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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 September 30, 1997 or
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[_] 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 0-20231
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FIBERMARK, INC.
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(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.)
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 September 30, 1997
$.001 par value 6,075,138
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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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<S> <C> <C>
ITEM 1. Financial Statements:
Consolidated Balance Sheets 3
September 30, 1997 and December 31, 1996
Consolidated Statements of Income 4
Three Months and Nine Months Ended
September 30, 1997 and 1996
Consolidated Statements of Cash Flows 5
Nine Months Ended
September 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
September 30 December 31
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1997 1996
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 9,075 $ 14,342
Accounts Receivable 24,645 20,847
Cogen Receivable 1,785
Inventories 34,358 29,293
Other 2,862 1,693
Deferred Income Taxes 2,090 2,090
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TOTAL CURRENT ASSETS 73,030 70,050
PROPERTY, PLANT AND EQUIPMENT, NET 95,730 89,696
GOODWILL, NET 45,761 46,950
ORGANIZATIONAL AND FINANCING COSTS 5,614 5,642
TOTAL ASSETS $ 220,135 $ 212,338
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 16,315 $ 15,085
Accrued Liabilities 23,846 25,047
Current Portion of Long Term Debt
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TOTAL CURRENT LIABILITIES 40,161 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 11,314 12,603
Deferred Income Tax 11,510 11,510
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TOTAL LONG TERM LIABILITIES 122,824 124,113
STOCKHOLDERS' EQUITY:
Common Stock 4 4
Additional Paid in Capital 44,804 44,733
Accumulated Earnings 12,342 3,356
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TOTAL STOCKHOLDERS' EQUITY 57,150 48,093
TOTAL LIABILITY AND STOCKHOLDERS' EQUITY $ 220,135 $ 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 09/30 NINE MONTHS ENDED 09/30
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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 $ 57,802 $ 26,789 $ 176,659 $ 77,734
Cost of Sales 46,285 21,674 142,559 64,105
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Gross Profit 11,517 5,115 34,100 13,629
General and Administrative Expenses 3,790 2,089 12,234 6,316
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Income from Operations 7,727 3,026 21,866 7,313
Other (Income) Expenses, Net 245 (357) 218 (991)
Interest Expense 2,281 8 6,900 310
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Income Before Income Taxes 5,201 3,375 14,748 7,994
Provision for Income Taxes 2,002 1,282 5,762 3,037
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Net Income Applicable to Common Shares $ 3,199 $ 2,093 $ 8,986 $ 4,957
========== ========== ========== ==========
Net Income Per Common Share $ 0.51 $ 0.35 $ 1.43 $ 0.82
========== ========== ========== ==========
Average Number of Shares Outstanding (1) 6,307 6,054 (2) 6,275 6,053
</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
third quarter which requires the Company to include them in calculating
earnings per share. Average number of shares outstanding include 232,455
shares of vested stock options.
2) The cumulative level of vested stock options reached a point during the
third quarter which requires the Company to include them in calculating
earnings per share. Average number of shares outstanding include 207,552
shares of vested stock options.
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FIBERMARK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Unaudited
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<CAPTION>
NINE MONTHS ENDED
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09/30/97 09/30/96
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 8,986 $ 4,957
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and Amortization 5,592 2,389
Amortization of Deferred Gain (1,289) (1,289)
Amortization of Unearned Compensation - 95
Loss on Sale of Assets - 12
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts Receivable (3,798) (1,872)
Inventories (5,065) 454
Other (1,169) 1,932
Accounts Payable 1,230 (547)
Accrued Liabilities (1,201) 2,629
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Net Cash Provided by Operating Activities 3,286 8,760
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Cogeneration Proceeds 1,785 2,000
Additions to Property, Plant and Equipment (9,716) (4,298)
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Net Cash Provided By (Used In) Investing Activities (7,931) (2,298)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Revolving Credit Line - 64,092
Payments of Revolving Credit Line - (63,530)
Repayment of Senior Term Debt - (5,030)
Exercise of Stock Options 71 35
Deferred Expenses (693) -
Acquisition Expenses Paid - (358)
APIC - Unearned Compensation Adjustment - (15)
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Net Cash Used In Financing Activities (622) (4,806)
NET INCREASE (DECREASE) IN CASH (5,267) 1,656
CASH AT BEGINNING OF PERIOD 14,342 1,518
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CASH AT END OF PERIOD $ 9,075 $ 3,174
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</TABLE>
(The accompanying notes are an integral part
of the consolidated financial statements.)
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FIBERMARK, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
1. Basis of Presentation:
---------------------
The balance sheet as of September 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 September 30, 1997 and December 31, 1996 consisted of the
following (000's):
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<CAPTION>
(Unaudited)
09/30/97 12/31/96
<S> <C> <C>
Raw Material $13,398 $11,356
Work in Process 9,020 6,667
Finished Goods 9,429 8,783
Stores Inventory 1,590 1,568
Operating Supplies 921 919
Total Inventories $34,358 $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
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payments of $3.0, $2.0 and $2.0 million were received in May 1995, May 1996 and
May 1997 respectively.
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 September 30, 1997 Compared to Three Months Ended September
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30, 1996:
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Net sales for the third quarter of 1997 were $57.8 million as compared to $26.8
million for the comparable quarter in 1996. $30.8 million of this increase was
attributable to the October 31, 1996 acquisition of Custom Papers Group and
Arcon Coating Mills. Third quarter sales for the markets in which the Company
was established prior to the acquisitions were $27.0 million, up 1.0% from the
comparable quarter in 1996. Sales in the office products market decreased 3% to
$13.5 million compared to $13.9 million in the third quarter of 1996. Durable
specialty sales were $9.4 million in the third quarter of 1997, compared to $8.4
million in the third quarter of 1996. The book cover component of our technical
specialty sales decreased slightly to $3.9 million in the third quarter of 1997
as compared to $4.1 million in the comparable quarter in 1996.
Gross profit margin increased to 19.9% in the third quarter of 1997 as compared
to 19.1% for the comparable quarter in 1996. The primary reason for this
improvement relates to productivity gains at the Brattleboro, Vermont mill.
General and administrative expenses increased by $1.7 million in the third
quarter of 1997, primarily due to the impact of the acquisitions.
Other expense increased by $.6 million in the third quarter of 1997 due to
higher levels of amortization related to the acquisitions.
Interest expense increased by $2.3 million due to the debt incurred to finance
the acquisitions.
Net income for the third quarter of 1997 was $3.2 million or $.51 per share
compared to $2.1 million or $.35 per share for the comparable quarter in 1996.
The effective tax rate for the third quarter of 1997 was 38.5% compared to 38.0%
for the comparable quarter in 1996.
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Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30,
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1996.
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Net sales for the first nine months of 1997 were $176.7 million as compared to
$77.7 million for the comparable period in 1996. $95.4 million of this increase
was attributable to the October 31, 1996 acquisition of Custom Papers Group and
Arcon Coating Mills. First nine-month sales for the markets in which the Company
was established prior to the acquisitions were $81.2 million, up 4.5% from the
comparable period in 1996. Sales in the office products market increased 6.6% to
$42.0 million compared to $39.4 million in the comparable period in 1996.
Durable specialty sales increased 6.3% to $26.8 million in the first nine months
of 1997, compared to $25.2 million in the comparable period in 1996. The book
cover component of our technical specialty sales were $11.6 million in the first
nine months of 1997, compared to $11.8 million for the same period in 1996.
Gross profit margin increased to 19.3% in the first nine months of 1997 as
compared to 17.5% for the comparable period in 1996. Current year margins were
impacted positively by lower fiber prices and productivity gains 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 $5.9 million in the first nine
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 $1.2 million in the first nine months of 1997 due to
higher levels of amortization related to the acquisitions.
Interest expense increased by $6.6 million due to the debt incurred to finance
the acquisitions.
Net income for the first nine months of 1997 was $9.0 million or $1.43 per share
compared to $5.0 million or $.82 per share for the comparable period in 1996.
The effective tax rate for the first nine months of 1997 was 39.1% compared to
38.0% for the comparable period in 1996.
Liquidity and Capital Resources:
- -------------------------------
As of September 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 September
30, 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 $3,286,000 and $8,760,000 for the nine months ended
September 30, 1997 and September 30, 1996, respectively. During these periods
additions to property, plant and equipment were $9,716,000 and $4,298,000
respectively. The Company believes that cash flow from operations, plus amounts
available under
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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 nine-month period ended September 30, 1997. The Company
does not anticipate any unusual effects of inflation over the foreseeable
future.
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PART II. OTHER INFORMATION
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.
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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: November 13, 1997 /s/ Bruce Moore
-------------------------------
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 nine-month period ended September
30, 1997 and 1996.
<TABLE>
<CAPTION>
Sept. 30, 1997 Sept. 30, 1996
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<S> <C> <C>
Weighted average number of
shares issued and outstanding 6,275,213 6,053,000
</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 9 MONTHS ENDED SEPTEMBER 30, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 9,075
<SECURITIES> 0
<RECEIVABLES> 24,645
<ALLOWANCES> 1,703
<INVENTORY> 34,358
<CURRENT-ASSETS> 73,030
<PP&E> 110,438
<DEPRECIATION> 14,708
<TOTAL-ASSETS> 220,135
<CURRENT-LIABILITIES> 40,161
<BONDS> 122,824
0
0
<COMMON> 4
<OTHER-SE> 57,150
<TOTAL-LIABILITY-AND-EQUITY> 220,135
<SALES> 176,659
<TOTAL-REVENUES> 176,659
<CGS> 142,559
<TOTAL-COSTS> 154,793
<OTHER-EXPENSES> 218
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,900
<INCOME-PRETAX> 14,748
<INCOME-TAX> 5,762
<INCOME-CONTINUING> 8,986
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,986
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 0
</TABLE>
