34.0% 34.0% 34.0% 34.0% 34.0% 34.0%
State income taxes 4.8 4.8 4.8 5.0 5.0 5.0
Inability to utilize foreign
operating losses 1.0 6.8 1.2
Provision for contingencies 5.8
Reversal of opening domestic
valuation allowance (6.8)
Other items 1.9 0.8 (0.6) 0.9 1.0 2.4
------- ------- ------- ------- ------- -------
40.7% 40.6% 44.0% 39.9% 40.0% 42.6%
======= ======= ======= ======= ======= =======
</TABLE>
See Accompanying Notes
<PAGE>
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 4 - Refinancing of Long Term Debt
On July 23, 1996, the Company refinanced its long term debt under a new
unsecured credit agreement. The terms of the new credit agreement provide a
credit facility totaling $45.0 million, of which $20.0 million is revolving
credit due on June 30, 2000 bearing interest at prime or LIBOR (at the Company's
option) plus a margin of 75 to 150 basis points based on the Company's debt to
cash flow ratio for the preceding four quarters. At September 29, 1996, this
loan bore interest at the rate of LIBOR plus 125 basis points. Amounts available
under the revolving loan are subject to certain borrowing base limitations. The
balance of the credit facility is a $25.0 million term loan due in quarterly
installments of $0.625 million with a final payment of $8.75 million due on June
30, 2003 bearing interest at prime plus 25 basis points or LIBOR plus 180 basis
points (at the Company's option). The new credit facility establishes certain
financial covenants, including covenants relating to the Company's funded debt
to EBIDTA ratio, cash flow coverage ratio, and leverage ratio. The Company's
performance with respect to these covenants will affect among other things the
level of funding available under the agreement. On July 23, 1996, the Company
borrowed $25.0 million of term debt and $9.5 million of revolving debt under the
new credit facility to repay $30.6 million owed under its prior secured credit
facility, $2.8 million in debt related to the land purchase for the new
headquarters facility, and $1.1 million to fund certain working capital
requirements and closing costs related to the new credit facility. In connection
with the debt refinancing, the company recorded a $0.3 million ($0.04 per share)
extraordinary charge in the third quarter of 1996 attributable to the write-off
deferred financing fees related to the Company's prior credit facility.
Note 5 - New Headquarters and Manufacturing Facility
In May 1996, the Company broke ground on the construction of a new
headquarters and manufacturing facility in Waukegan, Illinois, a suburb of
Chicago. The Company previously purchased the 20 acre land site for $3.5
million. The additional cost of completing the facility is expected to
approximate $10.5 million. The facility is expected to be completed by the
middle of 1997. As of September 29, 1996, the Company had incurred $2.0 million
in construction costs related to the facility. The Company expects that
construction costs will be financed by advances under the new credit facility
and cash flow from operations.
Note 6 - Subsequent Events
On October 28, 1996, it was announced that the Company will begin a search for a
successor for Jay R. Taylor, President and Chief Executive Officer of the
Company. The Company expects that a successor will be recruited within the next
few months. At that time, Mr. Taylor will retire but is expected to remain as a
consultant and a member of the Board of Directors of the Company. It is expected
that Mr. Taylor's duties as a consultant would include implementation of an
orderly transfer of the CEO position and representing the Company in matters
affecting highway legislation at the federal and state levels.
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The following is a discussion and analysis of the consolidated financial
condition and results of operations of the Company for the quarters, nine months
and years ended September 29, 1996 and October 1, 1995. The following should be
read in conjunction with the condensed consolidated financial statements and
related notes appearing elsewhere herein and in conjunction with the
consolidated financial statements and notes thereto contained in the 1995 Form
10-K.
The Company manufactures and markets highway safety products used in a variety
of applications where motorist guidance is important.
Seasonality and Quarterly Results
The Company's sales are seasonal. The domestic highway maintenance and
construction season tends to reach its peak in the second and third quarters of
the year, and domestic sales of the Company's products are generally highest in
these quarters. While international sales are also seasonal, international
maintenance and construction seasons vary from the domestic season and tend to
offset somewhat the seasonality of domestic sales. International sales
constituted 11.5% and 14.1% of net sales in the first nine months of 1996 and
1995, respectively, and 14.2% of net sales in the year ended December 31, 1995.
Sales in any given quarter generally result from orders booked and shipped in
that quarter. Accordingly, net sales and operating income are particularly
sensitive to the timing of domestic market demand and tend to be highest in the
second and third quarters, whereas net sales and operating income tend to be
reduced during the first and fourth quarters, resulting in either operating
losses or reduced earnings for those periods. In addition, the Company's
performance in any given quarter is further affected by the level of government
highway funding and weather anomalies.
Results of Operations
The following table sets forth, for the periods indicated, the percentage of net
sales of certain items in the Company's condensed consolidated statements of
operations and the percentage change in each item from the prior period.
<PAGE>
<TABLE>
<CAPTION>
Percentage of Percentage of Percentage of
Net Sales Percentage Net Sales Percentage Net Sales Percentage
Quarter Ended Change from Nine Months Ended Change from Year Ended Change from
9/29/96 10/1/95 Prior Period 9/29/96 10/1/95 Prior Period 9/29/96 10/1/95 Prior Period
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 9.6% 100.0% 100.0% 32.2% 100.0% 100.0% 30.4%
Cost of goods sold 62.8 59.8 15.2 63.5 58.3 44.0 64.7 56.5 49.3
Gross profit 37.2 40.2 1.4 36.5 41.7 15.6 35.3 43.5 5.8
Selling and administrative 13.7 14.9 1.2 17.2 19.4 17.1 17.6 20.3 12.8
Research and development 2.4 3.1 (14.2) 3.2 4.7 (10.5) 3.4 4.6 (5.4)
Amortization of intangibles 2.5 2.7 1.0 3.2 4.2 1.3 3.4 4.3 1.8
Operating income 18.6 19.6 4.0 12.9 13.4 27.2 11.0 14.2 0.8
Interest expense 2.3 2.9 (12.7) 3.1 3.8 9.9 3.3 3.7 15.6
Joint venture partnership
loss N/A 0.1 NM N/A 0.2 NM N/A 0.3 NM
Income before provision
for income taxes and
extraordinary item 16.3 16.7 7.3 9.8 9.4 36.9 7.7 10.5 (4.8)
Extraordinary item,
net of tax benefit 1.2 N/A NM 0.5 N/A NM 0.4 N/A NM
Net income 8.5 10.0 (6.7) 5.3 5.7 24.0 3.9 6.0 (15.7)
</TABLE>
See Accompanying Notes
<PAGE>
Quarter Ended September 29, 1996
Compared to
Quarter Ended October 1, 1995
Net sales of $28.8 million for the quarter ended September 29, 1996
increased $2.5 million or 10 % compared with the third quarter of 1995. Net
sales of domestic highway delineation products including thermoplastic increased
13 % compared with the third quarter of 1995. Optical film domestic revenues
decreased 12% while international sales decreased 7% compared with the third
quarter of 1995. The continuation of soft market demand in some European and
Asian markets adversely impacted international sales during the quarter.
Cost of goods sold for the third quarter of 1996 was $18.1 million compared
to $15.7 million in the third quarter of 1995. As a percentage of net sales,
cost of goods sold increased from 59.8% in the third quarter of 1995 to 62.8% in
1996. The corresponding 3.0 percentage point decline in gross margin was largely
attributable to a sales mix which favored lower margin products, including
thermoplastic and competitive pricing for certain product lines. The
thermoplastic business consists mostly of commodity products and has
historically generated a substantially lower gross margin than Stimsonite's
other operations; cost of goods for thermoplastic products are approximately 30
percentage points higher than Stimsonite's other operations.
Selling and administrative expenses for the third quarter of 1996 were $4.0
million, an increase of $0.1 million. As a percentage of net sales, selling and
administrative expenses were 13.7% in the 1996 period compared to 14.9% in the
1995 period.
Research and development expenses for the third quarter of 1996 were $0.7
million compared to $0.8 million in the third quarter of 1995. The decrease was
largely due to realization of revenue from sales of insert tools which is an
offset to research and development expenses. As a percentage of net sales,
research and development expenses were 2.4 % in the 1996 period compared to 3.1
% in 1995.
Interest expense was $0.7 million in the third quarter of 1996, a decrease of
$0.1 million compared to 1995, principally due to lower interest rates
associated with the new credit agreement. See Note 4 of Notes to Condensed
Consolidated Financial Statements.
Nine Months Ended September 29, 1996
Compared to
Nine Months Ended October 1, 1995
Net sales for the nine months ended September 29, 1996 were $66.5 million,
an increase of $16.2 million or 32.2 % compared to the fiscal 1995 period.
Increases of $3.7 million in domestic highway delineation revenues and $12.8
million in domestic thermoplastic revenues were partially offset by a reduction
of $0.3 million in optical film revenues.
Cost of goods sold for the nine months ended September 29, 1996 were $42.2
million compared to $29.3 million in the 1995 period. The cost increase consists
of $10.9 million in thermoplastics operations and $2.0 million in higher costs
associated with higher sales of other products.
Selling and administrative expenses for the nine months ended September 29, 1996
totaled $11.5 million, an increase of $1.7 million or 17.1 % compared to a year
earlier. The increase is largely related to the acquired business and an
increase in commissions related to product mix. Selling and administrative
expenses were offset favorably by income of $0.3 million arising from the sale
of a product line which generated approximately 1% of the Company's revenues.
Research and development expenses for the nine months ended September 29, 1996
were $2.1 million, a decrease of 10.5 % compared to the 1995 period. As a
percentage of net sales, research and development expenses were 3.2 % in the
1996 period compared to 4.7% in 1995. The net decrease in spending is related
to lower tooling expenses offset by increased spending related to new product
development and quality improvements in an existing product line.
Interest expense was $2.1 million for the nine months ended September 29,
1996, an increase of $0.2 million or 9.9 % compared to 1995. The net increase is
primarily related to increased debt resulting from the acquisition of the
thermoplastic business partially offset by lower interest rate costs associated
with the new credit agreement.
Year Ended September 29, 1996
Compared to
Year Ended October 1, 1995
Net sales for the year ended September 29, 1996 were $84.3 million, an increase
of $19.6 million or 30.4 % compared to the year ended October 1, 1995. Excluding
the effect of the thermoplastic acquisition, net sales increased $2.2 million or
4.1%. The Company's proprietary products, including domestic highway
delineation products experienced sales growth while optical film and
international sales declined slightly due to aggressive competitive pricing and
soft market demand in certain foreign markets. Sales of proprietary products are
affected by patents covering certain highway snow plowable products. Certain
current patents covering these products will expire between 1997 and 2000.
Cost of goods sold for the year ended September 29, 1996 were $54.5 million
compared to $36.5 million in 1995. The 49.3 % increase was due to higher sales
of lower margin products, particularly thermoplastic products. Excluding the
effect of the thermoplastic acquisition, cost of goods sold were $29.4 million
in 1996 vs. $26.5 million in 1995.
Selling and administrative expenses for the year ended September 29, 1996
totaled $14.8 million, an increase of $1.7 million or 12.8 % compared to a year
earlier. The increase was largely the result of the thermoplastic acquisition,
offset by $0.3 million in income arising from the sale of a minor product line.
Research and development expenses for the year ended September 29, 1996 were
$2.8 million compared to $3.0 million a year earlier. As a percentage of net
sales, research and development expenses were 3.4 % for the year ended September
29, 1996 compared to 4.6 % for the previous year.
Interest expense for the year ended the September 29, 1996 was $2.8 million, an
increase of $0.4 million or 15.6 % compared to a year earlier. The net increase
is largely related to increased indebtedness used to fund the acquisition of the
thermoplastic operations and the acquisition of land and construction costs
to date related to a new headquarters and manufacturing facility, partially
offset by lower interest costs associated with the new credit agreement.
Liquidity and Capital Resources
The Company finances working capital expenditures principally through
internally generated funds and revolving credit borrowings. On July 23, 1996,
the Company refinanced its long term debt under a new unsecured credit
agreement. The terms of the new credit agreement provide a credit facility
totaling $45.0 million, of which $20.0 million is revolving credit due on June
30, 2000 and bearing interest at prime or LIBOR (at the Company's option) plus a
margin of 75 to 150 basis points based on the Company's debt to cash flow ratio
for the preceding four quarters. At September 29, 1996, the loan bore interest
at the rate of LIBOR plus 125 basis points. Amounts available under the
revolving loan are subject to certain borrowing base limitations. The balance of
the credit facility is a $25.0 million term loan due in quarterly installments
of $0.625 million with a final payment of $8.75 million due on June 30, 2003 and
bearing interest at prime plus 25 basis points or LIBOR plus 180 basis points
(at the Company's option). The new credit facility establishes certain financial
covenants, including covenants relating to the Company's funded debt to EBIDTA
ratio, cash flow coverage ratio, and leverage ratio. The Company's performance
with respect to these covenants will affect among other things the level of
funding available under the agreement. On July 23, 1996, the Company borrowed
$25.0 million of term debt and $9.5 million of revolving debt under the new
credit facility to repay $30.6 million owed under its prior secured credit
facility, $2.8 million in debt related to the land purchase for the new head
quarters facility, and $1.1 million to fund certain working capital requirements
and closing costs related to the new credit facility. In connection with the
debt refinancing, the company recorded a $0.3 million ($0.04 per share)
extraordinary charge in the third quarter of 1996 attributable to the write-off
off deferred financing fees related to the Company's prior credit facility.
During the nine months ended September 29, 1996, the Company's long term debt
increased $7.0 million as a result of borrowings in connection with the purchase
of land and construction costs to date on a new headquarters and manufacturing
facility in Waukegan, Illinois and to fund current working capital requirements.
At September 29, 1996, the Company's outstanding borrowings under the new credit
facility consisted of $25.0 million of term loans and $9.9 million of revolving
loans. During the fourth quarter of 1996, $0.6 million of term loans are due and
an additional $2.5 million of term loans are due in 1997. At September 29, 1996,
the additional amount available under the revolving loan portion of the new
credit agreement after consideration of all borrowing base limitations and
outstanding loans was $10.1 million.
The Company's sales are seasonal, with domestic revenues tending to be
highest in the second and third quarter of the year consistent with the domestic
highway maintenance and construction season. The Company builds working capital,
principally accounts receivable and inventory, during the second and third
quarters to support sales. Positive cash flow from operations is generally
realized in the third and fourth quarters as cash collections are higher than
production levels and in the fourth quarter of the year as production and
related expenditures seasonally decline and accounts receivable are collected.
Conversely, the Company generally experiences negative cash flow in the first
quarter, when sales are lower, and in the second quarter, when the Company is
building working capital but has not yet collected revenues from second quarter
sales. The Company has historically borrowed funds available under its revolving
credit facilities to fund working capital during these quarters. As a result of
the seasonal fluctuations, the Company realized $2.3 million from operating
activities in the first nine months of 1996 compared to expending $0.6 million
in the first nine months of 1995. The Company realized $4.6 million from
operating activities in the year ended September 29, 1996, compared to $2.7
million from operating activities in the year ended October 1, 1995.
In May 1996, the Company broke ground on the construction of a new headquarters
and manufacturing facility in Waukegan, Illinois, a suburb of Chicago. The
Company previously purchased the 20 acre land site for $3.5 million. The
additional cost of completing the facility is expected to approximate $10.5
million. The facility is expected to be completed by the middle of 1997. As of
September 29, 1996, the Company had incurred $2.0 million in construction costs
on the facility. The Company expects that additional construction costs will be
financed by advances under the new credit facility and cash flow from
operations.
Excluding amounts expended for the Company's new facility in Waukegan, Illinois,
the Company expects capital expenditure spending for additions and replacements
to approximate $4.0 million in 1996 and $4.3 million in 1997 with funding to be
principally provided from internally generated funds.
In October 1995, the board of directors authorized the repurchase of up to
500,000 shares of the Company's common stock. As of September 29, 1996, the
Company had purchased 148,500 shares of its common stock at an average price of
$8.18 per share.
The Company expects that cash flow from operations and borrowings under the new
credit facility will be sufficient to fund working capital needs, capital
expenditures and mandatory principal payments under the new credit facility
through 1997.
From time to time, the Company considers possible acquisitions of businesses
complementary to the Company's business. It is likely that any significant
acquisition would be funded with additional long term debt.
This Form 10-Q contains "forward looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, including (without limitation)
statements as to expectations, beliefs and future financial performance and
assumptions underlying the foregoing relating to product demand, ability to meet
short and long term debt requirements, expected cash flow from operations, and
projected capital spending levels. The actual results of outcomes could differ
materially from those discussed in the particular forward looking statements
based on a number of factors, including (i) changes in economic conditions and
(ii) pricing and other actions taken by competitors.
<PAGE>
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K
(A) Exhibits
11.1 Statement regarding computation of per share earnings
27 Financial Data Schedule
(B) Reports on Form 8-K No reports were filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated November 12, 1996 STIMSONITE CORPORATION
THOMAS C. RATCHFORD
--------------------
Thomas C. Ratchford
Vice President-Finance, Treasurer,
Secretary and Chief Financial Officer
(Its Duly Authorized Officer and
Principal Financial and Accounting
Officer)
<PAGE>
Exhibit Index
Sequential
Exhibit Page
Number Description Number
11.1 Statement regarding computation of per share earnings 20
27 Financial Data Schedule 21
Stimsonite Corporation
Computation of Per Share Earnings
For the Periods Indicated
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended Year Ended
----------------------- ----------------------- ----------------------
Description 9/29/96 10/1/95 9/29/96 10/1/95 9/29/96 10/1/95
- ----------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Average Shares Outstanding 8,823,983 8,919,650 8,844,428 8,914,400 8,858,525 8,911,775
Net additional shares assuming
dilutive stock options exercised
and proceeds used to purchase
treasury shares at fair market
value 143,033 180,640 151,163 184,051 157,906 176,658
Options issued within one year
prior to the initial filing
date of registration statement
for an initial public offering
in accordance with Staff
Accounting Bulletin No. 83 4,446 25,346 11,461 27,367 13,086 27,265
----------- ----------- ----------- ----------- ----------- ----------
Average number of common
shares and common equivalent
shares outstanding 8,971,462 9,125,636 9,007,052 9,125,818 9,029,517 9,115,698
=========== =========== =========== =========== =========== ==========
Income before
extraordinary items $2,790,000 $2,634,000 $3,862,000 $2,847,000 $3,625,000 $3,904,000
Extraordinary item,
net of tax benefit (332,000) 0 (332,000) 0 (332,000) 0
----------- ----------- ----------- ----------- ----------- ----------
Net Income $2,458,000 $2,634,000 $3,530,000 $2,847,000 $3,293,000 $3,904,000
=========== =========== =========== =========== =========== ==========
Per share Information
Income before extraordinary
items, net of tax benefit $0.31 $0.29 $0.43 $0.31 $0.40 $0.43
Extraordinary item, net of
tax benefit (0.04) 0.00 (0.04) 0.00 (0.04) 0.00
----------- ----------- ----------- ----------- ----------- ----------
Net Income $0.27 $0.29 $0.39 $0.31 $0.36 $0.43
=========== =========== =========== =========== =========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM FORM 10-Q FOR THE
QUARTERLY PERIOD ENDED SEPTEMBER 29, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<CIK> 0000876400
<NAME> STIMSONITE CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> dollars
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-29-1996
<EXCHANGE-RATE> 1.000
<CASH> 387
<SECURITIES> 0
<RECEIVABLES> 29,989
<ALLOWANCES> 1,276
<INVENTORY> 13,076
<CURRENT-ASSETS> 44,496
<PP&E> 31,062
<DEPRECIATION> 13,153
<TOTAL-ASSETS> 80,199
<CURRENT-LIABILITIES> 15,154
<BONDS> 0
0
0
<COMMON> 89
<OTHER-SE> 23,572
<TOTAL-LIABILITY-AND-EQUITY> 80,199
<SALES> 84,298
<TOTAL-REVENUES> 84,298
<CGS> 54,523
<TOTAL-COSTS> 54,523
<OTHER-EXPENSES> 20,503
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,792
<INCOME-PRETAX> 6,477
<INCOME-TAX> 2,852
<INCOME-CONTINUING> 3,625
<DISCONTINUED> 0
<EXTRAORDINARY> 332
<CHANGES> 0
<NET-INCOME> 3,293
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0
</TABLE>
