FORM 10-Q
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 June 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.
State or other jurisdiction of (I.R.S. Employer incorporation or
organization Identification No.)
Delaware 11-3101034
FOILMARK, INC. 40 Melville Park Road Melville, New York
11747 (516) 694-7773
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 4,141,254
FOILMARK, INC.
INDEX TO FORM 10-Q
PAGE
INDEX 2 Part I-Financial Information Item 1- Financial
Statements Condensed Consolidated Balance Sheets- June 30, 1996
and December 31, 1995 3 Consolidated Statements of Income for the
Six (6) months and the three (3) months ended June 30, 1996 and
1995 4 Consolidated Statements of Cash Flows Six (6) months ended
June 30, 1996 and 1995 5 Notes to Condensed Consolidated
Financial Statements 6 Item 2- Managements Discussion and
Analysis of Financial Conditions and Results of Operations 7-9
Part II- Other Information Item 4-Submission of Matters to Vote
of Security Holders 10 Item 6-Other information 10 Signature 11
(2)
[GRAPHIC OMITTED] [GRAPHIC OMITTED] [GRAPHIC OMITTED]
FOILMARK, INC. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS JUNE 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 June 30,
1996 and 1995, the results of operations for the six (6) months
ended June 30, 1996 and 1995, and statements of cash flows for
the six (6) months ended June 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 June 30, 1996 and
December 31, 1995 was as follows:
June 30, 1996 December 31, 1995 (Unaudited) (Audited)
Raw materials $ 2,443,283 $ 1,885,377 Work in-process
3,889,125 1,837,471 Finished goods 6,317,088 7,833,315
$12,659,496 $11,556,163 (6)
ITEM #2 - Managements Discussion of Financial
Conditions and Result of Operations
GENERAL:
The Company had a net loss after taxes of $40,103 for
the six (6) months ended June 30, 1996 compared to net
income of $1,118,285 for the comparable 1995 period. This
was largely attributable to a decline in hot stamping
machinery and foil sales resulting from a softness in the
market that began in the third quarter of 1995. The flat
demand for foil has resulted in downward pressure on prices
which adversely impacted revenues and margins during this
period. In addition, included in the first half results is
approximately $200,000 in non-recurring relocation costs
associated with consolidating the machinery operations in
Newburyport. The Companys second quarter pre-tax income was
$256,594 as compared to a loss of $316,000 in the first
quarter. In the second quarter of 1996, machinery activity
increased, and manufacturing efficiencies for foil improved
as a result of the new coating equipment placed into service
at the end of 1995.
Revenues increased to $10,162,169 and $19,008,712 for
the three (3) and six (6) months ended June 30, 1996 up from
$9,131,475 and $18,799,465, respectively, for the comparable
1995 periods. However, included in the 1996 revenues is
$1,523,739 and $2,272,579 from Imtran-Foilmark for the three
(3) and six (6) months ended June 30, 1996. Imtran was
acquired in August 1995 and was not included in the
comparable 1995 three (3) and six (6) month results.
The consolidation of the two machinery companies was
completed on June 15, 1996. Certain duplications of factory
overhead, selling and administrative expenses that are
included in the first six (6) months of 1996 have now been
eliminated, and will not occur in the second half of 1996.
NET SALES:
Net sales for the six (6) months ended June 30, 1996
increased 1.1% to $19,008,712 from $18,799,465 for the six
(6) months ended June 30, 1995. For the three (3) months
ended June 30, 1996, net sales increased by $1,030,694 to
$10,162,169 an 11.3% increase over the comparable 1995.
Included in the 1996 total sales was $1,523,739 and
$2,272,579 from Imtran-Foilmark that was acquired in August
1995 and was not included in the 1995 comparable second
quarter and six (6) months. Excluding Imtran from 1996,
sales would have declined 5.7% and 11.0% for the three (3)
and six (6) months ended June 30, 1996.
Contributing to the lower sales was the flat market for
machinery that began in the third quarter of 1995 continuing
through the balance of 1995 and all of the first quarter of
1996. While machinery sales increased in the second quarter
of 1996 over the first quarter, the improvement was not
sufficient to make up the difference of the lower first
quarter.
Foil sales continued to show weakness due to
competitive pressures, declining by 3% for the six (6)
months ended June 30, 1996 from the comparable 1995 period.
However, the 1996 second quarter foils sales improved
increasing 2.4% over the 1996 first quarter.
GROSS PROFIT:
Gross profit declined $880,415 or 14.6% for the six (6)
months ended June 30, 1996 versus the comparable 1995
period. Gross profit as a percentage of net sales declined
from 32.0% in 1995 to 27.0% in the six (6) months ended June
30, 1996. The decline in gross profit
(7)
was mainly attributable to the flat market for
machinery sales and higher production costs. Further,
competitive pressures due to temporary over capacity forced
pricing for both machinery and foil product lines to be
reduced in order to maintain market share. Also, the foil
manufacturing subsidiary experienced manufacturing
difficulties as a result of the start-up of new production
equipment placed into service at the end of 1995 and the
delay in receipt of certain production machinery. This
affected overall manufacturing efficiencies causing the
decline in gross profit.
For the three (3) months ended June 30, 1996 gross
profit margin declined to 28.4% from 33% from the three (3)
months ended June 30, 1995, but improved as compared to the
1996 first quarter gross profit margin of 27.0%.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Selling, general and administrative expenses increased
by $959,937 and $583,371 , respectively for the six (6) and
three (3) months ended June 30, 1996 compared to similar
1995 periods. Approximately $773,000 and approximately
$318,000 of these increases were attributable to the
inclusion of Imtran-Foilmark which was acquired in August
1995 and therefore not included in 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 six (6) months ended
June 30, 1996 declined by 86.6% to a profit of $283,913
versus $2,124,265 for the six (6) months ended June 30,
1995, respectively. For the three (3) months ended June 30,
1996 income from operations declined by 61.3% to $462,163
from $1,193,995 for the three (3) months ended June 30,
1995.
The principal reasons for the decline in income from
operations was a decrease in machinery and foil sales
combined with a 14.6% reduction in gross profits due to
higher production costs, and an increase in selling, general
and administrative expenses. Weak demand produced downward
pressure on prices which also adversely impacted revenues
and margins.
INTEREST EXPENSE:
Interest expense increased to $384,703 for the six (6)
months ended June 30, 1996 compared to $224,602 for the
comparable 1995 period. Interest expense increased due to
the use of various bank loans finalized in June, 1995 to
fund the expansion projects at the Companys Newburyport and
Norwood, Massachusetts facilities, to acquire Imtran in
August 1995, and to provide working capital.
PROVISION FOR INCOME TAXES:
The Company has recorded a recovery of income taxes
(income tax benefit) of $19,900 for the six (6) months ended
June 30, 1996 on a pretax loss of $60,003. For the three (3)
months ended June 30, 1996, the Company recorded a provision
for faxes of $113,100 on pretax income of $256,594. The
effective tax rates uses was 44.0%.
NET INCOME (LOSS):
The Company experienced a net loss of $40,103 for the
six (6) months ended June 30, 1996 compared to a net profit
of $1,118,285 for the comparable 1995 period. The net loss
was attributable to lower sales, decreased gross profit,
increased amortization costs attributable to the acquisition
of Imtran and $200,000 in non-recurring relocation costs
associated with consolidating the machinery operations in
Newburyport,.
(8)
For the three (3) months ended June 30, 1996, the
Company had a net income of $143,494 compared to net income
of $594,377 for the three (3) months ended June 30, 1995.
The improvement between the first and second 1996 quarters
reflects an improvement in both sales and gross profits in
the machinery and foil product lines.
LIQUIDITY AND CAPITAL RESOURCES:
As of June 30, 1996, the Company had working capital of
$11,844,000 compared to $11,767,000 at June 1995. The net
increase in working capital was due to an increase in
accounts receivable and inventory offset by an increase in
current maturities of long-term debt, accounts payable and
accrued
expenses. The Company has a firm commitment from its
bankers to restructure two mortgages, one which matures in
October 1996, and the other January 2000 to one fifteen (15)
year mortgage. When completed working capital will increase
by $.3 million.
As of June 30, 1996 the Company had available under its
revolving credit facility $975,000 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 six (6) months ended June
30, 1996 amounted to $1,813,356 compared to $1,493,946 for
the comparable 1995 period. The 1996 capital expenditures
were incurred in connection with the expansion of building
and equipment at Newburyport and the relocation of
facilities from Norwood to Newburyport. The Companys
expansion and relocation was substantially complete at June
30, 1996.
(9)
Part II. Other Information
Item 1. Legal Proceedings
None
Item 4 Submission of Matters to Vote of Security Holders
On May 17, 1996, the Company held its 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 Companys 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 6. Exhibits and Reports on Form 8-K
1. No reports on Form 8-K have been filed during the
quarter ended June 30, 1996
(10)
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.
By:_S/ Philip
Leibel____________________________________________________
Philip Leibel Vice President-Finance (Chief Financial &
Accounting Officer)
Date: August 14, 1996
By:_ S/ Frank J.
Olsen________________________________________________ _
Frank J. Olsen, Jr. President and Chief Executive Officer
Date: August 14, 1996
(11)
