<PAGE> 1
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 the quarterly period ended December 31, 1997
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ______________________
Commission File Number 0-19453
HOLOPAK TECHNOLOGIES, INC.
-----------------------------------------------------------------------
Exact name of registrant as specified in its charter
Delaware 51-0323272
------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9 Cotters Lane, East Brunswick, New Jersey 08816
-----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (732) 238-2883
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 |_|
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at 2/9/98
----- ---------------------
Common Stock, $ .01 Par Value 2,796,403
Class A Common Stock, $ .01 Par Value 753,086
<PAGE> 2
HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
Index
Page Number
-----------
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1997
(Unaudited) and March 31, 1997 1
Consolidated Statements of Operations (Unaudited) for the Three
and Nine Months ended December 31, 1997 and 1996 2
Consolidated Statements of Cash Flows (Unaudited) for the Nine
Months Ended December 31, 1997 and 1996 3
Notes to Unaudited Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 7
PART II: OTHER INFORMATION 10
SIGNATURES 11
EXHIBIT 12
<PAGE> 3
HoloPak Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, March 31,
1997 1997
(UNAUDITED) (AUDITED)
------------ ------------
<S> <C> <C>
Assets
Current Assets:
Cash and Cash Equivalents ........................................................... $ 2,918,396 $ 3,004,356
Accounts Receivable, less allowance
for doubtful accounts of $224,256 as of December 31, 1997 and
$174,838 as of March 31, 1997..................................................... 5,917,133 5,548,899
Inventories (Note 2) ................................................................ 7,464,399 7,665,210
Prepaid Expenses .................................................................... 428,178 348,538
Prepaid Income Taxes ................................................................ 94,503 329,713
Deferred Income Taxes ............................................................... 160,000 124,944
Other Current Assets ................................................................ 65,574 140,193
------------ ------------
Total Current Assets .................................................................... 17,048,183 17,161,853
Property and Equipment, less accumulated depreciation and amortization of $14,939,404
as of December 31, 1997 and $12,120,857 as of March 31, 1997 ...................... 8,463,863 9,827,042
Excess of Cost over Fair Value of Net Assets Acquired, less accumulated
amortization of $1,711,560 as of December 31, 1997
and $1,561,260 as of March 31, 1997 ................................................. 6,649,255 6,799,555
Other Assets ............................................................................ 141,303 177,155
------------ ------------
Total Assets ........................................................................... $ 32,302,604 $ 33,965,605
============ ============
Liabilities and Stockholders' Equity
Current Liabilities:
Current Maturities of Long-Term Debt (Note 3) ........................................ $ 843,125 $ 1,752,500
Accounts Payable and Accrued Liabilities ............................................. 3,781,840 3,849,267
------------ ------------
Total Current Liabilities ............................................................... 4,624,965 5,601,767
Long-Term Debt (Note 3) ................................................................ 675,000 1,080,000
Deferred Income Taxes ................................................................... 1,083,180 1,272,247
------------ ------------
Total Liabilities ....................................................................... 6,383,145 7,954,014
------------ ------------
Stockholders' Equity
Preferred Stock: $ 01 par value: 10,000,000 shares authorized; none issued .......... -- --
Common Stock; $ 01 par value; 10,000,000 shares authorized; 2,796,403 shares issued 27,964 27,964
Class A Common Stock; nonvoting; $ 01 par value: 2,000,000 shares authorized;
753,086 shares convertible to Common Stock at any time at the stockholder's option 7,531 7,531
Class B Common Stock, $ 01 par value; 700,000 shares authorized; none issued ........ -- --
Additional Paid-in Capital .......................................................... 22,228,094 22,228,094
Retained Earnings ................................................................... 5,722,361 5,566,451
Cumulative Translation Adjustment ................................................... (795,006) (546,964)
------------ ------------
27,190,944 27,283,076
Less: Common Stock (201,800 shares) Held In the Treasury , at cost ................. (1,271,485) (1,271,485)
------------ ------------
Total Stockholders' Equity .............................................................. 25,919,459 26,011,591
------------ ------------
Total Liabilities and Stockholders' Equity .............................................. $ 32,302,604 $ 33,965,605
============ ============
</TABLE>
See notes to unaudited consolidated financial statements.
1
<PAGE> 4
HoloPak Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1997 1996 1997 1996
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net Revenues .................................................... $9,878,053 $ 9,978,397 $29,383,889 $ 32,146,953
Cost of Sales ................................................... 7,686,473 8,209,891 23,020,194 26,228,333
---------- ----------- ----------- ------------
Gross Profit .................................................... 2,191,580 1,768,506 6,363,695 5,918,620
Selling, General and Administrative Expenses .................... 2,087,732 1,819,183 6,075,391 5,599,275
Restructuring Charge ............................................ -- -- -- 130,000
---------- ----------- ----------- ------------
Operating Income (Loss) ......................................... 103,848 (50,677) 288,304 189,345
Interest Income ................................................. 46,322 23,734 106,458 65,095
Interest Expense ................................................ 34,011 67,197 118,175 217,056
---------- ----------- ----------- ------------
Income (Loss) From Continuing Operations
Before Income Taxes .................................... 116,159 (94,140) 276,587 37,384
Provision (Benefit) for Income Taxes ............................ 50,534 (1,722) 120,677 (45,399)
---------- ----------- ----------- ------------
Income (Loss) From Continuing Operations ........................ 65,625 (92,418) 155,910 82,783
Loss From Discontinued Operations (net of tax benefit of $86,000) -- -- -- 160,000
---------- ----------- ----------- ------------
Net Income (Loss) ............................................... $ 65,625 $ (92,418) $ 155,910 $ (77,217)
========== =========== =========== ============
Basic and diluted earnings (loss) per share: (Note 6)
Continuing Operations .................................... $ 0.02 $ (0.03) $ 0.05 $ 0.03
Discontinuing Operations ................................. -- -- -- (0.05)
---------- ----------- ----------- ------------
Net Income (Loss) ........................................... $ 0.02 $ (0.03) $ 0.05 $ (0.02)
========== =========== =========== ============
</TABLE>
See notes to unaudited consolidated financial statements.
2
<PAGE> 5
HoloPak Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
1997 1996
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income (Loss) ........................................... $ 155,910 $ (77,217)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Discontinued Operations ................................ -- 160,000
Depreciation ........................................... 1,948,244 1,930,819
Amortization ........................................... 150,300 131,140
Loss on sale of fixed assets ............................ 9,019 --
Decreases (Increases) In:
Accounts receivable .................................. (423,923) 258,458
Inventories .......................................... 149,402 547,127
Prepaid expenses ..................................... (83,649) 72,327
Prepaid Income taxes ................................. 227,914 (273,446)
Other current assets ................................. 74,619 (77,551)
Other assets ......................................... 35,852 (13,368)
(Decreases) Increases In:
Accounts payable and accrued liabilities ............. (39,662) 165,854
Deferred income taxes ................................ (211,838) (257,856)
----------- -----------
Net cash provided by operating activities ........... 1,992,188 2,566,287
----------- -----------
Cash Flows From Investing Activities
Proceeds from sale of fixed assets ...................... 5,200 --
Capital expenditures .................................... (708,579) (1,515,615)
Advances to discontinued operations ..................... -- (160,000)
----------- -----------
Net cash (used in) investing activities ............ (703,379) (1,675,615)
----------- -----------
Cash Flows From Financing Activities
Net increase from short-term borrowings ................. -- 350,000
Repayment of long-term borrowings ....................... (1,314,375) (1,314,375)
----------- -----------
Net cash (used in) financing activities ............. (1,314,375) (964,375)
----------- -----------
Effect of exchange rate changes on cash and cash equivalents (60,394) (5,424)
----------- -----------
Net decrease in cash and cash equivalents ................... (85,960) (79,127)
Cash and Cash Equivalents, Beginning of Period ............. 3,004,356 1,999,609
----------- -----------
Cash and Cash Equivalents, End of Period .................... $ 2,918,396 $ 1,920,482
=========== ===========
</TABLE>
See notes to unaudited consolidated financial statements
3
<PAGE> 6
HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Nine Months Ended December 31, 1997 and 1996
(Unaudited)
1. Summary of Significant Accounting Policies:
The accompanying unaudited consolidated financial statements have been
prepared by HoloPak Technologies, Inc. ("HoloPak" or the "Company") pursuant to
the rules and regulations of the Securities and Exchange Commission. In the
opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the nine months ended December 31, 1997 are not
necessarily indicative of the results that may be expected for the year ending
March 31, 1998. The Company's financial statements do not include certain
information and footnotes required by generally accepted accounting principles
and accordingly, should be read in conjunction with the financial statements and
the notes thereto included in HoloPak's Annual Report on Form 10-K for the year
ended March 31, 1997.
2. Inventories
The components of inventories were as follows:
<TABLE>
<CAPTION>
December 31, March 31,
1997 1997
---------- ----------
<S> <C> <C>
Finished Goods $3,953,791 $4,248,769
Work in Process 826,580 768,927
Raw Materials 2,684,028 2,647,514
---------- ----------
TOTAL $7,464,399 $7,665,210
========== ==========
</TABLE>
3. Note Payable & Long-Term Debt
The Company has available through August 1998 a secured revolving line of
credit in the amount of $3,000,000 to be used for general corporate purposes.
The Company has remaining availability under this general facility of $3,000,000
at December 31, 1997 and March 31, 1997. In addition, the Company had a line of
credit for capital expenditures which converted into a five year term loan in
March 1995. This loan requires equal quarterly payments of $135,000, which began
on June 17, 1995, with a final maturity of March 17, 2000. Outstanding
borrowings on this capital expenditures loan at December 31, 1997 were
$1,215,000. Both facilities bear interest at the three month London Interbank
Offered Rate ("LIBOR") plus 150 basis points. The interest rates in effect at
December 31, 1997 and March 31, 1997 were 6.8% and 6.4%, respectively.
4
<PAGE> 7
3. Note Payable & Long-Term Debt (cont'd.)
On March 17, 1993, the Company acquired all of the outstanding stock of
Alubec Industries and borrowed $4,850,000 in long-term debt to partially finance
the acquisition. The long-term debt is payable in equal quarterly installments
of $303,125 through 1998 and bears interest at 5.9%. The balance outstanding on
this term loan at December 31, 1997 was $303,125.
The conditions of the Company's bank borrowings and long-term debt call
for the Company to maintain certain financial ratios regarding debt service
coverage. At December 31, 1997, the Company was in compliance with these ratios.
Annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
For the Period Ended
December 31, Payments
-------------------- ----------
<S> <C>
1997 $ 843,125
1998 540,000
1999 135,000
----------
Total $1,518,125
==========
</TABLE>
4. Adoption of SFAS 131
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 131. Disclosures about Segments
of an Enterprise and Related Information, which will be effective for the
Company beginning April 1, 1998. SFAS No. 131 redefines how operating
segments are determined and requires expanded quantitative and qualitative
disclosures relating to a companies operating segments. The Company has
not yet made a determination as to the extent, if any, of how this
statement will effect its reporting.
5. Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share". This standard revises certain methodology for
computing earnings per common share and requires the reporting of two
earnings per share figures: basic earnings per share and diluted earnings
per share. Basic earnings per share is computed by dividing net income by
the weighted-average number of shares outstanding. Diluted earnings per
share is computed by dividing net income by the sum of the
weighted-average number of shares outstanding plus the dilutive effect of
shares issuable through the exercise of stock options.
5
<PAGE> 8
5. Earnings Per Share (cont'd.)
All earnings per share figures presented herein have been computed in
accordance with the adoption of SFAS No. 128. For the Company, basic
earnings per share equal previously reported primary earnings per share,
and diluted earnings per share include the effect of the assumed exercises
of dilutive stock options.
The components of the denominator for basic earnings per share and
diluted earnings per share are reconciled as followed:
<TABLE>
<CAPTION>
Three Months Nine Months Ended
Ended December 31, December 31,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Basic Earnings per Share:
Weighted Average Common
Shares Outstanding 3,347,689 3,347,689 3,347,689 3,347,689
========== ========== ========== ==========
Diluted Earnings per Share:
Weighted Average Common
Shares Outstanding 3,347,689 3,347,689 3,347,689 3,347,689
Stock Options 12 -0- -0- 13,988
---------- ---------- ---------- ----------
Denominator for diluted
Earnings per Share 3,347,701 3,347,689 3,347,689 3,361,677
========== ========== ========== ==========
</TABLE>
6
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Conditions and Results
of Operations
RESULTS OF OPERATIONS
Three and Nine Months Ended December 31, 1997 Compared to the Three and Nine
Months Ended December 31, 1996
Net Revenues:
For the three months ended December 31, 1997, net revenues were $9.9 million,
compared to $10.0 million in the prior year period. For the nine months ended
December 31, 1997, net revenues were $29.4 million, compared to $32.1 million in
the prior year, which is a decline of $2.7 million or 8.4%.
The decline in the third quarter was comprised of offsetting factors. Revenues
from sales of holographic products increased strongly, rising to $2.9 million
from $1.8 million, which was attributable to extremely strong demand for
security products. Revenues of paper products declined to $1.9 million from $2.0
million because of weakness in the Canadian dollar, and sales of hot stamping
foil products declined to $5.0 million from $6.1 million in the prior period due
to weak sales of metallic hot-stamping foils. The Company has experienced
significant declines in sales in this area as a result of competitive pressures.
For the nine months ended December 31, 1997, revenues of $29.4 million were $2.7
million or 8.4% less than the $32.1 million recorded in the nine months ended
December 31, 1996. Major declines were posted in the hot stamping and metallized
paper lines of business, offset only partially by gains in holography. The cause
of the decline in hot-stamping foils is concentrated in slow sales of metallic
foils, which declined from $11.4 million to $8.4 million. The decline is
attributable to slow markets in packaging and greeting cards and lost market
share to price cutting by competitors.
Metallized paper sales declined for the nine months ended December 31, 1997 from
$8.1 million in the prior period to $6.4 million. The decline was attributable
to the absence of trading card work and in recent months, the continuing
weakness of the Canadian dollar.
Revenues from holographic products, on the other hand, are on a record pace.
Year to date sales of $7.8 million are $2.5 million or 47% higher than the prior
year on consistently strong demand for security products.
7
<PAGE> 10
Cost of Sales and Gross Profit:
Cost of sales for the nine month period ended December 31, 1997 were $23.0
million, compared to $26.2 million for the same prior year period. For the
quarter ended December 31, 1997, cost of sales were $7.7 million, compared
to $8.2 million for the same prior year period.
Gross profit for the 1997 nine month period was $6.4 million yielding a gross
margin of 21.7%, compared to $5.9 million and gross margin of 18.4% for the same
period last year. For the quarter ended December 31, 1997, gross profit was $2.2
million yielding a gross margin of 22.2% compared to gross profit of $1.8
million and gross margin of 17.7%.
The improvement in gross profits and gross margins, in spite of the decline in
sales, is entirely attributable to a decline in the price of polyester film, the
primary raw material in the manufacture of both hot stamping and holographic
foil. Year to date, positive purchase variances on polyester film have
aggregated $1.0 million. Offsetting this positive variance has been poorer
absorption of fixed costs on lower revenues.
Selling, General and Administrative Expenses:
Selling, general, and administrative expenses for the quarter ended December 31,
1997 were $2.1 million compared to $1.8 million for the quarter ended December
31, 1996. For the nine months ended December 31, 1997, selling, general and
administrative expenses were $6.1 million compared to $5.6 million for the same
period ended December 31, 1996. The increase in selling, general and
administrative expenses for both periods is attributable to higher sales and
marketing expense, legal expenses, and executive salaries.
Operating Income (Loss):
Operating income for the quarter ended December 31, 1997 was $104,000, compared
to an operating loss of $51,000 for the same period ended December 31, 1996.
Year to date operating income is $288,000, compared to $189,000 for the same
period last year. The improvement in both periods is attributable to the
improvement in gross profits stemming from lower raw material costs.
Interest Income (Expense):
Net interest income for the quarter was $12,000, compared to net interest
expense of $43,000 in the prior period. For the nine month period ended December
31, 1997, net interest expense was $12,000, compared to net interest expense of
$152,000 for the same period ended December 31, 1996. Lower outstanding debt
balances are responsible for the net decrease.
8
<PAGE> 11
Income Taxes:
Income taxes for the quarter ending December 31, 1997 were a provision of
$50,000, compared to a benefit of $2,000 in the prior year. For the year to
date, income taxes are a provision of $121,000, compared to a benefit of $45,000
in the prior year. As a result of add-backs of permanent differences, primarily
amortization of goodwill and the effects of FASB 109 "Accounting for Incomes
Taxes", the company's effective tax rate for the nine months ended December 31,
1997 was 43.8%.
Loss from Discontinued Operations:
The loss from discontinued operations recorded in fiscal 1997 reflects the cost
of settling the lawsuit brought against the Company by Bollore Technologies
concerning a supply contract to the Company's discontinued European operations.
This operation has been completely closed.
FINANCIAL CONDITION
Liquidity and Capital Resources:
As of December 31, 1997, the Company had working capital of $12.4 million,
compared to working capital of $11.6 million at March 31, 1997. The increase is
primarily attributable to a decrease in current maturities of long-term debt of
$909,000, offset by an increase in accounts receivable of $368,000.
The Company has a general purpose line of credit of $3.0 million, against which
there were no outstanding borrowings at December 31, 1997.
Capital expenditures for the nine months ended December 31, 1997 were $708,000,
which included a major expenditure of $250,000 for the down payment on specialty
security product machinery.
9
<PAGE> 12
PART II
OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Change in Securities None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to Vote of Security Holders None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K
Exhibit 11 Computation of Earnings Per Share
10
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this to be signed on its behalf by the undersigned
thereunto duly authorized.
HoloPak Technologies, Inc.
/s/ James L. Rooney Dated: February 11, 1998
---------------------------------
James L. Rooney
Chief Executive Officer
/s/ David W. Jaffin Dated: February 11, 1998
---------------------------------
David W. Jaffin,
Chief Financial Officer
11
<PAGE> 1
EXHIBIT 11
HoloPak Technologies, Inc. and Subsidiaries
Computation of Earnings Per Share
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months Ended
Ended December 31, December 31,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Weighted Average Number of
Common Shares Outstanding
Basic Computation 3,347,689 3,347,689 3,347,689 3,347,689
Common Share Equivalents Based
Upon the Treasury Stock Method 12 -0- -0- 13,988
---------- ---------- ---------- ----------
Denominator for Diluted Earnings
Per Share 3,347,701 3,347,689 3,347,689 3,361,677
========== ========== ========== ==========
Basic and Diluted for Earnings
(Loss) Per Share
Continuing Operations $ 0.02 $ (0.03) $ 0.05 $ 0.03
Discontinued Operations -- -- -- (0.05)
---------- ---------- ---------- ----------
Net Income (Loss) $ 0.02 $ (0.03) $ 0.05 $ (0.02)
========== ========== ========== ==========
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,918,396
<SECURITIES> 0
<RECEIVABLES> 5,917,133
<ALLOWANCES> 224,256
<INVENTORY> 7,464,399
<CURRENT-ASSETS> 17,048,183
<PP&E> 8,463,863
<DEPRECIATION> 14,934,404
<TOTAL-ASSETS> 32,302,604
<CURRENT-LIABILITIES> 4,624,965
<BONDS> 675,000
0
0
<COMMON> 27,964
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 25,919,459
<SALES> 29,383,889
<TOTAL-REVENUES> 29,383,889
<CGS> 23,020,194
<TOTAL-COSTS> 23,020,194
<OTHER-EXPENSES> 6,075,391
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 118,175
<INCOME-PRETAX> 276,587
<INCOME-TAX> 120,677
<INCOME-CONTINUING> 155,910
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 155,910
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
