UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 September 30, 1998.
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 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 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, 1998: 1,587,313
IMTEC, INC.
INDEX
Page #
Part I Financial Information
Condensed Balance Sheets -
September 30, 1998 and June 30, 1998 3 - 4
Condensed Statements of Operations -
Three Months Ended
September 30, 1998 and 1997 5
Condensed Statements of Cash Flows
Three Months Ended
September 30, 1998 and 1997 6
Notes to Condensed Financial Statements 7 - 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 11
Item 3. Quantitative and Qualitative
Disclosures about Market Risk 11
Part II Other Information
Item 2 Changes in Securities 12
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)
September 30, June 30,
1998 1998 .
ASSETS
Current Assets:
Cash and cash equivalents $ 16,772 $ 84,100
Accounts receivable:
less allowance for doubtful accounts:
September 30, 1998 - $207,000
June 30, 1998 - $198,000 1,751,125 2,259,107
Inventories 2,363,814 2,286,123
Prepaid expenses and other 92,099 60,725
Deferred income taxes 85,941 85,941
------------ -----------
Total Current Assets 4,309,751 4,775,996
------------ ------------
Property and equipment - net 1,795,705 1,587,914
Deposits 64,205 60,347
Computer software - net 87,371 97,469
Other intangibles - net 1,808,648 1,832,023
----------- -----------
$ 8,065,680 $ 8,353,749
=========== ===========
The accompanying notes are an integral part of these
condensed financial statements.
PART I - FINANCIAL INFORMATION
IMTEC, INC.
CONDENSED BALANCE SHEETS (CONTINUED)
(Unaudited)
September 30, June 30,
1998 1998 .
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable - bank $ 110,875 $ 0
Current installments of long term debt 235,567 235,567
Accounts payable 440,133 469,972
Income tax payable 90,379 33,323
Accrued liabilities
Salaries and wages 154,147 486,555
Commissions 54,280 68,375
Other 311,521 432,165
----------- -----------
Total Current Liabilities 1,396,902 1,725,957
Long term debt less current installments 497,925 575,118
Stockholders' equity:
Common stock - $.01 par value;
authorized 5,000,000 shares, issued and outstanding:
1,586,713 shares September 30, 1998
1,585,713 shares June 30, 1998 15,867 15,857
Additional paid-in capital 2,595,369 2,591,629
Retained Earnings 3,559,617 3,445,188
----------- -----------
Total Stockholders' Equity 6,170,853 6,052,674
----------- -----------
$ 8,065,680 $ 8,353,749
=========== ===========
The accompanying notes are an integral part of these
condensed financial statements.
IMTEC, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30,
1998 1997
---- ----
Net Sales $2,849,387 $2,619,525
Cost of Sales 1,658,054 1,378,508
----------- -----------
Gross Profit 1,191,333 1,241,017
Selling, general and
administrative expenses 862,898 776,655
Research and development
expenses 122,271 133,789
----------- -----------
Operating Income 206,164 330,573
Other Income (Expenses):
Miscellaneous income
and other expenses 825 10,724
Interest Expense (17,477) (7,825)
---------- ---------
Income Before
Income Taxes 189,512 333,472
Income Tax Expense 75,065 132,088
---------- ---------
Net Income $ 114,447 $ 201,384
========== ==========
Earnings per share - Basic $ 0.07 $ 0.13
========= ==========
Earnings per share - Diluted $ 0.07 $ 0.12
========= ==========
Shares for Basic Computation 1,585,735 1,553,088
Shares for Diluted Computation 1,665,419 1,624,773
The accompanying notes are an integral part of these
condensed financial statements.
IMTEC, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30,
1998 1997
---- ----
Cash flows from operating activities:
Net income $114,447 $201,384
Adjustment to reconcile net income to
net cash from operating activities:
Depreciation & amortization of property,
plant, equipment and other assets 143,999 164,714
Increase (decrease) in cash from:
Accounts receivable 504,106 (390,044)
Inventory (77,691) (412,483)
Marketable securities 409
Prepaid expenses and other assets (31,374) (45,231)
Accounts payable (29,839) 350,734
Income tax payable 57,056 (68,711)
Accrued liabilities (467,147) (59,031)
--------- ----------
Net cash from operating activities 213,557 (258,668)
Cash flows from investment activities:
Expenditures for property & equipment,
computer software and other
intangible assets (318,320) (115,231)
Acquisition of Customark 1,900,000
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of notes 110,875 99,922
Principal notes payable to bank 1,200,000
Principal payments on long term debt (77,193) (116,795)
Proceeds from issuance of stock 3,753
---------- ---------
Net cash from financing activities 37,435 1,183,127
--------- ---------
Net (decrease) in cash (67,328) (1,090,772)
Cash and cash equivalants at the beginning of period 84,100 1,352,562
---------- ---------
Cash and cash equivalants at the end of period $ 16,772 $ 262,199
========== =========
Supplemental Information Disclosures:
Interest paid 17,477 7,825
Income tax paid 18,009 200,800
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 three-month period ended September
30, 1998 are not necessarily indicative of the results to be expected for the
full year.
2 - Inventories
Inventories consist of:
September 30, June 30,
1998 1998
Finished Products $ 64,408 $ 158,907
Work in Process 374,958 190,122
Purchased Components 1,924,448 1,937,094
----------- -----------
$ 2,363,814 $ 2,286,123
=========== ===========
Inventory cost consisted of the cost of purchased components and
supplies, manufacturing labor and manufacturing overhead.
3 - Liability for Estimated Product Warranty
On September 30, 1998 and June 30, 1998, the Company had provided
$123,046 and $124,570 respectively, against future product warranties based on
its experience with customer claims. Warranty expenses charged to income
amounted to approximately $22,600 for the three month period ended September 30,
1998 and $22,615 for the three-month period ended September 30, 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 1998, 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 1998 and restated its
earnings per share for the first quarter of 1997. Previously reported income per
common share for the three months ended September 30, 1998 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 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,
1998 1997
Weighted average shares - basic 1,585,735 1,553,088
Dilutive effect of options 79,684 71,685
---------- ----------
Weighted average shares - diluted 1,665,419 1,624,773
========== ==========
5 - Pro forma Information
On August 12, 1997, IMTEC acquired the Customark division of Markem
Corp. The following pro forma reflects operations had Customark been a part of
IMTEC since July 1, 1997.
Period Ended September 30, 1998 September 30, 1997
- ------------------------------------------------------------------------------
Revenues $2,849,387 $2,814,129
Net Income 114,447 212,455
Diluted income per share $0.07 $0.13
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 1998.
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 Ended September 30, 1998
as compared to Three Months Ended September 30, 1997
Revenues for the three months ended September 30, 1998 increased
approximately 8.8% from the corresponding period in 1997.
Revenues from Bar Code labels and printing supplies were $2,088,463 for
the quarter ended September 30, 1998 compared to $1,860,862 for the same period
last year. Bar Code labels and printing supplies represented 73.3% of total
revenue for the three months ended September 30, 1998 compared to 71.0% for the
same period last year. The increase in Bar Code labels and printing supplies
sales in the three months ended September 30, 1998, when contrasted with the
same period in 1997, is primarily attributable to an increase in sales and
marketing efforts. The sales team almost doubled in size. Management believes
that the upward trend in the sales of Bar Code labels and printing supplies will
continue due to the sales and marketing efforts.
Revenues from the sales of Industrial Bar Code Equipment were $760,924
for the three months ended September 30, 1998 compared to $758,663 for the same
period in 1997. Industrial Bar Code Equipment sales represented 26.7% of total
revenue for the three months ended September 30, 1998 compared to 29.0% for the
same period last year.
Total backlog, for all products, as of September 30, 1998 was
approximately $3,304,946 the majority of which is scheduled to ship by June 30,
1999. Total backlog as of September 30, 1998 was $1,547,000.
Cost of sales for the three months ended September 30, 1998 were 58.2%,
up from 52.6% for the same period in 1997. This increase is directly related to
the product mix and the cost of setting up a new facility in the Pittsburgh
area.
Selling, general and administrative expenses increased 11.1% to
$862,898 for the quarter ended September 30, 1998 as compared to $776,655 for
the quarter ended September 30, 1997. The increase is primarly due to of the
growth in sales and marketing personnel as well as increased marketing activity.
This is consistent with management's focus on increasing sales.
Research and development expenses for the quarter ended September 30,
1998 were $122,271 (4.3% of sales) compared to $133,789 (5.1% of sales) for the
same period last year.
The Company's effective tax rate was approximately 40% for all periods
presented, and are based on the Company's estimated effective tax rate for the
full year.
Net income for the quarter ended September 30, 1998 was $114,447
compared to $201,384 for the quarter ended September 30, 1997. The major reasons
for this decrease are the increases in expenses as discussed above.
LIQUIDITY AND CAPITAL RESOURCES:
As of September 30, 1998, the Company's principal available sources of
liquidity were, respectively, from operations and a $1,000,000 bank line of
credit (of which $889,125 was available at September 30, 1998).
Accounts receivables decreased from $2,259,107 at June 30, 1998 to
$1,751,125 at September 30, 1998, a direct result of the decrease in sales
revenues from the fourth quarter of Fiscal 1998 ($3,921,961) to the first
quarter of Fiscal 1999 ($2,849,387).
Inventories increased from $2,286,123 at June 30, 1998 to $2,363,814 at
September 30, 1998.
The Company's capital commitments for fiscal 1999 are expected to be at
the same level as fiscal 1998.
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
SFAS No. 130 was adopted by the Company during the first quarter and it had
no effect upon the Companys financial position, results of operations or
financial statement disclosures as it does not have any elements of
comprehensive income. SFAS No. 131 will be adopted for the Companys fiscal 1999
annual financial statements. The Company is currently evaluating the effect that
the new standard will have on the disclosures in its annual financial
statements.
In June 1998, The Financial Accounting and Standards Board issued SFAS No.
133, Accounting for Derivatives Instruments and Hedging Activities. 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 recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. SFAS No. 133 is effective for all fiscal quarters of fiscal years
that begin after June 15, 1999. The Company does not anticipate the adoption of
this statement to have a material impact 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.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Companys outstanding long-term and short-term debt at September 30,
1998 bears interest at variable rates; therefore, the Companys results of
operations would be affected by interest rate changes to the extent of the notes
outstanding. Due to the short-term nature and insignificant amount of the
Companys notes payable and the decreasing amounts of the long-term debt, an
immediate 10 percent change in interest rates would not have a material effect
on the Companys results of operations over the next fiscal year.
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
A. October 26, 1998 - Annual Meeting of Stockholders
B. Election of Directors - all nominees elected
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
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/ Richard L. Kalich___________
Richard L. Kalich
President & Chief Executive Officer
BY:____/s/ George S. Norfleet III_________
George S. Norfleet III
Secretary / Treasurer