<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 September 30, 2000 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 0-20231
FIBERMARK, 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.)
161 WELLINGTON ROAD
P.O. BOX 498
BRATTLEBORO, VERMONT 05302
(802) 257-0365
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.001 PAR VALUE
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
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the last practicable date.
Class Outstanding
Common Stock September 30, 2000
$.001 par value 6,830,483
<PAGE>
FIBERMARK, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
PAGE
<S> <C>
ITEM 1. Financial Statements:
Consolidated Statements of Income 3
Three Months and Nine Months Ended
September 30, 2000 and 1999
Consolidated Balance Sheets 4
September 30, 2000 and December 31, 1999
Consolidated Statements of Cash Flows 5
Nine Months Ended
September 30, 2000 and 1999
Notes To Financial Statements 6-9
ITEM 2. Management's Discussion and Analysis of Financial 10-13
Condition and Results of Operations
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 13
PART II. OTHER INFORMATION
ITEM 5. Other Information 13
ITEM 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
</TABLE>
2
<PAGE>
FIBERMARK, INC
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2000 1999 2000 1999
-------- -------- -------- --------
Actual Actual Actual Actual
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 84,458 $ 81,866 $270,934 $233,754
Cost of sales 70,668 68,035 221,594 189,048
-------- -------- -------- --------
Gross profit 13,790 13,831 49,340 44,706
Selling, general and administrative expenses 5,544 6,498 19,018 17,958
Facility closure expense 7,230 7,230
-------- -------- -------- --------
Income from operations 8,246 103 30,322 19,518
Other (income) expense, net 462 (3) 1,047 179
Interest expense 3,228 2,502 10,201 7,731
-------- -------- -------- --------
Income before income taxes 4,556 (2,396) 19,074 11,608
Income tax expense (benefit) 1,995 (863) 8,619 4,877
-------- -------- -------- --------
Net income (loss) $ 2,561 $ (1,533) $ 10,455 $ 6,731
======== ======== ======== ========
Basic earnings (loss) per share $ 0.37 $ (0.20) $ 1.53 $ 0.87
======== ======== ======== ========
Diluted earnings (loss) per share $ 0.37 $ (0.19) $ 1.50 $ 0.85
======== ======== ======== ========
Average basic shares outstanding 6,830 7,720 6,830 7,746
Average diluted shares outstanding 6,981 7,910 6,986 7,934
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
FIBERMARK, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
Unaudited Audited
September 30, December 31,
ASSETS 2000 1999
--------- ---------
<S> <C> <C>
Current assets:
Cash $ 7,455 $ 12,466
Accounts receivable, net of allowances 49,995 41,880
Inventories 69,324 57,928
Other 1,266 717
Deferred income taxes 4,031 3,982
--------- ---------
Total current assets 132,071 116,973
Property, plant and equipment, net 177,923 171,423
Goodwill, net 45,038 47,038
Other intangible assets, net 5,379 6,268
Other long-term assets 1,456 1,602
Other pension assets 3,642 3,642
--------- ---------
Total assets $ 365,509 $ 346,946
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion long-term debt 3,612 7,221
Accounts payable 19,929 17,954
Accrued liabilities 21,828 19,898
Accrued income taxes payable 8,440 2,815
--------- ---------
Total current liabilities 53,809 47,888
--------- ---------
Long-term liabilities:
Revolving credit line 34,968 27,968
Long-term debt, less current portion 143,013 141,006
Deferred income taxes 15,342 16,087
Other long-term liabilities 20,600 22,220
--------- ---------
Total long-term liabilities 213,923 207,281
--------- ---------
Total liabilities 267,732 255,169
Commitments and contingencies
Stockholders' equity
Preferred stock, par value $.001 per share;
2,000,000 shares authorized, and none issued -- --
Common stock, par value $.001 per share;
20,000,000 shares authorized
7,830,483 and 6,830,483 shares issued and outstanding, respectively 8 8
Additional paid-in capital 64,398 77,052
Retained earnings 40,472 30,017
Accumulated other comprehensive loss (7,101) (2,646)
Less treasury stock, 1,000,000 shares at cost retired in 2000 -- (12,654)
--------- ---------
Total stockholders' equity 97,777 91,777
--------- ---------
Total liabilities and stockholders' equity $ 365,509 $ 346,946
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
FIBERMARK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Unaudited
<TABLE>
<CAPTION>
Nine Months Ended Sept. 30,
---------------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 10,455 $ 6,731
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 8,225 6,630
Amortization of deferred gain (1,289)
Loss on closure of facility 7,902 7,230
Changes in operating assets and liabilities:
Accounts receivable (10,415) (12,147)
Inventories (13,956) 612
Other (441) 609
Accounts payable 2,853 1,872
Accrued pension and other liabilities 2,981 3,859
Other long-term liabilities 581 (2,607)
Accrued income taxes payable 6,199
-------- --------
Net cash provided by operating activities 14,384 11,500
-------- --------
Cash flows used for investing activities:
Additions to property, plant and equipment (28,935) (41,295)
Payments for business acquired (22,147)
Deferred charge costs (193)
Decrease in other intangible assets 325 61
-------- --------
Net cash used in investing activities (28,610) (63,574)
-------- --------
Cash flows from financing activities:
Net proceeds from exercise of stock options 404
Stock buyback (1,013)
Net borrowings under revolving credit line 7,000 13,881
Borrowing of debt 9,826 16,194
Repayment of debt (5,782) (1,098)
-------- --------
Net cash provided by financing activities 11,044 28,368
-------- --------
Effect of exchange rate changes on cash (1,829) (1,289)
Net decrease in cash (5,011) (24,995)
Cash at beginning of period 12,466 33,804
-------- --------
Cash at end of period $ 7,455 $ 8,809
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
FIBERMARK, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
1. BASIS OF PRESENTATION:
The balance sheet as of September 30, 2000 and the statements of income and
cash flows for the quarters, and nine months ended September 30, 2000 and
1999 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, 1999 included in the
company's Annual Report on Form 10-K.
2. INVENTORIES:
Inventories at September 30, 2000 and December 31, 1999 consisted of the
following (000's):
<TABLE>
<CAPTION>
(Unaudited)
09/30/00 12/31/99
--------- --------
<S> <C> <C>
Raw Material $ 23,368 $ 21,232
Work in Progress 17,258 14,774
Finished Goods 24,202 17,561
Stores Inventory 2,454 2,386
Operating Supplies 2,042 1,975
--------- --------
TOTAL INVENTORIES $ 69,324 $ 57,928
========= ========
</TABLE>
3. NET INCOME PER COMMON SHARE:
The reconciliation of the numerators and denominators of the basic and
diluted income per common share computations for the company's reported net
income follows:
6
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
9/30/00 9/30/99 9/30/00 9/30/99
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Numerator:
Income available to common shareholders used in basic
and diluted earnings per share ($000) $ 2,561 $ (1,533) $ 10,455 $ 6,731
----------- ----------- ----------- -----------
Denominator:
Denominator for basic earnings per share:
Weighted average shares 6,830,483 7,719,654 6,830,483 7,745,640
Effect of dilutive securities:
Fixed stock options 150,138 190,079 155,063 188,176
----------- ----------- ----------- -----------
Denominator for diluted earnings per share:
Adjusted weighted average shares 6,980,621 7,909,733 6,985,546 7,933,816
=========== =========== =========== ===========
Basic earnings per share $ 0.37 $ (0.20) $ 1.53 $ .87
Diluted earnings per share $ 0.37 $ (0.19) $ 1.50 $ .85
</TABLE>
4. COMPREHENSIVE INCOME:
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
9/30/00 9/30/99 9/30/00 9/30/99
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Income (loss) $ 2,561 $ (1,533) $ 10,455 $ 6,731
Minimum pension liability adjustment
net of tax benefit -- 54 -- 82
Currency translation adjustment (2,565) 924 (4,455) (1,766)
----------- ----------- ----------- -----------
Comprehensive income (loss) $ (4) $ (555) $ 6,000 $ 5,047
=========== =========== =========== ===========
</TABLE>
7
<PAGE>
5. SEGMENT INFORMATION:
The following table categorizes net sales in each market segment into the
appropriate operating segment:
<TABLE>
<CAPTION>
Unaudited (In Thousands)
Operating Segment
--------------------------------------------------------------------------------------
Technical
3 months ended Sept. 30, 2000 German Oper. & Office Durable
Net sales & Filter Media Products Specialties Other Total
---------------- --------------- ---------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
MARKET SEGMENT
--------------
Filter Media 22,507 1,313 23,820
Technical Specialties 11,692 14,134 25,826
Durable Specialties 6,499 16,814 23,313
Office Products 11,499 11,499
---------------- --------------- ---------------- ------------ --------------
Total $ 40,698 $ 26,946 $ 16,814 $ - $ 84,458
================ =============== ================ ============ ==============
3 months ended Sept. 30, 1999
Net sales
MARKET SEGMENT
--------------
Filter Media 22,437 1,360 23,797
Technical Specialties 8,207 14,338 22,545
Durable Specialties 5,674 16,505 22,179
Office Products 13,345 13,345
---------------- --------------- ---------------- ------------ --------------
Total $ 36,318 $ 29,043 $ 16,505 $ - $ 81,866
================ =============== ================ ============ ==============
Unaudited (In Thousands)
Operating Segment
--------------------------------------------------------------------------------------
Technical
9 months ended Sept. 30, 2000 German Oper. & Office Durable
Net sales & Filter Media Products Specialties Other Total
---------------- --------------- ---------------- ------------ --------------
MARKET SEGMENT
--------------
Filter Media 75,382 4,241 79,623
Technical Specialties 36,549 42,920 79,469
Durable Specialties 20,289 53,631 73,920
Office Products 37,922 37,922
---------------- --------------- ---------------- ------------ --------------
Total $132,220 $ 85,083 $ 53,631 $ - $ 270,934
================ =============== ================ ============ ==============
9 months ended Sept. 30, 1999
Net sales
MARKET SEGMENT
--------------
Filter Media 70,541 4,003 74,544
Technical Specialties 11,054 43,908 54,962
Durable Specialties 17,637 47,269 64,906
Office Products 39,342 39,342
---------------- --------------- ---------------- ------------ --------------
Total $ 99,232 $ 87,253 $ 47,269 $ - $ 233,754
================ =============== ================ ============ ==============
</TABLE>
8
<PAGE>
5. SEGMENT INFORMATION:
The following table details selected financial data by operating segment:
<TABLE>
<CAPTION>
Unaudited (In Thousands)
Operating Segment
------------------------------------------------------------------------------------------
Technical
German Oper. & Office Durable
3 months ended Sept. 30, 2000 & Filter Media Products Specialties Other Total
---------------- ---------------- --------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales $ 40,698 $ 26,946 $ 16,814 $ 84,458
Inter-segment net sales 89 1,502 (1,591) -
---------------- ---------------- --------------- ---------------- ------------
Total net sales $ 40,787 $ 28,448 $ 16,814 $ (1,591) $ 84,458
================ ================ =============== ================ ============
EBIT $ 3,251 $ 1,330 $ 3,203 $ 7,784
================ ================ =============== ================ ============
Depreciation & Amortization $ 878 $ 1,257 $ 589 $ 2,724
Total Assets $137,770 $138,981 $ 34,304 $ 54,454 (1) $365,509
3 months ended Sept. 30, 1999
Net sales $ 36,318 $ 29,043 $ 16,505 $ 81,866
Inter-segment net sales - 810 (810) -
---------------- ---------------- --------------- ---------------- ------------
Total net sales $ 36,318 $ 29,853 $ 16,505 $ (810) $ 81,866
================ ================ =============== ================ ============
EBIT $ 2,852 $ 3,048 $ 2,453 $ (8,247)(2) $ 106
================ ================ =============== ================ ============
Depreciation and Amortization
(Excluding Deferred Gain) $ 830 $ 908 $ 569 $ 2,307
Total Assets $141,864 $118,903 $ 57,537 $ 25,662 (1) $343,966
Unaudited (In Thousands)
Operating Segment
-----------------------------------------------------------------------------------------
Technical
German Oper. & Office Durable
9 months ended Sept. 30, 2000 & Filter Media Products Specialties Other Total
---------------- ---------------- --------------- ---------------- ------------
Net sales $132,220 $ 85,083 $ 53,631 $ - $270,934
Inter-segment net sales 224 3,515 (3,739) -
---------------- ---------------- --------------- ---------------- ------------
Total net sales $132,444 $ 88,598 $ 53,631 $ (3,739) $270,934
================ ================ =============== ================ ============
EBIT $ 17,218 $ 3,664 $ 8,393 $ 29,275
================ ================ =============== ================ ============
Depreciation & Amortization $ 2,684 $ 3,799 $ 1,742 $ 8,225
Total Assets $137,770 $138,981 $ 34,304 $ 54,454 (1) $365,509
9 months ended Sept. 30, 1999
Net sales $ 99,232 $ 87,253 $ 47,269 $233,754
Inter-segment net sales 24 3,012 123 (3,159) -
---------------- ---------------- --------------- ---------------- ------------
Total net sales $ 99,256 $ 90,265 $ 47,392 $ (3,159) $233,754
================ ================ =============== ================ ============
EBIT $ 11,821 $ 9,095 $ 6,670 $ (8,247)(2) $ 19,339
================ ================ =============== ================ ============
Depreciation and Amortization
(Excluding Deferred Gain) $ 2,179 $ 2,672 $ 1,779 $ 6,630
Total Assets $141,864 $118,903 $ 57,537 $ 25,662 (1) $343,966
(1) Corporate assets not allocated to operating segments.
(2) 1999 Other includes: Technical & Office Products: Facility closure $ (7,230)
Sale/leaseback termination $ (1,017)
</TABLE>
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999
Net sales for the third quarter of 2000 were $84.5 million compared with $81.9
million for the third quarter of 1999, a 3.2% increase. Sales in FiberMark's
German operations and filter media operating segment increased by 12.1% to $40.7
million compared with $36.3 million in the third quarter of 1999, with $3.4
million of this increase related to the Lahnstein acquisition. The technical and
office products operating segment sales decreased by 6.9% to $27.0 million
compared with $29.0 million for the same period in 1999. Sales in the durable
specialties operating segment increased by 1.8% to $16.8 million compared with
$16.5 million for the third quarter of 1999.
Sales in the German operations and filter media segment were up due to strong
demand in our automotive and vacuum bag filter business in Europe. In addition,
Lahnstein revenues were strong, with particular strength in wallcovering and
flooring materials. The decrease in the technical and office products segment
was primarily due to weaker sales in office products. A general softening in the
U.S. economy and continued consolidation within the office products industry
have resulted in the decline in sales. The slight increase in durable
specialties reflects continued strength in the masking tape business offset by
softness in binding tapes used in office filing supplies.
Gross margin for the third quarter was 16.3% compared with 16.9% last year. The
lower gross margin was attributable to increases in pulp prices and energy costs
that have not yet been fully recovered with selling price increases.
General and administrative expenses for the third quarter of 2000 were $5.5
million compared to the $6.5 million for the same period in 1999. The decrease
for the quarter is primarily due to $.5 million in marketing support payments
received from suppliers.
Interest expense was $3.2 million for the quarter compared with $2.5 million for
the same period in 1999. The increase is due to the higher levels of debt as a
result of the Lahnstein acquisition, a repurchase of sale/leaseback assets and
funds used for last year's stock repurchase program.
The effective income tax rate was 43.8% compared with 36.0% for the third
quarter of 1999. Because of the Lahnstein acquisition, a higher percentage of
the company's earnings flow from Germany, which has a higher tax rate than the
United States.
Net income for the third quarter of this year was $2.6 million, or $.37 per
diluted share, compared with a net loss of $1.5 million, or $.19 per diluted
share, for the third quarter of last year. The third quarter of 1999 included
the write down of the Hughesville facility which negatively impacted net income
by $4.4 million or $.56 per share and the termination of the sale/leaseback
facility which reduced net income by $.6 million or $.08 per share.
10
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1999
Net sales for the first nine months of 2000 were $270.9 million compared with
$233.8 million for the first nine months of 1999, a 15.9% increase. Sales in
FiberMark's German operations and filter media operating segment increased by
33.3% to $132.2 million compared with $99.2 million in the first nine months of
1999. The Lahnstein acquisition accounted for $24.5 million of this increase.
The technical and office products operating segment sales decreased by 2.5% to
$85.1 million compared with $87.3 million for the same period in 1999. Sales in
the durable specialties operating segment increased by 13.3% to $53.6 million
compared with $47.3 million for the first nine months of 1999.
Sales in the German operations and filter media segment were up due to strong
demand in our automotive and vacuum bag filter business particularly in Europe.
Additionally, Lahnstein revenues were exceptionally strong due to growth in
wallcovering, flooring materials and printing/graphic arts grades. Revenues in
our technical and office products segment were slightly lower primarily due to
weaker sales in our office products as a result of a general softening in the
U.S. economy and continued consolidation within the office products industry.
The increase in durable specialties reflects strong demand worldwide for masking
tape driven by strong construction and renovation activity, as well as new
business gains with key customers.
Gross margin for the first nine months of 2000 was 18.2% compared with 19.1% for
the last year. The lower gross margin was attributable to significant increases
in raw material and energy costs that have not been fully recovered with selling
price increases.
General and administrative expenses increased by $1.0 million in the first nine
months of 2000 to $19.0 million versus $18.0 million for the comparable
nine-month period, due to the Lahnstein acquisition.
Interest expense was $10.2 million for the first nine months compared with $7.7
million for the same period in 1999. The increase is due to the higher levels of
debt as a result of the Lahnstein acquisition, a repurchase of sale/leaseback
assets and funds used for last year's stock repurchase program.
The effective income tax rate was 45.2% compared with 42.0% for the first nine
months of 1999. Because of the Lahnstein acquisition, a higher percentage of the
company's earnings flow from Germany, which has a higher tax rate than the
United States.
Net income for the first nine months of 2000 was $10.5 million or $1.50 per
diluted share, compared with last year's level of $6.7 million or $.85 per
diluted share. The first nine months of 1999 included the write down of the
Hughesville facility which negatively impacted net income by $4.4 million or
$.56 per share and the termination of the sale/leaseback facility which reduced
net income by $.6 million or $.08 per share.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, the company had outstanding $100.0 million of senior
notes. The notes have a ten-year term beginning October 16, 1996, are
non-amortizing and carry a fixed interest rate of 9.375%. Additionally, the
company had available to it a $50.0 million revolving credit facility as of
September 30, 2000. As of such date, $37.8 million was outstanding under this
credit facility.
11
<PAGE>
As of September 30, 2000, Gessner had a secured term loan of $20.7 million with
Bayerische Bank. The balance of this loan amortizes over five years with
interest rates ranging from 6.4% to 7.0%. As of this same date, Gessner had an
unsecured term loan of $1.8 million with the previous owner. The remaining loan
balance amortizes over one year and has a fixed rate of 5%. As of September 30,
2000, Gessner also had a $6.3 million capital spending facility with Bayerische
Vereinsbank. As of such date $4.1 million was outstanding under this facility.
As of September 30, 2000, Gessner also had a $6.7 million line of credit. As of
such date no advances are outstanding under this facility. Effective August 1,
1999, the company acquired Papierfabrik Lahnstein GmbH. A portion of the
purchase price was funded through a term loan. As of September 30, 2000,
Lahnstein had a $10.2 secured term loan with Bayerische Bank. The balance of
this loan amortizes over five years with interest rates ranging from 6.0% to
7.1%.
The company's historical requirements for capital have been primarily for
servicing debt, capital expenditures and working capital. For the nine months
ended September 30, cash flows from operating activities were $14.4 million in
2000 and $11.5 million for 1999. During these periods, additions to property,
plant and equipment totaled $28.9 million in 2000 and $41.3 million in 1999. The
company is currently in the process of installing a new paper machine at its
Warren Glen, New Jersey, facility, which the company believes will provide
quality improvements, cost reductions, product performance enhancements and the
ability to produce a broader range of products. This project is expected to cost
$22.0 million in total. The company has arranged a $15.0 million capital
spending facility with Jules & Associates to partially fund this project. This
facility will have a fixed interest rate of approximately 8.5% and will amortize
over seven years. As of September 30, 2000, $9.8 million had been advanced under
this facility. 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
The company attempts to minimize the effect of inflation on earnings by
controlling operating expenses. During the past several years, the rate of
general inflation has been relatively low and has not had a significant impact
on the company's results of operations. The company purchases raw materials that
are subject to cyclical changes in costs that may not reflect the rate of
general inflation.
SEASONALITY
The company's business is mildly seasonal, with the third quarter of each year
typically having the lowest level of net sales and operating income. Lower
December revenues tend to reduce fourth quarter revenues relative to the first
two quarters. This seasonality is the result of a lower level of purchasing
activity, since many of our U.S. customers shut down their manufacturing
operations during portions of July and many European manufacturers shut down
during portions of August and December.
NEW ACCOUNTING PRONOUNCEMENTS
There are no new accounting pronouncements applicable to the company.
12
<PAGE>
FORWARD-LOOKING STATEMENTS
Statements in this report that are not historical are forward-looking statements
subject to risk and uncertainties that could cause actual results to differ
materially. Such risk and uncertainties include fluctuations in economies
worldwide, fluctuations in our customers' demand and inventory levels (including
the loss of certain major customers), the price and availability of raw
materials and of competitive materials, which may preclude passing increases on
or maintaining prices with customers; changes in environmental and other
governmental regulations, changes in terms from lenders, ability to retain key
management and to reach agreement on labor issues, failure to identify or carry
out suitable strategic acquisitions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The company believes it has minimal exposure to financial market risks. All debt
is at a fixed rate. Most of the company's sales transactions have been conducted
in the currency where the shipment originated, limiting our exposure to changes
in currency exchange rates. The company does not use derivative financial
instruments.
ITEM 5. OTHER INFORMATION
Effective September 29, 2000, Director George E. McCown resigned from
FiberMark's Board of Directors for personal reasons.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
Reports on Form 8-K:
Not applicable.
13
<PAGE>
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 14, 2000
/s/ Bruce Moore
-----------------------------------
Bruce Moore, Vice President and
Chief Financial Officer
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
14
