<PAGE>
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 March 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
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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.)
161Wellington 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)
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(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 March 31, 1997
$.001 par value 6,064,638
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FIBERMARK, INC.
I N D E X
PART I. FINANCIAL INFORMATION
PAGE
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ITEM 1. Financial Statements:
Consolidated Balance Sheets 3
March 31, 1997 and December 31, 1996
Consolidated Statements of Income 4
Three Months Ended
March 31, 1997 and 1996
Consolidated Statements of Cash Flows 5
Three Months Ended
March 31, 1997 and 1996
Notes To Financial Statements 6-7
ITEM 2. Management's Discussion and Analysis of Financial 8-9
Condition and Results of Operations
PART II. OTHER INFORMATION
ITEM 6: Exhibits and Reports on Form 8-K 10
EXHIBIT 11 Statement Regarding Computations of net Earnings 11
Per Share
SIGNATURES 12
2
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PART I FINANCIAL INFORMATION
ITEM 1, FINANCIAL STATEMENTS
FIBERMARK, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
Unaudited
March 31 December 31
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1997 1996
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash 10,651 14,342
Accounts Receivable 24,235 20,847
Cogen Receivable 1,785 1,785
Inventories 31,137 29,293
Other 1,879 1,693
Deferred Income Taxes 2,090 2,090
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TOTAL CURRENT ASSETS 71,777 70,050
PROPERTY, PLANT AND EQUIPMENT, NET 91,801 89,696
GOODWILL, NET 46,553 46,950
ORGANIZATIONAL AND FINANCING COSTS 5,915 5,642
TOTAL ASSETS 216,046 212,338
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable 17,835 15,085
Accrued Liabilities 23,681 25,047
Current Portion of Long Term Debt - -
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TOTAL CURRENT LIABILITIES 41,516 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 12,174 12,603
Deferred Income Tax 11,510 11,510
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TOTAL LONG TERM LIABILITIES 123,684 124,113
STOCKHOLDERS' EQUITY:
Common Stock 4 4
Additional Paid in Capital 44,753 44,733
Accumulated Earnings 6,089 3,356
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TOTAL STOCKHOLDERS' EQUITY 50,846 48,093
TOTAL LIABILITY STOCKHOLDERS' EQUITY 216,046 212,338
======== =======
</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 MARCH 31
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1997 1996
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ACTUAL ACTUAL
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<S> <C> <C>
Net Sales $59,442 $24,859
Cost of Sales 48,177 21,356
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Gross Profit 11,265 3,503
General and Administrative Expenses 4,416 1,961
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Income from Operations 6,849 1,542
Other (Income) Expenses, Net 72 (328)
Interest Expense 2,258 180
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Income Before Income Taxes 4,519 1,690
Provision for Income Taxes 1,786 642
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Net Income Applicable to Common Shares $2,733 $1,048
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Net Income Per Common Share $ 0.44 $ 0.17
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Weighted Average Common Stock and
Equivalents Outstanding (1) 6,256 6,129
</TABLE>
(1) Current and prior years restated to reflect a 3-for-2 stock split effective
May 13, 1997.
(The accompanying notes are an integral part
of the consolidated financial statements.)
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FIBERMARK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
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03/31/97 03/31/96
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,733 $ 1,048
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and Amortization 1,807 796
Amortization of Deferred Gain (429) (430)
Amortization of Unearned Compensation 42
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts Receivable (3,388) (1,177)
Inventories (1,844) 42
Other (186) 2,195
Accounts Payable 2,750 (894)
Accrued Liabilities 3,051 432
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Net Cash Provided by Operating Activities 4,494 2,054
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Additions to Property, Plant and Equipment (3,274) (1,917)
Payment for Business Acquired (4,417)
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Net Cash Provided By (Used In) Investing Activities (7,691) (1,917)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Revolving Credit Line 27,788
Payments of Revolving Credit Line (28,565)
Repayment of Senior Term Debt (375)
Exercise of Stock Options 20 -
Deferred Expenses (514)
APIC - Unearned Compensation Adjustment (15)
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Net Cash Used In Financing Activities (494) (1,167)
NET INCREASE (DECREASE) IN CASH (3,691) (1,030)
CASH AT BEGINNING OF PERIOD 14,342 1,518
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CASH AT END OF PERIOD $ 10,651 $ 488
========= ========
</TABLE>
(The accompanying notes are an integral part
of the consolidated financial statements.)
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FIBERMARK, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
1. Basis of Presentation:
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The balance sheet as of March 31, 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 March 31, 1997 and December 31, 1996 consisted of the following
(000's):
(Unaudited)
03/31/97 12/31/96
Raw Material $ 12,622 $ 11,356
Work in Process 8,889 6,667
Finished Goods 7,157 8,783
Stores Inventory 1,542 1,568
Operating Supplies 927 919
TOTAL INVENTORIES $ 31,137 $ 29,293
3. Cogeneration Project:
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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 and $2.0 million were received in May
1995 and May 1996 respectively.
6
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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.
7
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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 March 31, 1997 Compared to Three Months Ended March 31, 1996:
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Net sales for the first quarter of 1997 were $59.4 million as compared to $24.9
million for the comparable quarter in 1996. $32.3 million of this increase was
attributable to the October 31, 1996 acquistion of Custom Papers Group and Arcon
Coating Mills. First quarter sales for the markets in which the Company was
established prior to the acquisitions were $27.1 million, up 8.8% from the
comparable quarter in 1996. Sales in the office products market increased 12.5%
to $14.4 million compared to $12.8 million in the first quarter of 1996.
Durable specialty sales increased 7.7% to $8.4 million versus $7.8 million in
the comparable 1996 quarter. The book cover component of our technical
specialty sales increased 2.5% to $3.9 million as compared to $3.8 million in
the first quarter of 1996. The increased sales in all market segments reflect
improved economic conditions and increased customer demand.
Gross profit margin increased to 19.0% for the first quarter of 1997 as compared
to 14.1% for the comparable quarter in 1996. The majority of this improvement
is attributable to reduced fiber costs, and improved productivity--particularly
on the Kobayashi paper machine at Brattleboro.
General and administrative expenses increased by $2.5 million 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 $.4 million due to higher levels of amortization
related to the acquisitions.
Interest expense increased by $2.1 million due to the debt incurred to finance
the acquisitions.
8
<PAGE>
Net income for the first quarter of 1997 was $2.7 million or $.44 per share
compared to $1.0 million or $.17 per share for the comparable quarter in 1996.
The effective tax rate for the first quarter of 1997 was 39.5% compared to 38.0%
for the comparable quarter in 1996.
Liquidity and Capital Resources:
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As of March 31, 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 March 31,
1997.
The Company's historical requirements for capital have been primarily for
servicing debt, capital expenditures and working capital. Cash flows from
operating activities were $4,494,000 and $2,054,000 for the three months ended
March 31, 1997 and March 31,1996, respectively. During these periods additions
to property, plant and equipment were $3,274,000 and $1,917,000 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 three-month period ended March 31, 1997. The Company does
not anticipate any unusual effects of inflation over the foreseeable future.
9
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PART II. OTHER INFORMATION
Page:
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Item 6: Exhibits and Reports on Form 8-K:
I. Exhibits:
Exhibit 11 Statement Regarding Computation
of Net Earnings Per Share 11
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.
10
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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.
SPECIALTY PAPERBOARD, INC.
Date: May 13, 1997 /s/ Bruce Moore
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Bruce Moore, Vice President
Chief Financial Officer
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
11
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EXHIBIT 11
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,
1997 and 1996.
Mar. 31, 1997 Mar. 31, 1996
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Weighted average number of
shares issued and outstanding 6,255,593 6,128,751
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENT FOR THE 3 MONTHS ENDED MARCH 31, 1997
FIBERMARK, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000887591
<NAME> FIBERMARK INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 10,651
<SECURITIES> 0
<RECEIVABLES> 24,235
<ALLOWANCES> 330
<INVENTORY> 31,137
<CURRENT-ASSETS> 71,777
<PP&E> 103,988
<DEPRECIATION> 12,187
<TOTAL-ASSETS> 216,046
<CURRENT-LIABILITIES> 41,516
<BONDS> 123,684
0
0
<COMMON> 4
<OTHER-SE> 50,846
<TOTAL-LIABILITY-AND-EQUITY> 216,046
<SALES> 59,442
<TOTAL-REVENUES> 59,442
<CGS> 48,177
<TOTAL-COSTS> 52,593
<OTHER-EXPENSES> 72
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,258
<INCOME-PRETAX> 4,519
<INCOME-TAX> 1,786
<INCOME-CONTINUING> 2,733
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,733
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0
</TABLE>
