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 December 31, 1997.
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 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 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 January 30, 1998, 1,577,713
IMTEC, INC.
INDEX
Page #
Part I Financial Information
Condensed Balance Sheets -
December 31, 1997 and June 30, 1997 3 - 4
Condensed Statements of Income -
Three Months and Six Months Ended
December 31, 1997 and 1996 5
Condensed Statements of Cash Flows
Three Months and Six Months Ended
December 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 11
Item 6 Exhibits and Reports on Form 8-K 11
Signatures 12
PART I - FINANCIAL INFORMATION
IMTEC, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
December 31, June 30
1997 1997
ASSETS
Current Assets:
Cash $ 191,987 $ 1,352,562
Marketable Securities 52,187 92,999
Accounts and notes receivable: Trade,
less allowance for doubtful accounts:
December 31, 1997 - $196,000
June 30, 1997 - $175,000 1,782,377 1,499,283
Inventories 2,079,721 1,402,318
Prepaid expenses and deferred charges 81,614 45,423
Deferred income tax 159,508 159,508
---------- ----------
Total Current Assets 4,347,394 4,552,093
------------
Plant and equipment - net 1,491,836 1,234,488
Other Assets:
Deposits 46,791 48,991
Computer software - net 85,083 94,759
Goodwill - net 1,637,130
Other intangibles - net 238,143 222,032
---------- ----------
$ 7,846,377 $ 6,152,363
========= =========
The accompanying notes are an integral part of these
condensed financial statements.
PART I - FINANCIAL INFORMATION
IMTEC, INC.
CONDENSED BALANCE SHEETS (CONTINUED)
(Unaudited)
December 31, June 30,
1997 1997 .
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Notes payable - bank $ 143,524 $ 0
Current installments of long term debt 185,051 0
Accounts payable 451,104 324,651
Income tax payable 297,307 223,935
Accrued liabilities
Salaries and wages 76,395 191,502
Commissions 179,306 95,229
Other 283,107 351,275
------------ ------------
Total Current Liabilities 1,615,794 1,186,592
Long term debt less current installments 846,889 -
----------- -----------
Total Liabilities 2,462,683 1,186,592
Stockholders' equity:
Common stock - $.01 par value;
authorized 5,000,000 shares, issued and outstanding:
1,553,088 shares December 31, 1997
1,553,088 shares June 30, 1997 15,531 15,531
Additional paid-in capital 2,489,674 2,489,674
Retained Earnings 2,878,489 2,460,566
----------- -----------
Total Stockholders' Equity 5,383,694 4,965,771
----------- -----------
$ 7,846,377 $ 6,152,363
======== ========
The accompanying notes are an integral part of these
condensed financial statements.
IMTEC, INC.
CONDENSED STATEMENTS OF INCOME
(Unaudited)
Six Months Ended Three Months Ended
December 31, December 31,
1997 1996 1997 1996
---- ---- ---- ----
Net Sales $5,403,964 $4,197,209 $2,784,440 $2,097,066
Cost of Sales 2,820,221 2,217,389 1,441,709 1,178,594
----------- ----------- ----------- -----------
Gross Profit 2,583,743 1,979,820 1,342,731 918,472
Selling, general and
administrative expenses 1,587,204 1,253,169 810,554 585,840
Research and development
expenses 290,015 300,946 156,229 158,274
----------- ----------- ----------- -----------
Operating Profit 706,524 425,705 375,948 174,358
Other Income:
Miscellaneous income
and other expenses 20,463 23,141 9,740 10,877
Interest Expense (34,890) 0 (27,065) 0
----------- ------------- ----------- ------------
Income Before
Income Taxes 692,097 448,846 358,623 185,235
--------- --------- --------- --------
Income Tax Expense 274,171 177,118 142,083 72,164
--------- --------- ---------- --------
Net Income $ 417,926 $ 271,728 $ 216,540 $ 113,071
======= ======= ======= =======
Earnings per share - Basic $ .27 $ .17 $ .14 $ .08
====== ====== ====== ======
Earnings per share - Diluted $ .25 $ .17 $ .13 $ .07
====== ====== ====== ======
The accompanying notes are an integral part of these
condensed financial statements.
IMTEC, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended Three Months Ended
December 31, December 31,
1997 1996 1997 1996
---- ---- ---- ----
Cash flows from operating activities:
Net Income $417,926 $271,728 $216,540 $113,071
Adjust, to reconcile net income to,
net cash provided by operating activities:
Depreciation & amortization 300,137 310,843 135,423 155,420
Increase (decrease) in cash from:
Accounts receivable (280,894) 80,505 109,150 (35,586)
Income tax refundable 87,086
Inventory (677,403) (91,312) (264,920) (32,192)
Marketable securities 40,812 40,403
Prepaid expenses and other assets (36,191) 151,210 9,040 23,286
Accounts payable 126,453 (277,993) (224,281) (60,747)
Income tax payable 73,372 141,103 142,083 123,561
Accrued liabilities (99,201) 12,310 (40,170) (27,217)
--------- -------- ---------- ----------
Net cash provided by (used in )
operating activities (134,989) 685,480 123,268 259,596
Cash flows from investment activities -
Expenditures for property & equipment,
computer software and other
intangible assets (2,201,050) (571,149) (185,819) (121,165)
----------- ---------- ---------- ----------
Cash flows from financing activities:
Net borrowing under line of credit 143,524 43,602
Proceeds from new long term debt 1,200,000
Principal payments on long term debt (168,060) (51,265)
Proceeds from issuance of stock 0 0 0 0
---------- ----------- --------- ------------
Net cash provided by (used in) finance
activities 1,175,464 0 (7,663) 0
Net increase (decrease) in cash (1,160,575) 114,331 (70,214) 138,431
Cash at the beginning of period 1,352,562 806,633 262,199 782,533
--------- -------- -------- --------
Cash at the end of period $ 191,987 $ 920,964 $ 191,987 $ 920,964
======= ======= ======= =======
Supplemental Information Disclosures:
Interest paid $ 34.890 $ 27,065
Income tax paid $200,800 $ 32,512 $ 32,512
-------- --------- ---------
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 six-month period ended December 31,
1997 are not necessarily indicative of the results to be expected for the full
year.
2 - Inventories
Inventories consist of:
December 31, June 30,
1997 1997
Finished Products $ 6,456 $ 78,263
Work in Process 273,252 145,391
Purchased Components 1,800,013 1,178,664
----------- -----------
$ 2,079,721 $ 1,402,318
=========== ===========
Inventory cost consisted of the cost of purchased components and
supplies, manufacturing labor and manufacturing overhead.
3 - Liability for Estimated Product Warranty
On December 31, 1997 and June 30, 1997, the Company had provided
$114,000 and $149,000 respectively, against future product warranties based on
its experience with customer claims. Warranty expenses charged to income
amounted to approximately $36,000 for the six month period ended December 31,
1997 and $46,000 for the six-month period ended December 31, 1996.
4 - Earnings per Share
Basic earnings per share were computed by dividing net earnings by the
weighted average number of shares of common stock outstanding during the year.
The diluted computation is performed 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 average number of common share and common share equivalents
entering into the calculation of basic and diluted earnings per share are as
follows:
Six months ended December 31,
1997 1996
Weighted average shares - Basic 1,553,088 1,545,088
Options 84,919 55,666
Warrants 0 0
--------- ---------
Weighted average shares - diluted 1,638,007 1,600,754
========= =========
Three months ended December 31,
1997 1996
Weighted average shares - Basic 1,553,088 1,545,088
Options 96,932 57,475
Warrants 0 0
--------- ---------
Weighted average shares - diluted 1,650,020 1,602,563
========= =========
5 - Pro Forma Information
On August 12, 1997, IMTEC acquired the Customark division of Markem
Crop. The following pro froma reflects operations had Customark been a part of
IMTEC since 7/1/96.
Six Months Ended Three Months Ended
December 31, December 31,
1997 1996 1997 1996
---- ---- ---- ----
Revenues $5,598,568 $5,218,281 $2,784,440 $2,621,347
Net Income 428,997 329,929 216,540 142,955
Earnings per Share $0.26 $0.21 $0.13 $0.09
The unaudited pro forma results are not necessarily indicative of the
actual results of operations that would have occurred had the acquisition
actually been made at the beginning of fiscal 1996.
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 Six Months Ended December 31, 1997
as compared to Three Months and Six Months Ended December 31, 1996
Revenues for the three months and six months ended December 31, 1997
increased approximately 32.8% and approximately 28.8%, respectively, over the
corresponding periods in 1996.
Revenues from Bar Code labels and printing supplies were $2,164,062 and
$4,024,923 for the three month and six month periods ended December 31, 1997
compared to $1,497,482 and $3,000,021, respectively, for the same periods last
year. Bar Code labels and printing supplies represented 77.7% and 74.5% of total
revenue for the three month and six month periods ended December 31, 1997
compared to 71.4% and 71.5%, respectively, for the same periods last year.
Revenues from the sales of Industrial Bar Code Equipment were $620,317
and $1,379,041 for the three and six month periods ended December 31, 1997
compared to $599,584 and $1,197,188 for the same periods in 1996. Industrial Bar
Code Equipment sales represented 22.3% and 25.5% of total revenue for the three
month and six month periods ended December 31, 1997 compared to 28.6% and 28.5%
respectively for the same periods last year. Management believes that the trend
in Industrial Bar Code Equipment sales will continue to move upward due to
expanded partnering and distribution relationships, new product offerings and
expanded use of technology.
Total backlog as of December 31, 1997 was $2,048,580, all of that is
shippable by June 30, 1997, compared to approximately $1,482,170 as of December
31, 1996.
Cost of sales for the three months and six months ended December 31,
1997 were 51.8% and 52.2% respectively, compared to 56.2% and 52.8% for the same
periods in 1996. The decrease from the prior year is primarily related to
product mix.
Selling, general and administrative expenses were $810,554 for the
quarter ended December 31, 1997 and $1,587,204 for the six months ended December
31, 1997, as compared to $585,840 and $1,253,169 respectively for the
corresponding periods ended December 31, 1996.
Development and engineering expenses for the three months and six
months ended December 31, 1997 were $156,229 (5.6% of sales) and $290,015 (5.4%
of sales) compared to were $158,274 (7.5% of sales) and $300,946 (7.2% 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 six months ended December 31, 1997
was $216,540 and $417,926, respectively, compared to $113,071 and $271,728,
respectively, for the same periods ended December 31, 1996. The major reason for
this increase is the increased margins on the increase in revenues
LIQUIDITY AND CAPITAL RESOURCES:
As of December 31, 1997, the Company's principal available sources of
liquidity were, respectively, from operations and a $1,000,000 bank line of
credit, of which $856,476 was available as of December 31, 1997, and a five year
term loan for $1,200,000, with a remaining balance of $1,031,940 at December 31,
1997. The purpose of the term loan was the acquisition of Customark, discussed
in the Company's 8-K filing on August 26, 1997.
Accounts receivable increased from $1,499,283 at June 30, 1997 to
$1,932,442 at December 31, 1997, a direct result of the increase in sales
revenues.
Inventories increased by $677,403, from $1,402,318 at June 30, 1997 to
$2,079,721 at December 31, 1997, as a result of increasing levels of business in
the sales of labels and printing supplies.
The Company's capital commitments for fiscal 1998 are expected to be at
the same level as fiscal 1997.
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 June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information." SFAS No. 130 establishes standards for reporting and
display of comprehensive income and its components (revenues, expenses, gains
and losses) in a full set of general-purpose financial statements. SFAS No. 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. Both
standards will be adopted by the Company during the first quarter of fiscal 1999
and are not expected to have a material effect on its financial position,
results of operations or financial statement disclosures.
PART II - OTHER INFORMATION
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. October 27, 1997 - Annual Meeting of Stockholders
B. Election of Directors - all nominees elected
C. Proposal to adopt the Company's 1997 Stock Option Plan
Results of vote; for, 916,198; against, 6,805; abstained,
2,622; unvoted, 525,914.
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
8-K, filed August 26, 1997; Items 2 and 7; Financial Statements
included in Item 7: Financial Statements, Pro Forma Financial
Statements and Exhibits:
(a) Financial Statements
Attached audited Statements of Income for years ended December 31, 1996 and 1995
and for the six-month period ended June 30, 1997
(b) Pro Forma Financial Information
(i) Unaudited pro forma condensed balance sheet of Registrant as of June 30,
1997, giving effect to the acquisition of Customark.
(ii) Unaudited pro forma consolidated statement of income for the year ended
June 30, 1997, giving effect to the acquisition of Customark.
(c) Exhibits
Inapplicable
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