UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.DC 20549
FORM 10-Q
[X][X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended September 30,December 31, 1999.
Commission File Number: 0-12661
Exact Name of Registrant as Specified in its Charter: IMTEC, Inc.
State of Incorporation: Delaware
I.R.S. Employer Identification Number: 03-0283466
Address of Principal Executive Offices: One Imtec Lane
Bellows Falls, VT 05101
Registrant's Telephone Number: 802-463-9502
Indicate by check mark whether the registrant (1) has filledfiled 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 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.
[X] YES [ ] 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 latest practicable date.
Common shares outstanding as of October 29, 1999: 1,595,513February 7, 2000, 1,635,313
IMTEC, INC.
INDEX
Page #
Part I Financial Information Page #
Item 1 Condensed Financial Statements
Condensed Balance Sheets -
September 30,December 31, 1999 and June 30, 1999 3 - 4
Condensed Statements of Operations -
Three Months and Six Months Ended
September 30,December 31, 1999 and 1998 5
Condensed Statements of Cash Flows
Three Months and Six Months Ended
September 30,December 31, 1999 and 1998 6
Notes to Condensed Financial Statements 7 - 910
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 1011 - 1113
Item 3 Quantitative and Qualitative
Disclosures about Market Risk 1214
Part II Other Information 1315
Item 4 Submission of Matters to a Vote of
Security Holders 15
Item 6 Exhibits and Reports on Form 8-K 15
Signatures 1416
PART I - FINANCIAL INFORMATION
ITEM 1 - CONDENSED FINANCIAL INFORMATION
IMTEC, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
September 30,
December 31, June 30
1999 1999
.-------- --------
ASSETS
Current assets:
Cash and cash equivalents $114,309$107,091 $ 55,260
Accounts receivable, net of allowance for
doubtful accounts of $276,000$276,600 and
$260,000 as of September 30,December 31, 1999
and June 30, 1999, respectively 2,253,0782,734,125 3,166,970
Inventories, net 2,378,5332,360,976 2,465,372
Prepaid expenses and deferred charges 243,750218,065 143,149
Deferred tax asset 160,570 160,570
---------- ----------
Total current assets 5,150,2405,580,827 5,991,321
----------- -----------------------
Property and equipment - net 2,321,9672,246,821 2,346,727
Construction-in-progress 805,6081,811,147 -
Computer software - net 61,16452,375 65,987
Other intangibles - net 1,658,4981,833,087 1,683,481
----------- -----------
$ 9,997,477$11,524,257 $ 10,087,516
========= =========
The accompanying notes are an integral part of these condensed financial
statements.
PART I - FINANCIAL INFORMATION
ITEM 1 - CONDENSED FINANCIAL INFORMATION
IMTEC, INC.
CONDENSED BALANCE SHEETS (CONTINUED)
(Unaudited)
September 30,December 31, June 30,
1999 1999
.-------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable - bank $ - $ 794,253
Current portion of long-term debt 257,155 257,155
Accounts payable 726,811752,103 750,302
Income taxes payable 81,976141,491 120,989
Accrued liabilities:
Salaries and wages 172,640123,525 204,503
Commissions 58,11991,206 77,376
Other 483,479502,810 514,328
--------------------- -----------
Total current liabilities 1,780,1801,868,290 2,718,906
Long-term capital lease obligation 805,6081,811,147 -
Long-term deferred tax liability 119,368 119,368
Long-term debt less current portion 223,365158,032 309,291
------------------- ---------
Total long-term liabilities 1,148,3412,088,547 428,659
Stockholders' equity:
Common stock - $.01 par value;
authorized 5,000,000 shares; issued and outstanding:
1,586,7131,633,013 shares September 30,December 31, 1999 and
1,587,313 shares June 30, 1999 15,87316,330 15,873
Additional paid-in capital 2,599,1632,725,450 2,599,163
Retained earnings 4,453,9204,825,640 4,324,915
----------- -----------
Total stockholders' equity 7,068,9567,567,420 6,939,951
----------- -----------
$ 9,997,47711,524,257 $ 10,087,516
======== ========
The accompanying notes are an integral part of these condensed financial
statements.
IMTEC, INC.
CONDENSED STATEMENTS OF OPERATIONSINCOME
(Unaudited)
Six Months Ended Three Months Ended
September 30,December 31, December 31,
1999 1998 1999 1998
---- ---- ---- ----
Net sales $3,179,833 $2,849,387$7,530,143 $6,212,386 $4,350,309 $3,363,003
Cost of sales 1,921,896 1,658,054
----------- -----------4,428,062 3,627,650 2,506,172 1,969,587
---------- ---------- ---------- ---------
Gross profit 1,257,937 1,191,3333,102,081 2,584,736 1,844,137 1,393,416
Selling, general and
administrative expenses 918,511 860,8982,008,398 1,736,273 1,089,886 875,372
Research and development
expenses 113,575 122,271
----------- -----------259,638 243,417 146,063 121,146
---------- ---------- ---------- ----------
Operating income 225,851 208,164profit 834,045 605,046 608,188 396,898
Other income (expense):
Miscellaneous income and other expenses 25 82596 2,918 70 2,093
Interest expense (19,702) (17,477)
------------ ------------(30,539) (39,236) (10,837) (21,758)
----------- ----------- ----------- -----------
Income before income taxes and
cumulative effect of
accounting change 206,174 191,512803,602 568,728 597,421 377,233
Income tax expense 77,169 75,865
------------ ------------302,877 228,654 225,708 152,789
---------- ---------- ---------- ----------
Income before cumulative effect of
accounting change 129,005 115,647500,725 340,074 371,713 224,444
Cumulative effect of accounting change,
net of income tax benefit -0 51,240 ----------- -----------0 0
---------- ---------- ---------- ----------
Net income $129,005 $64,407
=========== ===========$ 500,725 $ 288,834 $ 371,713 $ 224,444
========== ========== ========== ==========
Basic net income per common
share before cumulative
effect of accounting change $ .08.31 $ .07.21 $ .23 $ .14
Cumulative effect of accounting change - .03 ----------- ------------ -
---------- ---------- ---------- ----------
Basic net income per common share $ .08.31 $ .04
=========== ===========.18 $ .23 $ .14
========== ========== ========== ==========
Diluted net income per common share before
cumulative effect of accounting change $ .08.30 $ .07.20 $ .22 $ .13
Cumulative effect of accounting change - .03 ----------- ------------ -
---------- ---------- ---------- ----------
Diluted net income per common share $ .08.30 $ .04
=========== ===========.17 $ .22 $ .13
========== ========== ========== ==========
Weighted shares for basic computation 1,587,809 1,585,7351,592,068 1,586,966 1,596,328 1,587,220
Weighted shares for diluted computation 1,634,511 1,665,4191,645,785 1,653,491 1,653,741 1,640,693
The accompanying notes are an integral part of these condensed financial
statements.
IMTEC, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
ThreeSix Months Ended
September 30,December 31,
1999 1998
---- ----
Cash flows from operating activities:
Net income $129,005 $64,407Income $500,725 $288,834
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation & amortization of property
and equipment and other assets 202,757 142,799274,853 285,598
Cumulative effect of accounting change - 51,240
Increase (decrease) in cash from:
Accounts receivable 913,892 504,106
Inventories 86,839 (77,691)432,854 349,810
Inventory 104,396 (65,762)
Prepaid expenses and other assets (100,601) (31,374)(74,916) (37,686)
Accounts payable (23,491) (29,839)1,801 154,608
Income taxes payable (39,013) 57,05620,502 110,730
Accrued liabilities (81,969) (467,147)
----------(78,675) (505,842)
-------- ---------
Net cash provided by (used in )
operating activities 1,087,419 213,5571,181,540 631,548
Cash flows from investinginvestment activities:
Expenditures for property and& equipment,
computer software and other
intangible assets (148,191) (318,320)(310,941) (682,896)
--------- -----------------
Cash flows from financing activities:
Proceeds from issuanceNet borrowing under line of notes - 110,875
Repayment of note payable to bankcredit (794,253) Repayment of long term-debt (85,926) (77,193)135,676
Principal payments on long-term debt (151,259) (118,066)
Proceeds from issuance of stock - 3,753126,744 7,553
-------- --------- --------
Net cash provided by (used in) financingfinance
activities (880,179) 37,435
---------- --------(818,768) 25,163
Net increase (decrease) in cash 59,049 (67,328)and cash equivalents 51,831 (26,203)
Cash and cash equivalents at the beginning of period 55,260 84,100
--------- -----------------
Cash and cash equivalents at the end of period $107,091 $ 114,309 $ 16,77257,897
======== =========
========
Supplemental information disclosures:Information Disclosures:
Interest paid $ 19,70230,428 $ 17,47739,236
Income tax paid $116,182 $ 18,009$285,629 $116,334
The accompanying notes are an integral part of these condensed financial
statements.
IMTEC, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1 - Basis of Presentation
The financial information included herein is unaudited. However,unaudited: however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim periods.
The results of operations for the three-monthsix-month period ended September
30,December 31,
1999 are not necessarily indicative of the results to be expected for the full
year.
2 - Newly Adopted Accounting Pronouncement
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities," which requires that all start-up activities and organizational
costs be expensed as incurred. SOP 98-5 is effective for fiscal years beginning
after December 15, 1998, however, early adoption is encouraged. The Company
adopted this SOP in the fourth quarter of Fiscal 1999. The Company has reflected
the adoption of this standard in the results of operations for the three and six
months ended September 30,December 31, 1998 as though this standard had been adopted as of
the beginning of Fiscal 1999. The adoption of this statement resulted in a
charge of $51,240 (net of an income tax benefit of $33,609), which is included
in the Consolidated Statement of Operations as a cumulative effect of accounting
change. The cumulative effect of the adoption of SOP 98-5 is calculated as if
the new statement was adopted as of the beginning of the year.
3 - Inventories
Inventories consist of:
September 30, June 30,
1999 1999
Finished products $ 94,994 $ 72,325
Work in process 308,417 397,520
Purchased components 1,975,122 1,995,527
----------- -----------
$ 2,378,533 $ 2,465,372
=========== ===========
Inventories consist of:
December 31, June 30,
1999 1999
---- ----
Finished products $ 38,386 $ 72,325
Work in process 227,972 397,520
Purchased components 2,094,618 1,995,527
---------- ----------
$2,360,976 $2,465,372
========== ==========
Inventory cost consisted of the cost of purchased components and
supplies, manufacturing labor and manufacturing overhead.
4 - Liability for Estimated Product Warranty
As of September 30,On December 31, 1999 and June 30, 1999, the Company had provided
$138,000 and $137,000 respectively, against future product warranties based on its experience with customer
claims. Warranty expenses charged to income amounted to approximately $17,400$34,800
for the three-monthsix month period ended September 30,December 31, 1999 and $22,600$18,700 for the three-monthsix-month
period ended September 30,December 31, 1998.
5 - Income per Common Share
Basic income per share was computed by dividing net income by the
weighted average number of shares of common stock outstanding during each period
presented. Dilutive income per share reflects the effects of the Company's
outstanding options (using the treasury stock method at the average price during
the period), except where such items would be antidilutive.
A reconciliation of weighted average shares used for the basic
calculation and that used for the diluted calculation was as follows:
Three months ended September 30,
1999 1998
Weighted average shares - basic 1,587,809 1,585,735
Dilutive effect of options 46,702 79,684
--------- ---------
Weighted average shares - diluted 1,634,511 1,665,419Six months ended December 31,
1999 1998
---- ----
Weighted average shares - Basic 1,592,068 1,586,966
Dilutive effect of options 53,717 66,525
--------- ---------
Weighted average shares - diluted 1,645,785 1,653,491
========= =========
Three months ended December 31,
1999 1998
---- ----
Weighted average shares - Basic 1,596,328 1,587,220
Dilutive effect of options 57,413 53,473
--------- ---------
Weighted average shares - diluted 1,653,741 1,640,693
========= =========
Options to purchase 95,200 and 075,700 shares of common stock were
outstanding as of September 30,December 31, 1999 and 1998, respectively, but were not
included in the computation of diluted earnings per share because the options'
exercise prices were greater than the average market price of the common stock
and, therefore, their effect would be antidilutive.
6 - Capital Lease Obligation
The Company has entered into an agreement to lease a 56,000 square foot
facility in Keene, NH that is currently under construction. During the
construction period, the Company has guaranteed the developer's construction
loan. This lease will be accounted for as a capital lease. Accordingly, the
Company has recognized an asset as construction-in-progress and the
corresponding long-term liability as a capital lease obligation for the
construction costs incurred to-date of $805,608.$1,811,147. Total construction costs are
anticipated to be $2,400,000.$2,650,000.
7 - Segment Information
The Company has identified two distinct and reportable segments: the
Hardware and the Media segments. The Company considers these two segments
reportable under the requirements of Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
criteria as they are managed separately and the operating results of each
segment are regularly reviewed and evaluated separately by the Company's chief
decision-maker.
The Hardware segment provides printers, high-performance applicators
and laminators of labels for industrial environments. The Media segment provides
the high-performance label material for industrial environments.
The following is a summary of information about the Company's
operations by segment for the six and three monthsmonth periods ended September 30:December 31:
Hardware Media Total
Six months ended December 31, 1999
Net sales $2,343,620 $5,186,523 $7,530,143
Cost of sales 1,301,781 3,126,281 4,428,062
Gross profit 1,041,839 2,060,242 3,102,081
Selling, general & administrative (1) 617,839 1,390,559 2,008,398
Research & development 177,438 82,200 259,638
---------- ---------- ----------
Operating income $246,562 $587,483 $834,045
Six months ended December 31, 1998
Net sales $1,782,509 $4,429,877 $6,212,386
Cost of sales 1,074,370 2,553,280 3,627,650
Gross profit 708,139 1,876,597 2,584,736
Selling, general & administrative (1) 494,973 1,241,300 1,736,273
Research & development 161,074 82,343 243,417
---------- ---------- ----------
Operating income $52,092 $552,954 $605,046
(1) Management allocates general and administrative expenses to the two segments.
Depreciation and amortization for the Hardware and Media segments for the
six-month period ended December 31, 1999 were $51,210 and $223,643,
respectively, and for the six month period ended December 31, 1998 were $103,317
and $182,281, respectively.
Hardware Media Total
Three months ended September 30,December 31, 1999
Net sales $787,816 $2,392,017 $3,179,833$1,555,804 $2,794,505 $4,350,309
Cost of sales 441,348 1,480,548 1,921,896860,433 1,645,739 2,506,172
Gross profit 346,468 911,469 1,257,937695,371 1,148,766 1,844,137
Selling, general & administrative (1) 291,679 626,832 918,511326,160 763,726 1,089,886
Research & development 76,375 37,200 113,575101,063 45,000 146,063
---------- ---------- ----------
Operating income ($21,586) $247,437 $225,851$268,148 $340,040 $608,188
Three months ended September 30,December 31, 1998
Net sales $760,926 $2,088,461 $2,849,387$1,021,583 $2,341,420 $3,363,003
Cost of sales 467,752 1,190,302 1,658,054606,609 1,362,978 1,969,587
Gross profit 293,174 898,159 1,191,333414,974 978,442 1,393,416
Selling, general & administrative (1) 225,203 635,695 860,898269,770 605,602 875,372
Research & development 81,308 40,963 122,27179,766 41,380 121,146
---------- ---------- ----------
Operating income ($13,337) $221,501 $208,164$65,438 $331,460 $396,898
(1) Management allocates general and administrative expenses to the two segments.
Depreciation and amortization for the Hardware and Media segments for the
three-month period ended September 30,December 31, 1999 were $37,777$13,433 and $164,979,$58,664,
respectively, and for the three monththree-month period ended September 30,December 31, 1998 were
$51,385$51,932 and $90,658, respectively.$91,623, respectively
8 - Pending sale
On December 10, 1999, Brady Corporation (Milwaukee, WI) announced that
they were in talks with IMTEC, Inc. to acquire the Company. Subject to due
diligence, negotiation of a definitive agreement, and other matters, Brady would
acquire the outstanding capital stock of IMTEC, Inc. for $12 per share in a cash
transaction valued at approximately $21 million.
9 - Acquisition
During November 1999, the Company acquired the manufacturing rights,
engineering and inventory for the "Online" printer/applicator from Cognitive,
based in Golden, CO., a division of Axiohm Transaction Solutions, Inc. The
purchase price of $263,908 has preliminarily been allocated to Inventory, Fixed
Assets and $203,292 to Other Intangibles.
IMTEC, INC.
Item 2.ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995
The statements contained in the following Management's Discussion and
Analysis of Financial Condition and Results of Operations which are not
historical are "forward looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 31E of the Securities
Exchange Act of 1934, as amended. These forward looking statements represent the
Company's present expectations or beliefs concerning future events, however the
Company cautions that such statements are qualified by important factors. Such
factors, could cause actual results to differ materially from those indicated in
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
RESULTS OF OPERATIONS
Three Months and Six Months Ended September 30,December 31, 1999
as compared to Three Months and Six Months Ended September 30,December 31, 1998
Revenues for the three months and six months ended September 30,December 31, 1999
increased approximately 11.6% from29.4% and approximately 21.2%, respectively, over the
corresponding periodperiods in 1998.
Revenues from Bar Code labels and printing supplies were $2,392,017$2,794,505 and
$5,186,523 for the quarterthree month and six month periods ended September 30,December 31, 1999
compared to $2,088,461$2,341,420 and $4,429,877, respectively, for the same periodperiods last
year. Bar Code labels and printing supplies represented 75.2%64.2% and 68.9% of total
revenue for the three monthsmonth and six month periods ended September 30,December 31, 1999
compared to 73.3%69.6% and 71.3%, respectively, for the same periodperiods last year .year.
Revenues from the sales of Industrial Bar Code Equipment were
$787,816$1,555,804 and $2,343,620 for the three monthsand six month periods ended September 30,December 31,
1999 compared to $760,926$1,021,583 and $1,782,509 for the same periodperiods in 1998.
Industrial Bar Code Equipment sales represented 24.8%35.8% and 31.1% of total revenue
for the three monthsmonth and six month periods ended September 30,December 31, 1999 compared to
26.7%30.4% and 28.7% respectively for the same periodperiods last year. During November
1999, the Company acquired the manufacturing rights, engineering and inventory
for the "Online" printer/applicator from Cognitive, based in Golden, CO., a
division of Axiohm Transaction Solutions, Inc. During the quarter ended December
31, 1999, shipments of this equipment amounted to 7.6% of all equipment sales,
for the six months ended December 31, 1999, the "Online" product accounted for
5.1% of equipment sales. In September, 1999 the Company was awarded a $2 million
purchase order from Intermec Technologies Corporation for 216 Model 4420E-1
automated printer/applicators. For the three and six month periods ended
December 31, 1999, this purchase order accounted for 50.1% and 36.3% of
equipment shipments, respectively.
Total backlog for all products as of September 30,December 31, 1999 was
approximately $5,114,000, all$3,621,253, the majority of which is scheduled to ship by June 30,
2000.
Total backlog2000, compared to approximately $2,048,580 as of September 30, 1998 was $3,305,000. The increaseDecember 31, 1998.
Approximately $1.2 million of the current backlog is related to the result of an order announced on September 7, 1999 in excess of $2 million from
Intermec Technologies Corporation. The order is for 216 Model 4420E-1 automated
printer-applicators.above
mentioned purchase order.
Cost of sales, as a percentage of net sales, for the three months and six
months ended September 30,December 31, 1999 was 60.4%were 57.6% and 58.8%, up from 58.2%respectively, compared to
58.6% and 58.4% for the same periodperiods in 1998.
Selling, general and administrative expenses were $1,089,886 for the
quarter ended December 31, 1999 and $2,008,398 for the six months ended December
31, 1999, as compared to $875,372 and $1,736,273, respectively, for the
corresponding periods ended December 31, 1998. This increase is directly related to the product mixresult of
increased Sales and anMarketing activity, increased portionnational service coverage and
the addition of sales through indirect channels.
Selling, generala new Chief Financial Officer.
Development and administrative ("SG&A") expenses were $918,511 for
the quarter ended September 30, 1999 as compared to $860,898 for the quarter
ended September 30, 1998. This represents a 6.7% increase in these expenses.
While this represents an increase in dollars, SG&A as a percentage of revenues
decreased to 28.9% as of September 30, 1999 from 30.2% as of September 30, 1998.
Research and developmentengineering expenses for the quarterthree months and six months
ended September 30,December 31, 1999 were $113,575 (3.6%$146,063 (3.4% of sales), respectively, and
$259,638 (3.4% of sales) compared to $122,271 (4.3%$121,146 (3.6% of sales) and $243,417 (3.9%
of sales), respectively, for the same periodperiods last year.
The Company's effective tax rate was approximately 37%38% for the three
and six month periods ended December 31, 1999 and 40% for the three monthsand six
month periods ended September 30, 1999 andDecember 31, 1998, respectively, and is based on the Company's estimated
effective tax rate for the full year.
Net income for the quarterthree months and six months ended September 30,December 31, 1999
was $129,005$371,713 and $500,725, respectively, compared to $64,407$224,444 and $288,834,
respectively, for the quartersame periods ended September 30,December 31, 1998. The major reason
for thisThis increase in net
earnings is directly related to the increase in revenues andrevenues. In addition, the
cumulative effect of the adoption of SOP 98-5 which is reflected in the Consolidated Statement of Operationsdecreased net income for the threesix
months ended September 30,December 31, 1998. (See Note 2 of the Condensed Financial
Statements)
On December 10, 1999, Brady Corporation (Milwaukee, WI) announced that
they were in talks with IMTEC, Inc. to acquire the Company. Subject to due
diligence, negotiation of a definitive agreement, and other matters, Brady would
acquire the outstanding capital stock of IMTEC, Inc. for $12 per share in a cash
transaction valued at approximately $21 million.
LIQUIDITY AND CAPITAL RESOURCESRESOURCES:
As of September 30,December 31, 1999, the Company's principal available sources of
liquidity were from operations and a $2,000,000 bank line of credit, (allall of
which was available as of September 30, 1999).December 31, 1999.
Accounts receivable, net decreased from $3,166,970 as of June 30, 1999 to
$2,253,078$2,734,125 as of September 30,December 31, 1999, a direct result of the increased efforts at
collectionscollection of past due accounts.
Inventories, net decreased from $2,465,372 as of June 30, 1999 to
$2,378,533$2,360,976 as of September 30,December 31, 1999.
The Company's capital commitments for fiscal 2000 are expected to be at
the same level as fiscal 1999. The Company has entered into an agreement to
lease a 56,000 square foot facility in Keene, NH that is currently under
construction. During the construction period, the Company has guaranteed the
developer's construction loan. This lease will be accounted for as a capital
lease. Accordingly, the Company has recognized an asset as
construction-in-progress and the corresponding long-term liability as a capital
lease obligation for the construction costs incurred to-date of $805,608.$1,811,147.
Total constructionsconstruction costs are anticipated to be $2,400,000.$2,650,000.
The Company believes that it will be able to offset the effects of
inflation by selected price increases in its products, although it can give no
assurances in this regard.
The Company anticipates that cash flows from operations, together with
current cash balances and funds available under the Company's line of credit,
will be sufficient to meet the Company's working capital and capital equipment
expenditure requirements for the foreseeable future.
Recent Accounting Pronouncements
In Fiscal 1999, the Company adapted SOP 98-5, "Reporting on the Costs
of Start-Up Activities."
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities," which requires that all start-up activities and organizational
costs be expensed as incurred. SOP 98-5 is effective for fiscal years beginning
after December 15, 1998, however, early adoption is encouraged. The Company
adopted this SOP in the fourth quarter of Fiscal 1999. The Company has reflected
the adoption of this standard in the results of operations for the three and six
months ended September 30,December 31, 1998 as though this standard had been adopted as of
the beginning of Fiscal 1999. The adoption of this statement resulted in a
charge of $51,240 (net of an income tax benefit of $33,609), which is included
in the Consolidated Statement of Operations as a cumulative effect of accounting
change. The cumulative effect of the adoption of SOP 98-5 is calculated as if
the new statement was adopted as of the beginning of the year.
In June 1998, the Financial Accounting Standards Board issued SFASStatement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities," subsequently amended in June 1999, and
effective for fiscal years, including fiscal quarters, beginning after June 15,
2000. SFAS No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities. It requires that an entity recognizes all
derivatives as either assets or liabilities in the balance sheet and measures
those instruments at fair value. The Company will adopt SFAS No. 133 in the
first quarter of fiscal 2001. The Company is currently analyzing the impact this
statement will have on its financial statements.
Year 2000
The Company has reviewed the issue of Year 2000. All of the manufacturing
and accounting software has been brought into compliance, effective June 16,
1998. There are neither internal clocks nor dating mechanisms within the
Company's products that would be effected by changing dates. The Company is
confident that its products and services will continue uninterrupted into the
new millennium. No material additional costs are anticipated at this time.
The Company's contingency plan in the event other parties should be
unable to provide Year 2000 compliant electronic data is to revert to paper
documentation from these parties. However, to the extent that customers, vendors
or other entities with which the Company has material relationships do not
adequately address Year 2000 issues, the Company could experience payment
delays.
To date the Company has not experienced any significant Year 2000
issues. The Company will continue to monitor Year 2000 issues throughout the
calendar year.
Item 7A.3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's outstanding short-term debt as of September 30,at December 31, 1999 bears
interest at a variable rate;rates; therefore, the Company's results of operations would
be affected by interest rate changes to the extent of the notes outstanding.
There were no notes outstanding at December 31, 1999. Due to the short-termshort term
nature, an immediate 10 percent change in interest rates would not have a
material effect on the Company's results of operations over the next fiscal
year.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
NoneNot applicable
Item 3 - Defaults upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
A. November 1, 1999 - Annual Meeting of Stockholders
B. Election of Directors - all nominees elected
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on formForm 8-K
Exhibit 27 - Financial Data Schedule
The Company filed no reports on form 8-K during the quarter
Exhibit 27 - Financial Data Schedule
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 hereunto duly authorized.
IMTEC, INC.
BY:______/____/s/ Steven D. Anton____________
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Steven D. Anton
President & Chief Executive Officer
BY ______/BY:___/s/ George S. Norfleet III______III_________
--------------------------
George S. Norfleet III
Secretary / Treasurer