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 MARCH 31, 1996, OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO
____________.
Commission file number 1-14120
BLONDER TONGUE LABORATORIES, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1611421
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Jake Brown Road, Old Bridge, New Jersey 08857
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 679-4000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No___
Number of shares of common stock, par value $.001, outstanding as of March
31, 1996: 8,133,196.
The Exhibit Index appears on page 10 of 10.
<PAGE>
BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
March 31, Dec. 31,
1996 1995
---------- ---------
(unaudited)
<S> <C> <C>
Assets (Note 5)
Current assets:
Cash.......................................................................... $ 79 $ 477
Accounts receivable, net of allowance for doubtful
accounts of $172 and $205, respectively..................................... 10,323 9,155
Inventories (Note 4).......................................................... 15,946 13,390
Other current assets ......................................................... 391 906
Deferred income taxes......................................................... 228 137
--------- ---------
Total current assets.............................................. 26,967 24,065
Property, plant and equipment, net of accumulated
depreciation and amortization............................................... 6,784 6,486
Other assets.................................................................... 1,155 1,253
--------- ---------
$34,906 $31,804
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Revolving line of credit (Note 5)............................................. $ 4,444 $ 2,709
Current portion of long-term debt............................................. 219 221
Accounts payable.............................................................. 2,798 4,630
Accrued compensation.......................................................... 1,259 843
Other accrued expenses........................................................ 997 729
Income taxes.................................................................. 469 526
--------- ---------
Total current liabilities......................................... 10,186 9,658
--------- ---------
Deferred income taxes........................................................... 472 482
Long-term debt, including related party debt of $1,591.......................... 2,230 1,924
Commitments and contingencies (Note 6).......................................... -- --
Stockholders' equity (Note 7):
Preferred stock, $.001 par value; authorized 5,000,000 shares;
no shares outstanding....................................................... -- --
Common stock, $.001 par value; authorized 25,000,000 shares,
7,919,285 shares issued and outstanding at December 31, 1995 and
8,133,196 shares issued and outstanding at March 31, 1996................... 8 8
Paid-in capital............................................................... 21,234 19,546
Retained earnings............................................................. 776 186
--------- ---------
Total stockholders' equity........................................ 22,018 19,740
--------- ---------
$34,906 $31,804
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
Net sales....................................................... $11,572 $11,864
Cost of goods sold.............................................. 7,615 7,322
-------------- --------------
Gross profit................................................ 3,957 4,542
-------------- --------------
Operating expenses:
Selling expenses............................................ 1,215 1,086
General and administrative.................................. 1,070 1,172
Research and development.................................... 523 459
-------------- --------------
2,808 2,717
-------------- --------------
Earnings from operations........................................ 1,149 1,825
-------------- --------------
Other income (expense):
Interest expense............................................ (165) (212)
Other income................................................ -- 21
-------------- --------------
(165) (191)
-------------- --------------
Earnings before income taxes.................................... 984 1,634
Provision for income taxes...................................... 394 83
-------------- --------------
Net earnings................................................ $ 590 $ 1,551
============== ==============
Net earnings per share......................................... $ 0.07
==============
Weighted average shares outstanding............................ 8,266
==============
Pro forma data (Note 3):
Historical earnings before income taxes..................... $ 1,634
Pro forma provision for income taxes........................ 654
--------------
Net earnings ........................................... $ 980
==============
Pro forma net earnings per share................................ $ 0.16
==============
Weighted average shares outstanding............................. 5,967
==============
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1996 1995
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings.................................................................. $ 590 $ 1,551
Adjustments to reconcile net earnings to cash
used in operating activities:
Depreciation and amortization............................................. 281 72
Provision for doubtful accounts........................................... (33) 76
Deferred income taxes..................................................... (101) --
Changes in operating assets and liabilities:
Accounts receivable..................................................... (1,135) (4,940)
Inventories............................................................. (2,556) (1,470)
Other current assets.................................................... 515 14
Other assets............................................................ 54 55
Income taxes............................................................ (57) 74
Accounts payable and accrued expenses................................... (1,148) 1,882
--------- ---------
Net cash used in operating activities.................................. (3,590) (2,686)
--------- ---------
Cash Flows From Investing Activities:
Capital expenditures.......................................................... (535) (85)
--------- ---------
Net cash used in investing activities.................................. (535) (85)
--------- ---------
Cash Flows From Financing Activities:
Net borrowings under revolving line of credit................................. 1,735 2,982
Proceeds from long-term debt.................................................. 412 --
Repayments of long-term debt.................................................. (108) (218)
Proceeds from sale of common stock............................................ 1,688 --
Distributions paid to stockholders............................................ -- (428)
--------- ---------
Net cash provided by financing activities.............................. 3,727 2,336
--------- ---------
Net Decrease In Cash............................................................ (398) (435)
Cash, beginning of period....................................................... 477 502
--------- ---------
Cash, end of period............................................................. $ 79 $ 67
========= =========
Supplemental Cash Flow Information:
Cash paid for interest........................................................ $ 154 $ 193
Cash paid for income taxes.................................................... 305 10
========= =========
Non-cash transactions:
Accrued dividends............................................................. -- 1,728
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
(unaudited)
Note 1 - Company and Basis of Presentation
Blonder Tongue Laboratories, Inc. (the "Company") is a manufacturer of
television and satellite signal distribution equipment supplied to the private
cable television and broadcast industries. The consolidated financial statements
include the accounts of Blonder Tongue Laboratories, Inc. and subsidiaries as
discussed below. Significant intercompany accounts and transactions have been
eliminated in consolidation.
The results for the first quarter of 1996 are not necessarily indicative of
the results to be expected for the full fiscal year and have not been audited.
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments, consisting only of normal recurring
accruals, necessary for a fair statement of the results of operations for the
period presented and the consolidated balance sheet at March 31, 1996. Certain
information and footnote disclosure normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the SEC rules and regulations. These financial
statements should be read in conjunction with the financial statements and notes
thereto that were included in the Company's latest annual report on Form 10-K.
Note 2 - Reorganization and Recapitalization
On December 11, 1995, the Company acquired Blonder Tongue International,
Inc. (BTI). BTI was an S Corporation formed in 1994 by the stockholders of the
Company. The acquisition was consummated by contribution of BTI's shares to the
Company. The acquisition was accounted for at historical cost similar to a
pooling of interests, due to the common control exercised over the entities by
related parties. The accompanying consolidated financial statements have been
restated for the period ended March 31, 1995. As a result of the acquisition of
BTI, the S Corporation elections for both BTI and the Company automatically
terminated on December 11, 1995.
On October 3, 1995, the Board of Directors and stockholders approved the
following actions in connection with the Company's initial public offering,
which actions were implemented on December 11, 1995:
Authorized capital consisting of 25 million shares of $.001 par value common
stock and 5 million shares of $.001 par value preferred stock. The preferred
stock may be issued in one or more series with such rights, preferences and
limitations as the Board of Directors of the Company may determine.
Declared a 2,011 for 1 stock split for the common stock. The consolidated
financial statements reflect the impact of the stock split for all periods
presented.
Note 3 - Pro Forma Presentations
The income tax provision for the period ended March 31, 1995 has been
calculated as if the Company were taxable as a C Corporation under the Internal
Revenue Code.
Pro forma net earnings per share is based on the weighted average number of
common stock shares and common stock equivalent shares outstanding during each
period, as adjusted for the effects of the application of Securities and
Exchange Commission Staff Accounting Bulletin ("SAB") No. 83 (53 for March 31,
1995). Pursuant to SAB No. 83, options granted within one year of the initial
public offering which have an exercise price less than the initial public
offering price are treated as outstanding for all periods presented. Pro forma
net earnings per share is computed using the treasury stock method, under which
the number of shares outstanding reflects an assumed use of the proceeds from
the assumed exercise of such options to repurchase shares of the Company's
common stock at the initial public offering price.
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<PAGE>
BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
(unaudited)
Note 4 - Inventories
Inventories are summarized as follows:
March 31, Dec. 31,
1996 1995
------------ ----------
Raw Materials................................ $ 9,088 $ 7,293
Work in process.............................. 2,819 2,786
Finished Goods............................... 4,039 3,311
------------ ----------
$15,946 $13,390
============ ==========
Note 5 - Line of Credit
The Company has a $15 million line of credit with a bank on which funds may
be borrowed at the bank's prime rate (8.25% at March 31, 1996). As of March 31,
1996, the Company had drawn down $4,444 under the line of credit for working
capital needs. Borrowings under the line of credit are limited based on a
percentage of accounts receivable and inventory. The line of credit is
collateralized by a security interest in all of the Company's assets. The
agreement contains restrictions as to the amount of capital expenditures and
investments and requires the Company to maintain certain financial ratios. The
line of credit is renewable on June 30, 1996.
Note 6 - Commitments and Contingencies
In the first quarter of 1996, the Company entered into three five-year
capital lease agreements for certain machinery and equipment totaling $929. As
of March 31, 1996, progress payments totaling $387 have been made.
Note 7 - Stockholders' Equity
In January 1996, 182 shares of Common Stock were sold at a price of $9.50
per share pursuant to the exercise of the underwriters' over-allotment option
which generated net proceeds of approximately $1,606. The proceeds were used for
working capital.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Recent Development
On March 31, 1996, the Company entered into an agreement with Pacific Bell
and Pacific Telesis Video Services for the development and production of
modified versions of its VideoMask(TM) interdiction product. Pacific will
install both the specially designed single-family-dwelling and the multiple
dwelling units in its advanced communications network now being field tested in
San Jose, California. The agreement covers five years with initial shipments
expected in late 1996.
First three months of 1996 Compared with first three months of 1995
Net Sales. Net sales decreased $292,000, or 2.5%, to $11,572,000 in the
first three months of 1996 from $11,864,000 in the first three months of 1995.
International sales accounted for $789,000 (6.8% of total sales)
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<PAGE>
for the first three months of 1996 compared to $1,444,000 (12.2% of total sales)
for the first three months of 1995. Net sales included approximately $270,000 of
VideoMask(TM) interdiction equipment. Longer than anticipated accelerated life
testing of the Company's new VideoMask(TM) interdiction product delayed
production until early March 1996. Net sales also included $300,000 under the
Company's agreement to supply interdiction equipment to Pacific Bell.
The decrease in sales was primarily attributed to a softening in demand for
products in the MDU market and lower international sales. Sales in the Lodging
market remained strong during the period. In mid February 1996, payments on its
account by Interactive Cable Systems, Inc. ("ICS"), one of the Company's largest
customers, slowed. Shipments to this customer for the first quarter were
monitored to coincide with collections from such customer for the same period.
Commencing at the end of the first quarter, the Company delayed further
shipments to this customer pending an improvement in its account aging and a
reduction in its outstanding account balance.
Cost of Goods Sold. Cost of goods sold increased to $7,615,000 for the
first three months of 1996 from $7,322,000 for the first three months of 1995
and also increased as a percentage of sales to 65.8% from 61.7%. The increase
was caused primarily by a higher proportion of sales during the period being
comprised of lower margin products.
Selling Expenses. Selling expenses increased to $1,215,000 in the first
three months of 1996 from $1,086,000 in the first three months of 1995,
primarily due to increased costs incurred for advertising, marketing materials
and trade shows.
General and Administrative Expenses. General and administrative expenses
decreased to $1,070,000 in the first three months of 1996 from $1,172,000 for
the first three months of 1995 and decreased as a percentage of sales to 9.2% in
the first three months of 1996 from 9.9% for the first three months of 1995. The
$102,000 decrease can be attributed to a reduction in rent expense, net of
increased depreciation, as a result of the purchase of the manufacturing
facility and a decline in salaries due to a head count reduction, offset by an
increase in expenditures for professional services and insurance.
Research and Development Expenses. Research and development expenses
increased 13.9% to $523,000 in the first three months of 1996 from $459,000 in
the first three months of 1995, primarily due to an increase in purchased
engineering services and increased expenditures related to the VideoMask(TM)
interdiction product line. Research and development expenses also increased as a
percentage of sales to 4.5% from 3.9% and the Company anticipates continuing to
increase its research and development expenditures.
Operating Income. Operating income decreased 37% to $1,149,000 for the
first three months of 1996 from $1,825,000 for the first three months of 1995.
Operating income as a percentage of sales decreased to 9.9% in the first three
months of 1996 from 15.4% in the first three months of 1995.
Interest and Other Expenses. Other expenses, net, decreased to $165,000 in
the first three months of 1996 from $191,000 in the first three months of 1995.
These expenses in the first three months of 1996 consisted of interest expense
in the amount of $165,000. Other expenses in the first three months of 1995
consisted of interest expense of $212,000, offset by $21,000 of other income.
Income Taxes. The Company with the consent of its stockholders elected to
be taxed as an S Corporation for federal income tax purposes since its
organization. As a consequence, the taxable net earnings of the Company were
taxed as income to the Company's stockholders in proportion to their individual
stockholdings, and the payment of federal income taxes on such proportionate
share of the Company's taxable earnings is the personal obligation of each
stockholder. The Company's status as an S Corporation terminated on December 11,
1995, and as a result the Company is now a C Corporation for income tax
purposes. As a C Corporation, the Company is currently taxed at a combined
effective rate of 40% based upon current federal and state income tax
regulations. Had the Company been taxable as a C Corporation for the first
quarter of 1995, pro forma income
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<PAGE>
taxes and pro forma net earnings after taxes would have been $654,000 and
$980,000, respectively, for the period ended March 31, 1995.
Liquidity and Capital Resources
As of March 31, 1996, the Company's working capital was $16,781,000,
compared to $14,407,000 as of December 31, 1995. The increase in working capital
is primarily attributable to a $1,606,000 equity capital infusion as a result of
the exercise by the Company's underwriters of their over-allotment option in
connection with the Company's initial public offering of Common Stock. These
additional proceeds were applied against the outstanding balance under the
Company's revolving line of credit. Historically, the Company has satisfied its
cash requirements primarily from net cash provided by operating activities and
from borrowings under its line of credit.
The Company's net cash used in operating activities for the three-month
period ended March 31, 1996 was $3,590,000, including $2,556,000 to fund the
increase in inventory, compared to cash used in operating activities for the
three-month period ended March 31, 1995, which was $2,686,000. Cash flows from
operating activities have been negative, due primarily to increases in accounts
receivable and inventory aggregating $3,691,000, resulting in part from slow
payment by ICS during such period, and the Company's decision to delay shipments
to such customer until its account aging had improved, and a reduction in
accounts payable of $1,832,000 offset by an increase of $684,000 in accrued
expenses. Approximately $838,000 of accounts receivable outstanding at March 31,
1996 was due from ICS for more than 60 days.
Cash used in investing activities was $535,000, substantially all of which
is attributable to capital expenditures for new equipment. During 1996 the
Company anticipates incurring capital expenditures relating to certain
improvements to the Old Bridge Facility in the amount of approximately $150,000.
The Company anticipates additional capital expenditures during calendar year
1996 aggregating, approximately $1,599,000, $560,000 of which will be used for
the purchase of several high speed robotic insertion machines to be used
primarily in the manufacture of circuit boards for the Company's new
VideoMask(TM) product line and the balance of which will be used for the
purchase of other automated assembly and test equipment. The Company does not
have any present plans or commitments for material capital expenditures for
fiscal year 1997.
Cash provided by financing activities was $3,727,000 for the first three
months of 1996, comprised primarily of debt proceeds, net of repayments, of
$2,039,000, net proceeds from the Company's sale of an additional 181,735 shares
of Common Stock pursuant to an over-allotment option relating to the Company's
initial public offering of $1,606,000 and an additional $82,000 relating to the
exercise of stock options.
As of March 31, 1996, the Company's outstanding balance under its line of
credit was $4,444,000. This loan is secured by substantially all of the
Company's assets. In October, 1995, the Company's line of credit was increased
to $15,000,000. The credit line expires on June 30, 1996, bears interest at
Meridian Bank's prime rate (8.25% as of April 29, 1996), and is subject to
certain covenants, including the maintenance of certain financial ratios and
limitations on capital expenditures and payment of dividends.
The Company has signed a commitment letter with its bank to borrow
approximately $2,800,000 secured by its principal office/manufacturing facility
located in Old Bridge, New Jersey. Closing of the loan transaction pursuant to
the commitment letter is subject to fulfillment of various conditions which are
normal and customary in transactions of this type. Proceeds of the loan will be
applied against the outstanding balance of the Company's revolving line of
credit.
The Company currently anticipates that the cash generated from operations,
existing cash balances and amounts available under its existing or a replacement
line of credit, will be sufficient to satisfy its foreseeable working capital
needs.
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<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings pending or, to the knowledge of
management, threatened against the Company.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the first
quarter ended March 31, 1996 through the solicitation of proxies or otherwise.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits are listed in the Exhibit Index appearing at page 10 herein.
(b) No reports on Form 8-K were filed in the quarter ended March 31, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BLONDER TONGUE LABORATORIES, INC.,
Date: May 15, 1996 By: /s/ JAMES A. LUKSCH
----------------------------------------
James A. Luksch
President and Chief Executive Officer
By: /s/ PETER PUGIELLI
----------------------------------------
Peter Pugielli, Senior Vice President
-- Finance
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<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit # Description Sequential Page Number
--------- ----------- ----------------------
<S> <C> <C>
3.1 Restated Certificate of Incorporation of Blonder Incorporated by reference from Exhibit
Tongue Laboratories, Inc. 3.1 to S-1 Registration Statement No. 33-
98070 originally filed October 12, 1995,
as amended.
3.2 Restated Bylaws of Blonder Tongue Laboratories, Incorporated by reference from Exhibit
Inc. 3.2 to S-1 Registration Statement No. 33-
98070 originally filed October 12, 1995,
as amended.
27 Financial Data Schedule Electronic Filing only.
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from Blonder
Tongue Laboratories, Inc. and subsidiaries consolidated statement of earnings
for the three-month period ended March 31, 1996 and Balance Sheet as at
March 31, 1996 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 79
<SECURITIES> 0
<RECEIVABLES> 10,495
<ALLOWANCES> 172
<INVENTORY> 15,946
<CURRENT-ASSETS> 26,967
<PP&E> 8,159
<DEPRECIATION> 1,375
<TOTAL-ASSETS> 34,906
<CURRENT-LIABILITIES> 10,186
<BONDS> 0
0
0
<COMMON> 8
<OTHER-SE> 22,010
<TOTAL-LIABILITY-AND-EQUITY> 34,906
<SALES> 11,572
<TOTAL-REVENUES> 11,572
<CGS> 7,615
<TOTAL-COSTS> 7,615
<OTHER-EXPENSES> 2,793
<LOSS-PROVISION> 15
<INTEREST-EXPENSE> 165
<INCOME-PRETAX> 984
<INCOME-TAX> 394
<INCOME-CONTINUING> 1,149
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 590
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
