UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended March 31, 1997.
Commission File Number: 0-12661
Exact Name of Registrant as Specified in its Charter: IMTEC, Inc.
State of Incorporation: Delaware
IRS 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 filled 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 shorted 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 April 18, 1997, 1,553,088
IMTEC, INC.
INDEX
Page #
Part I Financial Information
Condensed Balance Sheets -
March 31, 1997 and June 30, 1996 3 - 4
Condensed Statements of Income -
Three Months and Nine Months Ended
March 31, 1997 and 1996 5
Condensed Statements of Cash Flows
Three Months and Nine Months Ended
March 31, 1997 and 1996 6
Notes to Condensed Financial Statements 7 - 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II Other Information
Item 4 Submission of Matters to a Vote of
Security Holders 13
Item 6 Exhibits and Reports on Form 8-K 13
Signatures 14
PART I - FINANCIAL INFORMATION
IMTEC, INC.
CONDENSED BALANCE SHEETS (Unaudited)
March 31, June 30,
1997 1996 .
ASSETS
Current Assets:
Cash $ 867,516 $ 806,633
Marketable Securities 54,671 54,671
Accounts receivable
Trade, less allowance for doubtful accounts:
March 31, 1997 - $77,000
June 30, 1996 - $94,000 1,596,110 1,281,101
Inventories 1,585,819 1,512,037
Prepaid expenses and deferred charges 77,043 134,650
Income tax refundable 87,086
Deferred income tax 96,330 96,330
------------ -----------
Total Current Assets 4,277,489 3,972,508
----------- ------------
Plant and equipment, net of depreciation 1,214,280 995,450
--------- -------------
Other assets:
Deposits 36,437 150,481
Computer software less accumulated amortization
of $440,643 in 1997 and $317,718 in 1996, 60,594 109,008
Other intangibles less accumulated amortization of
$506,905 in 1997 and $362,535 in 1996 230,506 211,638
----------- -----------
327,537 471,127
----------- -----------
$ 5,819,306 $ 5,439,085
========= =========
The accompanying notes are an integral part of these
condensed financial statements.
PART I - FINANCIAL INFORMATION
IMTEC, INC.
CONDENSED BALANCE SHEETS (Unaudited) (CONTINUED)
March 31, June 30,
1997 1996 .
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Accounts payable $ 199,466 $ 430,420
Income tax payable 194,155 -
Accrued liabilities
Salaries and wages 124,305 176,276
Commissions 208,001 45,899
Other 322,120 417,030
---------- ----------
Total Current Liabilities 1,048,047 1,069,625
----------- -----------
Stockholders' equity:
Common stock - $.01 par value;
authorized 5,000,000 shares, issued and outstanding:
1,553,088 shares March 31, 1997
1,545,088 shares June 30, 1996 15,531 15,451
Additional paid-in capital 2,470,281 2,449,517
Retained earnings 2,285,447 1,904,492
----------- -----------
Total Stockholders' Equity 4,771,259 4,369,460
----------- -----------
$ 5,819,306 $ 5,439,085
========== ==========
The accompanying notes are an integral part of these
condensed financial statements.
IMTEC, INC.
CONDENSED STATEMENTS OF INCOME
(Unaudited)
Nine Months Ended Three Months Ended
March 31, March 31,
1997 1996 1997 1996
---- ---- ---- ----
Net sales $6,421,867 $7,072,244 $ 2,224,656 $2,307,861
Cost of sales 3,480,482 3,862,624 1,263,093 1,176,841
----------- ----------- ----------- -----------
Gross Profit 2,941,385 3,209,620 961,563 1,131,020
Selling, general and
administrative expenses 1,890,315 1,705,678 641,636 615,666
Research and development
expenses 445,311 484,131 144,361 178,176
---------- ---------- ---------- ----------
Operating profit 605,759 1,019,811 175,566 337,178
Miscellaneous income (expenses): 25,066 16,047 6,425 3,228
---------- ---------- ----------- -----------
Income before income taxes 630,825 1,035,858 181,991 340,406
Income tax expense 249,870 410,889 72,752 135,039
--------- --------- -------- ---------
Net income $ 380,955 $ 624,969 $ 109,239 $ 205,367
======= ======= ======= =======
Weighted average number of
common shares and common
shares equivalents outstanding 1,605,832 1,570,144 1,608,165 1,583,623
======= ======= ======= =======
Earnings per common share and
common share equivalents $ .24 $ .40 $ .07 $ .13
====== ====== ======= ======
The accompanying notes are an integral part of these
condensed financial statements.
IMTEC, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended Three Months Ended
March 31, March 31,
1997 1996 1997 1996
---- ---- ---- ----
Cash flows from operating activities:
Net income $ 380,955 $624,969 $109,239 $205,367
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation & amortization 466,266 384,590 155,423 128,954
Increase ( decrease) in cash from:
Accounts receivable (315,009) 281,848 (395,514) (217,580)
Income tax refundable 87,086
Inventory (73,782) 8,973 17,530 86,977
Prepaid expenses and other assets 171,651 (48,686) 20,441 (20,577)
Accounts payable (230,954) (302,445) 47,039 20,970
Income tax payable 194,155 17,434 53,052 48,028
Accrued liabilities 15,221 (639,223) 2,899 (148,524)
--------- ---------- --------- ----------
Net cash provided by
operating activities 695,589 327,460 10,109 103,615
Cash flows (used in) investment activities:
Expenditures for property & equipment,
computer software and other
intangible assets (655,550) (328,013) (84,401) (42,834)
---------- ---------- ---------- ----------
Cash flows provided by financing activities:
Proceeds from issuance of stock 20,844 176,964 20,844 149,463
--------- --------- --------- ---------
Net increase (decrease) in cash 60,883 176,411 (53,448) 210,244
Cash at the beginning of period 806,633 685,727 920,964 651,894
--------- --------- --------- ---------
Cash at the end of period $ 867,516 $ 862,138 $ 867,516 $ 862,138
======= ======= ======= =======
Supplemental Information Disclosures:
Income taxes paid $ 52,212 $ 394,344 $ 19,700 $ 87,900
======= ======= ======= =======
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, 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 nine month period ended March 31,
1997 may not necessarily be indicative of the results to be expected for the
full year.
2 - Inventories
Inventories consist of:
March 31, June 30,
1997 1996
Finished Products $ 18,132 $ 39,299
Work in Process 192,856 97,310
Purchased Components 1,374,831 1,375,428
----------- -----------
$ 1,585,819 $ 1,512,037
======== ========
3 - Liability for Estimated Product Warranty
On March 31, 1997 and June 30, 1996, the Company had provided
approximately $143,000 and $120,000 respectively, against future product
warranties based on its experience with customer claims. Warranty expenses
charged to income amounted to approximately $62,000 for the nine month period
ended March 31, 1997 and $64,000 for the nine month period ended March 31, 1996.
4 - Earnings per Common Share
Primary earnings per share were computed by dividing net income by the
weighted average number of shares of common stock and common stock equivalents
outstanding during the year, if dilutive. Common stock equivalents (stock
options and warrants) are assumed to be exercised when they are issued and the
proceeds used to repurchase outstanding shares of the Company's common stock at
the average price during the period.
The fully-diluted computation is performed using the same method as for
the primary computation, except that the proceeds from exercised stock options
and warrants are assumed to be used to repurchase outstanding shares of the
Company's common stock at the higher of the average for the period or the March
31 market price.
The average number of common stock and common stock equivalents
entering into the calculation of primary and fully-diluted earnings per share
are as follows:
Nine months ended March 31,
1997 1996
Common shares 1,546,427 1,497,766
Options 55,989 72,378
Warrants 0 0
---------- ----------
Total for primary calculation 1,602,416 1,570,144
Options 3,416 0
Warrants 0 0
---------- ----------
Total for fully-diluted calculation 1,605,832 1,570,144
========= =========
Three months ended March 31,
1997 1996
Common shares 1,549,166 1,539,513
Options 56,634 44,110
Warrants 0 0
---------- ----------
Total for primary calculation 1,605,800 1,583,623
Options 2,365 0
Warrants 0 0
--------- ----------
Total for fully-diluted calculation 1,608,165 1,583,623
========= =========
In March 1997, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards (SAFS) No. 128, "Earnings per
Share," which will be effective for interim and annual periods ending after
December 15, 1997. Had SFAS No. 128 been effective for the quarters ended March
31, 1997 and 1996, reported earnings per share and diluted earnings per share on
a proforma basis would be the same as stated in this report.
IMTEC, INC.
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 Nine Months Ended March 31, 1997
as compared to Three Months and Nine Months Ended March 31, 1996
Revenues for the three months and nine months ended March 31, 1997
decreased approximately 3.3% and 8.9% respectively over the corresponding
periods in 1996.
Revenues from labels and printing supplies were $1,637,863 and
$4,637,884 for the three month and nine month periods ended March 31, 1997
compared to $1,329,479 and $3,744,758 respectively for the same periods last
year. Labels and printing supplies represented 73.6% and 72.2% of total revenue
for the three month and nine month periods ended March 31, 1997 compared to
57.8% and 53.1% respectively for the same periods last year. Management believes
that the increase in sales of labels and printing supplies is attributable to an
increase in the product line and the sales force and production capacity.
Revenues from the sales of Industrial Equipment were $586,793 and
$1,783,983 for the three and nine month periods ended March 31, 1997 compared to
$971,329 and $3,304,383 for the same periods in 1996. Industrial Equipment sales
represented 26.4% and 27.8% of total revenue for the three month and nine month
periods ended March 31, 1997 compared to 42.2% and 46.9% respectively for the
same periods last year. It should be noted that approximately $1,115,752 for the
nine months ended March 31, 1996 represented sales to a single customer. The
contract with the above mentioned customer was completed in July, 1995 and
additional orders are not anticipated. If these sales to the single customer
were excluded from the previous year's revenue figures, remaining equipment
revenues would show a decrease of 18.5% for the nine month period and a 39.6%
decrease for the three month period over the corresponding periods of the
previous year. Management believes that this trend in Industrial Equipment sales
will be reversed due to newly available products and an increase in the number
and geographic coverage by resellers of the product line. Equipment backlog was
$266,000 at March 31, 1997 compared to $289,000 at March 31, 1996. While this
represents a 7.9% decrease in equipment backlog, it should be noted that the new
products mentioned above have just been introduced to the market.
Total backlog, for all products, as of March 31, 1997 was approximately
$1,354,000,, of which approximately $576,000 is shipable by June 30, 1997,
compared to $1,212,000 as of March 31, 1996, about half of which was shipable by
June 30, 1996.
Cost of sales for the three months and nine months ended March 31, 1997
were 56.8% and 54.2% respectively, compared to 51.2% and 54.8% for the same
periods in 1996. The increase in the three month cost of sales is the result of
increased shipments through resellers, which carry lower margins, and normal
startup costs on new products.
Selling, general and administrative expenses were $641,636 for the
quarter ended March 31, 1997 and $1,890,315 for the nine months ended March 31,
1997, as compared to $615,666 and $1,705,678, respectively for the corresponding
periods ended March 31, 1996. The increase for the 1997 quarter is primarily
attributed to an increase in marketing & sales activity. The 1997 nine month
increase is primarily the result of the reversal in December, 1995 of a
previously established litigation contingency reserve estimate of $215,000 as a
consequence of the Vermont Supreme Court's ruling in favor of the Company which
overturned a judgment in that amount previously entered against the Company. Had
such reversal not occurred, selling, general and administrative expenses for the
nine months ended March 31, 1996 would have been $1,920,678, approximately the
same as the 1997 period.
Research and development expenses for the three months and nine months
ended March 31, 1997 were $144,361 (6.5% of sales) and $445,311 (6.9% of sales)
compared to $178,176 (7.7% of sales) and $484,131 (6.8% of sales), respectively,
for the same periods last year.
The Company's effective tax rate was approximately 40% for all periods
presented, and is based on the Company's estimated effective tax rate for the
full year.
Net income for the three months and nine months ended March 31, 1997
was $109,239 and $380,955, respectively, compared to $205,367 and $624,969,
respectively, for the same periods ended March 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES:
As of March 31, 1997, the Company's principal available sources of
liquidity were, respectively, from operations and a $1,000,000 bank line of
credit, all of which was available as of March 31, 1997.
Accounts receivable increased by $315,009, from $1,281,101 at June 30,
1996 to $1,596,110 at March 31, 1997, a direct result of the increase in
international shipments that represented 32.1% of sales for the quarter ended
March 31, 1997, compared to 19.6% and 14.6% for the quarters ended December 31,
1996 and September 30, 1996, respectively. Typically, international terms and
collections tend to extend beyond those of domestic customers, creating the
increase in the accounts receivable.
The Company's capital commitments for fiscal 1997 are expected to be
approximately 50% above the level of fiscal 1996. This is the result of the
Company's commitment to improve the capability and capacity of its label
operations. The Company anticipates that it will fund such commitments from
operating revenues and, if required, its unused and available bank line of
credit.
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 and marketable securities 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 March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share," which will be effective for interim and annual periods ending after
December 15, 1997. SFAS No. 128 will require the Company to restate all
previously reported earnings per share information to conform to the new
pronouncement's requirements.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
Not applicable
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission if Matters to a Vote of Security Holders
---------------------------------------------------
A. December 11, 1996 - Annual Meeting of Stockholders
B. Election of Directors - all nominees elected
Item 5 - Information
None
Item 6 - Exhibits and Reports on Form 8-K
8-K, filed Feb. 21, 1997, announcing a change in audit firms
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/ Richard L. Kalich___________
Richard L. Kalich
President & Chief Executive Officer
BY:______/s/ George S. Norfleet III_________
George S. Norfleet III
Secretary / Treasurer