UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
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 0-27994
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.)
50 Tannery Road, Unit 2
North Branch, New Jersey 08876
(Address of principal executive offices)
(908) 534-2111
(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
<PAGE>
BATTERIES BATTERIES, INC.
FORM 10-Q 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............. 11
PART II - OTHER INFORMATION........................... 16
PAGE 2
<PAGE>
BATTERIES BATTERIES, INC.
CONSOLIDATED BALANCE SHEET
(In Thousands, Except Share and Per Share Data)
ASSETS December 31, March 31,
1998 1999
(unaudited)
CURRENT ASSETS:
Cash and Cash Equivalents $ 330 $ 406
Accounts receivable 7,151 6,641
Inventories 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
<PAGE>
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
NET INCOME (LOSS) PER SHARE - $ (0.03) $ 0.03
WEIGHTED AVERAGE NUMBER OF
COMMON & COMMON EQUIVALENT
SHARES OUTSTANDING 4,743,000 4,743,000
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
Deferred income tax 0 0
CHANGES IN ASSETS AND LIABILITIES:
Accounts receivable 334 509
Inventories 1,027 (284)
Prepaid expenses and other
assets (76) (68)
Accounts payable and accrued
expenses 275 311
Net cash provided (used) 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 provided by (used)
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>
PAGE 6
<PAGE>
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
Philadelphia, 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 Cellular Products Group is headquartered in Huntingdon
Valley, Pennsylvania and is comprised of:
- Advanced Fox Cellular, 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 7>
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 "BNAcquisition") 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 8> 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 Loans 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
Loans. The Loans 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 Term
Loans was $1.3 million and the Revolver Loans 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 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.
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 9> 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:
<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 $ (61) $ 305 $ (311) (67)
Assets 1999 $11,006 $10,594 $ 2,727 $ 24,327
1998 $15,385 $ 5,996 $ 5,734 $ 27,115
Depreciation and
Amortization 1999 $ 77 $ 93 $ 29 $ 199
1998 $ 66 $ 67 $ 60 $ 193
Provision for Bad Debts
and obsolete
inventories 1999 $ 93 $ 123 0 $ 216
1998 0 $ 42 0 $ 42
Interest (income) expense
and financing costs 1999 0 0 $ 176 $ 176
1998 0 0 $ 202 $ 202
</TABLE>
Additional information regarding revenue by products and service
groups for the quarter ended March 31, 1999 and 1998 is as
follows:
1999 1998
OEM Value Added Sales $ 1,133 $ 1,897
Cellular Products and Accessories $ 6,200 $ 5,501
Other Battery Products $ 3,706 $ 5,716
Total Sales $11,039 $13,114
<PAGE 10>
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 sales accounted for the percentages of net sales for the
quarters ended March 31, 1999 and 1998 as follows:
1999 1998
Europe, Middle East & Africa $ 106 $ 120
Asia and Pacific $ 1 $ 1
Americas Excluding U.S.A $ 184 $ 463
Total $ 291 $ 584
Receivables from export sales for Advanced Fox and Battery
Network at March 31, 1999 and 1998 were approximately $400,000
and $371,000 respectively.
PAGE 11
<PAGE>
Item 2. MANAGEMENTS DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
RESULTS OF OPERATIONS
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, Fox and Cliffco had sales increases of
15% or $.6 million and 18% or $.3 million, respectively.
Gross profit increased by $.6 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 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 cellular companies' purchasing efforts, which
began in June, 1998, resulted in a more economical
purchasing system for both cellular companies;
- the Battery Group's increased centralization of purchasing
efforts has resulted in a small improvement in its gross
margin percentage.
<PAGE 12>
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, increased
purchasing 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.
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, 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 1997 to $179,000 in
1998 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 difference is
primarily due to the tax benefit attributable to a one time deductible
loss incurred 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
<PAGE 13> 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 1998 were bank
borrowings and the sale of equity issues.
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 $509,000 and an
increase in accounts payable and accrued expenses of $311,000 and an
increase in prepaid expenses of $68,000. 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 expense of $275,000, less a net loss of $144,000 (offset by
depreciation and amortization of $193,000) and an increase in prepaid
expense and the assets of $76,000.
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
<PAGE 14> 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 30, 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 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.
<PAGE 15>
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.
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 $9,846,000 at March 31, 1999. Based on this balance, a
<PAGE 16> 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 London
Interbank Offering 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.
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 17
<PAGE>
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/ Steve Rade
Date May 17, 1999 Steve Rade
Chief Executive Officer
By:/s/ Ronald E. Badke
Date May 17, 1999 Ronald E. Badke
Chief Operating Officer and
Chief Financial Officer
<PAGE 18>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted
from the unaudited
consoldiated balance sheet as of March 31, 1999, and the unaudted
statement of
income for the three months then ended contained in the report on
Form 10-Q 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> 7,250
<ALLOWANCES> (609)
<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> 9,813
<TOTAL-LIABILITY-AND-EQUITY> 24,327
<SALES> 11,039
<TOTAL-REVENUES> 11,039
<CGS> 6,943
<TOTAL-COSTS> 6,943
<OTHER-EXPENSES> 3,624
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<INTEREST-EXPENSE> 176
<INCOME-PRETAX> 296
<INCOME-TAX> 146
<INCOME-CONTINUING> 150
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 150
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
