UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 March 31, 1996
or
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1943
For the transition period from to
Commission file number 0-20231
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SPECIALTY PAPERBOARD, INC.
(Exact name of registrant as specified in its charter)
Delaware 82-0429330
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Brudies Road, Brattleboro, Vermont, 05302
(Address of principal executive offices)
(802) 257-0365
(Registrant's telephone number, including area code)
NONE
- - -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock.
<TABLE>
<S> <C>
Class Outstanding
Common Stock March 31, 1996
$.001 par value 4,033,432
</TABLE>
<PAGE>
SPECIALTY PAPERBOARD, INC.
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ITEM 1. Financial Statements ------
Consolidated Balance Sheets 3
March 31, 1996 and December 31, 1995
Consolidated Statements of Income 4
Three Months Ended
March 31, 1996 and 1995
Consolidated Statements of Cash Flows 5
Three Months Ended
March 31, 1996 and 1995
Notes to Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial 7-8
Condition and Results of Operations
EXHIBIT 11 Statement Regarding Computations of Net Earnings 9
Per Share
PART II, OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
</TABLE>
<PAGE>
PART I, FINANCIAL INFORMATION
ITEM 1, FINANCIAL STATEMENTS
SPECIALTY PAPERBOARD, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
Unaudited
<TABLE>
<CAPTION>
March 31 December 31
1996 1995
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 488 $ 1,518
Accounts Receivable 10,583 9,406
Cogen Receivable 1,680 1,680
Inventories 16,814 16,856
Other 753 2,948
---------- ----------
TOTAL CURRENT ASSETS 30,318 32,408
LONG TERM COGEN RECEIVABLE 1,832 1,832
PROPERTY, PLANT AND EQUIPMENT, NET 34,863 33,551
ORGANIZATIONAL AND FINANCING COSTS 2,012 2,199
OTHER LONG TERM ASSETS 496 500
DEFERRED INCOME TAXES 4,128 4,128
TOTAL ASSETS $ 73,649 $ 74,618
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 6,808 $ 7,702
Accrued Liabilities 5,978 5,546
Current Portion of Long Term Debt 1,750 1,688
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TOTAL CURRENT LIABILITIES 14,536 14,936
LONG TERM LIABILITIES:
Revolving Debt
Senior Term Debt 3,411 4,625
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TOTAL LONG TERM DEBT 3,411 4,625
Deferred Gain 13,892 14,322
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TOTAL LONG TERM LIABILITIES 17,303 18,947
STOCKHOLDERS' EQUITY:
Common Stock 4 4
Additional Paid in Capital 44,698 44,713
Unearned Compensation (79) (121)
Accumulated Deficit (2,813) (3,861)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 41,810 40,735
TOTAL LIABILITY AND STOCKHOLDERS' EQUITY $ 73,649 $ 74,618
============ ============
</TABLE>
(The accompanying notes are an integral part
of the consolidated financial statements.)
<PAGE>
SPECIALTY PAPERBOARD, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended March 31
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1996 1995
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<S> <C> <C>
Net Sales $ 24,859 $ 35,198
Cost of Sales 21,356 30,361
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Gross Profit 3,503 4,837
General and Administrative Expenses 1,961 2,324
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Income from Operations 1,542 2,513
Other (Income) Expenses, Net (328) (306)
Cogeneration (Income) (6,512)
Loss on Sale of Assets 8,159
Interest Expense 180 530
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Income Before Income Taxes 1,690 642
Provision for Income Taxes 642 177
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Net Income 1,048 465
Net Income Applicable to Common Shares $ 1,048 $ 465
========= ==========
Net Income Per Common Share: $ 0.26 $ 0.12
Average Number of Shares Outstanding 4,033 4,033
</TABLE>
(The accompanying notes are an integral part
of the consolidated financial statements.)
<PAGE>
SPECIALTY PAPERBOARD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended
------------------
3/31/96 3/31/95
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,048 $ 465
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and Amortization 796 1,099
Amortization of Deferred Gain (430) (429)
Amortization of Unearned Compensation 42 30
Loss on Sale of Assets 8,159
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts Receivable (1,177) (2,341)
Inventories 42 (1,003)
Other 2,195 (54)
Accounts Payable (894) 633
Accrued Liabilities 432 152
------- ------
Net Cash Provided by Operating Activities 2,054 6,711
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Cogeneration Receipt (6,512)
Additions to Property, Plant and Equipment (1,917) (682)
Net Proceeds from Sale of Assets 13,853
Expenses Paid in Connection with Sale of Assets (725)
Net Cash Provided By (Used In) ------- ------
Investing Activities (1,917) 5,934
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Revolving Credit Line 27,788 36,563
Payments of Revolving Credit Line (28,565) (40,815)
Repayment of Senior Term Debt (375) (8,150)
APIC - Unearned Compensation Adjustment (15)
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Net Cash Used In Financing Activities (1,167) (12,402)
NET INCREASE (DECREASE) IN CASH (1,030) 243
CASH AT BEGINNING OF PERIOD 1,518 1,367
------ -------
CASH AT END OF PERIOD $ 488 $ 1,610
======= =======
</TABLE>
(The accompanying notes are an integral part
of the consolidated financial statements.)
<PAGE>
SPECIALTY PAPERBOARD, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
1. Basis of Presentation:
The balance sheet as of March 31, 1996 and the statements of income and
cash flows for the quarter then ended are unaudited and, in the opinion of
management, all adjustments necessary for a fair presentation of such
financial statements have been recorded. Such adjustments consist only of
normal recurring items.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The year-end balance sheet was
derived from audited financial statements, but does not include disclosures
required by generally accepted accounting principles. It is suggested that
these interim financial statements be read in conjunction with the audited
financial statements for the year ended December 31, 1995 included in the
Company's Annual Report on Form 10-K.
2. Inventories:
Inventories at March 31, 1996 and December 31, 1995 consisted of the
following (000's):
<TABLE>
<CAPTION>
(Unaudited)
03/31/96 12/31/95
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<S> <C> <C>
Raw Materials $ 7,277 $ 7,269
Work In Process 4,630 4,650
Finished Goods 4,907 4,937
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$ 16,814 $ 16,856
</TABLE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW:
The Company's financial results are dependent upon a number of factors,
including the level of orders from key customers, levels of inventory
maintained by such customers, fluctuations in the price of raw materials
and actions by competitors. In addition, the Company's results will continue
to be influenced--as they have been in the past--by the level of growth in
the overall economy and in the markets served by the Company.
RESULTS OF OPERATIONS:
Three Months Ended March 31, 1996 Compared to Three Months Ended
March 31, 1995:
Net sales decreased to $24,859,000 in the first quarter of 1996 from
$35,198,000 in the comparable quarter in 1995. Sales of office products
materials decreased 13.2% ($1,959,000) to $12,847,000 as compared to
$14,806,000 in the comparable quarter in 1995, reflecting a general economic
slowdown that reduced customer demand in this market. Sales of saturated
specialties decreased 26.0% ($2,752,000) to $7,827,000 as compared to
$10,579,000 in the comparable quarter in 1995, reflecting a general economic
slowdown that reduced customer demand in this market. Sales of book cover
material decreased 16.5% ($753,000) to $3,821,000 as compared to $4,574,000 in
the comparable quarter in 1995. Sales of gasket materials produced under a
temporary toll agreement with Armstrong World Industries, Inc., who bought
the Company's gasket business in March 1995, totaled $364,000 in the first
quarter of 1996, as compared to $5,239,000 in the comparable quarter in 1995.
Gross profit margin increased to 14.1% for the first quarter 1996 as compared
to 13.8% for the comparable quarter in 1995. The net effect of changes
between selling prices and fiber costs between the two periods represented
marginal improvement, offset in part by a high level of production trial
activity and lower sales volumes.
General and administrative expenses decreased to $1,961,000 (7.9% of net
sales) in the first quarter of 1996 from $2,324,000 (6.6% of net sales) for
the comparable quarter in 1995. This decrease resulted from reduced levels
of expenses due to the sale of the Company's gasket business.
Income from operations decreased to $1,542,000 (6.2% of net sales) in the
first quarter of 1996 from $2,513,000 (7.1% of net sales) for the comparable
quarter in 1995. This was the direct result of decreased sales due to a
general economic slowdown that reduced customer demand in the various markets.
Other income was $328,000 in the first quarter of 1996 as compared to
$306,000 in the comparable 1995 quarter.
Interest expense decreased to $180,000 in the first quarter of 1996 from
$530,000 in the comparable 1995 quarter. This decrease was due to lower
levels of debt.
The effective tax rate for the first quarter of 1996 was 38.0%.
<PAGE>
Liquidity and Capital Resources:
The Company's historical requirements for capital have been primarily for
servicing debt, capital expenditures and working capital. Cash flows from
operating activities were $2,054,000 and $6,711,000 for the three months
ended March 31, 1996 and March 31, 1995, respectively. During these periods,
additions to property, plant and equipment were $1,917,000 and $682,000
respectively. The Company has budgeted base level capital spending at
$5,000,000 for its existing facilities in 1996. The Company believes that
cash flow from operations, plus amounts available under credit facilities
will be sufficient to fund its capital requirements, debt service and working
capital requirements for the foreseeable future. As of March 31, 1996, the
Company's $15,000,000 revolving credit line had a zero balance.
The Company intends to pursue strategic acquisitions of other specialty mills
or complementary product lines. While no specific acquisitions are currently
under negotiation, the Company continues to engage in discussions with
potential acquisition candidates. Any such acquisition could require the
Company to secure independent debt or equity financing to complete the
transaction.
Inflation:
The Company's results of operations have experienced no significant impact
due to inflation for the three-month period ended March 31, 1996. The
Company does not anticipate any unusual effects of inflation over the
foreseeable future.
<PAGE>
PART II. OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K:
I. Exhibits:
Exhibit 11 - Statement Regarding Computation of Net
Earnings Per Share - page 9.
II. Reports on Form 8-K:
On March 28, 1996 the Company filed a Form 8-K citing
the resignation of its Independent Accountant,
Coopers & Lybrand L.L.P.,
and the engagement of New Independent Accountant,
KPMG Peat Marwick L.L.P.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant had duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SPECIALTY PAPERBOARD, INC.
Date: May 10, 1996
____________________________
Bruce Moore, Vice President,
Chief Financial Officer
(Principal Financial and
Accounting Officer and Duly
Authorized Officer)
SPECIALTY PAPERBOARD, INC.
STATEMENT REGARDING COMPUTATION
OF NET EARNINGS PER SHARE
(Unaudited)
Exhibit 11 - Statement regarding computation of per share earnings attached
to and made part of Part II of Form 10-Q for the three month period ended
March 31, 1996 and 1995.
<TABLE>
<CAPTION>
March 31 March 31
1996 1995
-------- --------
<S> <C> <C>
Weighted average number of
shares issued and outstanding. 4,033,432 4,033,432
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1996
OF SPECIALTY PAPERBOARD, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 488
<SECURITIES> 0
<RECEIVABLES> 11,162
<ALLOWANCES> 255
<INVENTORY> 16,814
<CURRENT-ASSETS> 30,318
<PP&E> 45,638
<DEPRECIATION> 10,775
<TOTAL-ASSETS> 73,649
<CURRENT-LIABILITIES> 14,536
<BONDS> 17,303
0
0
<COMMON> 4
<OTHER-SE> 41,806
<TOTAL-LIABILITY-AND-EQUITY> 73,649
<SALES> 24,859
<TOTAL-REVENUES> 24,859
<CGS> 21,356
<TOTAL-COSTS> 23,317
<OTHER-EXPENSES> (328)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 180
<INCOME-PRETAX> 1,690
<INCOME-TAX> 642
<INCOME-CONTINUING> 1,048
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,048
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
