-----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, QaL3Cm0r8P5jQtDmz2XAI6bOlYdn9Hecik/aTLMQGLwB0BNVhl+6Maf2sEzMoPz1 i48S7FpYW4BYUb3bKNuzPQ== 0001169232-04-005621.txt : 20041110 0001169232-04-005621.hdr.sgml : 20041110 20041110161526 ACCESSION NUMBER: 0001169232-04-005621 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20040930 FILED AS OF DATE: 20041110 DATE AS OF CHANGE: 20041110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARLTON TECHNOLOGIES INC CENTRAL INDEX KEY: 0000096988 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 221825970 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07708 FILM NUMBER: 041133352 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 d61184_10-q.txt FORM 10-Q 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, 2004 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) Pennsylvania 22-1825970 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 2828 Charter Road 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 |_| Indicate by check mark whether the issuer is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X| 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 stock as of the last practicable date: 12,844,696 Item 1. FINANCIAL STATEMENTS MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands except share and per share data)
September 30, December 31, ASSETS 2004 2003 ------------- ------------ Current: Cash and cash equivalents $ 527 $ 241 Accounts receivable, net of allowance of $438 and $415, respectively 11,844 7,824 Inventories 6,349 6,272 Prepaid and other current assets 1,007 1,191 -------- -------- Total current assets 19,727 15,528 Property and equipment, net of accumulated depreciation of $11,134 and $10,106, respectively 2,585 3,240 Rental assets, net of accumulated depreciation of $4,063 and $3,672, respectively 2,864 2,789 Goodwill 2,714 2,714 Other assets, net of accumulated amortization of $1,729 and $1,603, respectively 201 388 Notes receivable 107 159 -------- -------- Total assets $ 28,198 $ 24,818 ======== ======== LIABILITIES AND STOCKHOLDERS EQUITY Current liabilities: Current portion of long-term debt $ 79 $ 89 Accounts payable 6,292 6,363 Accrued expenses and other current liabilities 5,884 6,080 -------- -------- Total current liabilities 12,255 12,532 -------- -------- Long-term liabilities: Long-term debt, net of current portion 7,577 5,146 -------- -------- Total long-term liabilities 7,577 5,146 -------- -------- Total liabilities 19,832 17,678 -------- -------- Commitments and contingencies -- -- Stockholders equity: Preferred stock, no par value - shares authorized 10,000,000; no shares issued or outstanding -- -- Common stock, no par value - shares authorized 50,000,000; 12,844,696 outstanding at September 30, 2004 and December 31, 2003 -- -- Stock warrants 742 742 Additional paid-in capital 32,951 32,951 Accumulated deficit (25,179) (26,405) -------- -------- 8,514 7,288 Less cost of 148,803 treasury shares (148) (148) -------- -------- Total stockholders equity 8,366 7,140 -------- -------- Total liabilities and stockholders equity $ 28,198 $ 24,818 ======== ========
The accompanying notes and the notes to the consolidated financial statements included in the Registrant's Annual Report on Form 10-K are an integral part of these 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, September 30, September 30, 2004 2003 2004 2003 ------------- ------------- ------------- ------------- Sales $ 16,796 $ 12,626 $ 55,901 $ 49,946 Cost of sales 13,462 10,400 43,574 38,711 -------- -------- -------- -------- Gross profit 3,334 2,226 12,327 11,235 Selling expenses 1,889 1,818 6,044 6,353 Administrative and general expenses 1,524 1,627 4,726 5,288 Restructuring and other expenses -- 1,114 -- 1,114 -------- -------- -------- -------- Operating profit (loss) (79) (2,333) 1,557 (1,520) Other income (expense): Interest income and other income -- 22 -- 31 Interest expense (156) (58) (381) (169) Income from investments in affiliates 50 20 50 20 -------- -------- -------- -------- Income (loss) before income taxes (185) (2,349) 1,226 (1,638) Benefit from income taxes -- (433) -- (433) -------- -------- -------- -------- Net income (loss) (185) (1,916) 1,226 (1,205) ======== ======== ======== ======== Net income (loss) per common share: Basic $ (0.01) $ (0.15) $ 0.10 $ (0.09) ======== ======== ======== ======== Diluted $ (0.01) $ (0.15) $ 0.09 $ (0.09) ======== ======== ======== ========
The accompanying notes and the notes in the consolidated financial statements included in the Registrant's Annual Report on Form 10-K are an integral part of these financial statements. 3 MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)
For the nine months ended September 30, 2004 2003 ------- ------- Cash flows from operating activities: Net income (loss) $ 1,226 $(1,205) Adjustments to reconcile net income to cash provided by (used in) operating activities: Depreciation and amortization 1,546 1,486 Income from investments in affiliates (50) (20) Change in assets and liabilities: (Increase) decrease in accounts receivable, net (4,020) 1,092 (Increase) in inventories (77) (643) (Increase) decrease in prepaid and other current assets 184 (627) (Increase) decrease in notes and other receivables 246 (221) Decrease in accounts payable, accrued expenses and other current liabilities (267) (760) ------- ------- Net cash used in operating activities (1,212) (898) ------- ------- Cash flows from investing activities: Capital expenditures (840) (620) Proceeds from sale of stock in affiliate 50 -- Acqusition of business, net of cash acquired -- (384) ------- ------- Net cash used in investing activities (790) (1,004) ------- ------- Cash flows from financing activities: Proceeds from revolving credit facility, net 2,511 1,500 Payments for acquisition obligation (163) -- Payments for leasehold improvement obligation (34) -- Proceeds from capital lease obligation 107 -- Payments for loan origination fees (133) (50) Payments for promissory note -- (113) ------- ------- Net cash provided by financing activities 2,288 1,337 ------- ------- Increase (decrease) in cash and cash equivalents 286 (565) Cash and cash equivalents - beginning of period 241 880 ------- ------- Cash and cash equivalents - end of period $ 527 $ 315 ======= =======
The accompanying notes and the notes in the consolidated financial statements included in the Registrant's Annual Report on Form 10-K are an integral part of these financial statements. 4 MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION: The consolidated financial statements included herein are unaudited and have been prepared in accordance with 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. Operating results for the quarter and nine month periods are not necessarily indicative of the results that may be expected for the full year or for future periods. These financial statements should be read in conjunction with the Form 10-K for the year ended December 31, 2003. 2. ACQUISITION AND RESTRUCTURING COSTS: On August 1, 2003, a Company subsidiary acquired the assets of Exhibit Crafts, Inc., a Los Angeles, CA area manufacturer of trade show exhibits and a 20% interest in International Exposition Services, Inc., (IES), a trade show shipping and installation provider. The initial purchase price was $694,000, including the assumption of certain liabilities totaling $310,000. In addition, the sellers received 20% of the subsidiary's common stock. The purchase price approximated the fair value of the net assets acquired. In addition, the asset purchase agreement provides for contingent payments of up to $750,000 based on operating performance in 2004, 2005 and 2006. The Company relocated its San Diego area manufacturing facility to the acquired Los Angeles, CA area facility during the third quarter of 2003. Costs recorded in the third quarter of 2003 in connection with this relocation and consolidation were $1.1 million, which included relocation and employee termination expenses and the Company recorded a charge for a portion of the remaining lease obligation related to the vacated San Diego area facility. 3. MAJOR CUSTOMERS AND CONCENTRATIONS: During the first nine months of 2004 and 2003, one customer accounted for 11.3% and 17.9%, respectively, of the Company's total sales. This customer accounted for 12% of total accounts receivable at September 30, 2004. 4. PER SHARE DATA: The following table sets forth the computation of basic and diluted net income per common share (in thousands except per share data):
Three months ended Nine months ended ------------------ ----------------- September September September September 30, 2004 30, 2003 30, 2004 30, 2003 -------- -------- -------- -------- Net income (loss) $ (185) $ (1,916) $ 1,226 $ (1,205) ======== ======== ======== ======== Weighted average common shares outstanding used to compute basic net income per common share 12,845 12,845 12,845 12,845 Additional common shares to be issued assuming the exercise of stock options, net of shares assumed reacquired -- -- 1,174 -- -------- -------- -------- -------- Total shares used to compute diluted net income per common share 12,845 12,845 14,019 12,845 ======== ======== ======== ======== Basic net income (loss) per share $ (.01) $ (.15) $ .10 $ (.09) ======== ======== ======== ======== Diluted net income (loss) per share $ (.01) $ (.15) $ .09 $ (.09) ======== ======== ======== ========
5 MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Excluded in the computation of diluted income per common share were outstanding options and warrants to purchase 333,000 shares of common stock at September 30, 2004 and 336,000 shares of common stock at September 30, 2003 because the option and warrant exercise prices were greater than the market price of the common shares. Also excluded in the computation of diluted income per common share were outstanding options and warrants to purchase 1,272,000 shares of common stock at September 30, 2004 and 1,163,000 shares of common stock at September 30, 2003 because inclusion of such shares would be antidilutive. 5. INVENTORIES: Inventories, as of the respective dates, consist of the following (in thousands): September 30, 2004 December 31, 2003 ------------------ ----------------- Raw materials $ 456 $ 467 Work in process 2,880 3,579 Finished goods 3,013 2,226 ------ ------ $6,349 $6,272 ====== ====== 6. RECENTLY ISSUED ACCOUNTING STANDARDS In June 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 146, "Accounting for Exit or Disposal Activities" ("SFAS 146"). Statement of Financial Accounting Standards ("SFAS") 146 addresses significant issues regarding the recognition, measurement, and reporting of costs associated with exit and disposal activities, including restructuring activities that are currently accounted for pursuant to the guidance that the Emerging Issues Task Force ("EITF") has set forth in EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." Effective in the first quarter of 2003, the Company adopted the provisions of SFAS 146. This new accounting principle had an impact on the timing and recognition of costs associated with the Company's relocation and consolidation of its West Coast operations during the second half of 2003 and in the second quarter of 2004. 6 MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 7. STOCK-BASED COMPENSATION The Company accounts for grants of stock options under its stock option plans based on the recognition and measurement principles of APB Opinion No. 25 and related Interpretations. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123 to stock-based employee compensation (in thousands except per share data):
For the three months ended For the nine months ended Sept 30, 2004 Sept 30, 2003 Sept 30, 2004 Sept 30, 2003 ------------- ------------- ------------- ------------- Net income (loss), as reported $ (185) $ (1,916) $ 1,226 $ (1,205) --------- --------- --------- --------- Deduct: Total stock-based employee compensation expense determined under fair value based method, net of tax (8) (15) (43) (45) --------- --------- --------- --------- Pro forma net income (loss) $ (193) $ (1,931) $ 1,183 $ (1,250) ========= ========= ========= ========= Earnings (loss) per share: Basic: As Reported $ (.01) $ (.15) $ 0.10 $ (.09) ========= ========= ========= ========= Pro forma $ (.01) $ (.15) $ 0.09 $ (.09) ========= ========= ========= ========= Diluted: As reported $ (.01) $ (.15) $ 0.09 $ (.09) ========= ========= ========= ========= Pro forma $ (.02) $ (.15) $ 0.08 $ (.09) ========= ========= ========= =========
The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS For the three and nine month periods ended September 30, 2004 and 2003. Sales
Three Months Ended (In thousands) Sept. 30, 2004 Sept. 30, 2003 % Inc. (Dec.) -------------- -------------- ------------- Trade show exhibits group $ 8,191 $ 5,263 55.6% Permanent and scenic displays group 8,605 7,363 16.9 ------- ------- ---- Total sales $16,796 $12,626 33.0% ======= ======= ==== Nine Months Ended (In thousands) Sept. 30, 2004 Sept. 30, 2003 % Inc. (Dec.) -------------- -------------- ------------- Trade show exhibits group $34,892 $30,964 12.7% Permanent and scenic displays group 21,009 18,982 10.7 ------- ------- ---- Total sales $55,901 $49,946 11.9% ======= ======= ====
Total net sales of $16.8 million for the third quarter of 2004 increased 33% from the third quarter of 2003, and total net sales of $55.9 million for the first nine months of 2004 increased 11.9% from the same prior year period. The third quarter increase was principally attributable to higher sales of trade show exhibits and related services, which grew 55.6% from comparable sales for the third quarter of 2003. New customers and higher sales to several existing customers contributed to the third quarter trade show exhibits sales increase. Sales of permanent and scenic displays increased 16.9% in the third quarter of 2004 from the same 2003 period primarily due to higher sales of store fixtures. The sales increase for the first nine months of 2004 was comprised of a 12.7% increase in sales of trade show exhibits and related services and a 10.7% increase in sales of permanent and scenic displays. These increases were largely the result of the same factors discussed for the third quarter. Gross Profit Gross profit, as a percentage of sales, improved to 19.8% in the third quarter of 2004 from 17.6% in the same 2003 period. This improvement was attributable to several factors, including cost reduction initiatives and the favorable effect of higher sales on fixed overhead expenses. The gross profit percentage decreased to 22.1% for the first nine months of 2004 as compared with 22.5% in the same prior year period. This decrease was due, in large part, to additional lease expense of $0.2 million accrued in the second quarter of 2004 in connection with the Company's consolidation of its West Coast operations initiated during the second half of 2003. The lease obligation for the remaining portion of the Company's vacated San Diego area facility was terminated on June 30, 2004. The additional expense recorded in the second quarter of 2004 reflected costs associated with this lease termination. 8 Selling Expenses Selling expenses, as a percentage of sales, decreased to 11.2% for the third quarter of 2004 and to 10.8% for the first nine months of 2004 from 14.4% and 12.7% for the respective 2003 periods. These decreases were largely the result of cost reduction initiatives implemented near the end of 2003, which were realized during 2004. Administrative and General Expenses Administrative and general expenses were reduced $0.1 million in the third quarter of 2004 and $0.6 million in the first nine months of 2004 from the expense levels for the comparable periods of 2003. These reductions were principally attributable to cost reduction initiatives implemented for the Company's trade show exhibit businesses as well as to costs recognized in the second quarter of 2003 in connection with a terminated merger transaction. Restructuring and Other Expenses The Company relocated its San Diego area manufacturing facility to its Los Angeles, CA area facility during the third quarter of 2003. Costs recorded in the third quarter of 2003 in connection with this relocation and consolidation were $1.1 million, which included relocation and employee termination expenses and the Company recorded a charge for a portion of the remaining lease obligation related to the vacated San Diego area facility. Interest Expense Interest expense increased to $156,000 in the third quarter of 2004 from $58,000 in the same 2003 period and to $381,000 for the first nine months of 2004 from $169,000 for the first nine months of 2003. Approximately half of these increases were due to higher borrowing from the Company's revolving credit facility largely as a result of financing higher accounts receivable. The remaining portion of these increases was the result of higher interest rates on the Company's new credit facility discussed below. Income from Investments in Affiliate A gain of $50,000 was recognized in the third quarter of 2004 related to the sale of the Company's stock in a portable trade show exhibit manufacturer. Benefit from Income Taxes In the fourth quarter of 2002, the Company established a valuation allowance for deferred income tax assets related to net operating loss carry forwards. As a result, the Company did not record a provision for income taxes in 2004. In the third quarter of 2003, the Company recognized the benefit of an expected income tax refund for $0.4 million related to a net operating loss carry back. Net Income (Loss) The Company incurred a net loss of $0.2 million ($.01 per fully diluted share) in the third quarter of 2004 as compared with a net loss of $1.9 million ($.15 per fully diluted share) in the same prior year period. Net income of $1.2 million ($.09 per fully diluted share) for the first nine months of 2004 compared favorably to a net loss of $1.2 million ($.09 per fully diluted share) for the comparable period of 2003. These improvements were due in large part to higher sales and cost reduction initiatives in 2004 and the $1.1 million restructuring charge recorded in the third quarter of 2003. 9 Backlog The Company's backlog of orders was approximately $16 million at September 30, 2004 and September 30, 2003. LIQUIDITY AND CAPITAL RESOURCES On February 6, 2004, the Company replaced its $8 million revolving credit facility with a new credit facility provided by a commercial asset-based lender. The new credit facility, which expires on February 6, 2007, provides for borrowing capacity of up to $12 million based on a percentage of eligible accounts receivable and inventories. This new facility bears interest based on the 30-day dealer placed commercial paper rate plus 4.50% (effective rate of approximately 6% at September 30, 2004), restricts the Company's ability to pay dividends, and includes certain financial covenants (fixed charge coverage ratio and maximum cash capital expenditure amount of $1 million in 2004 and $1.25 million in 2005 and in 2006). The Company's borrowing capacity was $9.2 million at September 30, 2004. Proceeds from this credit facility are used primarily for working capital and other capital purposes. The Company's working capital increased to $7.5 million at September 30, 2004 from $3 million at December 31, 2003, largely due to a $4 million increase in accounts receivable. The increase in accounts receivable was principally attributable to higher sales near the end of the third quarter of 2004 as compared with sales near the end of 2003 as well as slower payment schedules from several of the Company's Fortune 1000 clients. The increase in accounts receivable also led to the increase in long-term debt to $7.6 million at September 30, 2004 from $5.1 million at December 31, 2003. The Company has lease commitments for certain facilities under non-cancelable operating leases. Timing of future lease commitments as well as maturities of long-term debt is as follows:
Payment due by period --------------------- 2005 to 2008 to After Contractual Obligations Total 2004 2007 2010 2010 ----------------------- ------- ------- ------- ------- ----- Long-Term Debt Obligations $ 7,549 $ 45 $ 7,504 $ -- $ -- Capital Lease Obligations 107 34 73 -- -- Operating Lease Obligations 6,509 542 4,826 1,141 -- Purchase Obligations -- -- -- -- -- Other Long-Term Liabilities Reflected on the Registrant's Balance Sheet Under GAAP -- -- -- -- -- ------- ------- ------- ------- ---- Total $16,437 $ 1,082 $14,223 $ 1,133 -- ======= ======= ======= ======= ----
The Company leases a facility from a partnership controlled by two outside shareholders of the Company. This lease, which expires on May 14, 2019, contains an option for the Company to terminate after 10 years (May 14, 2009) subject to the landlord's ability to relet the premises. The minimum annual rent is $771,000 through May 14, 2009 and is reset thereafter (not included in the table above). The Company is also responsible for taxes, insurance and other operating expenses for this facility. The Company jointly leases a 31,000 square foot facility with International Expo Services ("IES"), in which the Company holds a minority interest. The annual lease commitment for this facility is $214,000 through September 22, 2007, which is not included with the above future operating lease commitments. Payments in connection with this lease are made by IES. 10 OUTLOOK The Company expects sales volume in 2004 to increase modestly above the 2003 sales level. The Company's trade show exhibit and retail chain client base of Fortune 1000 companies is expected to continue to closely manage their marketing and capital budgets, which would inhibit the Company's sales and margin growth. The Company continues to explore new sales opportunities while continuing to pursue operating efficiency improvements and cost reduction initiatives to mitigate the impact of its clients' tight budget management. RECENTLY ISSUED ACCOUNTING STANDARDS In June 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 146, "Accounting for Exit or Disposal Activities" ("SFAS 146"). Statement of Financial Accounting Standards ("SFAS") 146 addresses significant issues regarding the recognition, measurement, and reporting of costs associated with exit and disposal activities, including restructuring activities that are currently accounted for pursuant to the guidance that the Emerging Issues Task Force ("EITF") has set forth in EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." Effective in the first quarter of 2003, the Company adopted the provisions of SFAS 146. This new accounting principle had an impact on the timing and recognition of costs associated with the Company's relocation and consolidation of its West Coast operations during the second half of 2003 and in the second quarter of 2004. FORWARD-LOOKING STATEMENTS This report contains forward-looking statements. When used in this report, the words "intends," "believes," "plans," "expects," "anticipates," "probable," "could" and similar words are used to identify these 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 enter new markets and expand existing business; continued availability of financing to provide additional sources of funding for capital expenditures, working capital and 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 and labor prices from suppliers; changes in customers' financial condition; the Company's ability to attract and retain competent employees; the Company's ability to add and retain customers; changes in sales mix; the Company's ability to integrate and upgrade technology; uncertainties regarding accidents or litigation which may arise; the financial impact of facilities consolidations; uncertainties about the impact of the threat of future terrorist attacks on business travel and related trade show attendance; 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. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's revolving credit facility bears a floating rate of interest, based on the 30-day dealer placed commercial paper rate plus 4.50%. The Company had borrowings of $7.4 million from its revolving credit facility at September 30, 2004. Fluctuations in foreign currency exchange rates do not significantly affect the Company's financial position and results of operations. 11 ITEM 4. CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures The Company established a Disclosure Committee chaired by the Company's Chief Financial Officer and comprised of managers representing the Company's major areas, including financial reporting and control, sales, operations and information technology. This Committee carried out an evaluation of the effectiveness and operation of the Company's disclosure controls and procedures, and established ongoing procedures to monitor and evaluate these controls and procedures in the future. Based upon that evaluation, as of the end of the period covered by this report, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic SEC filings. (b) Changes in internal controls There were no changes in the Company's internal controls over financial reporting identified in connection with the Item 4 (a) evaluation that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. PART II - OTHER INFORMATION Responses to Items 1, 2, 3, 4 and 5 are omitted since these items are either inapplicable or the response thereto would be negative. ITEM 6. EXHIBITS (a) Exhibits. 10(a) First Amendment to Loan and Security Agreement 10(b) Second Amendment to Loan and Security Agreement 31(a) Rule 13a - 14(a) / 15(d) - 14 (a) Certification, Chief Executive Officer 31(b) Rule 13a - 14(a) / 15(d) - 14 (a) Certification, Chief Financial Officer 32 Section 1350 Certifications SIGNATURES In accordance with 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, thereunto duly authorized. MARLTON TECHNOLOGIES, INC. By: /s/ Robert B. Ginsburg - -------------------------- Robert B. Ginsburg President and Chief Executive Officer By: /s/ Stephen P. Rolf - -------------------------- Stephen P. Rolf Chief Financial Officer Dated: November 10, 2004 12 EX-10.(A) 2 d61184_ex10-a.txt FIRST AMENDMENT TO LOAN Exhibit 10(a) FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated as of April 13, 2004 (this "Amendment"), is made by and among GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation ("Lender"), SPARKS EXHIBITS & ENVIRONMENTS CORP., a Pennsylvania corporation ("Leading Borrower"), SPARKS EXHIBITS & ENVIRONMENTS, LTD., a California corporation ("Second Borrower"), SPARKS EXHIBITS & ENVIRONMENTS, INC., a Georgia corporation ("Third Borrower"), and DMS STORE FIXTURES LLC, a Pennsylvania limited liability company ("Fourth Borrower"; Leading Borrower, Second Borrower, Third Borrower and Fourth Borrower, being collectively referred to herein as "Borrowers" and each a "Borrower"). WITNESSETH : WHEREAS, Borrowers and Lender are parties to that certain Loan and Security Agreement, dated as of February 6, 2004 (as amended, supplemented or otherwise modified from time to time, the "Loan Agreement"; capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Loan Agreement); and WHEREAS, Borrowers have requested that Lender amend the Loan Agreement, as more fully set forth herein, and Lender is willing to do so subject to the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises, the covenants and agreements contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties, intending to be legally bound, do hereby agree as follows: STATEMENT OF TERMS 1. Amendment to Schedule A. Schedule A is hereby amended as follows: (a) The following defined term is hereby added: "Designated Account Debtor" shall mean each of the Account Debtors listed in Schedule H attached hereto. (b) Subparagraph (m) of the definition of "Eligible Accounts" is hereby amended and restated in its entirety as follows: (m) that is not paid within 60 days from its due date or 120 days from its invoice date, except for the Designated Account Debtors, with respect to which any Account that is not paid within the number of days from its due date or its invoice date set forth opposite the name of each Designated Account Debtor in Schedule H attached hereto, or that are Accounts of an Account Debtor if 50% or more of the Accounts owing from such Account Debtor remain unpaid within such time periods. (c) The definition of "Special Reserve" is hereby amended by deleting the term "$100,000" contained therein and inserting in place thereof the term "$125,000". - 1 - 2. Elimination of Accrued Volume Rebate Reserve. The accrued volume rebate reserve presently in place is hereby eliminated. 3. Representations and Warranties. To induce Lender to enter into this Amendment, each Borrower hereby warrants and represents to Lender as follows: (a) each representation and warranty of such Borrower set forth in the Loan Agreement is hereby restated and reaffirmed as true and correct on and as of the date hereof after giving affect to this Amendment as if such representation or warranty were made on and as of the date hereof (except to the extent that any such representation or warranty expressly relates to a prior specific date or period in which case it is true and correct as of such prior date or period); (b) no Default or Event of Default has occurred and is continuing as of this date under the Loan Agreement after giving effect to this Amendment; (c) such Borrower has the power and is duly authorized to enter into, deliver and perform its obligations under this Amendment and to perform its obligations under the Loan Agreement, as amended hereby; and (d) this Amendment and the Loan Agreement, as amended hereby, constitutes a legal, valid and binding obligation of such Borrower and is enforceable against such Borrower in accordance with its terms. 4. Conditions Precedent to Effectiveness of this Amendment. The effectiveness of this Amendment is subject to the fulfillment of the following conditions precedent: (a) Lender shall have received one or more counterparts of this Amendment duly executed and delivered by each Borrower; (b) Each Guarantor shall have consented to the execution, delivery and performance of this Amendment and all of the transactions contemplated hereby by signing one or more counterparts of this Amendment in the appropriate space indicated below and returning the same to Lender; and (c) Lender shall have received an amendment fee in the amount of $2,500. 5. Continuing Effect of Loan Agreement. Except as expressly modified hereby, the provisions of the Loan Agreement, and the Liens granted thereunder, are and shall remain in full force and effect, and are hereby ratified and continued including, without limitation, the provisions regarding confession of judgment. 6. Counterparts. This Amendment may be executed in multiple counterparts each of which shall be deemed to be an original and all of which when taken together shall constitute one and the same instrument. Any signature delivered by a party via facsimile shall be deemed to be an original signature hereto. 7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAWS. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first set forth above. SPARKS EXHIBITS & ENVIRONMENTS CORP. By:_____________________________________ Name: Robert B. Ginsburg Title: Chief Financial Officer - 2 - SPARKS EXHIBITS & ENVIRONMENTS, LTD. By:_____________________________________ Name: Robert B. Ginsburg Title: Chief Financial Officer SPARKS EXHIBITS & ENVIRONMENTS, INC. By:_____________________________________ Name: Robert B. Ginsburg Title: Chief Financial Officer DMS STORE FIXTURES LLC By:_____________________________________ Name: Robert B. Ginsburg Title: Chief Financial Officer GENERAL ELECTRIC CAPITAL CORPORATION By:_____________________________________ Name: Jeffrey Zinn Title: Duly Authorized Signatory Each of the undersigned Guarantors, intending to be legally bound, does hereby consent to the execution, delivery and performance of the within and foregoing Amendment, and confirms and reaffirms, without setoff, counterclaim, deduction or other claim of avoidance of any nature, the continuing effect of such Guarantor's guarantee of the Obligations after giving effect to the foregoing Amendment. ACKNOWLEDGED and AGREED to as of the date first set forth above: SPARKS EXHIBITS & ENVIRONMENTS CORP. By:___________________________________ Name: Robert B. Ginsburg Title: Chief Financial Officer SPARKS EXHIBITS & ENVIRONMENTS, LTD. By:___________________________________ Name: Robert B. Ginsburg Title: Chief Financial Officer - 3 - SPARKS EXHIBITS & ENVIRONMENTS, INC. By:___________________________________ Name: Robert B. Ginsburg Title: Chief Financial Officer DMS STORE FIXTURES LLC By:___________________________________ Name: Robert B. Ginsburg Title: Chief Financial Officer MARLTON TECHNOLOGIES, INC. By:___________________________________ Name: Robert B. Ginsburg Title: Chief Executive Officer SPARKS EXHIBITS HOLDING CORPORATION By:___________________________________ Name: Robert B. Ginsburg Title: Chief Financial Officer SPARKS EXHIBITS & ENVIRONMENTS INCORPORATED By:___________________________________ Name: Robert B. Ginsburg Title: Chief Financial Officer SPARKS EXHIBITS & ENVIRONMENTS COMPANY By:___________________________________ Name: Robert B. Ginsburg Title: Chief Financial Officer - 4 - EX-10.(B) 3 d61184_ex10-b.txt SECOND AMENDMENT TO LOAN Exhibit 10(b) SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated as of September 8, 2004 (this "Amendment"), is made by and among GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation ("Lender"), SPARKS EXHIBITS & ENVIRONMENTS CORP., a Pennsylvania corporation ("Leading Borrower"), SPARKS EXHIBITS & ENVIRONMENTS, LTD., a California corporation ("Second Borrower"), SPARKS EXHIBITS & ENVIRONMENTS, INC., a Georgia corporation ("Third Borrower"), and DMS STORE FIXTURES LLC, a Pennsylvania limited liability company ("Fourth Borrower"; Leading Borrower, Second Borrower, Third Borrower and Fourth Borrower, being collectively referred to herein as "Borrowers" and each a "Borrower"). WITNESSETH : WHEREAS, Borrowers and Lender are parties to that certain Loan and Security Agreement, dated as of February 6, 2004 (as amended, supplemented or otherwise modified from time to time, the "Loan Agreement"; capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Loan Agreement); and WHEREAS, Borrowers have requested that Lender amend the Loan Agreement, as more fully set forth herein, and Lender is willing to do so subject to the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises, the covenants and agreements contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties, intending to be legally bound, do hereby agree as follows: STATEMENT OF TERMS 1. Amendment to Schedule H. Schedule H to the Loan Agreement is hereby amended and restated to read as set forth in Schedule H attached hereto. 2. Representations and Warranties. To induce Lender to enter into this Amendment, each Borrower hereby warrants and represents to Lender as follows: (a) each representation and warranty of such Borrower set forth in the Loan Agreement is hereby restated and reaffirmed as true and correct on and as of the date hereof after giving affect to this Amendment as if such representation or warranty were made on and as of the date hereof (except to the extent that any such representation or warranty expressly relates to a prior specific date or period in which case it is true and correct as of such prior date or period); (b) no Default or Event of Default has occurred and is continuing as of this date under the Loan Agreement after giving effect to this Amendment; (c) such Borrower has the power and is duly authorized to enter into, deliver and perform its obligations under this Amendment and to perform its obligations under the Loan Agreement, as amended hereby; and (d) this Amendment and the Loan Agreement, as amended hereby, constitutes a legal, valid and binding obligation of such Borrower and is enforceable against such Borrower in accordance with its terms. 3. Conditions Precedent to Effectiveness of this Amendment. The effectiveness of this Amendment is subject to the fulfillment of the following conditions precedent: (a) Lender shall have received one or more counterparts of this Amendment duly executed and delivered by each Borrower; and - 1 - (b) Each Guarantor shall have consented to the execution, delivery and performance of this Amendment and all of the transactions contemplated hereby by signing one or more counterparts of this Amendment in the appropriate space indicated below and returning the same to Lender. 4. Continuing Effect of Loan Agreement. Except as expressly modified hereby, the provisions of the Loan Agreement, and the Liens granted thereunder, are and shall remain in full force and effect, and are hereby ratified and continued including, without limitation, the provisions regarding confession of judgment. 5. Counterparts. This Amendment may be executed in multiple counterparts each of which shall be deemed to be an original and all of which when taken together shall constitute one and the same instrument. Any signature delivered by a party via facsimile shall be deemed to be an original signature hereto. 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAWS. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first set forth above. SPARKS EXHIBITS & ENVIRONMENTS CORP. By:_____________________________________ Name: Robert B. Ginsburg Title: Chief Financial Officer SPARKS EXHIBITS & ENVIRONMENTS, LTD. By:_____________________________________ Name: Robert B. Ginsburg Title: Chief Financial Officer SPARKS EXHIBITS & ENVIRONMENTS, INC. By:_____________________________________ Name: Robert B. Ginsburg Title: Chief Financial Officer DMS STORE FIXTURES LLC By:_____________________________________ Name: Robert B. Ginsburg Title: Chief Financial Officer GENERAL ELECTRIC CAPITAL CORPORATION By:_____________________________________ Name: Jeffrey Zinn Title: Duly Authorized Signatory - 2 - Each of the undersigned Guarantors, intending to be legally bound, does hereby consent to the execution, delivery and performance of the within and foregoing Amendment, and confirms and reaffirms, without setoff, counterclaim, deduction or other claim of avoidance of any nature, the continuing effect of such Guarantor's guarantee of the Obligations after giving effect to the foregoing Amendment. ACKNOWLEDGED and AGREED to as of the date first set forth above: SPARKS EXHIBITS & ENVIRONMENTS CORP. By:___________________________________ Name: Robert B. Ginsburg Title: Chief Financial Officer SPARKS EXHIBITS & ENVIRONMENTS, LTD. By:___________________________________ Name: Robert B. Ginsburg Title: Chief Financial Officer SPARKS EXHIBITS & ENVIRONMENTS, INC. By:___________________________________ Name: Robert B. Ginsburg Title: Chief Financial Officer DMS STORE FIXTURES LLC By:___________________________________ Name: Robert B. Ginsburg Title: Chief Financial Officer MARLTON TECHNOLOGIES, INC. By:___________________________________ Name: Robert B. Ginsburg Title: Chief Executive Officer SPARKS EXHIBITS HOLDING CORPORATION By:___________________________________ Name: Robert B. Ginsburg Title: Chief Financial Officer SPARKS EXHIBITS & ENVIRONMENTS INCORPORATED By:___________________________________ Name: Robert B. Ginsburg Title: Chief Financial Officer SPARKS EXHIBITS & ENVIRONMENTS COMPANY By:___________________________________ Name: Robert B. Ginsburg Title: Chief Financial Officer - 3 - EX-31.(A) 4 d61184_ex31-a.txt CEO CERTIFICATION Exhibit 31(a) SECTION 302 CERTIFICATION I, Robert B. Ginsburg, the Chief Executive Officer of Marlton Technologies, Inc., certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of Marlton Technologies, Inc. 2. Based upon my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report)that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. November 10, 2004 /s/ Robert B. Ginsburg - ---------------------- Robert B. Ginsburg Chief Executive Officer 1 EX-31.(B) 5 d61184_ex31-b.txt CFO CERTIFICATION Exhibit 31(b) SECTION 302 CERTIFICATION I, Stephen P. Rolf, the Chief Financial Officer of Marlton Technologies, Inc., certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of Marlton Technologies, Inc. 2. Based upon my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. November 10, 2004 /s/ Stephen P. Rolf - ------------------- Stephen P. Rolf Chief Financial Officer 1 EX-32 6 d61184_ex32.txt CERTIFICATIONS Exhibit 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Marlton Technologies, Inc. (the "Company") on Form 10-Q for the period ending September 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Robert B. Ginsburg, Chief Executive Officer of the Company, and Stephen P. Rolf, Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, based on their knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Robert B. Ginsburg /s/ Stephen P. Rolf - ---------------------- ------------------- Robert B. Ginsburg Stephen P. Rolf Chief Executive Officer Chief Financial Officer November 10, 2004 November 10, 2004 1 -----END PRIVACY-ENHANCED MESSAGE-----