<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, 1998
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.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT 2/10/99
----- ----------------------
<S> <C>
Common Stock, $ .01 Par Value 3,346,519
</TABLE>
<PAGE> 2
HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1998
(Unaudited) and March 31, 1998 1
Consolidated Statements of Operations (Unaudited) for the Three
and Nine Months ended December 31, 1998 and 1997 2
Consolidated Statements of Cash Flows (Unaudited) for the Nine
Months Ended December 31, 1998 and 1997 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosure About Market
Risk 12
II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
</TABLE>
<PAGE> 3
HOLOPAK TECHNOLOGIES, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
1998 MARCH 31,
(UNAUDITED) 1998
----------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents .................................................. $ 3,116,367 $ 1,939,764
Accounts Receivable, less allowance for doubtful accounts of
$162,167 as of December 31, 1998 and $217,604 as of March 31, 1998 ........ 4,952,507 5,740,100
Inventories (Note 2) ....................................................... 6,620,266 7,413,759
Prepaid Expenses ........................................................... 469,172 477,020
Prepaid Income Taxes ....................................................... 110,950 104,876
Deferred Income Taxes ...................................................... 125,000 129,834
Other Current Assets ....................................................... 46,901 40,120
------------ ------------
TOTAL CURRENT ASSETS ........................................................... 15,441,163 15,845,473
Property and Equipment, less accumulated depreciation of $15,349,128 as
of December 31, 1998 and $14,382,827 as of March 31, 1998 .................... 7,410,144 8,169,074
Excess of Cost over Fair Value of Net Assets Acquired, less accumulated
amortization of $1,911,996 as of December 31, 1998 and $1,761,669 as
of March 31, 1998 .......................................................... 6,448,819 6,599,146
Other Assets ................................................................... 142,013 147,102
------------ ------------
TOTAL ASSETS .................................................................. $ 29,442,139 $ 30,760,795
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current Maturities of Long-Term Debt (Note 3) ............................... $ 1,175,000 $ 1,080,000
Accounts Payable and Accrued Liabilities .................................... 2,635,982 3,079,475
------------ ------------
TOTAL CURRENT LIABILITIES ...................................................... 3,810,982 4,159,475
Deferred Income Taxes .......................................................... 907,705 1,027,353
------------ ------------
TOTAL LIABILITIES .............................................................. 4,718,687 5,186,828
------------ ------------
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 convertered to Common Stock on February 3, 1999 .......... 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 .......................................................... 4,984,212 5,302,398
Cumulative Translation Adjustment .......................................... (1,252,864) (720,535)
------------ ------------
25,994,937 26,845,452
Less: Common Stock (201,800 shares) Held In Treasury, at cost ............. (1,271,485) (1,271,485)
------------ ------------
Total Stockholders' Equity ..................................................... 24,723,452 25,573,967
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..................................... $ 29,442,139 $ 30,760,795
============ ============
</TABLE>
See unaudited notes to 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,
1998 1997 1998 1997
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET REVENUES ............................. $ 7,705,814 $ 9,878,063 $ 25,013,339 $ 29,383,889
Cost of Sales ............................ 6,233,896 7,686,473 20,121,619 23,020,194
------------ ------------ ------------ ------------
Gross Profit ............................. 1,471,918 2,191,590 4,891,720 6,363,695
Selling, General & Administrative Expenses 1,616,289 2,087,732 5,206,168 6,075,391
------------ ------------ ------------ ------------
Operating (Loss) Income .................. (144,371) 103,858 (314,448) 288,304
Interest Income .......................... 37,277 46,322 99,751 106,458
Interest Expense ......................... 20,076 34,011 74,094 118,175
------------ ------------ ------------ ------------
(LOSS) INCOME BEFORE INCOME TAXES ........ (127,170) 116,169 (288,791) 276,587
Provision for Income Taxes ............... 70,763 50,534 29,395 120,677
------------ ------------ ------------ ------------
NET (LOSS) INCOME ........................ $ (197,933) $ 65,635 $ (318,186) $ 155,910
============ ============ ============ ============
BASIC AND DILUTED (LOSS)
EARNINGS PER SHARE (NOTE 6):
NET (LOSS) INCOME ........................ $ (0.06) $ 0.02 $ (0.10) $ 0.05
============ ============ ============ ============
Weighted-average number of common shares
and common share equivalents outstanding 3,347,689 3,347,701 3,347,689 3,347,689
</TABLE>
See unaudited notes to consolidated financial statements
2
<PAGE> 5
HOLOPAK TECHNOLOGIES, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
1998 1997
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET (LOSS) INCOME ........................................... $ (318,186) $ 155,910
Adjustments to reconcile net (loss) income to net cash
provided by operating activites:
Depreciation ........................................... 1,615,033 1,948,244
Amortization ........................................... 150,327 150,300
(Gain) loss on sale of fixed assets .................... (120,954) 9,019
Decreases (Increases) In:
Accounts receivable .................................. 651,276 (423,923)
Inventories .......................................... 644,103 149,402
Prepaid expenses ..................................... (718) (83,649)
Prepaid Income taxes ................................. (7,013) 227,914
Other current assets ................................. (6,781) 74,619
Other assets ......................................... (62,040) 35,852
(Decreases) Increases In:
Accounts payable and accrued liabilities ............. (391,540) (39,662)
Deferred income taxes ................................ (94,054) (211,838)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES ........... 2,059,453 1,992,188
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of fixed assets ...................... 134,081 5,200
Capital expenditures .................................... (1,067,153) (708,579)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES ............... (933,072) (703,379)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term borrowings ....................... (405,000) (1,314,375)
Increase in long-term borrowings ........................ 500,000 --
----------- -----------
NET CASH PROVIDED FROM (USED IN) FINANCING ACTIVITIES 95,000 (1,314,375)
----------- -----------
Effect of exchange rate changes on cash and cash equivalents (44,778) (60,394)
----------- -----------
Net increase (decrease) in cash and cash equivalents ........ 1,176,603 (85,960)
Cash and Cash Equivalents, Beginning of Period ............. 1,939,764 3,004,356
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD .................... $ 3,116,367 $ 2,918,396
=========== ===========
</TABLE>
See unaudited notes to consolidated financial statements
3
<PAGE> 6
HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(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, 1998 are not necessarily indicative of the results
that may be expected for the year ending March 31, 1999. 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, 1998.
2. INVENTORIES
The components of inventories were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 MARCH 31, 1998
----------------- --------------
<S> <C> <C>
Finished Goods $3,817,381 $3,859,107
Work in Process 612,273 839,991
Raw Materials 2,190,612 2,714,661
---------- ----------
TOTAL $6,620,266 $7,413,759
========== ==========
</TABLE>
3. NOTE PAYABLE & LONG-TERM DEBT
Effective October 1, 1998, the Company renegotiated the terms of its
credit facility and has available through September 1999 a secured
revolving line of credit in the amount of $3.0 million to be used for
general corporate purposes. The Company has $3.0 million available
under this general facility at February 9, 1999. As of October 1, 1998,
the Company converted $500,000 from its previous line of credit to a
four year term loan. This loan requires equal quarterly payments of
$31,250 beginning January 1, 1999 and maturing on October 1, 2002. In
addition, the Company has a five year term loan. 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 expenditure loan at December 31, 1998 and March 31, 1998 were
$675,000 and $1,080,000, respectively. The line of credit facility
bears interest at the one month London Interbank Offered Rate ("LIBOR")
plus 225 basis points. The 1995 and 1998 term loans bear interest at
the three month LIBOR plus 150 basis points and 250 basis points
respectively. The interest rate in effect for the line of credit
facility was 7.6% at December 31, 1998 and 7.9% at March 31, 1998. The
interest rate in effect for the 1995 term loan was 6.7% at December 31,
1998 and 6.9% at March 31, 1998. The interest rate in effect for the
1998 term loan was 7.8% at December 31, 1998.
4
<PAGE> 7
3. NOTE PAYABLE & LONG-TERM DEBT (CONT'D)
At December 31, 1998, the Company was not in compliance with its Fixed
Charge Coverage Ratio of 1.1 to 1.0; however, the Company obtained a
waiver on this covenant as of December 31, 1998. The Bank has not
waived this covenant for future potential non-compliance and therefore,
all amounts under this agreement have been classified as current
liabilities.
Annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD ENDING
DECEMBER 31, PAYMENTS
--------------------- --------
<S> <C> <C>
1999 $ 665,000
2000 260,000
2001 125,000
2002 125,000
----------
$1,175,000
==========
</TABLE>
4. ADOPTION OF SFAS NO. 130
In 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." Comprehensive income is defined as the total
change in shareholders' equity during the period other than from
transactions with shareholders. For the Company, comprehensive income
is comprised of net income and the net change in the accumulated
foreign currency translation adjustment account. Total comprehensive
(loss) income for the nine months ended December 31, 1998 and 1997 was
$(850,515) and $(92,132) respectively.
5. ADOPTION OF SFAS NO. 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 with its 1999 fiscal year end. SFAS
No. 131 redefines how operating segments are determined and requires
expanded quantitative and qualitative disclosures relating to a
company's operating segments. The Company is currently assembling the
data and evaluating the impact of SFAS No. 131 on its current
disclosures.
5
<PAGE> 8
6. 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. All earnings per share figures presented herein have
been computed in accordance with the provisions of SFAS No. 128. For
the Company, both basic and diluted earnings per share equal previously
reported primary earnings per share. There was no dilutive effect for
the nine months ended December 31, 1998 and December 31, 1997.
7. THE MERGER
On November 17, 1998, the Company, Foilmark, Inc. ("Foilmark") and
Foilmark Acquisition Corporation, a subsidiary of Foilmark ("Foilmark
Sub") entered into a definitive agreement (the "Merger Agreement")
pursuant to which the parties agreed, subject to stockholder approval
and other conditions, to merge (the "Merger") the Company with and into
Foilmark Sub, with Foilmark Sub as the survivor of the Merger. If the
Merger is completed, HoloPak stockholders will receive 1.11 shares of
common stock, par value of $0.01 per share, of Foilmark and $1.42 in
cash for each share of common stock, par value $0.01 per share of
HoloPak. The Merger is expected to close in the first quarter of 1999,
subject to customary conditions and approval of the Merger by
stockholders of the Company and approval of the issuance of Foilmark
common stock to the HoloPak stockholders pursuant to the Merger by the
stockholders of Foilmark.
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
On November 17, 1998, the Company, Foilmark, Inc. ("Foilmark") and Foilmark
Acquisition Corporation, a subsidiary of Foilmark ("Foilmark Sub") entered into
a definitive agreement (the "Merger Agreement") pursuant to which the parties
agreed, subject to stockholder approval and other conditions, to merge (the
"Merger") the Company with and into Foilmark Sub, with Foilmark Sub as the
survivor of the Merger. If the Merger is completed, HoloPak stockholders will
receive 1.11 shares of common stock, par value of $0.01 per share, of Foilmark
and $1.42 in cash for each share of common stock, par value $0.01 per share of
HoloPak. The Merger is expected to close in the first quarter of 1999, subject
to customary conditions and approval of the Merger by stockholders of the
Company and approval of the issuance of Foilmark common stock to the HoloPak
stockholders pursuant to the Merger by the stockholders of Foilmark.
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO THE THREE MONTHS ENDED DECEMBER
31, 1997
NET REVENUES:
Net revenues for the three months ended December 31, 1998 were $7.7 million,
compared to $9.9 million for the comparable period of December 31, 1997, a
decrease of 22.2%. The decrease is primarily attributable to decreased sales
from the Company's holographic products. The other factor affecting sales is the
reduced average selling prices as a result of competitive pricing pressures and
decreases in the cost of raw materials passed onto customers. Revenues from
sales of holographic products decreased from $2.9 million to $1.9 million as a
result of reduced holographic security and diffraction product sales. Revenues
from sales of hot stamping foils decreased from $4.6 million to $3.8 million
primarily due to the decrease in the average selling price per unit as discussed
above. Revenues for metallized paper increased slightly from $1.9 million in the
prior year quarter as compared to $2.0 million in the quarter ending December
31, 1998.
COST OF SALES AND GROSS PROFITS:
Cost of sales decreased by $1.5 million to $6.2 million from $7.7 million in the
prior year period. The decrease from the comparable quarter of the prior year
was primarily attributable to lower hot stamping foils sales and the decline in
the price of polyester film, the primary raw material in the manufacturing of
both hot stamping and holographic foil.
Gross profit decreased by $.7 million, from $2.2 million in 1997 to $1.5 million
in the 1998 period as a result of the decrease in revenues partially offset by
the decrease in Cost of Sales. Fixed costs at the Company's Transfer Print
Foils, Inc., subsidiary were absorbed by lower sales thus decreasing the gross
profit as a percentage of sales to 19.1% from 22.2% in the prior year period.
7
<PAGE> 10
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Selling, general and administrative expenses decreased to $1.6 million from $2.1
million for the comparable period of 1997. The primary reductions occurred in
advertising, commissions and insurance expense, partially offset by increased
computer related charges and employment fees.
OPERATING (LOSS) INCOME:
Operating loss for the quarter ended December 31, 1998, was $144,000 compared to
operating income of $104,000 for the same period last year. The decline was
attributable to the decline in sales and gross profits.
INTEREST INCOME (EXPENSE):
Net interest income for the quarter was $17,200 compared to a net interest
income of $12,300 for the prior year period. The increase in interest income was
due to increased cash balances and lower debt.
INCOME TAXES:
Income taxes were $70,800 for the quarter ended December 31,1998 due to an
increase in the valuation reserve against previously established deferred tax
assets, compared to income taxes of $50,500 for the prior year period.
NET (LOSS) INCOME AND EARNINGS (LOSS) PER SHARE:
Net loss was $197,900 for the quarter ended December 31, 1998 compared to net
income of $65,600 for the prior year period. The loss per share was $0.06 for
the quarter ended December 31, 1998 compared to net income of $0.02 for the
prior year quarter. Lower operating profits were responsible for the decline.
8
<PAGE> 11
NINE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO THE NINE MONTHS ENDED DECEMBER
31, 1997
NET REVENUES:
Net revenues for the nine months ended December 31, 1998 were $25.0 million,
compared to $29.4 million for the comparable period of December 31, 1997, a
decrease of 15.0%. The decrease is primarily attributable to decreased sales
from the Company's holographic products. Another major factor affecting sales is
the reduced average selling price as a result of competitive pricing pressures
and decreases in the cost of raw materials passed onto customers. Revenues from
sales of holographic products decreased from $7.8 million to $5.5 million as a
result of reduced security product and diffraction sales. Revenues from hot
stamping foils decreased from $14.2 million to $12.3 million primarily due to
the decrease in the average selling price per unit as discussed previously.
Revenues for metallized paper increased slightly from $6.4 million in the period
ending 1997 to $6.5 million in the comparable period ending December 31, 1998.
COST OF SALES AND GROSS PROFIT:
Cost of sales decreased by $2.9 million to $20.1 million from $23.0 million in
the prior year period. The decrease from the prior year nine month period was
primarily attributable to lower holography sales as previously discussed and the
decline in the price of polyester film, the primary raw material in the
manufacturing of both hot stamping and holographic foil.
Gross profit decreased by $1.5 million, from $6.4 million in 1997 to $4.9
million in the 1998 period as a result of the decrease in revenues partially
offset by the decrease in cost of sales. Fixed costs at the Company's Transfer
Print Foils, Inc. subsidiary were absorbed by lower sales thus decreasing the
gross profit as a percentage of sales to 19.6% from 21.7% in the prior year
period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Selling, general and administrative expenses were $5.2 million compared to $6.1
million for the prior year period. The primary reductions occurred in
advertising, commissions and insurance expense.
OPERATING (LOSS) INCOME:
Operating loss for the nine month period ended December 31, 1998, was $314,000
compared to operating income of $288,000 for the same period last year. The
decline was attributable to the decline in sales and gross profits.
9
<PAGE> 12
INTEREST INCOME (EXPENSE):
Net interest income for the nine month period was $25,700 compared to an expense
of $11,700 for the prior year period. The increase in net interest income was
due to lower debt for the nine month period compared to the prior year period.
INCOME TAXES:
The income tax provision was $29,400 for the nine months ended December 31,
1998 due to an increase in the valuation reserve against previously established
tax assets, compared to an income tax provision of $120,700 for the prior year
period.
NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE:
Net loss was $318,200 for the nine months ended December 31, 1998 compared to
net income of $155,900 for the prior year period. The 1998 loss per share was
$0.10 compared to December 31, 1997 earnings of $0.05. Lower operating profits
were responsible for the decline.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES:
As of December 31, 1998, the Company had cash of $3.1 million and working
capital of $11.6 million, compared to cash of $1.9 million and working capital
of $11.7 million at March 31, 1998. The major sources of cash for the nine
months ending December 31, 1998 were from operating activities which includes a
decrease in accounts receivable of $.7 million and a decrease in inventory of
$.6 million. The major uses of cash for the nine months ending December 31,
1998 were increased capital expenditures of $1.1 million, the decrease in
accounts payable and accrued liabilities of $.4 million and the net loss of $.3
million.
The Company has available a general purpose credit line of $3,000,000 with a
remaining availability of $3,000,000 at February 9, 1999.
The Company's financial covenants under the Company's $3,000,000 credit line
consist of a Fixed Charge Coverage Ratio of 1.1 to 1.0 for the preceding twelve
months calculated at the end of each fiscal quarter and a minimum Tangible Net
Worth Covenant of $17,750,000 calculated at the end of each fiscal quarter.
At December 31, 1998, the Company was not in compliance with its Fixed Charge
Coverage Ratio of 1.1 to 1.0; however, the Company obtained a waiver on this
covenant as of December 31, 1998. The Bank has not waived this covenant for
future potential non-compliance and therefore, all amounts under this agreement
have been classified as current liabilities.
10
<PAGE> 13
STOCKHOLDERS' EQUITY:
Stockholder's equity decreased by $.9 million primarily due to a decrease in the
cumulative translation adjustment associated with our Canadian subsidiary and
the net loss for the period.
YEAR 2000
GENERAL
The "YEAR 2000 ISSUE" refers to computer hardware and software and their ability
to recognize and process dates beyond the year 1999. This includes, but is not
limited to, IS (Information systems) hardware and software, telephone systems
and plant infrastructure. In addition, this issue involves the capability of the
Company's customers and suppliers to provide an uninterrupted supply of orders,
goods and services. To ensure a smooth transition to the year 2000, the Company
has implemented a plan to correct and replace, where necessary, any hardware or
software which is not year 2000 compliant. The Company is also surveying our
suppliers and customers to identify those who will be ready and those who may
not be ready.
STATUS
The Company has identified certain Year 2000 IS issues and is in the process of
replacing or modifying non-compliant hardware and software. The Company's plants
have begun to evaluate their equipment and infrastructure and it is expected
that recommendations for corrective measures, if necessary will be formulated by
March 31, 1999. Purchasing has proceeded to survey all critical suppliers and a
cooperative program with our customers has begun to lessen their concern and
ensure a continued relationship. The Company's goal is to be compliant by July
1, 1999.
RISKS
Any oversight to correct a material internal YEAR 2000 problem could result in
the interruption or failure of certain normal business activities. These
interruptions or failures could adversely affect the Company's financial
condition. In addition, if any third parties who provide goods or services that
are critical to the Company's business activities fail to appropriately address
their YEAR 2000 issues, there could be a material adverse effect on the
Company's financial condition and results of operations. Because of the
magnitude and uncertainty of the problem, the Company cannot determine at this
time whether the consequences of any oversights will have a material impact on
the Company. The Company believes that the planned modifications of its internal
systems and equipment will allow it to be year 2000 compliant in a timely
manner.
CONTINGENCY PLAN
The Company will develop appropriate contingency plans to address internal and
external issues specific to YEAR 2000 compliance. These plans will include
performing certain processes manually, changing suppliers and increasing
inventory levels. The Company expects to complete its contingency plan by
September 30, 1999.
11
<PAGE> 14
COSTS
The Company does not expect the costs associated with its YEAR 2000 efforts to
be substantial. The Company has incurred approximately $205,000 of expenses
through January 31, 1999 associated with its Year 2000 issues and the Company
estimates that the total amount will not exceed $400,000, such costs to be
expensed throughout 1999. Such total amount includes expenditures under capital
leases for certain hardware and software costs. The Company's aggregate cost
estimate does not include time and costs that may be incurred by the Company as
a result of the failure of any third parties, including suppliers, to become
YEAR 2000 ready or costs to implement any contingency plan.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
12
<PAGE> 15
PART II
OTHER INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C>
Item 1. Legal Proceedings None
Item 2. Change in Securities and Use of Proceeds 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
</TABLE>
(a) Exhibits
Exhibit 11 Computation of (Loss) Earnings
Per Share of Common Stock
(b) Report on Form 8-K
On November 25, 1998, the Company filed a report on
Form 8-K, dated November 17, 1998, stating that the
Company entered into an Agreement and Plan of Merger
with Foilmark, Inc. and Foilmark Acquisition
Corporation, dated November 17, 1998.
13
<PAGE> 16
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..
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ JAMES L. ROONEY Dated: February 10, 1999
---------------------------- -----------------
James L. Rooney
President and
Chief Executive Officer
/s/ ARTHUR KARMEL Dated: February 10, 1999
---------------------------- -----------------
Arthur Karmel
Chief Financial Officer
</TABLE>
14
<PAGE> 1
EXHIBIT 11
HOLOPAK TECHNOLOGIES, INC.. AND SUBSIDIARIES
COMPUTATION OF (LOSS) EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS ENDED
ENDED DECEMBER 31 DECEMBER 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net (Loss) Earnings for Computation
of Net (Loss) Earnings Per Share $ (197,933) $ 65,635 $(318,186) $ 155,910
Total Common Shares and
Common Share Equivalents
Outstanding 3,347,689 3,347,701 3,347,689 3,347,689
Earnings (Loss) Per Common Share and
Common Share Equivalents:
Net (Loss) Income $(0.06) $0.02 $(0.10) $0.05
======= ===== ====== =====
</TABLE>
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,116,367
<SECURITIES> 0
<RECEIVABLES> 5,114,694
<ALLOWANCES> 162,187
<INVENTORY> 6,620,266
<CURRENT-ASSETS> 15,441,163
<PP&E> 22,759,272
<DEPRECIATION> 15,349,128
<TOTAL-ASSETS> 29,442,139
<CURRENT-LIABILITIES> 3,810,982
<BONDS> 0
0
0
<COMMON> 35,495
<OTHER-SE> 24,687,957
<TOTAL-LIABILITY-AND-EQUITY> 29,442,139
<SALES> 25,013,339
<TOTAL-REVENUES> 25,013,339
<CGS> 20,121,619
<TOTAL-COSTS> 20,121,619
<OTHER-EXPENSES> 5,206,168
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,657
<INCOME-PRETAX> (288,791)
<INCOME-TAX> 29,395
<INCOME-CONTINUING> (318,186)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (318,186)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
