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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1997 or
--------------------
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number 0-20231
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FIBERMARK, INC.
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(Exact name of registrant as specified in its charter)
Delaware 82-0429330
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
161 Wellington Road, Brattleboro, Vermont, 05302
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(Address of principal executive offices)
(802) 257-0365
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(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(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.
Class Outstanding
Common Stock June 30, 1997
$.001 par value 6,070,638
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FIBERMARK, INC.
I N D E X
PART I. FINANCIAL INFORMATION
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<CAPTION>
Page
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ITEM 1. Financial Statements:
Consolidated Balance Sheets 3
June 30, 1997 and December 31, 1996
Consolidated Statements of Income 4
Three Months and Six Months Ended
June 30, 1997 and 1996
Consolidated Statements of Cash Flows 5
Six Months Ended
June 30, 1997 and 1996
Notes To Financial Statements 6-7
ITEM 2. Management's Discussion and Analysis of Financial 8-10
Condition and Results of Operations
PART II. OTHER INFORMATION
ITEM 6: Exhibits and Reports on Form 8-K 11
EXHIBIT 11 Statement Regarding Computations of net Earnings 12
Per Share
SIGNATURES 13
</TABLE>
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FIBERMARK, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
Unaudited
<TABLE>
<CAPTION>
Unaudited
June 30 December 31
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1997 1996
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 7,608 $ 14,342
Accounts Receivable 24,423 20,847
Cogen Receivable - 1,785
Inventories 31,840 29,293
Other 2,566 1,693
Deferred Income Taxes 2,090 2,090
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TOTAL CURRENT ASSETS 68,527 70,050
PROPERTY, PLANT AND EQUIPMENT, NET 93,273 89,696
GOODWILL, NET 46,157 46,950
ORGANIZATIONAL AND FINANCING COSTS 5,757 5,642
TOTAL ASSETS $ 213,714 $ 212,338
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 16,228 $ 15,085
Accrued Liabilities 20,295 25,047
Current Portion of Long Term Debt
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TOTAL CURRENT LIABILITIES 36,523 40,132
LONG TERM LIABILITIES:
Senior Term Debt 100,000 100,000
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TOTAL LONG TERM DEBT 100,000 100,000
Deferred Gain 11,744 12,603
Deferred Income Tax 11,510 11,510
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TOTAL LONG TERM LIABILITIES 123,254 124,113
STOCKHOLDERS' EQUITY:
Common Stock 4 4
Additional Paid in Capital 44,789 44,733
Accumulated Earnings 9,144 3,356
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TOTAL STOCKHOLDERS' EQUITY 53,937 48,093
TOTAL LIABILITY AND STOCKHOLDERS' EQUITY $ 213,714 $ 212,338
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</TABLE>
(The accompanying notes are an integral part
of the consolidated financial statements.)
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FIBERMARK, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
Unaudited
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
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1997 1996 1997 1996
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Actual Actual Actual Actual
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<S> <C> <C> <C> <C>
Net Sales $ 59,415 $ 26,086 $ 118,857 $ 50,945
Cost of Sales 48,097 21,075 96,274 42,431
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Gross Profit 11,318 5,011 22,583 8,514
General and Administrative Expenses 4,028 2,266 8,444 4,227
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Income from Operations 7,290 2,745 14,139 4,287
Other (Income) Expenses, Net (99) (306) (27) (634)
Interest Expense 2,361 122 4,619 302
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Income Before Income Taxes 5,028 2,929 9,547 4,619
Provision for Income Taxes 1,974 1,113 3,760 1,755
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Net Income Applicable to Common Shares $ 3,054 $ 1,816 $ 5,787 $ 2,864
============= ============== ============== ==============
Net Income Per Common Share $ 0.49 $ 0.30 $ 0.92 $ 0.47
============= ============== ============== ==============
Average Number of Shares Outstanding 6,266(1) 6,053 6,259(2) 6,051
</TABLE>
(The accompanying notes are an integral part
of the consolidated financial statements.)
(1) The cumulative level of vested stock options reached a point during the
second quarter which requires the Company to include them in calculating
earnings per share. Average number of shares outstanding include 200,656
shares of vested stock options.
(2) The cumulative level of vested stock options reached a point during the
second quarter which requires the Company to include them in calculating
earnings per share. Average number of shares outstanding include 194,916
shares of vested stock options.
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FIBERMARK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Unaudited
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<CAPTION>
SIX MONTHS ENDED
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6/30/97 6/30/96
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 5,788 $ 2,864
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and Amortization 3,674 1,621
Amortization of Deferred Gain (859) (859)
Amortization of Unearned Compensation 68
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts Receivable (1,791) (2,173)
Inventories (2,547) 993
Other (873) 2,079
Accounts Payable 1,143 (237)
Accrued Liabilities (335) 1,333
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Net Cash Provided by Operating Activities 4,200 5,689
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Cogeneration Proceeds 2,000
Additions to Property, Plant and Equipment (5,976) (3,572)
Payment for Business Acquired (4,417)
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Net Cash Provided By (Used In) Investing Activities (10,393) (1,572)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Revolving Credit Line 56,242
Payments of Revolving Credit Line (56,079)
Repayment of Senior Term Debt (4,225)
Exercise of Stock Options 56 18
Deferred Expenses (597)
APIC - Unearned Compensation Adjustment (15)
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Net Cash Used In Financing Activities (541) (4,059)
NET INCREASE (DECREASE) IN CASH (6,734) 58
CASH AT BEGINNING OF PERIOD 14,342 1,518
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CASH AT END OF PERIOD $ 7,608 $ 1,576
=============== ===============
</TABLE>
(The accompanying notes are an integral part
of the consolidated financial statements.)
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FIBERMARK, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
1. Basis of Presentation:
---------------------
The balance sheet as of June 30, 1997 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, 1996 included in the Company's Annual
Report on Form 10-K.
2. Inventories:
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Inventories at June 30, 1997 and December 31, 1996 consisted of the following
(000's):
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<CAPTION>
(Unaudited)
06/30/97 12/31/96
<S> <C> <C>
Raw Material $13,255 $11,356
Work in Process 7,688 6,667
Finished Goods 8,291 8,783
Stores Inventory 1,551 1,568
Operating Supplies 1055 919
Total Inventories $31,840 $29,293
</TABLE>
3. Cogeneration Project:
--------------------
The Company has entered into agreements with Kamine/Besicorp Beaver Falls L.P.
("Kamine"), pursuant to which the Company's Latex Fiber Products Division will
be the host for a gas-fired 79-megawatt combined-cycle cogeneration facility
developed by Kamine in Beaver Falls, New York. Construction of the facility has
been completed. The Company received $4.4 million in cash in 1993. The Company
has a firm contract with Kamine to receive a series of cash payments totaling
$7.0 million between May 1995 and May 1997. The present value of these cash
payments, in the amount of $6.5 million was recorded as income in the first
quarter 1995. Cash payments of $3.0, $2.0 and $2.0 million were received in May
1995, May 1996 and May 1997 respectively.
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4. Income Taxes:
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In April 1994 the Company concluded a $25,000,000 Sale/Leaseback transaction
with The CIT Group that resulted in a deferred book gain of $17,200,000. This
gain is being recognized over the 10-year life of the lease. Existing NOLs were
utilized to offset the taxability of that gain. At the time of the transaction
there was some uncertainty as to the ultimate realizability of the tax benefits
generated in this transaction. The Company therefore chose to not reflect future
tax benefits at that time. The Company has continued to review the tax impact
and determinations arising from this transaction, and has concluded it is
appropriate to recognize all deferred tax assets arising from it.
5. Net Income Per Common Share:
---------------------------
Net Income per Common Share is computed by dividing net income by the weighted
average number of common shares outstanding after giving effect to dilutive
stock options. Weighted average common stock and equivalents outstanding and the
net income per common share have been restated to give effect to a 3-for-2 stock
split effective May 13, 1997, and to reflect common stock equivalents which were
excluded in previous presentations due to their immateriality.
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ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW:
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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 June 30, 1997 Compared to Three Months Ended June 30, 1996:
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Net sales for the second quarter of 1997 were $59.4 million as compared to $26.1
million for the comparable quarter in 1996. $32.3 million of this increase was
attributable to the October 31, 1996 acquisition of Custom Papers Group and
Arcon Coating Mills. Second quarter sales for the markets in which the Company
was established prior to the acquisitions were $27.1 million, up 3.8% from the
comparable quarter in 1996. Sales in the office products market increased 11% to
$14.1 million compared to $12.7 million in the second quarter of 1996. Durable
specialty sales were $9.0 million in the second quarter of 1997, comparable to
$9.0 million in the second quarter of 1996. The book cover component of our
technical specialty sales decreased slightly to $3.8 million in the second
quarter of 1997 as compared to $3.9 million in the comparable quarter in 1996.
Gross profit margin decreased to 19.0% in the second quarter of 1997 as compared
to 19.2% for the comparable quarter in 1996. Current year margins were
positively impacted by lower fiber prices and productivity gain at the
Brattleboro, Vermont mill. These benefits were partially offset by reduced
selling prices to customers with whom we have cost-indexed supply contracts. The
cost-indexed customers account for approximately 15% of the Company's sales. The
new product mix within the Company due to the acquisitions had the effect of
slightly reducing margins.
General and administrative expenses increased by $1.8 million in the second
quarter of 1997, primarily due to the impact of the acquisitions. Additional
expenses were also incurred relating to the change of the Company's name and
switching from Nasdaq to the New York Stock Exchange.
Other expense increased by $.2 million in the second quarter of 1997 due to
higher levels of amortization related to the acquisitions.
Interest expense increased by $2.2 million due to the debt incurred to finance
the acquisitions.
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Net income for the second quarter of 1997 was $3.1 million or $.49 per share
compared to $1.8 million or $.30 per share for the comparable quarter in 1996.
The effective tax rate for the second quarter of 1997 was 39.3% compared to
38.0% for the comparable quarter in 1996.
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996.
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Net sales for the first six months of 1997 were $118.9 million as compared to
$50.9 million for the comparable period in 1996. $64.6 million of this increase
was attributable to the October 31, 1996 acquisition of Custom Papers Group and
Arcon Coating Mills. First six-month sales for the markets in which the Company
was established prior to the acquisitions were $54.2 million, up 6.5% from the
comparable period in 1996. Sales in the office products market increased 11.8%
to $28.5 million compared to $25.5 million in the comparable period in 1996.
Durable specialty sales increased 3.6% to $17.4 million in the first six months
of 1996, compared to $16.8 million in the comparable period in 1996. The book
cover component of our technical specialty sales were $7.7 million in the first
six months of 1997, comparable to $7.7 million for the same period in 1996.
Gross profit margin increased to 19.0% in the first six months of 1997 as
compared to 16.7% for the comparable period in 1996. Current year margins were
positively impacted by lower fiber prices and productivity gain at the
Brattleboro, Vermont mill. These benefits were partially offset by reduced
selling prices to customers with whom we have cost-indexed supply contracts. The
cost-indexed customers account for approximately 15% of the Company's sales. The
new product mix within the Company due to the acquisitions had the effect of
slightly reducing margins.
General and administrative expenses increased by $4.2 million in the first six
months of 1997, primarily due to the impact of the acquisitions. Additional
expenses were also incurred relating to the change of the Company's name and
switching from Nasdaq to the New York Stock Exchange.
Other expense increased by $.6 million in the first six months of 1997 due to
higher levels of amortization related to the acquisitions.
Interest expense increased by $4.3 million due to the debt incurred to finance
the acquisitions.
Net income for the first six months of 1997 was $5.8 million or $.92 per share
compared to $2.9 million or $.47 per share for the comparable period in 1996.
The effective tax rate for the first six months of 1997 was 39.4% compared to
38.0% for the comparable period in 1996.
Liquidity and Capital Resources:
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As of June 30, 1997, the outstanding balance of the Company's senior note issue
was $100 million. These notes have a ten-year term, are non-amortizing and carry
a fixed interest rate of 9.375%. Additionally, the Company has a $20.0 million
revolving credit facility with $0.0 million outstanding as of June 30, 1997.
<PAGE>
The Company's historical requirements for capital have been primarily for
servicing debt, capital expenditures and working capital. Cash flows from
operating activities were $4,200,000 and $5,689,000 for the six months ended
June 30, 1997 and June 30, 1996, respectively. During these periods additions to
property, plant and equipment were $5,976,000 and $3,572,000 respectively. 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.
Inflation:
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The Company's results of operations have experienced no significant impact due
to inflation for the six-month period ended June 30, 1997. The Company does not
anticipate any unusual effects of inflation over the foreseeable future.
<PAGE>
PART II. OTHER INFORMATION
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Item 6: Exhibits and Reports on Form 8-K: Page
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I. Exhibits:
Exhibit 11 Statement Regarding Computation of Net
Earnings Per Share 12
II. Reports on Form 8-K:
On January 14 and January 23, 1997,
the Registrant Filed amendments to its
current report on Form 8-K Dated
October 31, 1996. These amendments
supplemented and revised the
information contained In Item 7 -
Financial Statements, Proforma
Financial Information, and Exhibits.
</TABLE>
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SIGNATURES
Pursuant to the requirements 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.
FIBERMARK, INC.
Date: August 13, 1997
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Bruce Moore, Vice President,
Chief Financial Officer
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
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EXHIBIT 11
FIBERMARK, 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 six-month period ended June 30,
1997 and 1996.
<TABLE>
<CAPTION>
June 30, 1997 June 30, 1996
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<S> <C> <C>
Weighted average number of
shares issued and outstanding 6,258,825 6,051,000
</TABLE>
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENT FOR THE 6 MONTHS ENDED JUNE 30, 1997
FIBERMARK, INC AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000887591
<NAME> FiberMark
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 7,608
<SECURITIES> 0
<RECEIVABLES> 24,423
<ALLOWANCES> 1,331
<INVENTORY> 31,840
<CURRENT-ASSETS> 68,527
<PP&E> 106,695
<DEPRECIATION> 13,422
<TOTAL-ASSETS> 213,714
<CURRENT-LIABILITIES> 36,523
<BONDS> 123,254
0
0
<COMMON> 4
<OTHER-SE> 53,937
<TOTAL-LIABILITY-AND-EQUITY> 213,714
<SALES> 118,857
<TOTAL-REVENUES> 118,857
<CGS> 96,274
<TOTAL-COSTS> 104,718
<OTHER-EXPENSES> (27)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,619
<INCOME-PRETAX> 9,547
<INCOME-TAX> 3,760
<INCOME-CONTINUING> 5,787
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,787
<EPS-PRIMARY> 0.92
<EPS-DILUTED> 0
</TABLE>
