SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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, 1996
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: 0000914066
FOILMARK, INC.
(Exact name of Registrant as specified in its charter)
Delaware 11-3101034
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 Malcolm Hoyt Drive
Newburyport, MA 01950
(Address of principal executive offices) (Zip code)
(508) 462-7300
(Registrant's telephone number including area code)
40 Melville Park Road
Melville, New York 11747
(If 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 ____
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes ____ No ____
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Title Outstanding
$.01 par value Common Stock 4,144,254
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
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FOILMARK, INC. AND SUBSIDAIRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1) In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial position as
of September 30, 1996 and 1995, the results of operations for the nine (9)
months ended September 30, 1996 and 1995, and statements of cash flows for the
nine (9) months ended September 30, 1996 and 1995.
Results for an interim period are not necessarily indicative of
results for the entire year and such results are subject to year end adjustments
and independent audit.
Classification of inventories as of September 30, 1996 and December 31, 1995
was as follows:
September 30, 1996 December 31, 1995
(Unaudited)
Raw materials $ 2,833,739 $ 1,885,377
Work in-process 4,390,298 1,837,471
Finished goods 6,079,897 7,833,315
--------- ---------
$13,303,934 $11,556,163
=========== ===========
See accompanying notes to condensed consolidated financial statements.
(6)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
GENERAL:
The Company had net income of $30,142 for the nine (9) months ended
September 30, 1996, and $70,249 for the three (3) months ended September 30,
1996. Financial results for the nine (9) months were adversely impacted by
approximately $200,000 in costs associated with the consolidation of the
Company's machinery manufacturing operation into its Foilmark-Imtran facility in
Newburyport, MA. Although the relocation was completed during June 1996,
production delays of manufactured parts resulting from the move and loss of
personnel not immediately replaced, curtailed machinery shipments for all of the
third quarter.
Additionally, the delay in delivery of Foilmark's state-of-the-art
metalizer and continuing difficulties in integrating new higher speed
manufacturing equipment, adversely impacted foil sales and margins in the third
quarter and for the nine (9) months.
Revenues increased to $9,564,222 and $28,572,934 for the three (3)
and nine (9) months ended September 30, 1996 up from
$8,813,358 and $27,612,823 for the comparable 1995 periods.
Machinery backlog including the contract to supply China North
Industries Corp. with equipment and technology to manufacture, convert and apply
hot stamping foils and holographic products previously announced in July,
exceeds $5 million, a 100% increase over the 1995 backlog.
NET SALES:
Net sales for the nine (9) months ended September 30, 1996 increased
3.5% to $28,572,934 from $27,612,823 for the nine (9) months ended September 30,
1995. For the three (3) months ended September 30, 1996, net sales increased by
$750,864 an 8.5% increase over the comparable 1995 period. Included in the 1996
nine (9) and three (3) month sales are $3,455,000 and $1,183,000 respectively
from the Company's Imtran division acquired in August 1995, as compared with
$639,000 for the three (3) and nine (9) months periods ended September 30, 1995.
Demand for foil products strengthened in the third quarter compared
to the prior six (6) months and increased 2.1% for the nine (9) months ended
September 30, 1996 compared to the September 30, 1995 period.
Machinery sales as a result of the Imtran acquisition increased 5.6%
for the nine (9) months ended September 30, 1996 compared to the nine (9) months
ended September 30, 1996. As a result of production delays associated with the
consolidation of the Company's machinery manufacturing operation into its
Foilmark-Imtran facility in Newburyport, MA, machinery sales for the three (3)
months ended September 30, 1996 were approximately the same as the three (3)
months ended September 30, 1995.
GROSS PROFIT:
Gross profit declined $202,374 or 7.3% for the three (3) months ended
September 30, 1996 versus the comparable 1995 period. For the nine (9) months
ended September 30, 1996 gross profit declined by $439,606 or 5.4% compared to
the nine (9) months ended September 30, 1995. Gross profit as a percentage of
net sales declined from 29.6% in 1995 to 27.07% for the nine (9) months ended
September 30, 1996.
Gross profit was adversely impacted by costs approximating $200,000 in
connection with the relocation of the machinery manufacturing facilities from
Norwood to Newburyport, MA. Although the relocation was completed in June 1996,
delays in the receipt of manufactured parts resulted in increased costs,
decreased efficiency and lower margins. Additionally, the delay in delivery of
the metalizer and continued difficulties in integrating new higher speed
manufacturing equipment resulted in lower margins for the Company's foil
products in the third quarter and for the nine (9) months.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Selling, general and administrative expenses increased by $1,784,819
and $292,921 respectively for the nine (9) and three (3) months ended September
30, 1996 compared to similar 1995 periods. Approximately $1,200,000 and $125,000
of these increases were attributable to the acquisition of Imtran in August 1995
and therefore not included for most of the comparable 1995 period. The balance
of the increase was due to increased amortization costs in connection with the
Imtran acquisition and costs associated with the relocation of the Norwood
facility to Newburyport.
INCOME FROM OPERATIONS:
Income from Operations for the nine (9) months ended September 30, 1996
declined by 77% to $665,248 compared with $2,889,973 for the nine (9) months
ended September 30, 1995. For the three (3) months ended September 30, 1996
income from operations declined by 56.5% to $381,335 from $876,630 for the three
(3) months ended September 30, 1995.
The primary reason for the decline in income from operations were a
5.4% reduction in gross profit on sales due to lower margins and a 30% increase
in selling, general and administrative expenses partially due to the Imtran
acquisition without a corresponding increase in sales.
INTEREST EXPENSE:
Interest expense increased to $676,539 for the nine (9) months
ended September 30, 1996 compared to $314,527 for the comparable 1995
period.
Interest expense increased due to additional bank loans the proceeds of
which were used to fund the 1995 expansion projects at the Company's
Massachusetts facilities, to acquire Imtran in August 1995 and to provide
working capital.
PROVISION FOR INCOME TAXES:
Provision for income taxes for the nine (9) months ended September 30,
1996 declined to $21,000 from $1,110,900 for the nine (9) months ended September
30, 1995 as a result of a 98% decline income before taxes. The effective tax
rate for both 1996 and 1995 was 41.0%.
NET INCOME:
The Company had net income of $30,142 for the nine (9) months ended
September 30,1 996 compared to $1,598,609 for the comparable 1995 period. The
98% decline in net income was due to a decline in gross profit, increased
amortization costs associated with the Imtran acquisition, and $200,000 in
additional operating costs incurred in connection with consolidating machinery
operations in Newburyport.
For the three (3) months ended September 30, 1996, the Company had net
income of $70,245 compared to $480,324 for the three (3) months ended September
30, 1995.
LIQUIDITY AND CAPITAL RESOURCES:
As of September 30, 1996, the Company had working capital of
$12,233,506 compared to $12,932,604 at September 30, 1995 due to an increase of
$1,556,603 in current maturities of long term debt. Included in this increase is
the final payment on a ten (10) year mortgage of $806,627 which matured October
1, 1996. The bank has agreed to extend payment to November 30, 1996. The Company
anticipates that prior to November 30, 1996 it will refinance the foregoing
mortgage and another mortgage which is due in January 2000. The new debt will
have a fifteen (15) year term and after payment of the existing mortgage and
will provide the Company approximately $300,000 in additional working capital.
As of September 30, 1996, the Company had available under its revolving
credit facility $623,612 for working capital purposes. The Company expects that
cash from operations and existing credit facilities will be sufficient to meet
its operating needs for 1996.
Capital expenditures for the nine (9) months ended September 30, 1996
amounted to $2,153,413 compared to $2,706,964 for the comparable 1995 period.
The 1996 capital expenditures were incurred in connection with the expansion of
the building and the acquisition equipment at Newburyport and the relocation of
facilities from Norwood to Newburyport. The Company's expansion and relocation
was substantially complete at September 30, 1996.
PART II
Item 1 Legal Proceedings
As set forth in Item 3 of the Company's Report on Form 10-K dated March
22, 1996, the Company is a defendant in a series of lawsuits arising out of a
motor vehicle accident involving a motor vehicle leased by the Company and one
of it subsidiaries, and operated by an employee of the subsidiary. During the
quarter ended September 30, 1996, the Company settled with one of the plaintiffs
within the policy limits.
Item 4 Submission of Matters to Vote of Security Holders
On May 17, 1996, the Company held it Annual Meeting of Shareholders,
Raymond P. Downey, Joseph E. Levangie and Kenneth R. Harris were elected to be
the Directors of the Company for three (3) year terms expiring in 1999. Set
forth below are the results of each matter voted upon at the Annual Meeting.
1. Election of Directors:
For Withheld
(a) Raymond P. Downey 2,869,607 55,150
--------- ------
(b) Joseph E. Levangie 2,870,607 55,150
--------- ------
(c) Kenneth R. Harris 2,870,607 55,150
--------- ------
2. Ratification of the appointment of KPMG Peat Marwick as the
Company's independent public accounts for the Company for the year ending
December 31, 1996.
For Against Abstentions Broker-Non-Votes
2,899,027 19,100 7,630
Item 5 Other Information
In July 1996, Joseph E. Levangie resigned as a Director of the Company
effective on the election of his successor. On October 30, 1996 Richard Daly,
President of Alpine Management Company, accepted his election as, and became, a
Director.
Item 6 Exhibits and Reports on Form 8-K
1. No reports on form 8-K have been filed during the quarter
ended September 30, 1996.
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.
FOILMARK, INC.
November 8, 1996 By:___________________________________________
Date Philip Leibel, Vice President-Finance
(Chief Financial & Accounting Officer)
November 8, 1996 By:___________________________________________
Date Frank J. Olsen, Jr., President and Chief
Executive Officer
