<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, 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 March 31, 2000
$.001 par value 6,830,483
<PAGE>
FIBERMARK, INC.
INDEX
PART I. FINANCIAL INFORMATION
Page
----
ITEM 1. Financial Statements:
Consolidated Statements of Income 3
Three Months Ended
March 31, 2000 and 1999
Consolidated Balance Sheets 4
March 31, 2000 and December 31, 1999
Consolidated Statements of Cash Flows 5
Three Months Ended
March 31, 2000 and 1999
Notes To Financial Statements 6-8
ITEM 2. Management's Discussion and Analysis of Financial 9-11
Condition and Results of Operations
ITEM 3. Quantitative and Qualitative Disclosures About
Market Risk 11
PART II. OTHER INFORMATION
ITEM 5. Other Information 11
ITEM 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
<PAGE>
FIBERMARK, INC
Consolidated Statements of Income
(In thousands, except per share amounts)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
------- -------
<S> <C> <C>
Net sales $95,088 $75,906
Cost of sales 76,990 60,630
------- -------
Gross profit 18,098 15,276
Selling, general and administrative expenses 6,818 5,764
------- -------
Income from operations 11,280 9,512
Other (income) expense, net 423 102
Interest expense 3,377 2,506
------- -------
Income before income taxes 7,480 6,904
Income tax expense 3,432 2,850
------- -------
Net income $ 4,048 $ 4,054
======= =======
Basic earnings per share $ 0.59 $ 0.52
======= =======
Diluted earnings per share $ 0.58 $ 0.51
======= =======
Average basic shares outstanding 6,830 7,791
Average diluted shares outstanding 6,984 7,965
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
FIBERMARK, INC.
Consolidated Balance Sheets
March 31, 2000 and December 31, 1999
(In thousands)
<TABLE>
<CAPTION>
Unaudited Audited
March 31, December 31,
ASSETS 2000 1999
--------- ---------
<S> <C> <C>
Current assets:
Cash $ 8,909 $ 12,466
Accounts receivable, net of allowances 46,191 41,880
Inventories 57,950 57,928
Other 1,176 717
Deferred income taxes 4,003 3,982
--------- ---------
Total current assets 118,229 116,973
Property, plant and equipment, net 172,798 171,423
Goodwill, net 46,308 47,038
Other intangible assets, net 6,010 6,268
Other long-term assets 1,537 1,602
Other pension assets 3,642 3,642
--------- ---------
Total assets $ 348,524 $ 346,946
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion long-term debt 7,819 7,221
Accounts payable 17,586 17,954
Accrued liabilities 21,818 19,898
Accrued income taxes payable 6,028 2,815
--------- ---------
Total current liabilities 53,251 47,888
--------- ---------
Long-term liabilities:
Revolving credit line 28,045 27,968
Long-term debt, less current portion 135,915 141,006
Deferred income taxes 15,772 16,087
Other long-term liabilities 21,500 22,220
--------- ---------
Total long-term liabilities 201,232 207,281
--------- ---------
Total liabilities 254,483 255,169
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 03/31/2000 8 8
Additional paid-in capital 77,052 77,052
Retained earnings 34,065 30,017
Accumulated other comprehensive loss (4,430) (2,646)
Less treasury stock, 1,000,000 shares at cost (12,654) (12,654)
--------- ---------
Total stockholders' equity 94,041 91,777
--------- ---------
Total liabilities and stockholders' equity $ 348,524 $ 346,946
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
FIBERMARK, INC.
Consolidated Statements of Cash Flows
(In thousands)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,048 $ 4,054
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,756 2,175
Amortization of deferred gain (430)
Changes in operating assets and liabilities:
Accounts receivable (5,318) (9,007)
Inventories (953) (1,763)
Other (337) (175)
Accounts payable (40) (1,119)
Accrued pension and other liabilities 2,360 4,076
Other long-term liabilities 200 61
Accrued income taxes payable 3,418 365
-------- --------
Net cash provided (used) by operating activities 6,134 (1,763)
-------- --------
Cash flows used for investing activities:
Additions to property, plant and equipment (6,850) (1,827)
Deferred charge costs (17)
Decrease in other intangible assets 60 22
-------- --------
Net cash used in investing activities (6,790) (1,822)
-------- --------
Cash flows from financing activities:
Net proceeds from exercise of stock options 137
Net borrowings under revolving credit line 77 --
Repayment of debt (2,017) (3,284)
-------- --------
Net cash used by financing activities (1,940) (3,147)
-------- --------
Effect of exchange rate changes on cash (961) (778)
Net decrease in cash (3,557) (7,510)
Cash at beginning of year 12,466 33,804
-------- --------
Cash at end of year $ 8,909 $ 26,294
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
FIBERMARK, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
(UNAUDITED)
1. BASIS OF PRESENTATION:
The balance sheet as of March 31, 2000 and the statements of income and
cash flows for the quarters ended March 31, 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 March 31, 2000 and December 31, 1999 consisted of the
following (000's):
<TABLE>
<CAPTION>
(Unaudited)
03/31/00 12/31/99
<S> <C> <C>
Raw Material $ 21,051 $ 21,232
Work in Progress 15,090 14,774
Finished Goods 17,270 17,561
Stores Inventory 2,476 2,386
Operating Supplies 2,063 1,975
----------- -----------
TOTAL INVENTORIES $ 57,950 $ 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 is as follows:
6
<PAGE>
<TABLE>
<CAPTION>
-------------- ---------------
1 QTR. 2000 1 QTR. 1999
-------------- ---------------
<S> <C> <C>
Numerator:
Income available to common shareholders used
in basic and diluted earnings per share ($000) $ 4,048 $ 4,054
-------------- ---------------
Denominator:
Denominator for basic earnings per share:
Weighted average shares 6,830,483 7,790,933
Effect of dilutive securities:
Fixed stock options 153,068 174,425
-------------- ---------------
Denominator for diluted earnings per share:
Adjusted weighted average shares 6,983,551 7,965,358
Basic earnings per share $ 0.59 $ 0.52
Diluted earnings per share $ 0.58 $ 0.51
</TABLE>
4. COMPREHENSIVE INCOME (LOSS):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------
03/31/00 03/31/99
-------------- ---------------
<S> <C> <C>
Net Income $ 4,048 $ 4,054
Minimum pension liability adjustment
net of tax benefit (398) (1,545)
Currency translation adjustment (4,032) (145)
-------------- ---------------
Total comprehensive income (loss) ($ 382) $ 2,364
</TABLE>
7
<PAGE>
5. SEGMENT INFORMATION:
The following table categorizes net sales in each market segment into the
appropriate operating segment:
<TABLE>
<CAPTION>
(In Thousands)
Operating Segment
--------------------------------------------------------------------------------
Technical
3 months ended March 31, 2000 German Oper. & Office Durable
Net sales & Filter Media Products Specialties Other Total
-------------- -------- ----------- ------- -----
<S> <C> <C> <C> <C> <C>
MARKET SEGMENT
--------------
Filter Media 27,380 1,451 28,831
Technical Specialties 12,326 14,867 27,193
Durable Specialties 7,074 17,942 25,016
Office Products 14,048 14,048
-------- -------- -------- ------- --------
Total $ 46,780 $ 30,366 $ 17,942 $ - $ 95,088
======== ======== ======== ======= ========
3 months ended March 31, 1999
Net sales
MARKET SEGMENT
--------------
Filter Media 24,987 1,184 26,171
Technical Specialties 1,272 15,486 16,758
Durable Specialties 5,715 14,054 19,769
Office Products 13,208 13,208
-------- -------- -------- ------- --------
Total $ 31,974 $ 29,878 $ 14,054 $ - $ 75,906
======== ======== ======== ======= ========
</TABLE>
The following table details selected financial data by operating segment:
<TABLE>
<CAPTION>
(In Thousands)
Operating Segment
-------------------------------------------------------------------
Technical
German Oper. & Office Durable
3 months ended March 31, 2000 & Filter Media Products Specialties Other Total
-------------- --------- ----------- ------- --------
<S> <C> <C> <C> <C> <C>
Net sales $ 46,780 $ 30,366 $17,942 $ 95,088
Inter-segment net sales 44 506 (550) --
-------- -------- ------- ------- --------
Total net sales $ 46,824 $ 30,872 $17,942 $ (550) $ 95,088
======== ======== ======= ======= ========
EBIT $ 7,307 $ 1,049 $ 2,501 $ 10,857
======== ======== ======= ======= ========
Depreciation & Amortization $ 912 $ 1,268 $ 576 $ 2,756
Total Assets $141,898 $122,929 $32,202 $51,495 (1) $348,524
3 months ended March 31, 1999
Net sales $ 31,974 $ 29,878 $14,054 $ 75,906
Inter-segment net sales 1,118 (1,118) --
-------- -------- ------- ------- --------
Total net sales $ 31,974 $ 30,996 $14,054 $(1,118) $ 75,906
======== ======== ======= ======= ========
EBIT $ 4,818 $ 3,107 $ 1,485 $ 9,410
======== ======== ======= ======= ========
Depreciation and Amortization $ 682 $ 875 $ 618 $ 2,175
(Excluding Deferred Gain)
Total Assets $100,590 $ 95,292 $60,146 $52,640 (1) $308,668
</TABLE>
(1) Corporate assets not allocated to operating segments.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999:
Net sales for the first quarter of 2000 were $95.1 million compared with $75.9
million for the first quarter of 1999, a 25.3% increase. The Lahnstein
acquisition accounted for $11.0 million of this increase. Sales in FiberMark's
German operations and filter media operating segment increased by 46.3% to $46.8
million compared with $32.0 million in the first quarter of 1999, with $11.0
million of this increase related to the Lahnstein acquisition. The technical and
office products operating segment sales increased by 1.7% to $30.4 million
compared with $29.9 million for the same period in 1999. Sales in the durable
specialties operating segment increased by 27.0% to $17.9 million compared with
$14.1 million for the first quarter of 1999.
Sales in the German operations and filter media segment were up due to strong
demand in the automotive and vacuum bag filter business in Europe and the United
States. Additionally, the gains we are seeing in the United States reflect the
quality and process consistency strides that have been made. The slight increase
in the technical and office products segment reflects a strong base business and
new business gains. The increase in durable specialties reflects strong demand
worldwide for masking tape driven by a strong economy and strong construction
and renovation activity, as well as new business gains.
Gross margin for the quarter was 19.1% compared with 20.2% last year. The lower
gross margin was attributable to rising pulp prices and energy costs that have
not yet been fully recovered with selling price increases.
General and administrative expenses for the quarter were $6.8 million compared
with $5.8 million for the same period in 1999. The increase is primarily due to
the Lahnstein acquisition.
Interest expense was $3.4 million for the quarter compared with $2.5 million for
the same period in 1999. The increase is due to the higher levels of net debt as
a result of the following 1999 activities: the Lahnstein acquisition, a
repurchase of sale/leaseback assets and funds used for the stock buyback
program.
The effective income tax rate was 45.9% compared with 41.3% for the first
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 first quarter of this year was $4.0 million, or $.58 per
share, compared with $4.1 million, or $.51 per share, for the first quarter of
last year.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 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
March 31, 2000. As of such date, $28.0 million was outstanding under this credit
facility.
9
<PAGE>
Effective January 1, 1998 the company acquired Steinbeis Gessner GmbH. A portion
of the purchase price was funded through term loans. As of March 31, 2000,
Gessner had a secured term loan of $22.5million with Bayerische Bank. The
balance of this loan amortizes over six years with interest rates ranging from
6.1% to 7.0%. As of this same date, Gessner had an unsecured term loan of $2.9
million with the previous owner. The remaining loan balance amortizes over two
years and has a fixed rate of 5%. As of March 31, 2000, Gessner also had a $6.8
million capital spending facility with Bayerische Vereinsbank. As of such date
$4.4 million was outstanding under this facility. As of March 31, 2000 Gessner
also had a $7.3 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 March 31, 2000, Lahnstein had a $13.9 secured term loan with
Bayerische Bank. This loan amortizes over six years with interest rates ranging
from 5.4% to 7.1%.
The company's historical requirements for capital have been primarily for
servicing debt, capital expenditures and working capital. For the three months
ended March 31, cash flows from operating activities were $6.1 million in 2000
and ($1.8) million for 1999. During these periods additions to property, plant
and equipment totaled $6.9 million in 2000 and $1.8 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 $19.0
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 March 31, 2000, there were no outstanding advances 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 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 PRONOUNCEMENT
There are no new accounting pronouncements applicable to the company.
10
<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.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
Reports on Form 8-K:
Not applicable.
11
<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: May 12, 2000
/s/ Bruce Moore
------------------------------------
Bruce Moore, Vice President and
Chief Financial Officer
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE 3 MONTHS ENDED MAR 31, 2000 FIBERMARK,
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-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 8,909
<SECURITIES> 0
<RECEIVABLES> 46,191
<ALLOWANCES> 0
<INVENTORY> 57,950
<CURRENT-ASSETS> 118,229
<PP&E> 172,798
<DEPRECIATION> 2,164
<TOTAL-ASSETS> 348,524
<CURRENT-LIABILITIES> 53,251
<BONDS> 135,915
0
0
<COMMON> 8
<OTHER-SE> 94,033
<TOTAL-LIABILITY-AND-EQUITY> 348,524
<SALES> 95,088
<TOTAL-REVENUES> 95,088
<CGS> 76,990
<TOTAL-COSTS> 83,808
<OTHER-EXPENSES> 423
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,377
<INCOME-PRETAX> 7,480
<INCOME-TAX> 3,432
<INCOME-CONTINUING> 4,048
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,048
<EPS-BASIC> 0.59
<EPS-DILUTED> 0.58
</TABLE>
