SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 25, 1998
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Blonder Tongue Laboratories, Inc.
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(Exact Name of registrant as specified in its charter)
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<S> <C> <C>
Delaware 1-14120 52-1611421
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(State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification No.)
incorporation)
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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: (732) 679-4000
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Not Applicable
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(Former name or former address, if changed since last report)
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Item 2. Acquisition of Assets.
As previously disclosed in the Current Report on Form 8-K of Blonder
Tongue Laboratories, Inc. (the "Company") filed with the Securities and Exchange
Commission on April 1, 1998, during March, 1998, the Company acquired all of the
assets and technology rights of the interdiction business of Scientific-Atlanta,
Inc. (the "Business Unit") for a purchase price consisting of (i) $19 million in
cash, (ii) 67,889 shares of the Company's common stock, (iii) a warrant to
purchase 150,000 additional shares of the Company's common stock at an exercise
price of $14.25 per share and (iv) assumption by the Company of certain
obligations under executory contracts with vendors and customers and certain
warranty obligations and other current liabilities of the Business Unit. The
closing occurred on March 25, 1998 rather than March 26, 1998 as indicated in
the Form 8-K filed on April 1, 1998.
The Company is filing this Form 8-K/A in order to provide the audited
financial statements of the Business Unit as well as the pro forma financial
statements of the Company required by Regulation S-X and unavailable at the time
of the original filing.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
The following audited financial statements of the Business Unit are
filed as a part of this Report:
1. Report of Independent Public Accountants
2. Financial Statements
a. Balance Sheets - June 27, 1997 and June 28, 1996
b. Statements of Operations for the years ended June 27, 1997
and June 28, 1996
c. Statements of Cash Flows for the years ended June 27, 1997
and June 28, 1996
3. Notes to Financial Statements
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Scientific-Atlanta, Inc.:
We have audited the accompanying balance sheets of INTERDICTION BUSINESS UNIT (a
business unit of Scientific-Atlanta, Inc.) as of June 27, 1997 and June 28, 1996
and the related statements of operations, and cash flows for the years ended
June 27, 1997 and June 28, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Interdiction Business Unit (a
business unit of Scientific-Atlanta, Inc.) as of June 27, 1997 and June 28, 1996
and the results of its operations and its cash flows for the years ended June
27, 1997 and June 28, 1996 in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN, LLP
Atlanta, Georgia
May 7, 1998
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INTERDICTION BUSINESS UNIT
(A Business Unit of Scientific-Atlanta, Inc.)
BALANCE SHEETS
JUNE 27, 1997 AND JUNE 28, 1996
ASSETS
1997 1996
---- ----
(In Thousands)
CURRENT ASSETS:
Accounts receivable, less allowances for
doubtful accounts of $43 and
$224 in 1997 and 1996, respectively $3,000 $4,480
Inventories 5,240 2,963
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Total current assets 8,240 7,443
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MACHINERY AND EQUIPMENT, at cost 2,057 1,940
Less accumulated depreciation and amortization 1,397 1,093
------ ------
660 847
------ ------
PATENTS, NET 774 651
------ ------
$9,674 $8,941
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LIABILITIES AND BUSINESS UNIT EQUITY
CURRENT LIABILITIES:
Accounts payable $3,092 $1,413
Accrued liabilities 324 603
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Total current liabilities 3,416 2,016
Other liabilities 135 281
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Total liabilities 3,551 2,297
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CONTINGENCIES (Note 5) 6,123 6,644
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BUSINESS UNIT EQUITY $9,674 $8,941
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The accompanying notes are an integral part of these balance sheets.
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INTERDICTION BUSINESS UNIT
(A Business Unit of Scientific-Atlanta, Inc.)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 27, 1997 AND JUNE 28, 1996
1997 1996
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(In Thousands)
SALES $ 8,139 $ 15,565
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COSTS AND EXPENSES:
Costs of sales 7,169 10,490
Sales and administrative 1,906 877
Research and development 1,673 703
Interest expense 0 5
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Total costs and expenses 10,748 12,075
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EARNINGS (LOSS) BEFORE INCOME TAXES (2,609) 3,490
PROVISION FOR INCOME TAXES 0 0
-------- --------
NET EARNINGS (LOSS) $ (2,609) $ 3,490
======== ========
The accompanying notes are an integral part of these statements.
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INTERDICTION BUSINESS UNIT
(A Business Unit of Scientific-Atlanta, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 27, 1997 AND JUNE 28, 1996
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<CAPTION>
1997 1996
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(In Thousands)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) earnings $(2,609) $ 3,490
Adjustments to reconcile net (loss) earnings to net cash (used in)
provided by operating activities:
Depreciation and amortization 368 415
Changes in operating assets and liabilities:
Accounts receivable 1,480 (2,361)
Inventories (2,277) (1,221)
Patents (186) (160)
Accounts payable and accrued liabilities 1,400 92
Other liabilities (146) 95
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Net cash (used in) provided by operating activities (1,970) 350
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of machinery and equipment (118) (198)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from (to) Parent 2,088 (152)
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Net cash provided by (used in) financing activities 2,088 (152)
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 0 0
CASH AND CASH EQUIVALENTS, beginning of period 0 0
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CASH AND CASH EQUIVALENTS, end of period $ 0 $ 0
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The accompanying notes are an integral part of these statements.
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<PAGE>
INTERDICTION BUSINESS UNIT
(A Business Unit of Scientific-Atlanta, Inc.)
NOTES TO FINANCIAL STATEMENTS
JUNE 27, 1997 AND JUNE 28, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
The Interdiction Business Unit ("the Company") is an operating business
unit of Scientific-Atlanta, Inc. ("SA" or "the Parent"). The Company is
not a separate legal entity and accordingly has no authorized or
outstanding capital stock. The Company manufactures interdiction
devices which are installed outside subscribers' homes and deliver
uniform service to cable-ready TV sets. Interdiction devices allow
cable operators to remotely change the service level, activate service,
or terminate service without sending a technician to the subscriber.
Basis of Presentation
These special purpose financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") and
present the financial position and results of operations of the Company
as if such unit had operated as a separate corporate entity
unaffiliated with SA. The results of operations include direct charges
for expenses such as facilities and telephone expenses and indirect
charges for other common expenses and corporate expenses. Common
expenses include, but are not limited to, shared factories and
functional services such as purchasing, human resources, financial
services, and legal services, which are charged based on management's
estimate of effort expended to support the business unit. In addition,
a fringe rate, which is applied to labor, is used to charge business
units the costs of employee benefit plans, such as a defined benefit
retirement plan, 401-k plan, health insurance, disability insurance,
and employer taxes related to compensation. Corporate expenses are
allocated to business units based on the ratio of business unit's sales
to consolidated sales. Management believes the charges and allocations
are based on practical and reasonable methods. However, these financial
statements are not necessarily indicative of the results of operations
which would have occurred if the Interdiction Business Unit had been an
independent company.
Amounts owed to SA by the Company have been included as a component of
business unit equity as these advances do not have any scheduled
maturity dates and are not expected to be settled upon the sale of the
Company by SA (see Note 6).
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Use of Estimates
The preparation of the accompanying 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 liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates. The estimates made by management primarily relate
to receivable and inventory reserves, and certain accrued liabilities,
principally relating to warranty and service provisions and
compensation.
Revenue Recognition
The Company recognizes revenue upon the shipment of products.
Research and Development Expenditures
Research and development costs are expensed as incurred.
Depreciation, Maintenance, and Repairs
Depreciation is provided using principally the straight-line method
over the estimated useful lives of the assets. Maintenance and repairs
are charged to expense as incurred. Renewals and betterments are
capitalized. The cost and accumulated depreciation of property retired
or otherwise disposed of are removed from the respective accounts, and
the gains or losses, thereon, are included in the consolidated
statement of earnings.
Warranty Costs
The Company accrues warranty costs at the time of sale. Expenses
related to unusual product warranty problems and product defects are
recorded in the period the problem is identified.
Cash and Cash Equivalents
SA provides a centralized cash management function; accordingly the
Company does not maintain separate cash accounts and its cash
disbursements and collections are settled by SA.
Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of trade accounts
receivable. A significant portion of the Company's revenue is derived
from a limited number of customers. For 1997 and 1996, four customers
individually accounted for more than 10% of the Company's revenue and
in aggregate accounted for 68% and 76% of the Company's revenues,
respectively. The Company typically does not require collateral or
security from its customers. The amount of loss should customers fail
to pay the receivables is limited to the notional amount of such
receivables.
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Fair Value of Financial Instruments
The book values of trade accounts receivable and trade accounts payable
approximate their fair values principally because of the short-term
maturities of these instruments.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market. Cost includes materials, direct labor, and manufacturing
overhead. Market is defined principally as net realizable value.
Inventories include purchased and manufactured components in various
stages of assembly as presented in the following table:
1997 1996
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(In Thousands)
Raw materials and work-in-process $2,973 $ 661
Finished goods 2,267 2,302
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Total inventory $5,240 $2,963
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2. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
1997 1996
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(In Thousands)
Warranty and service $ 75 $183
Common liabilities 249 420
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$324 $603
==== ====
Common liabilities consist primarily of accruals for compensation and
employee benefits, such as vacation, health and disability insurance
and retirement plans, which are made on a company-wide basis for
domestic employees. These liabilities are not specifically identifiable
to a business unit. Business units are supported by shared factories
and functional services such as purchasing, human resources, financial
services and legal services. Common liabilities have been allocated
based on a ratio of the Company's sales to total sales generated by the
domestic operations of SA. Management has determined that such
allocation is a practical and reasonable method of allocation. However,
these financial statements are not necessarily indicative of the
financial position which would have occurred if the Company had been an
independent company.
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3. OTHER LIABILITIES
Other liabilities consist of common liabilities for accrued benefits
and retirement plans and are allocated using the methodology described
in Note 2.
4. INCOME TAXES
For the years ended June 27, 1997 and June 28, 1996, Interdiction's
results were included in the federal and state income tax returns for
Scientific Atlanta, Inc. For the purpose of these financial statements,
the income tax provision has been determined on a basis as if
Interdiction was a separate taxpayer. Due to the history of losses
incurred by Interdiction, the net deferred tax asset resulting from
temporary differences is not considered probable of realization and
therefore is offset in all periods presented by a valuation allowance.
5. CONTINGENCIES
The Company is a party to various legal proceedings arising in the
ordinary course of business. In management's opinion, the outcome of
these proceedings will not have a material adverse effect on the
Company's financial position or results of operations.
6. SUBSEQUENT EVENTS
On March 1, 1998, SA signed a definitive agreement to sell the
inventory, manufacturing assets, and patents of the Interdiction
Business Unit to Blonder Tongue Laboratories, Inc. (Blonder Tongue) for
$19 million in cash, Blonder Tongue stock valued at $1 million and an
option to acquire additional shares of Blonder Tongue stock. The sale
was effective at the close of business on March 24, 1998.
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(b) Pro Forma Financial Information
The following unaudited pro forma financial statements of the Company
are filed as a part of this Report:
Blonder Tongue Laboratories, Inc.
Pro Forma Unaudited Condensed Financial Information
The accompanying pro forma unaudited condensed statements of operations are
based upon the historical consolidated financial statements of Blonder Tongue
Laboratories Inc. ("Blonder") and the Interdiction Business Unit (a business
unit of Scientific-Atlanta, Inc.) ("Interdiction") adjusted to give effect to
the Interdiction acquisition accounted for as a purchase, as if the acquisition
had occurred at January 1, 1997. The pro forma statements of operations are not
necessarily indicative of the results that would have been obtained if the
acquisition had occurred on the dates indicated or for any future period or
date. The pro forma adjustments give effect to available information and
assumptions that the Company believes are reasonable. The pro forma condensed
financial information should be read in conjunction with the Company's
historical consolidated financial statements and notes thereto and the
historical consolidated financial statements of Interdiction and the notes
thereto.
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Forma Unaudited Condensed Statements of Operations
(Dollars in thousands, except per share amounts)
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Year Ended December 31, 1997
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Blonder Interdiction Acquisition Pro Forma
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<S> <C> <C> <C> <C>
Net sales $ 62,057 $ 15,776 $ -- $ 77,833
Cost of sales 39,656 12,690 $ -- 52,346
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Gross profit 22,401 3,086 -- 25,487
-------- -------- ------- --------
Selling, general and
administrative 9,938 2,100 1,175 (a) 13,213
Research and development 1,954 1,491 -- 3,445
-------- -------- ------- --------
11,892 3,591 1,175 16,658
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Earnings from operations 10,509 (505) (1,175) 8,829
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Other income (expense)
Interest expense (414) -- (1,568)(b) (1,982)
Other income 595 -- -- 595
-------- -------- ------- --------
181 -- (1,568) (1,387)
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Earnings before income taxes 10,690 (505) (2,743) 7,442
-------- -------- ------- --------
Provision for income taxes 4,276 -- (1,299)(c) 2,977
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Net earnings $ 6,414 $ (505) $(1,444) $ 4,465
-------- -------- ------- --------
Basic earnings per share $ 0.78 $ 0.54
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Basic weighted average shares
outstanding 8,227 68 8,295
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Diluted earnings per share $ 0.77 $ 0.53
Diluted weighted average shares
outstanding 8,375 68 8,443
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Quarter ended March 31, 1998
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Acquisition
Blonder Interdiction Adjustments Pro Forma
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<S> <C> <C> <C> <C>
Net sales $15,119 $5,990 $ -- $21,109
Cost of sales $10,024 4,250 -- 14,274
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Gross profit 5,095 1,740 -- 6,835
------- ------ -------- ------
Selling, general and
administrative 2,720 271 294(a) 3,285
Research and development 577 324 -- 901
------- ------ -------- ------
3,297 595 294 4,186
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Earnings from operations 1,798 1,145 (294) 2,649
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Other income (expense)
Interest expense (124) (7) (392)(b) (523)
Other income 1 -- -- 1
------- ------ -------- ------
(123) (7) (392) (522)
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Earnings before income taxes 1,675 1,138 (686) 2,127
------- ------ -------- ------
Provision for income taxes 670 -- 181(c) 851
------- ------ -------- ------
Net earnings $ 1,005 $1,138 $ (867) $1,276
------- ------ -------- ------
Basic earnings per share $ 0.12 $ 0.15
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Basic weighted average shares
outstanding 8,245 68 8,313
------- -------- ------
Diluted earnings per share $ 0.12 $ 0.15
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Diluted weighted average shares
outstanding 8,505 68 8,573
------- -------- ------
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Adjustments to reflect the acquisition as if it had occurred as of January 1,
1997 are as follows:
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<CAPTION>
Year ended Quarter ended
December March 31,
31, 1997 1998
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a -- Adjustment to reflect amortization of intangibles acquired and
goodwill of $17.6 million over an average life of 15 years $1,175 $294
b -- Adjustment to reflect interest expense on $19 million of debt
used to finance the acquisition at 8.25% $1,568 $392
c -- Adjustment to reflect taxes at the Company's effective
tax rate of 40%
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SIGNATURE
Pursuant to 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 hereunto duly authorized.
BLONDER TONGUE LABORATORIES, INC.
By: /s/ James A. Luksch
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James A. Luksch
President
Date: June 1, 1998
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