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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 JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ____________________
Commission File Number 0-19453
HOLOPAK TECHNOLOGIES, INC.
Exact name of registrant as specified in its charter
Delaware 51-0323272
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9 COTTERS LANE, EAST BRUNSWICK, NEW JERSEY 08816
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (908) 238-2883
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 such 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. YES X NO
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT 7/31/96
----- ----------------------
Common Stock, $ .01 Par Value 2,796,403
Class A Common Stock, $ .01 Par Value 753,086
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HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
PAGE NUMBER
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PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1996
(Unaudited) and March 31, 1996 1
Consolidated Statements of Operations (Unaudited) for the Three
Months June 30, 1996 and 1995 2
Consolidated Statements of Cash Flows (Unaudited) for the Three
Months Ended June 30, 1996 and 1995 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II: OTHER INFORMATION 9
SIGNATURES 10
EXHIBIT 11
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HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, MARCH 31,
1996 1996
UNAUDITED
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents........................................................... $ 945,328 $ 1,999,609
Accounts Receivable, less allowance
for doubtful accounts of $42,000 and $81,000...................................... 7,966,070 6,582,515
Inventories ....................................................................... 8,297,904 8,149,598
Prepaid Expenses.................................................................... 472,799 411,748
Due From Related Parties............................................................ 46,789 20,000
Prepaid Income Taxes ............................................................... 1,241,481 1,200,162
Deferred Income Taxes .............................................................. 307,468 307,468
Other Current Assets ............................................................... 16,081 16,470
------------ ------------
TOTAL CURRENT ASSETS................................................................... 19,293,920 18,687,570
Property and Equipment, Net ........................................................... 10,569,093 10,638,555
Excess of Cost over Fair Value of Assets Acquired, less
accumulated amortization of $1,411,671 as of June, 1996 and $1,361,930 as of
March, 1996.......................................................................... 6,949,144 6,998,885
Other Assets........................................................................... 149,088 149,088
------------ ------------
TOTAL ASSETS.......................................................................... $ 36,961,245 $ 36,474,098
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Bank Borrowings ................................................................... $ 400,000 $ -
Current Maturities of Long- Term Debt ............................................. 1,752,500 1,752,500
Accounts Payable and Accrued Liabilities............................................ 3,993,840 3,642,661
------------ ------------
TOTAL CURRENT LIABILITIES.............................................................. 6,146,340 5,395,161
Long-Term Debt ....................................................................... 2,394,375 2,832,500
Deferred Income Taxes ................................................................ 1,689,092 1,740,128
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TOTAL LIABILITIES...................................................................... 10,229,807 9,967,789
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Commitments and Contingencies ......................................................... - -
STOCKHOLDERS' EQUITY
Preferred Stock: $.01 par value: 10,000,000 shares authorized; none issued......... - -
Common Stock; $.01 par value; 10,000,000 shares authorized; 2,796,403 shares issued 27,964 27,964
Class A Common Stock; $.01 par value: 2,000,000 shares authorized; 753,086 shares
convertible to Common Stock at any time at the stockholder's option............. 7,531 7,531
Class B Common Stock, $.01 par value; 700,000 shares authorized; none issued........ - -
Additional paid-in capital......................................................... 22,228,094 22,228,094
Retained Earning................................................................... 6,173,456 5,926,661
Cumulative Translation Adjustment.................................................. (434,122) (412,456)
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28,002,923 27,777,794
Less: Common Stock (201,800 shares) Held In the Treasury, at cost ................ (1,271,485) (1,271,485)
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Total Stockholders' Equity............................................................. 26,731,438 26,506,309
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................................. $ 36,961,245 $ 36,474,098
============ ============
See notes to consolidated financial statements.
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HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
JUNE 30,
1996 1995
(UNAUDITED) (UNAUDITED)
------------ ------------
NET REVENUES................................................... $11,864,154 $12,054,009
Cost of Sales.................................................. 9,557,984 9,474,131
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Gross Profit................................................... 2,306,170 2,579,878
Selling, General and Administrative Expenses................... 1,972,807 1,999,137
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Operating Income .............................................. 333,363 580,741
Interest Income................................................ 22,153 39,623
Interest Expense............................................... 76,791 142,743
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INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES.......... 278,725 477,621
Provision for Income Taxes ................................... 31,930 142,774
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NET INCOME .................................................... $ 246,795 $ 334,847
============ ============
EARNINGS PER COMMON SHARE AND COMMON
SHARE EQUIVALENT
NET INCOME ................................................ $ 0.07 $ 0.10
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND COMMON SHARE EQUIVALENTS OUTSTANDING................... 3,372,732 3,517,989
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See notes to consolidated financial statements.
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HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
JUNE 30,
1996 1995
(UNAUDITED) (UNAUDITED)
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OPERATING ACTIVITIES
NET INCOME ................................................................ $ 246,795 $ 334,847
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation ......................................................... 629,193 603,966
Amortization.......................................................... 49,741 64,077
(Increase) in accounts receivable..................................... (1,390,516) (787,312)
(Increase) in inventories............................................. (155,898) (550,939)
(Increase) in prepaid expenses....................................... (61,399) (37,579)
Decrease (Increase) in due from related parties...................... (26,789) 1,979
Decrease (Increase) in prepaid income taxes........................... (41,317) 65,929
Decrease (Increase) in other current assets........................... 389 (24,434)
(Increase) in other assets............................................ - (1,705)
Increase in accounts payable and accrued liabilities.................. 355,018 85,806
(Decrease) in deferred income taxes................................... (49,628) (53,594)
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NET CASH (USED) IN OPERATING ACTIVITIES............................ (444,411) (298,959)
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures................................................... (570,082) (278,033)
Proceeds from discontinued operations.................................. - 499,537
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NET CASH PROVIDED (USED) PROVIDED BY INVESTING ACTIVITIES.......... (570,082) 221,504
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CASH FLOW FROM FINANCING ACTIVITIES
Net (decrease) increase from short-term borrowings..................... 400,000 (522,208)
Repayment of long-term borrowings...................................... (438,125) (438,125)
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NET CASH (USED) IN FINANCING ACTIVITIES............................ (38,125) (960,333)
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Effect of exchange rate changes on cash and cash equivalents............... (1,663) (21,213)
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Net (decrease) in Cash and Cash Equivalents............................... (1,054,281) (1,059,001)
Cash and Cash Equivalents, Beginning of Period............................. 1,999,609 2,300,336
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CASH AND CASH EQUIVALENTS, END OF PERIOD................................... $ 945,328 $ 1,241,335
=========== ============
See notes to consolidated financial statements.
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HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been
prepared by HoloPak Technologies, Inc. ("HoloPak" or the "Company")
pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the three
months ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the year ending March 31, 1997. The
Company's financial statements do not include certain information and
footnotes required by generally accepted accounting principles and
accordingly, should be read in conjunction with the financial
statements and the notes thereto included in HoloPak's Annual Report on
Form 10-K for the year ended March 31, 1996.
2. INVENTORIES
The components of inventories were as follows:
JUNE 30, 1996 MARCH 31, 1996
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Finished Goods $3,995,000 $3,765,000
Work in Process 959,000 1,006,000
Raw Materials 3,344,000 3,379,000
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TOTAL $8,298,000 $8,150,000
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3. RELATED PARTY TRANSACTIONS
In June 1996, the Company loaned $27,000 to an officer of the Company
as part of his employment agreement to purchase shares of the Companys
Stock on the open market. The loan bears interest at 5%. The
principal is to be repaid in five years.
4. NOTE PAYABLE & LONG-TERM DEBT
The Company has available an unsecured revolving line of credit in the
amount of $4,000,000 to be used for general corporate purposes.
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The facility bears interest at LIBOR plus 100 basis points which was
approximately 6% at June 30, 1996. At June 30, 1996, there was
$400,000 outstanding under this line of credit. The Company also owes
$2,025,000 under a five year term loan. This term loan requires
quarterly payments of $135,000, which began on June 17, 1995 and also
bears interest at three-month LIBOR plus 100 basis points. Final
maturity will be on March 17, 2000.
The Company also has outstanding $2,121,875 in long term debt incurred
to fund the acquisition of Alubec. This debt bears interest at a
fixed rate of 5.9%. Principal payments are $303,125 per quarter and
will mature on March 31, 1998.
Annual maturities of long-term debt are as follows:
FOR THE YEAR ENDED
JUNE 30, PAYMENTS
-------- ----------
1997 1,752,500
1998 1,449,375
1999 540,000
2000 405,000
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TOTAL $4,146,875
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5. COMMITMENTS & CONTINGENCIES
As a result of the discontinuance of the operations of Jaeger Graphic
Technologies ("JGT"), on October 13, 1995, Bollore Technologies S.A.
filed suit in the Commercial Court of Paris against JGT and the
Company. The suit claims noncompliance by the Company and JGT with a
supply agreement and seeks damages in the amount of approximately 5.76
million French francs (approximately $1.3 million as of June 30, 1996).
The Company is defending this matter vigorously. At this time
management is unable or predict the outcome of this matter or the range
of loss, if any, which may result and therefore no such amount has been
provided for as of June 30, 1996.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THE THREE MONTHS ENDED
JUNE 30, 1995
GENERAL:
The cost of raw materials decreased during the three month period ended June
30, 1996, from the unusually high costs that adversely affected fiscal 1996.
However, the quality of certain key raw materials available to the Company has
declined, forcing the Company to undertake costly additional processing steps
to assure product quality. Accordingly, it is the belief of management that
gross margins will remain low for the foreseeable future.
On August 5, 1996, the Company announced that it would be taking a
restructuring charge in the second quarter amounting to approximately $210,000
to reflect work force reductions. Management sees this as the first of a
number of steps necessary to rebuild margins, which will include capital
investment in quality improvements and upgrading the skill levels of the
Company's workforce.
NET REVENUES:
During the three months ended June 30, 1996, revenues were $11.9 million,
compared to $12.1 million for the same period last year, a decrease of 1.6%.
The decrease is attributable to weak sales of hot-stamping foils, particularly
in metallic graphics foils. For the period, foil revenues declined from $7.2
to $6.3 million. Slow weaker demand in a variety of graphics and packaging
businesses caused the decline.
The decrease in foil revenues was partially offset by increases in holography
and paper revenues. Holography revenues increased to $1.8 million from $1.5
million in the year earlier period, an increase of 20%. The increase is
attributable to strong sales of security products. Paper revenues increased to
$3.8 million from $3.3 million, an increase of 15%. The increase resulted from
increased demand for packaging and trading cards.
Selling prices for the Company's products were unchanged during the quarter.
COST OF SALES AND GROSS PROFIT:
Cost of goods sold increased by $84,000 to $9.6 million. The increase from the
first quarter of last year is attributable to higher raw material prices and
poorer production yield in the manufacture of hot-stamping foil.
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Gross profit declined to $2.3 million from $2.6 million in the year earlier
period. Gross margin was 19.4%, compared to 21.4% in the first quarter of last
year. The decrease in margin was caused by the production problems mentioned
above and lower overhead absorption on reduced production.
The poorer production yield was caused by a quality problem in one of the key
raw materials for the manufacture of hot-stamping foil. This quality problem
necessitated an extra processing step in foil manufacture which increased, both
production waste and labor costs. Management estimates that this problem cost
the Company $350,000 in gross margin for the quarter.
The quality problem with this raw material has not yet been solved. The
Company is directing all of its research efforts to finding an acceptable and
cost-effective solution.
SELLING GENERAL AND ADMINISTRATIVE EXPENSES:
Selling, general and administrative expenses declined slightly from year
earlier levels, reflecting lower administrative expenses.
OPERATING RESULTS:
Operating profit for the quarter was $333,000, compared to $581,000 one year
ago. The decrease was attributable to the falloff in sales and gross profits.
INTEREST EXPENSE (NET)
Net interest expense for the quarter was $55,000, compared to $103,000 in the
first quarter last year. The decrease was attributable to lower debt levels
prevailing during the first quarter offset by lower average invested cash
balances.
NET INCOME:
Net income was $247,000, compared to $335,000 in the first quarter last year.
The cause of the decreased earnings was the decrease in operating profits.
INCOME TAXES:
The effective tax rate for the three months period was 11.5%, compared to 29.9%
one year ago. The decline is attributable to a higher percentage of the
Company's earnings deriving from Canadian operations, a tax loss benefit in the
United States, and the reversal of a certain timing differences under the
effects of FASB 109.
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FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES:
As of June 30, 1996, the Company had working capital of $13.1 million, compared
to $13.3 million at March 31, 1996. The decrease in working capital resulted
from two offsetting factors; first, an increase in receivables of $1.4 million,
which resulted from extended terms granted to one major customer and higher
sales to that customer, which was offset by increased payables, and an increase
of $400,000 in the Company's short term credit line.
The Company has available a general purpose credit line of $4.0 million,
against which $400,000 had been drawn as of June 30, 1996.
During the quarter, the Company made $570,000 in capital expenditures. The
primary expenditure was $200,000 for a thermal oxidizer needed to produce foil
in Canada.
STOCKHOLDER'S EQUITY:
Stockholders equity increased by $225,000. The increase was comprised of net
income less a slight increase in the cumulative translation adjustment.
DISCONTINUED OPERATIONS:
All of the operations of Jaeger Graphic Technology, S.A. have either been
closed or sold. However, as a result of this discontinuance, on October 13,
1995, Bollore Technologies S.A. filed suit in the Commercial Court of Paris
against JGT and the Company. The suit claims noncompliance by the Company and
JGT with a supply agreement and seeks damages in the amount of approximately
5.76 million French francs (approximately $1.3 million as of June 30, 1996).
The Company is defending this matter vigorously. At this time management is
unable to predict the outcome of this matter or the range of loss, if any,
which might result. Therefore, no such amount has been provided for in the
financial statements.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Change in Securities None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to Vote of Security Holders None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 10.1 Note and Pledge Agreement between
the Company and R. E. Coghan, dated 6/26/96
Exhibit 11 Computation of Earnings Per Share
b. Report on Form 8-K None
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this to be signed on its behalf by the undersigned
thereunto duly authorized.
HOLOPAK TECHNOLOGIES, INC.
/s/ ROBERT E. COGHAN Dated: August 9, 1996
-----------------------------
Robert E. Coghan,
Chief Executive Officer
/s/ DAVID W. JAFFIN Dated: August 9, 1996
-----------------------------
David W. Jaffin,
Chief Financial Officer
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EXHIBIT INDEX
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Exhibit
No. Description
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Exhibit 10.1 Note and Pledge Agreement between
the Company and R. E. Coghan, dated 6/26/96
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule