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, 1998.
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 May 11, 1998, 1,585,713
IMTEC, INC.
INDEX
Page #
Part I Financial Information
Condensed Balance Sheets -
March 31, 1998 and June 30, 1997 3 - 4
Condensed Statements of Income -
Three Months and Nine Months Ended
March 31, 1998 and 1997 5
Condensed Statements of Cash Flows
Three Months and Nine Months Ended
March 31, 1998 and 1997 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 12
Item 6 Exhibits and Reports on Form 8-K 12
Signatures 13
PART I - FINANCIAL INFORMATION
IMTEC, INC.
CONDENSED BALANCE SHEETS (Unaudited)
March 31, June 30,
1998 1997 .
ASSETS
Current Assets:
Cash $ 105,878 $ 1,352,562
Marketable Securities 52,000 92,999
Accounts receivable
Trade, less allowance for doubtful accounts:
March 31, 1998 - $200,000
June 30, 1997 - $175,000 1,805,437 1,499,283
Inventories 2,265,556 1,402,318
Prepaid expenses and deferred charges 95,556 45,423
Deferred income tax 159,508 159,508
---------- -----------
Total Current Assets 4,483,935 4,552,093
--------- ----------
Plant and equipment - net 1,537,869 1,234,488
Other assets:
Deposits 54,897 48,991
Computer software - net 79,776 94,759
Goodwill - net 1,624,561 -
Other intangibles - net 229,085 222,032
---------- -----------
$ 8,010,123 $ 6,152,363
========= =========
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,
1998 1997 .
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Current installments of long term debt $ 185,051 $ -
Accounts payable 398,005 324,651
Income tax payable 301,647 223,935
Accrued liabilities
Salaries and wages 100,604 191,502
Commissions 189,306 92,229
Other 324,974 351,275
---------- ---------
Total Current Liabilities 1,499,587 1,186,592
--------- ---------
Long term debt less current installments 793,071 -
---------- ---------------
Stockholders' equity:
Common stock - $.01 par value;
authorized 5,000,000 shares, issued and outstanding:
1,585,713 shares March 31, 1998
1,553,088 shares June 30, 1997 15,857 15,531
Additional paid-in capital 2,591,629 2,489,674
Retained earnings 3,109,979 2,460,566
--------- ----------
Total Stockholders' Equity 5,717,465 4,965,771
--------- ----------
$ 8,010,123 $ 6,152,363
======== ========
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,
1998 1997 1998 1997
---- ---- ---- ----
Net sales $8,588,595 $6,421,867 $ 3,184,630 $ 2,224,656
Cost of sales 4,528,000 3,480,482 1,707,777 1,263,093
----------- ----------- ----------- -----------
Gross Profit 4,060,595 2,941,385 1,476,853 961,563
Selling, general and
administrative expenses 2,520,861 1,890,315 929,142 641,636
Research and development
expenses 439,561 445,311 149,548 144,361
---------- ---------- ---------- ----------
Operating profit 1,100,173 605,759 398,163 175,566
Other Income (Expense)
Other income 31,936 25,066 6,953 6,425
Interest expense (56,807) - (21,917) -
----------- ----------- ----------- ----------
Income before income taxes 1,075,302 630,825 383,199 181,991
Income tax expense 425,886 249,870 151,715 72,752
---------- --------- --------- --------
Net income $ 649,416 $ 380,955 $ 231,484 $ 109,239
======= ======= ======= =======
Earnings per share - Basic $ 0.42 $ 0.27 $ 0.15 $ 0.07
======= ======= ======= =======
Earnings per share - Diluted $ 0.40 $ 0.24 $ 0.14 $ 0.07
====== ====== ======= ======
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,
1998 1997 1998 1997
---- ---- ---- ----
Cash flows from operating activities:
Net income $ 649,416 $ 380,955 $ 231,484 $109,239
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation & amortization 402,257 466,266 102,120 155,423
Increase ( decrease) in cash from:
Accounts receivable (312,060) (315,009) (31,166) (395,514)
Income tax refundable - 87,086 - -
Marketable securities 40,999 - 187 -
Inventory (863,238) (73,782) (185,835) 17,530
Prepaid expenses and other assets (50,133) 171,651 (13,942) 20,441
Accounts payable 73,354 (230,954) (53,099) 47,039
Income tax payable 77,712 194,155 4,340 53,052
Accrued liabilities (23,122) 15,221 76,076 2,899
---------- --------- --------- ---------
Net cash provided by (used in)
operating activities (4,815) 695,589 130,165 10,109
Cash flows from investment activities:
Expenditures for property & equipment,
computer software and other
intangible assets (2,322,269) (655,550) (121,213) (84,401)
----------- ---------- ---------- ----------
Cash flows from financing activities:
Net borrowing under line of credit - - (143,524) -
Proceeds from long term debt 1,200,000 - - -
Principal payments on long term debt (221,878) - (53,818) -
Proceeds from issuance of stock 102,281 20,844 102,278 20,844
-------- --------- -------- ---------
Net cash provided by (used in) finance
activities 1,080,400 20,844 (95,061) 20,844
--------- --------- ---------- ---------
Net increase (decrease) in cash (1,246,684) 60,883 (86,109) (53,448)
Cash at the beginning of period 1,352,562 806,633 191,987 920,964
--------- --------- --------- ---------
Cash at the end of period $ 105,878 $ 867,516 $ 105,878 $ 867,516
======= ======= ======= =======
Supplemental Information Disclosures:
Interest paid $ 56,807 - $ 21,917 -
Income taxes paid $ 548,175 $ 52,212 $ 147,375 $ 19,700
======= ======= ======= =======
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,
1998 may not necessarily be indicative of the results to be expected for the
full year.
2 - Inventories
Inventories consist of:
March 31, June 30,
1998 1997
Finished Products $ 89,453 $ 78,263
Work in Process 273,623 145,391
Purchased Components 1,902,480 1,178,664
----------- -----------
$ 2,265,556 $ 1,402,318
=========== ===========
3 - Liability for Estimated Product Warranty
On March 31, 1998 and June 30, 1997, the Company had provided
approximately $118,000 and $149,000 respectively, against future product
warranties based on its experience with customer claims. Warranty expenses
amounted to approximately $58,000 for the nine month period ended March 31, 1998
and $62,000 for the nine month period ended March 31, 1997.
4 - Earnings per Common Share
In February 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 128 "Earnings per Share," which establishes standards for
computing and presenting earnings per share and applies to entities with
publicly held common stock or potential common stock. Prior to 1997, the Company
computed income per common share using the methods outlined in Accounting
Principles Board ("APB") Opinion No. 15, "Earnings per Share," and its
interpretations. The Company adopted SFAS No. 128 in 1997 and restated its
earnings per share for the first quarter of 1997. Previously reported income per
common share for the three months and nine months ended March 31, 1997 did not
differ from that computed using SFAS 128.
Basic earnings per share was computed by dividing net earnings by the
weighted average number of shares of common stock outstanding during the year.
Dilutive earnings per share reflect 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 reconcilatrion of weighted average shares used for the basic
calculation and that used for the diluted calculation was as follows:
Nine months ended March 31,
1998 1997
Weighted average shares - basic 1,560,998 1,546,427
Dilutive effect of options 82,128 55,989
---------- ----------
Weighted average shares - diluted 1,643,126 1,602,416
========== ==========
Three months ended March 31,
1998 1997
Weighted average shares - basic 1,577,171 1,549,166
Dilutive effect of options 75,456 56,634
---------- ----------
Weighted average shares - diluted 1,652,627 1,605,800
========== ==========
5 - Pro Forma Information
On August 12, 1997, IMTEC acquired the Customark division of Markem
Crop. The following pro froma information reflects operations had Customark been
a part of IMTEC since July 1, 1996.
Nine Months Ended Three Months Ended
March 31, March 31,
1998 1997 1998 1997
---- ---- ---- ----
Revenues $8,783,199 $7,920,727 $3,184,630 $2,702,444
Net Income $660,487 $533,643 $231,484 $158,942
Diluted Earnings per Share $0.40 $0.33 $0.14 $0.10
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 1997.
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, 1998
as compared to Three Months and Nine Months Ended March 31, 1997
Revenues for the three months and nine months ended March 31, 1998
increased approximately 43.2% and 33.7% respectively over the corresponding
periods in 1997.
Revenues from labels and printing supplies were $2,278,074 and
$6,302,998 for the three month and nine month periods ended March 31, 1998
compared to $1,637,863 and $4,637,884 respectively for the same periods last
year. Labels and printing supplies represented 71.5% and 73.4% of total revenue
for the three month and nine month periods ended March 31, 1998 compared to
73.6% and 72.2% 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, the sales force and production capacity, as well
as the the above mentioned acquistion which represents approximately $501,000
and $1,252,000 of the increase for the respective periods.
Revenues from the sales of Industrial Equipment were $906,556 and
$2,285,597 for the three and nine month periods ended March 31, 1998 compared to
$586,793 and $1,783,983 for the same periods in 1997. Industrial Equipment sales
represented 28.5% and 26.6% of total revenue for the three month and nine month
periods ended March 31, 1998 compared to 26.4% and 27.8% respectively for the
same periods last year. Management believes that this trend in Industrial
Equipment sales will continue for the proximate future due to new products and
an increase in the number of resellers of the product line and the geographic
coverage. Equipment backlog was $620,000 at March 31, 1998 compared to $266,000
at March 31, 1997.
Total backlog, for all products, as of March 31, 1998 was approximately
$2,414,000,, of which approximately $1,800,000 is shipable by June 30, 1998,
compared to $1,354,000 as of March 31, 1997, about half of which was shipable by
June 30, 1997.
Cost of sales for the three months and nine months ended March 31, 1998
were 53.6% and 52.7% respectively, compared to 56.8% and 54.2% for the same
periods in 1997. The decrease in the cost of goods is related to the spread of
the overhead over a larger sales base and the mix of product.
Selling, general and administrative expenses were approximately
$929,000 for the three months ended March 31, 1998 and approximately $2,521,000
for the nine months ended March 31, 1998, as compared to approximately $642,000
and approximately $1,890,000, respectively for the corresponding periods ended
March 31, 1997. The increase for the 1998 periods is primarily attributed to an
increase in marketing & sales activity and the addition of sales staff from the
above mentioned acquistion.
Research and development expenses for the three months and nine months
ended March 31, 1998 were approximately $150,000 (4.7% of sales) and
approximately $440,000 (5.2% of sales) compared to approximately $144,000 (6.5%
of sales) and approximately $445,000 (6.9% 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, 1998
was $231,484 and $649,416, respectively, compared to $109,239 and $380,955,
respectively, for the same periods ended March 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES:
As of March 31, 1998, the Company's principal available sources of
liquidity were, respectively, operations, a $1,000,000 bank line of credit, all
of which was available as of March 31, 1998 and a five year term loan for
$1,200,000, with a remaining balance of $978,122 at March 31, 1998. 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 by $306,154, from $1,499,283 at June 30,
1997 to $1,805,437 at March 31, 1998, a direct result of the increase in sales
revenues
Inventories increased by $863,238, from $1,402,318 at June 30, 1997 to
$2,265,556 at March 31, 1998, 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 or
results of operations.
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 of Matters to a Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits on Form 8-K
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
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.
May 14, 1998
BY:_______/s/ Richard L. Kalich___________
Richard L. Kalich
President & Chief Executive Officer
BY:______/s/ George S. Norfleet III______
George S. Norfleet III
Secretary / Treasurer