UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
Commission File Number 0-27996
BATTERIES BATTERIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-383-5420
(State of other jurisdiction (IRS Employer incorporation
or organization) Identification No.)
Building IEB, Chimney Rock Road
Bound Brook, New Jersey 08805
(Address of principal executive offices)
(732) 764-0619
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
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
As of March 31, 1999, there were 4,743,000 shares of common stock
outstanding.
<PAGE 1>
BATTERIES BATTERIES, INC.
FORM 10-Q/A FOR THE PERIOD ENDED March 31, 1999
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Consolidated Financial Statements
Consolidated Balance sheets March 31, 1999
(unaudited) and December 31, 1998............... 3
Consolidated Statements of Operations For the
three months ended March 31, 1999 (unaudited)
and 1998 (unaudited)............................ 4
Consolidated Statements of Cash Flows For the
three months ended March 31, 1999 (unaudited)
and 1998 (unaudited)............................ 5
Notes to the Consolidated Financial Statements.... 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations............. 13
PART II - OTHER INFORMATION........................... 19
<PAGE 2>
BATTERIES BATTERIES, INC.
CONSOLIDATED BALANCE SHEET
(In Thousands, Except Share and Per Share Data)
December 31, March 31,
1998 1999
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 330 $ 406
Accounts receivable
(net of allowances of $563
and $625, respectively) 7,151 6,641
Inventories
(net of reserves of $697
and $482, respectively) 9,452 9,736
Prepaid expenses and other current
assets 340 434
Current deferred income taxes 211 211
Total current assets 17,484 17,428
PROPERTY AND EQUIPMENT - Net 1,336 1,344
EXCESS OF COST OVER NET ASSETS ACQUIRED 5,110 5,055
OTHER ASSETS 555 500
TOTAL $24,485 $24,327
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 600 $ 600
Accounts payable 3,887 4,023
Accrued expenses 1,464 1,639
Total current liabilities $ 5,951 $ 6,262
LONG-TERM DEBT - NET $ 8,865 $ 8,246
STOCKHOLDERS' EQUITY:
Preferred stock, par value $0.001,
1,000,000 shares authorized
no shares issued or outstanding -- --
Common Stock, par value $.001,
10,000,000 shares authorized,
$4,743,000 shares, issued and
outstanding, respectively 5 5
Additional paid-in capital 10,716 10,716
Retained (Deficit) (1,052) (902)
Total stockholders' equity 9,669 9,819
TOTAL $24,485 $24,327
See notes to consolidated financial statements.
<PAGE 3>
BATTERIES BATTERIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except share and per share data)
THREE MONTHS ENDED
March 31, 1998 March 31, 1999
NET SALES $13,114 $11,039
COST OF SALES 9,532 6,943
Gross profit 3,582 4,096
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 3,649 3,624
INCOME (LOSS) FROM OPERATIONS (67) 472
INTEREST EXPENSE, NET 202 176
INCOME (LOSS) BEFORE PROVISION
(BENEFIT) FOR INCOME TAXES (269) 296
PROVISION (BENEFIT) FOR INCOME
TAXES (125) 146
NET INCOME (LOSS) (144) 150
BASIC EARNINGS (LOSS) PER SHARE $ (0.03) $ 0.03
DILUTED EARNINGS (LOSS) PER SHARE $ (0.03) $ 0.03
BASIC WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 4,743,000 4,743,000
DILUTED WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 4,743,000 4,753,677
See notes to consolidated financial statements
<PAGE 4>
<PAGE>
BATTERIES BATTERIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In 000's)
THREE MONTHS ENDED
March 31, 1998 March 31, 1999
OPERATING ACTIVITIES:
Net income (loss) $ (144) $ 150
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Depreciation & amortization
expense 193 199
CHANGES IN ASSETS AND LIABILITIES:
Accounts receivable 334 510
Inventories 1,027 (284)
Prepaid expenses and other
assets (76) (69)
Accounts payable and accrued
expenses 275 311
Net cash provided by
operating activities 1,609 817
INVESTING ACTIVITIES:
Purchase of property and equipment,
net (110) (122)
Net cash used in investing
activities (110) (122)
FINANCING ACTIVITIES:
Net payments on borrowings (1,561) (619)
Net cash used by
financing activities (1,561) (619)
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (62) 76
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 540 330
CASH AND CASH EQUIVALENTS, END
OF PERIOD $ 478 $ 406
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during period for:
Interest $ 228 $ 167
Income taxes $ 238 $ 62
See notes to consolidated financial statements
<PAGE 5>
BATTERIES BATTERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(Unaudited)
1. BUSINESS
Batteries Batteries, Inc. (the "Company" or "Batteries
Batteries") was founded in May 1995 to create a nationwide
battery distribution business serving the commercial,
industrial and retail markets. Through a series of
acquisitions for cash, notes and securities, Batteries
Batteries acquired (i) in June 1995 Specific Energy, Inc.
("Specific Energy") based in Phoenix, Arizona, (ii) in
April 1996, Advanced Fox Antenna, Inc. ("Advanced Fox")
based in Huntingdon Valley, Pennsylvania and Tauber
Electronics, Inc. ("Tauber") based in San Diego, California,
(iii) in January 1997 Battery Network, Inc. and affiliate
companies ("Battery Network") based in Chicago, Illinois,
North Branch, New Jersey and Escondido, California, and
(iv) in May 1997 Cliffco of Tampa Bay, Inc. ("CTB") based in
Tampa, Florida.
The Company's operations are presently organized into two
business groups: battery assembly and distribution and
cellular and wireless accessory distribution.
The Battery Group is headquartered in Escondido, California
and is comprised of:
- Tauber Electronics which engineers, manufactures, and
distributes battery packs and battery systems to
original equipment manufacturers throughout the United
States.
- Battery Network is a national distributor of specialty
batteries to the commercial, industrial, and
government/institutional markets.
The Wireless Products Group is headquartered in Huntingdon
Valley, Pennsylvania and is comprised of:
- Advanced Fox Antenna, based in Huntingdon Valley,
Pennsylvania with sales offices and warehouse
facilities in Miami, Florida, and Escondido,
California. Advanced Fox distributes over 1,600
cellular accessory products, including batteries,
chargers, and antennas to customers throughout North
and South America.
- Cliffco of Tampa Bay, Florida is a distributor of
cellular products to a variety of customers including
the large communication carriers. <PAGE 6>
Financial Information about these industry segments is found
in Note 5(Industry Segment) of this report.
The accompanying consolidated financial statements as of the
three month period ended March 31, 1999 and March 31, 1998,
are unaudited; but in the opinion of management, the
information contained herein reflects all adjustments
necessary to make the results of operations for the interim
periods a fair statement of such operations. All such
adjustments are of a normal recurring nature. Operating
results for interim periods are not necessarily indicative
of results which may be expected for the year as a whole.
These consolidated financial statements should be read in
conjunction with the audited financial statements and
footnotes thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1998.
2. ACQUISITIONS AND LOAN FACILITY
On January 7, 1997, effective January , 1997 the Company
acquired the business and related assets of Battery Network
(the "BN/Acquisition") which operates principally in
California, New Jersey and Illinois. The purchase price of
approximately $11.2 million consisted of (i) approximately
$8.3 million in cash, subject to adjustment to the extent
that the net worth, as defined of Battery Network, exceeded
or was less than $7.3 million; (ii) 550,000 shares of Common
Stock valued at a price of $4.125 per share and five year
options to purchase an additional 225,000 shares at an
exercise price of $4.50 per share, and (iii) approximately
$590,000 in transaction costs.
On May 12, 1997, the Company acquired the business and
related assets of CTB. The purchase price of approximately
$615,000 consisted of (i) cash of approximately $75,000
(ii) 193,000 shares of common stock valued at $2.35 per
share or $446,985 and (iii) approximately $93,000 in
transaction costs. In addition, the Company assumed
liabilities of $1,162,000. As part of its assumption of
liabilities, the Company paid at the closing indebtedness of
CTB of approximately $560,000. The CTB agreement included a
three-year employment contract with the president and sole
stockholder of the seller. The operations of CTB have been
included in the consolidated results of operations of the
Company from the date of its acquisition.
The cash portion of the purchase price of each transaction,
as well as the repayment of CTB debt of $560,000 to its
collateralized lender was funded with a portion of the
proceeds of a borrowing pursuant to a Revolving Credit, Term
Loan and Security Agreement, dated January 6, 1997, as
amended May 13, 1997, (the "Loan Facility"), between IBJ
Schroder Bank & Trust Company, as Agent ("IBJ") and the
Company and all its subsidiaries. The Loan Facility consists
<PAGE 7> of a $3,000,000 Term Loan (the "Term Loan") payable
in 35 monthly installments of $50,000 each with the balance
to be paid at maturity and a Revolving Credit Facility (the
"Revolver Loan") of up to $10,000,000 to be advanced at the
rate of 80% of eligible accounts receivable and 50% of
inventories. The Revolver Loan bears interest at the rate
of 1/4 of 1% plus the higher of (i) the base commercial
lending rate of IBJ or (ii) the weighted average of the
rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds
brokers plus 1/4 of 1%, or, at the option of the Company at
the Eurodollar rate plus 2%. The Eurodollar rate is defined
as Libor for a designated period divided by one less the
aggregate reserve requirements. The interest on the Term
Loan is 1/2% higher than the interest rate on the Revolver
Loan. The Loan Facility is secured by a pledge of the
assets of the borrowers and a pledge of the outstanding
capital stock of the subsidiaries of the Company. As of
March 31, 1999, the principal amounts outstanding of the
Term Loan was $1.3 million and the Revolver Loan was
$7.5 million.
The Loan Facility contains certain covenants that include
maintenance of certain financial ratios, maintenance of
certain amounts of working capital and net worth as well as
other affirmative and negative covenants. At December 31,
1998, the Company was not in compliance with certain of
these covenants. On March 30, 1999, the Company entered
into an amended credit agreement whereby the non-compliance
at December 31, 1998 was waived, and the Loan Facility was
extended for an additional one year period to January 7,
2001 and new financial covenants were negotiated through
December 31, 2000 which reflect the Company's current
projections. As of March 31, 1999, the Company was in
compliance with these covenants.
3. MANAGEMENT AGREEMENT
In February 1998, the management agreement with Founders
Management Services, Inc. ("Founders") was revised by mutual
consent to delete provisions relating to the rights of
Founders to an incentive fee and to an origination fee
(thereby limiting its fees to an annual management fee of
$150,000) and to move up the expiration date of the
Agreement to April 30, 1999. On May 5, 1998, both active
principals of Founders resigned as officers and directors of
the Company, effectively terminating the relationship
between the Company and Founders.
4. RESTRUCTURING CHARGES
During the second quarter of 1998, the company made the
decision to exit the retail battery business and explore the
possibility of a sale of Specific Energy Corporation in
<PAGE 8> Phoenix, Arizona. On August 6, 1998, the Company
executed an Asset Purchase Agreement with a closing date set
for on or about August 31, 1998. In accordance with FASB
Statement 121 -- "Accounting for the Impairment of Long-
Lived Assets and Assets to be Disposed of," the Company
reduced the carrying amount of the retail assets of Specific
Energy to its net realizable value in the second quarter of
1998 by $575,000 which principally represented the remaining
goodwill resulting from the Specific Energy acquisition in
1995.
5. SEGMENT DISCLOSURE
Summary information by segment as of March 31, 1999 and 1998 and
the quarters ended March 31, 1999 and 1998 is as follows:
The Company's operations are presently organized into two
business groups: battery assembly and distribution and cellular
and wireless accessory distribution as follows:
The Battery Group is headquartered in Escondido, California. The
Battery Group consists of Tauber Electronics, which engineers,
manufactures and distributes battery packs and battery systems to
original equipment manufacturers and Battery Network which is a
national distributor of specialty batteries to the commercial,
industrial and government/institutional markets and Specific
Energy Inc., a retail distributor of specialty batteries whose
assets were sold in September, 1998.
The Wireless Products Group, headquartered in Huntingdon Valley,
Pennsylvania, consists of Advanced Fox Antenna, Inc. which
distributes over 1,600 cellular telephone accessory products,
including batteries, chargers, and antennas throughout North and
South America and Cliffco of Tampa Bay, Inc., which distributes
cellular accessories to a variety of customers including the
large communication carriers.
The business groups were established based primarily on
commonality and synergies in product offerings and market focus,
and management expertise.
Listed below is a geographic breakdown of each group by
individual company listing the headquarters and branch
operations.
<PAGE 9>
The Battery
Group Location Nature of Operation
Battery Network Escondido, CA Headquarters -
Battery Network
Battery Network North Branch NJ Branch Sales and
Warehousing
Battery Network McHenry, IL Branch Sales Office
Tauber Electronics Escondido, CA Headquarters -
Tauber Electronics
The Wireless
Group Location Nature of Operation
Advanced Fox Antenna Huntingdon Headquarters -
Valley, PA Wireless Group
Advanced Fox Antenna Miami, FL Branch Sales and
Warehousing
Cliffco of Tampa Tampa Bay, FL Headquarters for
Bay, Inc. Cliffco of Tampa
Bay, Inc.
<TABLE>
<CAPTION>
Corporate
Battery Wireless and Total
Segment Segment Unallocated Consolidated
<S> <C> <C> <C> <C> <C>
Net Sales 1999 $ 4,893 $ 6,146 ---------- $11,039
1998 $ 7,788 $ 5,326 ---------- $13,114
Operating Income(Loss) 1999 $ (392) $ 1,136 $ (272) 472
1998 $ (64) $ 284 $ (287) (67)
Assets 1999 $15,016 $11,392 $ (2,081) $ 24,327
1998 $19,533 $ 7,048 $ 534 $ 27,115
Depreciation and
Amortization 1999 $ 77 $ 93 $ 29 $ 199
1998 $ 88 $ 67 $ 38 $ 193
Interest Expense 1999 $______ $______ $ 176 $ 176
1998 $______ $______ $ 202 $ 202
Income (loss) before taxes 1999 $ (392) $ 1,136 $ (448) $ 296
1998 $ (64) $ 284 $ (489) $ (269)
</TABLE>
Listed below is the composition of corporate and unallocated
assets as of March 31, 1998 and March 31, 1999. <PAGE 10>
1998 1999
Cash (overdraft) $ 11,188 $ (7,222)
Due from (to) subsidiaries 78,774 (2,405,002)
Deferred organization expense 82,500 52,500
Deferred income taxes 186,453 186,453
Deferred finance cost 154,143 72,500
Other 20,831 19,895
Total $533,889 $(2,080,906)
Additional information regarding revenue by products and service
groups for the quarter ended March 31, 1998 and 1999 is as
follows:
1998 1999
OEM Value Added Sales $ 1,897 $ 1,133
Wireless Products and Accessories $ 5,501 $ 6,200
Other Battery Products $ 5,716 $ 3,706
Total Sales $13,114 $11,039
All revenue and essentially all long-lived assets were related to
operators in the United States as of March 31, 1999 and for the
quarters ended March 31, 1999 and 1998.
Export of sales for the quarters ended March 31, 1998 and 1999 as
follows:
1998 1999
Europe, Middle East & Africa $ 120 $ 106
Asia and Pacific $ 1 $ 1
Americas Excluding U.S.A $ 463 $ 184
Total $ 584 $ 291
Receivables from export sales for Advanced Fox and Battery
Network at March 31, 1998 and 1999 were approximately $400,000
and $371,000 respectively.
<PAGE 11>
Item 2. MANAGEMENTS DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATIONS
The following table represents the Company's statement of
operations data expressed as a percentage of net sales for the
respective periods:
Three Months Ended
June 30,
1998 1999
Net Sales 100.0% 100.0%
Cost of Sales 72.7 62.9
Gross Profit 27.3 37.1
Selling, General and
Administrative Expenses 27.8 32.8
Income (loss) from operations (.5) 4.3
Interest Expense, net 1.5 1.6
Income (loss) before provision
(benefit) for income taxes: (2.0) 2.7
Provision (benefit) for income taxes (9) 1.3
Net Income (1.1) 1.4
Three Months ended March 31, 1999 ("1999") Compared to Three
Months ended March 31, 1998 ("1998").
Consolidated net sales decreased 15.8% or $2.1 million, from
$13.1 million in 1998 to $11.0 million in 1999. The decrease in
sales was due primarily to a decrease in sales of Battery Network
and Tauber which decreased approximately 42% or $2.0 million and
13% or $.3 million respectively. Additionally, the sale of the
Specific Energy retail division on September 14, 1998, and the
resulting loss of its sales volume contributed to the overall
decrease in total sales (Specific Energy had sales of.6 million
in the three months ended March 31, 1998). The sales decrease
was partially offset by the continued growth of the Wireless
Products Group which had a sales increase of approximately 15.4%
or $.8 million. The Wireless Products Group's two operating
entities, Advanced Fox and Cliffco had sales increases of 15% or
$.6 million and 18% or $.2 million, respectively.
Gross profit increased by $.5 million from $3.6 million in
1998 to $4.1 million in 1999, and gross profit as a percentage of
sales increased from 27.3% to 37.1%. Specifically, the Wireless
<PAGE 12> Products Group's increase in gross profit of
$1.1 million was the major factor for the overall gross profit
improvement; however, this was partially offset by the decreases
in gross profit of $.2 million and $.1 million attributed to
Battery Network and Tauber respectively. Additionally, the sale
of the Specific Energy retail division on September 14, 1998, and
the resulting loss of that entity's contribution to gross profit
affected our overall gross profit increase (Specific Energy had
gross profit of $.3 million in 1998). The substantial increase
in gross profit percentage was a result of the following:
- the Wireless Products Group which operates at a
substantially higher gross margin percentage than the
Battery Group increased its percentage of total Company
sales from approximately 41% to 56% in comparing the
three months of 1998 to 1999;
- both Advanced Fox and Cliffco substantially improved
their gross margin percentage due to a continued
economically advantageous Far East purchasing policy.
The consolidation of the two wireless companies'
purchasing efforts, which began in June, 1998, resulted
in a more economical purchasing system for both
wireless companies;
- the Battery Group's increased centralization of
purchasing efforts has resulted in a small improvement
in its gross margin percentage.
Selling, general and administrative (SG&A) expenses
decreased from $3,649,000 in 1998 to $3,624,000 in 1999; however,
as a percentage of sales, SG&A expenses increased from 27.8% in
1998 to 32.8% in 1999. The decrease in SG&A was attributable to:
- an approximate increase of $.3 million in the Wireless
Product Group principally in marketing, selling, and
distribution costs to support the current and
anticipated sales growth. This including the continued
expansion of the Advanced Fox main distribution
facility and its Miami distribution facility. The
Company also experienced increased sales and
telemarketing costs and increased costs in providing
services to other divisions;
- the sale of Specific Energy retail division on
September 14, 1998 (Specific Energy incurred
approximately $.3 million of SG&A during the first
quarter of 1998.
The increase as a percentage of sales was primarily
attributable to the large sales decline at Battery Network
without a corresponding reduction in SG&A expenses.
<PAGE 13>
During the second quarter of 1998, the company made the
decision to exit the retail battery business and explore the
possibility of a sale of Specific Energy Inc., located in
Phoenix, Arizona. On August 6, 1998, the Company executed an
Asset Purchase Agreement with a closing date set for on or about
August 31, 1998. In accordance with FASB Statement 121 --
"Accounting for the Impairment of Long-Lived Assets and Assets to
be Disposed of", the Company reduced the carrying amount of the
retail assets of Specific Energy to their net realizable value in
the second quarter of 1998 by $575,000 which principally
represented the remaining goodwill resulting from the Specific
Energy acquisition in 1995.
Interest expenses decreased from $202,000 in 1998 to
$176,000 in 1999 due primarily to decreased borrowings under the
Company's Loan Facility due to the sale of Specific Energy on
September 15, 1998 and the resulting decrease in need for
additional funds. Additionally, the company was affected by the
availability of lower effective borrowing rates.
The Company's effective income tax rate in 1999 is
approximately 49% as compared to approximately 47% in 1998. The
income tax provision for the three months ended March 31, 1999
reflects income taxes at an estimated annual rate.
LIQUIDITY AND CAPITAL RESOURCES
The Company's requirement for capital is to provide for:
(i) support of an increase in sales; (ii) capital equipment
expenditures related to: (a) Year 2000 system compliance; (b)
business system upgrade's; (c) warehouse and office upgrades and
expansion; and (d) purchase of machinery and equipment used to
streamline receiving, shipping, packaging and battery pack
assembly operations, and (iii) financing for future acquisitions.
The Company's primary sources of financing during 1999 were bank
borrowings and cash flow operations.
The Company's working capital as of March 31, 1999 was
$11.2 million. For the three months ended March 31, 1999, net
cash provided by operating activities was $817,000.00. Net cash
provided by operating activities during 1998 was $1,609,000.00.
The increase in cash provided by operating activities during 1999
was attributable to net income of $150,000 plus depreciation and
amortization of $199,000, and a net decrease in accounts
receivable of $510,000 and an increase in accounts payable and
accrued expenses of $311,000 less increases in Inventory of
$284,000 and prepaid expenses of $69,000. The increase in cash
provided by operating activities during 1998 was attributable to
net decreases in accounts receivable and inventory of $334,000
and $1,027,000 respectively, and an increase in accounts payable
and accrued expenses of $275,000, less a net loss of $144,000
(offset by depreciation and amortization of $193,000) and an
increase in prepaid expenses and the other assets of $76,000.
<PAGE 14>
Net cash used in investing activities for the three months
ended March 31, 1999 and 1998 was for the purchase of property
and equipment in the amounts of $122,000 and $110,000
respectively.
Cash used by financing activities for the three months ended
March 31, 1999 was $619,000 comprised of $469,000 net payments
under the Revolving Credit Facility and $150,000 under the Term
Loan Facility. Cash used by financing activities for the three
months ended March 31, 1998 was $1,561,000 comprised of
$1,411,000 million net payments under the Revolving Credit
Facility and $150,000 under the Term Loan Facility. The Company
had at March 31, 1999 cash and cash equivalents of approximately
$406,000.
The Loan Facility contains certain covenants that include
maintenance of certain financial ratios, maintenance of certain
amounts of working capital and net worth as well as other
affirmative and negative covenants. At December 31, 1998, the
Company was not in compliance with certain of these covenants.
On March 31, 1999, the Company entered into an amended credit
agreement whereby the non-compliance at December 31, 1998 was
waived, and the Loan Facility was extended for an additional one
year period to January 7, 2001 and new financial covenants were
negotiated through December 31, 2000 which reflect the Company's
current projections. As of March 31, 1999, the Company was in
compliance with these covenants.
The Company estimates that it will incur capital
expenditures of approximately $500,000 during the twelve months
ended March 31, 2000, principally for the procurement of a new
computer system and the software to upgrade the Company's
business systems and to insure Year 2000 compliance, and to
purchase machinery and equipment to enhance its warehousing,
distribution and assembly operations.
Based upon its present plans, management believes that
operating cash flow, available cash and available credit
resources will be adequate to make the repayments of indebtedness
described herein, meet the working capital cash needs of the
Company and anticipated capital expenditure needs during the
12 months ending March 31, 2000.
YEAR 2000 ISSUES
The ability of computers, software and other equipment
utilizing microprocessors to recognize and properly process data
fields containing a 2-digit year is commonly referred to as the
Year 2000 (Y2K)issue. As the year 2000 approaches, non-Y2K
compatible systems will be unable to accurately process certain
data-based information.
State of Readiness. The Company has identified the
following applications and hardware that have already been
<PAGE 15> rendered Y2K compliant, or require, modification or
replacement to be Y2K compliant and has implemented plans to
modify or repair the applications and hardware in accordance with
the following schedule.
Division System Compliance Date
Battery Group
Battery Network Accounting server 11/1/98
Accounting software 11/1/98
Work stations 7/31/99
Phone systems (except
voice mail) 3/30/99
Voice mail 6/30/99
Other software EDI- 9/31/99
Tauber Electronics Accounting software 7/31/99
Accounting server 7/31/99
Workstations 7/31/99
Phone system (except
voice mail) 5/31/99
Voice mail 6/30/99
Wireless Products Group
Advanced Fox Accounting server 2/1/99
Accounting software 2/1/99
Work stations 2/1/99
Cliffco Accounting software 7/1/99
Workstations 12/31/98
The Company is in the process of contacting its vendors and
significant customers regarding their Y2K compliance plans which
may affect the Company's operations.
The Company believes that its approximate total cost to
become Y2K compliant is as follows:
Total Cost as
Division Estimated Cost of 3/31/99
Battery Group
Battery Network $210,000 $195,000
Tauber Electronics $ 50,000 $ 15,000
Wireless Products Group
Advanced Fox $204,000 $184,000
Cliffco $128,000 $ 98,000
The Company does not separately track the internal costs for
its Y2K compliance efforts; however, the primary cost to the
Company's Y2K compliance plan is principally payroll costs for
its internal information systems department employees. The
Company believes it has adequate financial resources to pay for
the balance of the Y2K compliance costs.
<PAGE 16>
The most significant remaining risk to the Company regarding
Y2K would be the interruption of business due to vendors and
customers non-compliance with Y2K issues.
Certain operational aspects of Batteries Batteries could be
affected by outside service providers not being Y2K compliant,
including telephone service and other essential utility services.
These risks are not under the control of the Company, but are
universal in nature to all businesses. Any of the previously
discussed Y2K issues, if not addressed, could have a material
adverse effect on the Company.
The Company expects to be fully complaint by September 30,
1999.
The Company believes it will be fully compliant by
September 30, 1999; however, we are developing a contingency plan
in the event we are unable to meet expectations regarding our
self imposed compliance schedule.
SEASONALITY AND INFLATION
The Company's net sales typically show no significant
seasonal variations, although net sales may be affected in the
future by timing of any business acquisitions.
The impact of inflation on the Company's operations has not
been significant to date. However, a high rate of inflation in
the future poses a risk to the Company and its ability to sustain
its operating results.
Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The Company's only financial instruments with market risk
exposure are revolving credit borrowings and variable rate term
loans, which total $8,846,000 at March 31, 1999. Based on this
balance, a change of one percent in the interest rate would cause
a change in interest expense of approximately $22,115, or $0.005
per share (or $0.0025 per share net of an income tax benefit
calculated using the Company's historical statutory rates), on an
annual basis.
These instruments are non-trading in nature (not entered
into for trading purposes) and carry interest at a pre-agreed
upon percentage point spread from either the prime interest rate
of the 90-day Eurodollar Rate (LIBOR). The Company's objective
in maintaining these variable rate borrowings is the flexibility
obtained regarding early repayment without penalties and lower
overall cost as compared with fixed-rate borrowings. <PAGE 17>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Securities Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8 -K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE 18>
SIGNATURES
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 thereunto duly authorized.
By:/s/ Stephen Rade
Date August 10, 1999 Stephen Rade
Chief Executive Officer
By:/s/ Ronald E. Badke
Date August 10, 1999 Ronald E. Badke
Chief Operating Officer and
Chief Financial Officer
<PAGE 19>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted
from the unaudited
consolidated balance sheet as of March 31, 1999, and the
unaudited statement of
income for the three months then ended contained in the report on
Form 10-Q/A
for the three months ended March 31, 1999 of Batteries Batteries,
Inc. and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 406
<SECURITIES> 0
<RECEIVABLES> 7,266
<ALLOWANCES> (625)
<INVENTORY> 9,736
<CURRENT-ASSETS> 17,428
<PP&E> 1,344
<DEPRECIATION> 199
<TOTAL-ASSETS> 24,327
<CURRENT-LIABILITIES> 6,262
<BONDS> 0
0
0
<COMMON> 5
<OTHER-SE> 9,814
<TOTAL-LIABILITY-AND-EQUITY> 24,327
<SALES> 11,039
<TOTAL-REVENUES> 11,039
<CGS> 6,943
<TOTAL-COSTS> 6,943
<OTHER-EXPENSES> 3,624
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 176
<INCOME-PRETAX> 296
<INCOME-TAX> 146
<INCOME-CONTINUING> 150
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 150
<EPS-BASIC> .03
<EPS-DILUTED> .03
</TABLE>
