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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, 2003
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 incorporation or organization) (IRS Employer Identification No.)
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
---------------------- -------------------
Check 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 equity as of the last practicable date:
12,845,096
Item 1. FINANCIAL STATEMENTS
MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands except share data)
June 30, December 31,
ASSETS 2003 2002
------------- ---------------
Current:
Cash and cash equivalents $ 1,132 $ 880
Accounts receivable, net of allowance
of $362 and $309, respectively 10,649 8,083
Inventory 5,246 5,723
Prepaids and other current assets 1,385 1,042
-------- --------
Total current assets 18,412 15,728
Investment in affiliates 259 259
Property and equipment, net of accumulated
depreciation of $9,855 and $9,168, respectively 3,236 3,929
Rental assets, net of accumulated depreciation
of $3,438 and $3,200, respectively 2,766 2,535
Goodwill 2,714 2,714
Other assets, net of accumulated amortization
of $1,461 and $1,349, respectively 98 211
Notes receivable 144 233
-------- --------
Total assets $ 27,629 $ 25,609
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 4,535 $ 128
Accounts payable 7,234 4,509
Accrued expenses and other 5,807 7,630
-------- --------
Total current liabilities 17,576 12,267
-------- --------
Long-term debt, net of current portion - 4,000
-------- --------
Total liabilities $ 17,576 $ 16,267
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;
12,993,499 issued at June 30, 2003 and at December 31, 2002 - -
Stock warrants 742 742
Additional paid-in capital 32,951 32,951
Accumulated deficit (23,493) (24,204)
-------- --------
10,200 9,489
Less cost of 148,403 treasury shares at June 30, 2003 and
at December 31, 2002 (147) (147)
-------- --------
Total stockholders' equity 10,053 9,342
-------- --------
Total liabilities and stockholders' equity $ 27,629 $ 25,609
======== ========
The accompanying notes and the notes in the 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 For the six
months ended months ended
-------------------- ----------------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
------- -------- -------- --------
Sales $19,864 $ 21,419 $ 37,321 $ 38,214
Cost of sales 15,257 17,090 28,311 29,722
------- -------- -------- --------
Gross profit 4,607 4,329 9,010 8,492
Selling 2,236 2,187 4,536 4,378
Administrative and general 2,016 1,969 3,661 3,721
------- -------- -------- --------
Operating profit 355 173 813 393
Other income (expense):
Interest income and other income 5 64 9 93
Interest expense (65) (162) (111) (277)
Loss from investments in affiliates -- -- -- (1,156)
------- -------- -------- --------
Income (loss) before income taxes and change in accounting principle 295 75 711 (947)
Provision for income taxes -- 30 -- 291
------- -------- -------- --------
Net income (loss) before change in accounting principle 295 45 711 (1,238)
Cumulative effect of change in accounting principle, net of tax benefit -- -- (12,385)
------- -------- -------- --------
Net income (loss) $ 295 $ 45 $ 711 $(13,623)
======= ======== ======== ========
Income (loss) per common share before change in accounting principle:
Basic $ 0.02 -- $ 0.06 $ (0.10)
======= ======== ======== ========
Diluted $ 0.02 -- $ 0.06 $ (0.10)
======= ======== ======== ========
Income (loss) per common share after change in accounting principle:
Basic $ 0.02 -- $ 0.06 $ (1.05)
======= ======== ======== ========
Diluted $ 0.02 -- $ 0.06 $ (1.05)
======= ======== ======== ========
The accompanying notes and the notes in the 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.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
For the six months
ended June 30,
2003 2002
-------- --------
Cash flows from operating activities:
Net income (loss) $ 711 $(13,623)
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation and amortization 1,040 1,174
Loss from investment in affiliates -- 1,156
Cumulative effect of change in accounting principle -- 12,385
Non-cash compensation and other operating items -- 191
Change in assets and liabilities:
(Increase) in accounts receivable, net (2,566) (1,987)
Decrease in inventory 477 337
(Increase) in prepaid and other assets (343) (122)
Decrease in notes receivable 89 216
Increase in accounts payable, accrued expenses and other 902 1,656
-------- --------
Net cash provided by operating activities 310 1,383
-------- --------
Cash flows from investing activities:
Capital expenditures (465) (558)
-------- --------
Net cash used in investing activities (465) (558)
-------- --------
Cash flows from financing activities:
Principal (payments for) proceeds from revolving credit facility 500 (1,800)
Payments for loan origination fees -- (50)
Payments for promissory note (93) (78)
-------- --------
Net cash (used in) provided by financing activities 407 (1,928)
-------- --------
Increase / (decrease) in cash and cash equivalents 252 (1,103)
Cash and cash equivalents - beginning of period 880 1,233
-------- --------
Cash and cash equivalents - end of period $ 1,132 $ 130
======== ========
The accompanying notes and the notes in the 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 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. Operating results for the quarter 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 Annual Report to
Shareholders and Form 10-K for the year ended December 31, 2002.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results may differ from those estimates.
2. MAJOR CUSTOMERS:
During the second quarter and first six months of 2003, one customer accounted
for 25% and 16%, respectively, of the Company's total net sales. During the
second quarter and first six months of 2002, the same customer accounted for 27%
and 22%, respectively, of the Company's total net sales.
3. 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 Six months ended
June 30, June 30, June 30, June 30,
------- ------- ------- ----------
2003 2002 2003 2002
------- ------- ------- ----------
Net income (loss) before change in accounting
principle $ 295 $ 45 $ 711 $ (1,238)
======= ======= ======= ==========
Net income (loss) after change in accounting
principle $ 295 $ 45 $ 711 $ (13,623)
======= ======= ======= ==========
Weighted average common
shares outstanding used to compute
basic net income per common share 12,846 12,988 12,846 12,988
Additional common shares to be issued
assuming the exercise of stock options,
net of shares assumed reacquired -- 44 -- --
------- ------- ------- ----------
Total shares used to compute diluted
net income per common share 12,846 13,032 12,846 12,988
======= ======= ======= ==========
Before change in accounting principle:
Basic net income (loss) per share $ .02 $ .00 $ .06 $ (.10)
======= ======= ======= ==========
Diluted net income (loss) per share $ .02 $ .00 $ .06 $ (.10)
======= ======= ======= ==========
After change in accounting principle:
Basic net income (loss) per share $ .02 $ .00 $ .06 $ (1.05)
======= ======= ======= ==========
Diluted net income (loss) per share $ .02 $ .00 $ .06 $ (1.05)
======= ======= ======= ==========
5
MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Excluded in the computation of diluted income per common share were options and
warrants to purchase 7,373,512 and 534,000 shares of common stock, which were
outstanding at June 30, 2003 and 2002, respectively, because the option and
warrant exercise prices were greater than the average market price of the common
shares.
4. INVENTORY:
Inventory, as of the respective dates, consists of the following (in thousands):
June 30, 2003 December 31, 2002
------------- -----------------
Raw materials $ 438 $ 373
Work in process 3,055 4,400
Finished goods 1,753 950
------ ------
$5,246 $5,723
====== ======
5. INVESTMENTS IN AFFILIATES:
The Company recorded an impairment loss of $1.2 million for its investment in a
portable trade show exhibit manufacturer in the first quarter of 2002. No income
tax benefit was recorded in connection with this capital loss.
During the first quarter of 2002 the Company also recorded a valuation allowance
of $191,000 against a deferred tax asset associated with a capital loss, which
resulted from the write-off of an investment in an affiliate located in the
United Kingdom. Management has concluded that the Company will most likely not
be able to generate capital gains in the next two years that would be sufficient
to realize the tax benefit from this capital loss.
6. CHANGE IN ACCOUNTING PRINCIPLE (ADOPTION OF SFAS NO. 142):
Effective January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142), which
eliminates amortization of these assets and requires annual testing for
impairment. The Company's reporting units for purposes of applying the
provisions of SFAS 142 are the DMS Store Fixtures business ("DMS") and the
Sparks Exhibits & Environments businesses ("Sparks"). SFAS 142 requires a
comparison of the reporting unit's fair value, which is determined based on
discounted cash flows, to its carrying value to determine potential impairment.
If the fair value is less than the carrying value, an impairment loss is
recognized. The Company recorded an impairment loss of $12.4 million in the
first quarter of 2002 in connection with the adoption of SFAS 142.
7. RECENTLY ISSUED ACCOUNTING STANDARDS:
In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or Disposal
Activities" ("SFAS 146"). 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. Although
adoption by the Company had no impact on its results of operations or financial
position during the first half of the year, it is expected to impact the timing
and recognition of costs associated with the Company's plans for future exit or
disposal activities (see Note 9). Accordingly, the Company will evaluate the
impact of SFAS 146 on its financial statements.
6
MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46") FIN 46 clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. The initial recognition provisions of FIN 46 are
applicable immediately to new variable interests in variable interest entities
created after January 31, 2003. For a variable interest in a variable interest
entity created before February 1, 2003, the initial recognition provisions of
FIN 46 are to be implemented no later than the beginning of the first interim or
annual reporting period beginning after June 15, 2003, which are applicable in
the Company's third quarter ended September 30, 2003. The Company will continue
to evaluate the impact of FIN 46 on its financial statements.
8. TERMINATED MERGER AGREEMENT:
The Company and Redwood Acquisition Corp.("Redwood") entered into a merger
agreement in February 2003 pursuant to which all of the outstanding shares of
common stock of the Company (other than the shares held by approximately eight
shareholders) would be converted into the right to receive $0.30 per share. On
June 19, 2003, the Company's Board of Directors approved a termination proposal
submitted by Redwood, which terminated the proposed merger agreement with
Redwood. Costs of approximately $200,000 incurred in connection with this
proposed merger agreement were charged to administrative and general expenses in
the second quarter of 2003.
9. SUBSEQUENT EVENT:
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., a trade show shipping and
installation provider. The initial purchase price is $250,000, 20% of the
subsidiary's common stock as well as the assumption of certain liabilities
totaling approximately $0.4 million. In addition, the asset purchase agreement
includes contingent payments of up to $750,000 based on operating performance in
2004, 2005 and 2006. The Company plans to relocate its San Diego area
manufacturing facility to the Los Angeles, CA area facility during the second
half of 2003. Expected costs in connection with this relocation and
consolidation are approximately $500,000. In addition, the Company is attempting
to sublet or terminate the lease for its San Diego area manufacturing facility.
The total net future lease payments for this facility are $2.5 million.
7
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the three and six month periods ended June 30, 2003 and 2002.
Sales
Three Months Ended
(In thousands)
June 30, 2003 June 30, 2002 % Inc. (Dec.)
------------- ------------- --------------
Trade show exhibits group $11,683 $12,873 (9)%
Permanent and scenic displays group 8,181 8,546 (4)
------- -------- -----
Total sales $19,864 $21,419 (7)%
======= ======== =====
Six Months Ended
(In thousands)
June 30, 2003 June 30, 2002 % Increase
------------- ------------- ----------
Trade show exhibits group $25,701 $25,338 1 %
Permanent and scenic displays group 11,620 12,876 (10)
------- -------- -----
Total sales $37,321 $38,214 (2)%
======= ======== =====
Total net sales of $19.9 million for the second quarter of 2003 decreased 7%
below the second quarter of 2002, and total net sales $37.3 million for the
first six months of 2003 decreased 2% from the same prior year period. The
second quarter decrease was principally attributable to lower sales of trade
show exhibits and related services, which decreased 9% below comparable sales
for the second quarter of 2002. Lower sales of trade show exhibits for the
second quarter were largely the result of reductions in certain customers' trade
show marketing budgets in response to a slower economy. The loss of a trade show
exhibit client also accounted for a portion of this decrease. The sales decrease
for the first six months of 2003 was primarily due to lower sales of store
fixtures in the first quarter of 2003 to a national retail customer.
Operating Profit
Gross profit, as a percentage of net sales, improved to 23.2% in the second
quarter and to 24.1% for the first six months of 2003 from 20.2% and 22.2% in
the respective prior year periods. These improvements were due, in large part,
to higher gross profit margins generated from sales of store fixtures as well as
to cost reduction and profit improvement initiatives implemented in the second
half of 2002.
Selling expenses were essentially unchanged in the second quarter of 2003 and
increased $158,000 to $4.5 million in the first six months of 2003 as compared
with the same prior year periods. As a percentage of net sales, selling expenses
increased to 11.3% and 12.2% in the second quarter and first half of 2003,
respectively, from 10.2% and 11.5% for the comparable 2002 periods. The
percentage increase was principally attributable to fixed marketing expenses
such as salaries and sales office rent expense as compared with the lower sales
volume.
Administrative and general expenses were essentially unchanged in the second
quarter and first half periods of 2003 as compared with same prior year periods.
Costs of approximately $200,000 related to the terminated merger transaction
discussed below incurred in the second quarter of 2003 were offset by lower bad
debt expense and cost reduction initiatives.
8
Operating profit increased to $355,000 in the second quarter of 2003 from
$173,000 in the second quarter of 2002 and to $813,000 for the first half of
2003 from $393,000 in the same prior year period. These improvements were
primarily due to higher gross profit margins realized in 2003.
Other Income/(Expense)
Interest expense was reduced to $65,000 and to $111,000 in the second quarter
and first six months of 2003, respectively, from $162,000 and $277,000 in the
comparable 2002 periods. These reductions were due, in part, to lower interest
rates.
A loss of $1.2 million from investments in affiliates was recorded in the first
quarter of 2002 to write down the Company's investment in a portable trade show
exhibit manufacturer.
Net Income/(Loss) Before Change in Accounting Principle
Net income of $295,000 before change in accounting principle for the second
quarter of 2003 increased from $75,000 reported for same prior year period as a
result of higher operating profit and lower interest costs. For the first six
months of 2003, net income of $711,000 before change in accounting principle
improved from a net loss of $947,000 for the comparable period of 2002. Higher
operating profit in 2003 and the 2002 write down of the investment in affiliate
largely accounted for the increase for the six month period.
Provision for Income Taxes
In the fourth quarter of 2002, the Company established a valuation allowance for
deferred income tax assets. As a result, the Company has not recorded current
period income tax expense in 2003.
In the first quarter of 2002, the Company did not recognize an income tax
benefit from the $1.2 million impairment loss from investments in affiliates
because this capital loss was not expected to be offset by capital gains within
the required statutory period. The provision for income taxes of $261,000
recorded in the first quarter of 2002 also included a valuation allowance of
$191,000 related to a 1999 capital loss incurred in connection with the
Company's investment in a United Kingdom affiliate.
Cumulative Effect of Accounting Change
The Company recorded an impairment loss of $12.4 million in the first quarter of
2002 in connection with the adoption of Statement of Financial Accounting
Standards No. 142 "Goodwill and Other Intangible Assets."
Backlog
The Company's backlog of orders was approximately $18 million at June 30, 2003
and $17 million at June 30, 2002.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital decreased to $836,000 at June 30, 2003 from $3.5
million at December 31, 2002. This decrease was principally attributable to
reclassification of $4.5 million from long-term debt to the current portion of
long-term debt related to the Company's bank credit facility which expires May
16, 2004. The Company is evaluating alternatives to replace or renew its
existing credit facility prior to its expiration. Accounts receivable increased
to $10.6 million at June 30, 2003 from $8.1 million at December 31, 2002
primarily as a result of timing of store fixtures shipments
9
The Company has lease commitments for several facilities under non-cancelable
operating leases. Timing of future lease commitments as well as maturities of
long-term debt are as follows:
(In thousands)
2003 2004 2005 2006 2007 After 2007
---- ---- ---- ---- ---- ----------
Lease commitments $985 $1,796 $1,737 $1,166 $771 $1,060
Debt maturities 35 4,500 -- -- -- --
The Company leases a facility from a partnership controlled by two shareholders
of the Company. This lease, which expires on May 14, 2019, requires minimum
annual rent of $771,000 at a fixed rate for the first 10 years, and the Company
is responsible for taxes, insurance and other operating expenses. The Company
has the option to terminate this lease in 2009 subject to the landlord's ability
to relet or sell the premises at minimum specified values.
OUTLOOK
The Company expects sales to decrease in 2003 from 2002 levels. In view of
current economic conditions, the Company's trade show exhibit client base of
Fortune 1000 companies is expected to closely manage their marketing expense
budgets, which would inhibit trade show exhibit sales and profit margins. The
Company continues to explore new sales opportunities while pursuing operating
efficiency improvements and cost reduction initiatives to mitigate the impact of
lower sales volume.
RECENT DEVELOPMENTS
The Company and Redwood Acquisition Corp.("Redwood") entered into a merger
agreement in February 2003 pursuant to which all of the outstanding shares of
common stock of the Company (other than the shares held by approximately eight
shareholders) would be converted into the right to receive $0.30 per share. On
June 19, 2003, the Company's Board of Directors approved a termination proposal
submitted by Redwood, which terminated the proposed merger agreement with
Redwood. Costs of approximately $200,000 incurred in connection with this
proposed merger agreement were charged to administrative and general expenses in
the second quarter of 2003.
SUBSEQUENT EVENT
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., a trade show shipping and
installation provider. The initial purchase price is $250,000, 20% of the
subsidiary's common stock as well as the assumption of certain liabilities
totaling approximately $0.4 million. In addition, the asset purchase agreement
includes contingent payments of up to $750,000 based on operating performance in
2004, 2005 and 2006. The Company plans to relocate its San Diego area
manufacturing facility to the Los Angeles, CA area facility during the second
half of 2003. Expected costs in connection with this relocation and
consolidation are approximately $500,000. In addition, the Company is attempting
to sublet or terminate the lease for its San Diego area manufacturing facility.
The total net future lease payments for this facility are $2.5 million.
10
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or Disposal
Activities" ("SFAS 146"). 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. Although
adoption by the Company had no impact on its results of operations or financial
position during the first half of the year, it is expected to impact the timing
and recognition of costs associated with the Company's plans for future exit or
disposal activities (see Note 9). Accordingly, the Company will evaluate the
impact of SFAS 146 on its financial statements.
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46") FIN 46 clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. The initial recognition provisions of FIN 46 are
applicable immediately to new variable interests in variable interest entities
created after January 31, 2003. For a variable interest in a variable interest
entity created before February 1, 2003, the initial recognition provisions of
FIN 46 are to be implemented no later than the beginning of the first interim or
annual reporting period beginning after June 15, 2003, which are applicable in
the Company's third quarter ended September 30, 2003. The Company will continue
to evaluate the impact of FIN 46 on its financial statements.
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; the Company's ability to sublet or
terminate leases for vacated facilities; uncertainties about 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 LIBOR rates, plus an applicable spread. The Company had borrowings of $4.5
million from its revolving credit facility at June 30, 2003.
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, within the 90 days prior to the date of 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 significant changes in the Company's internal
controls or in other factors that would significantly affect these
controls subsequent to the date of their evaluation.
PART II - OTHER INFORMATION
Responses to Items one through five are omitted since these items are either
inapplicable or the response thereto would be negative.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Page
(2)(a) Agreement and Plan of Merger By and Between Redwood
Acquisition Corp. and the Company dated as of February 20,
2003 (Incorporated by reference to the Company's February 26,
2003 Preliminary Proxy Statement, filed with the Commission).
(2)(b) Agreement and Plan of Merger of the Company (Incorporated by
reference to the Company's Proxy Statement dated September
27, 2001, filed with the Commission).
(3)(i) Articles of Incorporation of the Company (Incorporated by
reference to the Company's Proxy Statement dated September
27, 2001, filed with the Commission).
3(ii) Amended and Restated By-laws of the Company (Incorporated by
reference to Exhibit 3(ii)(a) of the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2002,
filed with the Commission).
10(a) Amended and Restated Employment Agreement dated November 20,
2001 between the Company and Robert B. Ginsburg (Incorporated
by reference to the Company's September 27, 2001 Proxy
Statement, filed with the Commission).*
12
Exhibit Page
10(b) Employment Agreement dated 11/20/01 between the Company and
Jeffrey K. Harrow (Incorporated by reference to the Company's
September 27, 2001 Proxy Statement, filed with the
Commission).*
10(c) Employment Agreement dated 11/20/01 between the Company and
Scott Tarte (Incorporated by reference to the Company's
September 27, 2001 Proxy Statement, filed with the
Commission).*
10(d) Subscription Agreement dated 8/23/01 among Scott Tarte,
Jeffrey K. Harrow and the Company (Incorporated by reference
to the Company's September 27, 2001 Proxy Statement, filed
with the Commission).
10(e) Subscription Agreement dated 8/23/01 among Robert B.
Ginsburg, Alan I. Goldberg and the Company (Incorporated by
reference to the Company's September 27, 2001 Proxy
Statement, filed with the Commission).
10(f) Form of Warrants issued by the Company to Jeffrey K. Harrow,
Scott Tarte, Robert B. Ginsburg and Alan I. Goldberg on
11/20/01 (Incorporated by reference to the Company's
September 27, 2001 Proxy Statement, filed with the
Commission). Schedule of grants (Incorporated by reference to
Exhibit 10(f) to the Company's Annual Report on Form 10-K for
the year ended December 31, 2001, filed with the Commission).
10(g) Stockholders' Agreement date 11/20/01 among Jeffrey K.
Harrow, Scott Tarte, Robert B. Ginsburg and the Company
(Incorporated by reference to the Company's September 27,
2001 Proxy Statement, filed with the Commission).
10(h) Registration Rights Agreement dated 11/20/01 among Jeffrey K.
Harrow, Scott Tarte, Robert B. Ginsburg, Alan I. Goldberg and
the Company (Incorporated by reference to the Company's
September 27, 2001 Proxy Statement, filed with the
Commission).
10(i) Amended Agreement of Employment, dated December 11, 1992,
between the Company and Alan I. Goldberg (Incorporated by
reference to Exhibit 10(b) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1992, filed with
the Commission).*
10(j) Letter Agreement dated January 2, 1998 to Amended Employment
Agreement with Alan I. Goldberg (Incorporated by reference to
Exhibit 7(2) to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998, filed with the
Commission).*
10(k) Letter Agreement dated 11/20/01 to Amended Employment
Agreement with Alan I. Goldberg. (Incorporated by reference
to Exhibit 10(k) to the Company's Annual Report on Form 10-K
for the year ended December 31, 2001, filed with the
Commission).*
10(l) Employment Agreement dated November 24, 1999 with Stephen P.
Rolf (Incorporated by reference to Exhibit 10(l) to the
Company Annual Report of Form 10-K for the year ended
December 31, 1999, filed with the Commission).*
13
Exhibit Page
10(m) Option Agreement dated January 10, 2000 with Stephen P. Rolf
(Incorporated by reference to Exhibit 10(x) to the Company
Quarterly Report on Form 10-Q for the quarter ended June 30,
2000, filed with the Commission).*
10(n) Option Cancellation Agreement dated November 20, 2001 among
Robert B. Ginsburg, Alan I. Goldberg and the Company
(Incorporated by reference to Exhibit 10(n) to the Company's
Annual Report on Form 10-K for the year ended December 31,
2001, filed with the Commission).*
10(o) Option Agreements with Outside Directors (Incorporated by
reference to Company Proxy Statement dated April 30, 1999,
filed with the Commission).*
10(p) Option Agreements dated August 7, 2000 with Outside Directors
(Incorporated by reference to Exhibit 10(x) to the Company
Quarterly Report on Form 10-Q for the quarter ended June 30,
2000, filed with the Commission).*
10(q) Option Agreements dated March 1, 2002 with Outside Directors
(Incorporated by reference to Exhibit 10(e) to the Company's
Annual Report on Form 10-K for the year ended December 31,
2001, filed with the Commission).*
10(r) 2000 Equity Incentive Plan (Incorporated by reference to
Exhibit 10(n) to the Company's Annual Report on Form 10-K for
the year ended December 31, 2001, filed with the
Commission).*
10(s) 2001 Equity Incentive Plan (Incorporated by reference to
Exhibit 10(ee) to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 2001, filed with the
Commission).*
10(t) Lease for Premises located at 2828 Charter Road,
Philadelphia, PA dated May 14, 1999 (Incorporated by
reference to Exhibit 10(f) to the Company Annual Report on
Form 10-K for the year ended December 31, 1999, filed with
the Commission).
10(u) Amendment to Lease 2828 Charter Road, Philadelphia, PA dated
February 25, 2000 (Incorporated by reference to Exhibit 10(g)
to the Company Annual Report on Form 10-K for the year ended
December 31, 1999, filed with the Commission).
10(v) Lease for Premises located at 8125 Troon Circle, Austell, GA
30001 (Incorporated by reference to Exhibit 10(i) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1993, filed with the Commission).
10(w) Lease Agreement dated June 29, 1998 between Gillespie Field
Partners, LLC and Sparks Exhibits, Ltd. (Incorporated by
reference to Exhibit 7(2) to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1998, filed with
the Commission).
14
Exhibit Page
10(x) Second Amended and Restated Revolving Credit and Security
Agreement dated as of May 16, 2002 with Wachovia Bank, NA,
(Incorporated by reference to Exhibit 10(bb) to the Company`s
Quarterly Report on Form 10-Q for the quarter ended June 30,
2002, filed with the Commission).
10(y) Amendment to Second Amended and Restated Revolving Credit and
Security Agreement dated March 11, 2003 with Wachovia Bank,
NA (Incorporated by reference to the Company's Annual Report
on Form10-K for the year ended December 31, 2002, filed with
the Commission).
10(z) Option Agreement dated June 3, 2002 with Robert B. Ginsburg
(Incorporated by reference to Exhibit 10(cc) to the Company`s
Quarterly Report on Form 10-Q for the quarter ended June 30,
2002, filed with the Commission).*
10(aa) Option Agreement dated June 3, 2002 with Alan I. Goldberg
(Incorporated by reference to Exhibit 10(dd) to the Company`s
Quarterly Report on Form 10-Q for the quarter ended June 30,
2002, filed with the Commission).*
10(bb) Option Agreement dated October 23, 2002 with Washburn
Oberwager (Incorporated by reference to Exhibit 10ee) to the
Company`s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2002, filed with the Commission).*
21 Subsidiaries of the Company (Incorporated by reference to
Exhibit 21 to the Company's Annual Report on Form 10-K for
the year ended December 31, 2000, filed with the Commission).
31 Section 1350 Certification 17
---------------
32(a) Rule 13A - 14(a) / 15d - 14(a) Certifications, Chief Executive Officer 18
---------------
32(b) Rule 13A - 14(a) / 15d - 14(a) Certifications, Chief Financial Officer 19
---------------
*Management contract or compensatory plan or arrangement.
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
15
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.
/s/ Robert B. Ginsburg
- -------------------------------------
Robert B. Ginsburg
President and Chief Executive Officer
/s/ Stephen P. Rolf
- -------------------------------------
Stephen P. Rolf
Chief Financial Officer
Dated: August 12, 2003
16