-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LFQQO1xwOIgYtTpINAc+UVMTMhe95sJERjOZMegqSMCuLk8tFzrjZYbqkW7K/Pp7 Kfnc54KRF1+lxvzGIRIcjA== /in/edgar/work/0000950116-00-002739/0000950116-00-002739.txt : 20001115 0000950116-00-002739.hdr.sgml : 20001115 ACCESSION NUMBER: 0000950116-00-002739 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARLTON TECHNOLOGIES INC CENTRAL INDEX KEY: 0000096988 STANDARD INDUSTRIAL CLASSIFICATION: [7389 ] IRS NUMBER: 221825970 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07708 FILM NUMBER: 766666 BUSINESS ADDRESS: STREET 1: 2828 CHARTER RD STE 101 CITY: PHILADELPHIA STATE: PA ZIP: 19154 BUSINESS PHONE: 2156766900 MAIL ADDRESS: STREET 1: 2828 CHARTER RD CITY: PHILADELPHIA STATE: PA ZIP: 19154 FORMER COMPANY: FORMER CONFORMED NAME: TELESCIENCES INC DATE OF NAME CHANGE: 19880201 10-Q 1 0001.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 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 1-7708 ------ MARLTON TECHNOLOGIES, INC. ----------------------------------------------- (Exact name of issuer as specified in its charter) New Jersey 22-1825970 - -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 2828 Charter Road, Suite 101 Philadelphia PA 19154 - -------------------------------------------------------------------------------- (Address of principal executive offices) City State Zip Issuer's telephone number (215) 676-6900 ------------- Former name, former address and former fiscal year, if changed since last report. Check whether the issuer (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 ---------------------- ------------------- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by court Yes No ---------------------- ------------------- APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares outstanding of each of the issuer's classes of common equity as of the last practicable date: 7,422,266 Transitional Small Business Disclosure Form (check one): Yes No X ----------------- ------------------ MARLTON TECHNOLOGIES, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands except share data)
September 30, December 31, ASSETS 2000 1999 -------- -------- Current: Cash and cash equivalents $ 1,029 $ 836 Accounts receivable, net of allowance of $1,642 and $410, respectively 21,141 16,232 Inventory 11,285 11,655 Prepaids and other current assets 1,874 2,320 Deferred income taxes 1,327 341 -------- -------- Total current assets 36,656 31,384 -------- -------- Investment in affiliates 1,835 2,058 Property and equipment, net of accumulated depreciation of $6,309 and $5,315, respectively 4,850 5,011 Rental assets, net of accumulated depreciation of $2,188 and $1,942, respectively 1,678 1,370 Goodwill, net of accumulated amortization of $3,148 and $2,523, respectively 19,634 20,258 Other assets, net of accumulated amortization of $1,178 and $1,088, respectively 517 121 -------- -------- Total assets $ 65,170 $ 60,202 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 112 $ 2,912 Accounts payable 8,540 7,080 Accrued expenses and other 8,424 9,328 -------- -------- Total current liabilities 17,076 19,320 -------- -------- Long-term debt, net of current portion 18,086 10,448 Other long-term liabilities 354 551 Deferred income taxes 159 159 -------- -------- Total liabilities 35,675 30,478 -------- -------- Commitments and contingencies Stockholders' equity: Preferred stock, $.10 par - shares authorized 10,000,000; no shares issued or outstanding Common stock, $.10 par - shares authorized 50,000,000; 7,427,266 and 7,331,765 issued, respectively 743 733 Additional paid-in capital 30,543 30,353 Accumulated (deficit) (1,679) (1,250) -------- -------- 29,607 29,836 Less cost of 5,000 treasury shares (112) (112) -------- -------- Total stockholders' equity 29,495 29,724 -------- -------- Total liabilities and stockholders' equity $ 65,170 $ 60,202 ======== ========
See notes to consolidated financial statements. 2 MARLTON TECHNOLOGIES, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands except per share data)
For the three months ended For the nine months ended September 30, September 30, 2000 1999 2000 1999 -------- -------- -------- -------- Net sales $ 21,482 $ 21,921 $ 71,324 $ 71,738 Cost of sales 17,417 16,744 55,270 56,250 -------- -------- -------- -------- Gross profit 4,065 5,177 16,054 15,488 -------- -------- -------- -------- Selling expenses 2,272 2,187 7,841 6,798 Administrative and general expenses 3,606 1,694 7,835 5,199 -------- -------- -------- -------- 5,878 3,881 15,676 11,997 -------- -------- -------- -------- Operating profit (loss) (1,813) 1,296 378 3,491 -------- -------- -------- -------- Interest income and other income 27 31 68 114 Interest (expense) (384) (309) (1,030) (836) (Loss) from investments in affiliates, net (71) (27) (67) (29) Write down of investment in affiliate -- (465) -- (465) -------- -------- -------- -------- (428) (770) (1,029) (1,216) -------- -------- -------- -------- Income (loss) before provision for income taxes (2,241) 526 (651) 2,275 Provision for (benefit from) income taxes (986) 210 (222) 909 -------- -------- -------- -------- Net income (loss) $ (1,255) $ 316 $ (429) $ 1,366 ======== ======== ======== ======== Income (loss) per common share: Basic $ (.17) $.04 $ (.06) $.19 Diluted $ (.17) $.04 $ (.06) $.18
See notes to consolidated financial statements. 3 MARLTON TECHNOLOGIES, INC. and SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED) (In thousands except share data)
Common Stock Additional Total Paid-in Accumulated Treasury Stockholders' Shares Amount Capital Deficit Stock Equity --------- ---------- ---------- ---------- ---------- ---------- Balance, December 31, 1999 7,331,765 $ 733 $ 30,353 $ (1,250) $ (112) $ 29,724 Issuance of shares for debt restructuring 37,210 4 96 -- -- 100 Issuance of shares under compensation arrangements 58,291 6 94 -- -- 100 Net loss for the nine months ended September 30, 2000 -- -- -- (429) -- (429) --------- ---------- ---------- ---------- ---------- ---------- Balance, September 30, 2000 7,427,266 $ 743 $ 30,543 $ (1,679) $ (112) $ 29,495 ========= ========== ========== ========== ========== ==========
See notes to consolidated financial statements. 4 MARLTON TECHNOLOGIES, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)
For the nine months ended September 30, 2000 1999 ------- ------- Cash flows from operating activities: Net income (loss) $ (429) $ 1,366 Adjustments to reconcile net income to cash used in operating activities: Depreciation and amortization 2,027 1,843 Decrease in deferred tax asset (986) 181 Equity in (income) loss of affiliates (2) 29 Write down of investment in affiliate -- 465 Other non cash item 100 -- Change in assets and liabilities: (Increase) decrease in accounts receivable, net (4,753) (976) (Increase) decrease in inventory 370 (1,997) (Increase) decrease in prepaid and other assets 492 131 Increase (decrease) in accounts payable, accrued expenses and other 554 (6,236) ------- ------- Net cash used in operating activities (2,627) (5,194) ------- ------- Cash flows from investing activities: Guaranteed payments to sellers (197) (201) Capital expenditures (1,390) (2,220) Cash paid for investment in affiliate -- (258) ------- ------- Net cash used in investing activities (1,587) (2,679) ------- ------- Cash flows from financing activities: Payments for loan origination fees (432) -- Net borrowings from revolving credit facility 4,839 5,365 Principal payments on long-term debt -- (1,634) Proceeds from exercised stock options -- 110 ------- ------- Net cash provided by financing activities 4,407 3,841 ------- ------- Increase (decrease) in cash and cash equivalents 193 (4,032) Cash and cash equivalents - beginning of period 836 4,620 ------- ------- Cash and cash equivalents - end of period $ 1,029 $ 588 ======= ======= Supplemental cash flow information: Cash paid for interest $ 673 $ 705 ======= ======= Cash paid for income taxes $ 787 $ 744 ======= ======= Non-cash financing activity: Issuance of common stock for revolving credit facility $ 100 -- ======= ======= Issuance of common stock in connection with acquisition -- $ 228 ======= =======
See notes to consolidated financial statements. 5 MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. SUMMARY OF ACCOUNTING POLICIES Basis of Presentation The consolidated financial statements included herein are unaudited and have been prepared in accordance with generally accepted accounting principles for interim financial reporting and Securities and Exchange Commission regulations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the financial statements reflect all adjustments (of a normal and recurring nature) which are necessary to present fairly the financial position, results of operations and cash flows for the interim periods. These financial statements should be read in conjunction with the Annual Report to Shareholders and Form 10-K for the year ended December 31, 1999. 2. PER SHARE DATA The following table sets forth the computation of basic and diluted net income per common share (in thousands except for per share data):
Three months ended Nine months ended September 30, September 30, 2000 1999 2000 1999 ---- ---- ---- ---- Net income (loss) $(1,255) $316 $(429) $1,366 ======== ==== ====== ====== Weighted average common shares outstanding used to compute basic net income per common share 7,380 7,282 7,367 7,231 Additional common shares to be issued assuming exercise of stock options, net of shares assumed reacquired -- 427 38 571 Total shares used to compute diluted net income (loss) per common share 7,380 7,709 7,405 7,802 ===== ===== ===== ===== Basic net income (loss) per share $ (.17) $.04 $ (.06) $.19 ======= ==== ======= ==== Diluted net income (loss) per share $ (.17) $.04 $ (.06) $.18 ======= ==== ======= ====
Options and warrants to purchase 1,779,000 and 266,000 shares of common stock were outstanding at September 30, 2000 and 1999, respectively, but were not included in the computation of diluted income per common share because the options' and warrants' exercise prices were greater than the average market price. 3. INVENTORY Inventory consists of the following (in thousands): September 30, 2000 December 31, 1999 ------------------ ----------------- Raw Materials $ 465 $ 482 Work In Process 6,407 7,612 Finished Goods 4,413 3,561 ------- ------- $11,285 $11,655 ======= ======= 4. INVESTMENT IN AFFILIATES During the third quarter of 1999, the Company recognized an impairment loss of approximately $465,000 related to its investment in Abex Europe, which went into receivership on October 15, 1999. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net Sales
Three months ended (in thousands) September 30, 2000 September 30, 1999 % Increase/ ------------------ ------------------ (Decrease) ----------- Trade show exhibits group $ 9,642 $ 8,252 16.8% Permanent and scenic displays group 11,840 13,669 (13.4) -------- -------- ------- Total net sales $ 21,482 $ 21,921 (2.0)% ======== ======== ======= Nine months ended (in thousands) September 30, 2000 September 30, 1999 % Increase/ ------------------ ------------------ (Decrease) ----------- Trade show exhibits group $ 44,111 $ 35,561 24.0% Permanent and scenic displays group 27,213 36,177 (24.8) --------- --------- ------ Total net sales $ 71,324 $ 71,738 ( 0.6)% ========= ========= ======
Total net sales decreased 2% in the third quarter of 2000 and were essentially unchanged in the first nine months of 2000 as compared with the same 1999 periods. This was the net result of higher sales of trade show exhibits (up 16.8% in the third quarter and 24% in the first nine months) offset by lower sales of permanent and scenic displays (down 13.4% in the third quarter and 24.8% in the first nine months). Higher trade show exhibit sales were principally attributable to sales to new clients secured near the end of 1999, resulting from the Company's continuing focus on client expansion. The third quarter decrease in sales of permanent and scenic displays was principally attributable to stopping production for a customer having financial difficulties, as discussed below. The decrease in permanent and scenic displays sales for the first nine month period was largely the result of lower sales for store fixtures during the first six months of 2000 and for scenic displays during the first nine months of 2000. The store fixtures decrease in the first six months of 2000 was primarily due to lower sales to large national retail customers experiencing slower new store growth. The decrease for scenic displays in the first nine months of 2000 was due to large projects in 1999 which were not replaced with similar size projects in 2000, resulting from a general slowdown in the industry, as well as the aborted production for the customer having financial difficulties, as discussed below. Operating Profit (Loss) An operating loss of $1.8 million was incurred in the third quarter of 2000 as compared with operating profit of $1.3 million in the same prior year period. The Company recorded a bad debt provision for $1.4 million and an inventory reserve of $.6 million related to two permanent and scenic displays customers. One of these customers, which the Company has successfully serviced for several years, disclosed in the third quarter that it is in violation of its bank debt covenants. Based on information currently available, management believes it is uncertain that the Company will receive payment for $1.2 million of accounts receivable related principally to permanent displays installed in the first half of 2000. The Company also incurred operating losses at its Orlando, Florida operation in the third quarter of 2000 associated with curtailed production for this customer. These Orlando operating losses are expected to continue into the fourth quarter of 2000 as the Company attempts to replace this lost sales and production volume. The Company is in dispute with another customer with respect to the quality of certain store fixtures and stopped doing business with this 7 customer. Although management intends to aggressively pursue collection of accounts receivable and recovery of inventory produced for purchase orders received from this customer, such collection and cost recovery is uncertain. Accordingly, a reserve of approximately $200,000 and $600,000 for the accounts receivable and inventory, respectively was recorded in the third quarter. The Company also incurred operating losses at its San Francisco, California operation in the third quarter 2000 due in large part to lower sales and production volume. Additional operating losses are expected for this operation in the fourth quarter 2000 as the Company discontinues production operations in San Francisco and consolidates it into other production facilities. The gross profit margin, as a percentage of net sales, decreased to 18.9% in the third quarter and increased to 22.5% in the first nine months of 2000 as compared with 23.6% and 21.6% in the respective prior year periods. The third quarter decrease was principally attributable to the $600,000 inventory write down discussed above, which reduced the gross profit percentage by 2.8%. The gross profit percentage increase for the first nine months of 2000 was the net result of several factors, including higher margins generated by the scenic displays business in the second quarter and higher gross profit margins generated by trade show exhibits sales in the first quarter, partially offset by the third quarter inventory write down. Selling expenses, as a percentage of net sales, increased to 10.6% in the third quarter and 11% in the first nine months of 2000 from 10% and 9.5% in the respective 1999 periods. These increases were due in part to higher tradeshow exhibit sales, which are subject to higher sales commissions and variable selling expenses. The Company also invested in additional sales personnel in 2000. Administrative and general expenses increased by $1.9 million in the third quarter and by $2.6 million in the first nine months of 2000 as compared with the corresponding periods of 1999. These increases were attributable to several factors, including the $1.4 million third quarter bad debt provision, higher depreciation expense related to investments in computer systems and office facilities, management recruiting expenses and relocation costs to consolidate the Company's store fixtures business during the first half of 2000. Other Income (Expense) Interest expense increased to $0.4 million and $1.0 million from $0.3 million and $0.8 million in the third quarter and first nine months of 2000 and 1999, respectively. These increases were due in large part to higher borrowings and interest rates on the Company's revolving credit facility to finance working capital requirements resulting from slower billing and collections of accounts receivable. Income Taxes The benefit for income taxes, as a percentage of the pre-tax losses in 2000, was 44% in the third quarter and 34% in the first nine months of 2000. The 1999 rate of 40% reflects a benefit from the utilization of business tax credits. The difference between statutory income tax rates and these effective tax rates is principally attributable to non-deductible goodwill amortization. Net Income A net loss of $1.3 million ($.17 per fully diluted share) and $0.4 million ($.06 per fully diluted share) was incurred in the third quarter and first nine months of 2000 as compared with net income of $0.3 million ($.05 per fully diluted share) and $1.4 million ($.18 per fully diluted share) in the respective prior year periods. The losses incurred in 2000 were the result of several factors, including the third quarter bad debt and inventory provisions, higher administrative and general expenses and higher interest expense. Backlog The Company's backlog of orders decreased to approximately $22 million at September 30, 2000 from approximately $24 million at September 30, 1999. 8 LIQUIDITY AND CAPITAL RESOURCES The Company's working capital increased $7.5 million during the first nine months of 2000 to $19.6 million at September 30, 2000 from $12.1 million at December 31, 1999. This increase was principally attributable to an $4.9 million increase in accounts receivable and to a $2.8 million reduction in the current portion of long-term debt. The accounts receivable increase was due to a higher balance for the Company's store fixtures largely related to major new clients and to a slower billing and collection process experienced by the Company's trade show exhibits operations. Billing and collection delays were attributable to several factors, including continuing difficulties associated with the deployment of a new computer system described below. Management believes that these difficulties will continue for the remainder of 2000. The decrease in the current portion of long-term debt was the result of the debt agreement restructuring described below. On January 21, 2000, the Company restructured its bank debt with an amended revolving credit facility, providing for borrowing capacity up to $30 million. This new facility, which matures on January 21, 2005, was used to refinance a term loan and can be used to finance capital expenditures, permitted acquisitions and other working capital requirements. The new facility is collateralized by all of the Company's assets and bears interest at rates based on the LIBOR, adjusted for applicable spreads ranging from 1.25% to 2.5%. The Company is subject to an annual commitment fee of 1/4% on the average unused portion of the revolving credit facility. Loan origination fees totaling $532,000 comprised of $432,000 of cash payments and issuance of 37,210 shares of the Company's common stock are included under other assets and will be amortized over five years. There were borrowings of $18 million under this facility at September 30, 2000. This new facility includes certain financial covenants requiring a minimum net worth and maintenance of certain financial ratios, and restricts the Company's ability to pay dividends. The Company was not in compliance with the financial covenants of certain of these financial ratios at September 30, 2000 as a result of the bad debt provision and inventory write down recorded in the third quarter. The Company obtained a waiver from the bank expiring on December 29, 2000 with respect to non-compliance with these covenants. Management is in ongoing communications with the bank and anticipates that it will require an extended waiver or amendment to these covenants prior to December 29, 2000 to avoid non-compliance at year end. OUTLOOK The Company expects continued sales growth from trade show exhibits and lower sales from permanent and scenic displays for the last three months of 2000. Management believes that the trade show exhibit client base of Fortune 1000 companies will continue to tightly manage their marketing budgets, which may impact the Company's trade show exhibit profit margins. The Company has upgraded several facilities and continues to pursue operating efficiency improvements to mitigate the impact of margin pressure from its client base. The Company converted its management information system at the beginning of 1999 and incurred inefficiencies as a result of the transition, which have continued into 2000. Although management is taking decisive action to address this situation, inefficiencies are expected to continue into the fourth quarter of 2000. Further investments are planned to upgrade the Company's management information systems. Management plans ongoing investment in human resources, particularly for new sales executives and support staff to create long-term growth opportunities, and believes that these investments will provide future opportunities for continued growth and business expansion. FORWARD-LOOKING STATEMENTS This report contains forward-looking statements. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, there are certain important factors that could cause the Company's actual results to differ materially from those included in such forward-looking statements. Some of the important factors which could cause actual results to differ materially from those projected include, but are not limited to: the Company's ability to continue to identify and complete strategic acquisitions to 9 enter new markets and expand existing business; continued availability of financing to provide additional sources of funding for working capital requirements, future acquisitions, capital expenditure requirements and foreign investments; the effects of competition on products and pricing, growth and acceptance of new product lines through the company's sales and marketing programs; changes in material prices from suppliers; changes in customers' financial condition; ability to attract and retain competent employees; ability to add and retain customers; changes in sales mix; ability to integrate and upgrade technology; uncertainties regarding accidents or litigation which may arise in the ordinary course of business; and the effects of, and changes in the economy, monetary and fiscal policies, laws and regulations, inflation and monetary fluctuations as well as fluctuations in interest rates, both on a national and international basis. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's revolving credit facility bears a floating rate of interest, based on LIBOR rates, plus an applicable spread. The Company had borrowings of $18 million from its $30 million revolving credit facility at September 30, 2000. Fluctuations in foreign currency exchange rates do not significantly affect the Company's financial position and results of operations. PART II - OTHER INFORMATION Responses to Items one through six are omitted since these items are either inapplicable or the response thereto would be negative. SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MARLTON TECHNOLOGIES, INC. /s/ Robert B. Ginsburg - ---------------------- Robert B. Ginsburg President and Chief Executive Officer /s/ Stephen P. Rolf - ------------------- Stephen P. Rolf Chief Financial Officer Dated November 13, 2000 10 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF MARLTON TECHNOLOGIES, INC. 3-MOS SEP-30-2000 SEP-30-2000 1,029 0 22,783 (1,642) 11,285 36,656 11,159 (6,309) 65,170 17,076 0 0 0 743 28,752 65,170 21,482 21,482 17,417 17,417 4,322 1,600 384 (2,241) (986) (1,255) 0 0 0 (1,255) (0.17) (0.17)
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