UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarter ended March 29, 1997
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 0-22053
GENERAL BEARING CORPORATION
---------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-2796245
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
44 High Street, West Nyack, New York 10994
------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 358-6000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.01 par value per share
---------------------------------------
(Title of class)
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.
[x ] Yes [ ] No
At May 7, 1997, the Registrant had issued and outstanding
3,900,000 shares of common stock, $.01 par value per share.
<PAGE>
CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION
FOR THE PURPOSE OF "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
The Private Securities Litigation Reform Act of 1995
provides a "safe harbor" for forward-looking statements, which
are statements other than those of historical fact, including,
without limitation, ones identified by the use of the words
"anticipates,: "estimates," "expects," "intends," "plans,"
"predicts," and similar expressions. In this Quarterly Report
such statements may relate to the recoverability of deferred
taxes, likely industry trends, the continued availability of
credit lines, the suitability of facilities, access to suppliers
and implementation of joint ventures and marketing programs.
Such forward looking statements involve important risks and
uncertainties that could cause actual results to differ
materially from those expected by the Company, and such
statements should be read along with the cautionary statements
accompanying them and mindful of the following additional risks
and uncertainties possibly affecting the Company: the possibility
of a general economic downturn, which is likely to have an
important impact on historically cyclical industries such as
manufacturing; significant price, quality or marketing efforts
from domestic or overseas competitors; the loss of, or
substantial reduction in orders from, a major customer; the loss
of, or failure to attain additional quality certifications;
changes in U.S. or foreign government regulations and policies,
including the imposition of antidumping orders on the Company or
any of its suppliers; a significant judgment or order against the
Company in a legal or administrative proceeding; and potential
delays in implementing planned sales and marketing expansion
efforts and the failure of their effectiveness upon
implementation.
<PAGE>
GENERAL BEARING CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 29, 1997
TABLE OF CONTENTS
Page No.
--------
PART I
Item 1. Financial Statements . . . . . . . . . . . . 2 - 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Result of
Operations . . . . . . . . . . . . . . . . 6 - 7
PART II
Item 1. Legal Proceedings . . . . . . . . . . . . . . 8
Item 6. Exhibits and Reports on Form 8-K. . . . . . . 8
Signature . . . . . . . . . . . . . . . . . . . . . . . 9
---------
1
<PAGE>
FINANCIAL STATEMENTS OF
-----------------------
GENERAL BEARING CORPORATION
---------------------------
AND SUBSIDIARIES
----------------
Item 1. CONSOLIDATED BALANCE SHEETS
---------------------------
March 29,
1997
--------
ASSETS (Unaudited)
------
Current:
Cash $ 139,319
Accounts receivable - trade, less
allowance for doubtful accounts
of $235,000 and $235,000 5,358,134
Inventories 13,470,219
Prepaid expenses and other current assets 407,145
Advances to parent and affiliates 1,512,501
---------
Total current assets 20,887,318
----------
Fixed assets, net 2,426,487
---------
Investments and advances:
Investments in affiliates 687,454
Advances to affiliate 255,824
-------
943,278
-------
Deferred tax asset, net 1,089,000
---------
Other assets 35,325
------
Total Assets $ 25,381,408
= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current:
Note payable - bank $ 7,144,894
Accounts payable:
Trade 1,365,008
Affiliates 532,026
Accrued expenses and other current
liabilities 1,721,423
Current maturities of long-term debt 222,840
-------
Total current liabilities 10,986,191
----------
Long-term debt, less current maturities:
Bank 947,190
Parent 2,750,142
Affiliate 745,408
-------
Total long-term liabilities 4,442,740
---------
Commitments and contingencies
Stockholders' equity:
Preferred stock par value $.01 per share - shares
authorized 1,000,000 none issued
and outstanding -
Common stock par value $.01 per share - shares
authorized 19,000,000, issued and outstanding
3,900,000 and 3,000,000 shares. 39,000
Additional paid-in capital 28,592,391
Deficit (18,678,914)
-----------
Total stockholders' equity 9,952,477
-----------
Total liabilities and stockholder's equity $ 25,381,408
= ==========
December 29,
1996
-------
ASSETS
------
Current:
Cash $ 12,969
Accounts receivable - trade, less
allowance for doubtful accounts of
$235,000 and $235,000 4,575,493
Inventories 13,898,595
Prepaid expenses and other current assets 467,081
Advances to parent and affiliates 710,397
-------
Total current assets 19,664,535
----------
Fixed assets, net 2,604,670
---------
Investments and advances:
Investments in affiliates 687,454
Advances to affiliate 255,824
--------
943,278
-------
Deferred tax asset, net 700,000
-------
Other assets 486,182
-------
Total Assets $ 24,398,665
= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current:
Note payable - bank $ 9,526,484
Accounts payable:
Trade 1,998,361
Affiliates 1,774,013
Accrued expenses and other current
liabilities 2,245,386
Current maturities of long-term debt 222,840
--------
Total current liabilities 15,767,084
----------
Long-term debt, less current maturities:
Bank 1,002,900
Parent 2,750,142
Affiliate 739,588
--------
Total long-term liabilities 4,492,630
---------
Commitments and contingencies
Stockholders' equity:
Preferred stock par value $.01 per share
- shares authorized 1,000,000 none
issued and outstanding -
Common stock par value $.01 per share
- shares authorized 19,000,000, issued
and outstanding 3,900,000 and 3,000,000
shares. 30,000
Additional paid-in capital 23,654,524
Deficit (19,545,573)
-----------
Total stockholders' equity 4,138,951
---------
Total liabilities and stockholder's equity $ 24,398,665
= ==========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
2
<PAGE>
FINANCIAL STATEMENTS OF
-----------------------
GENERAL BEARING CORPORATION
---------------------------
AND SUBSIDIARIES
----------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(UNAUDITED)
-----------
13 Weeks Ended
-------------------------
March 29, March 30,
1997 1996
-------- ---------
Sales $ 9,592,560 $ 9,918,733
Cost of sales 6,734,879 7,460,409
--------- ---------
Gross profit 2,857,681 2,458,324
Selling, general and
administrative expenses 2,098,426 1,827,408
--------- ---------
Operating income 759,255 630,916
Interest, net, including $5,714 and
$37,500 to parent 281,596 331,181
------- -------
Income before deferred income taxes 477,659 299,735
Income tax (Benefit) (389,000) 114,000
-------- -------
Net income $ 866,659 $ 185,735
= ======= = =======
Net income per common share $ 0.25 $ 0.06
= ==== = =====
Weighted average number of
common shares 3,494,500 3,000,000
========= =========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
3
<PAGE>
FINANCIAL STATEMENTS OF
-----------------------
GENERAL BEARING CORPORATION
---------------------------
AND SUBSIDIARIES
----------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(UNAUDITED)
-----------
13 Weeks ended
-------------------------
March 29, March 30,
1997 1996
---------- -----------
Cash flows from operating activities:
Net income $ 866,659 $ 185,735
Add (deduct) noncash items charged
(credited) to income:
Deferred income taxes (389,000) 114,000
Depreciation and amortization 133,102 124,684
Add (deduct) changes in operating
assets and liabilities:
Accounts receivable (782,641) (7,658)
Inventories 428,376 1,194,269
Prepaid expenses and other assets 509,936 15,028
Due to (from) affiliates (1,574,395) (176,036)
Accounts payable and accrued
expenses (1,157,316) (841,675)
Accrued customer damage claims - (156,348)
- --------
Net cash provided by (used in)
operating activities (1,965,279) 451,999
--------- -------
Cash flows from investing activities:
Equipment purchases (104,062) (217,784)
------- -------
Cash flows from financing activities:
Sale of common stock, net 4,946,867 -
Repayment of long-term debt - bank (55,710) (55,710)
Increase (decrease) in note payable
- bank (2,381,590) 59,916
Due to Parent (313,876) (259,640)
------- -------
Net cash provided by (used
in) financing activities 2,195,691 (255,434)
--------- -------
Net (decrease) increase in cash 126,350 (21,219)
Cash, beginning of period 12,969 50,735
------ ------
Cash, end of period $ 139,319 $ 29,516
= ======= = ======
Cash paid during the 13 weeks for:
Interest $ 341,839 $ 323,542
Income Taxes $ 0 $ 0
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
4
<PAGE>
GENERAL BEARING CORPORATION
---------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. BASIS OF The accompanying unaudited condensed consolidated
PRESENTATION financial statements have been prepared in accordance with
generally accepted accounting principles for interim
financial information and with the instructions to Form
10-Q and Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally
accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting solely of normal recurring accruals)
considered necessary for a fair presentation have been
included. Operating results for the thirteen weeks ended
March 29, 1997 are not necessarily indicative of the
results that may be expected for the year ending December
27, 1997. For further information, refer to the
consolidated financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for
the year ended December 28, 1996.
In February 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards
No. 128, "Earnings Per Share" ("SFAS No. 128"). SFAS No.
128 specifies the computation, presentation, and
disclosure requirements for earnings per share. SFAS No.
128 is effective for periods ending after December 15,
1997. The adoption of this statement is not expected to
have a material effect on the consolidated financial
statements.
2. LITIGATION There has been no material change in litigation from
the year ended December 28, 1996. See Part II of this
report for further disclosure.
3. INITIAL On February 7, 1997, General Bearing Corporation
PUBLIC completed an initial public offering of 900,000 shares of
OFFERING common stock. The effect on the relevant stockholders'
equity accounts is as follows:
Paid-in-
Common Stock Capital
----------- -----------
Balance, December 28, 1996 $30,000 $23,654,524
Proceeds from sale of 900,000
shares of common stock (par 9,000 4,937,867
value 0.01 per share) ----------- ----------
Balance, March 29, 1997 $39,000 $28,592,391
(unaudited) =========== ===========
5
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
RESULTS OF OPERATIONS
Sales. Sales for the first fiscal quarter of 1997 were $
9,592,560, a decrease of $326,173 or 3.3% as compared to the same
period in 1996. The decrease in sales between the two periods
reflected a significant decline (approximately $600,000) in sales
of railroad bearings. This decrease in sales was partially
offset by an increase in sales of approximately $300,000 in
railroad components.
Gross Profit. Gross profit as a percentage of sales was
29.8% in the first fiscal quarter of 1997 as compared to 24.8% in
the first fiscal quarter of 1996. This increase resulted in part
from the implementation of a program to increase efficiency in
plant operations. This program entailed the consolidation of
operations at the Company's West Nyack, New York facility which
resulted in a significant reduction of plant personnel and
simplification of tooling and quality control functions. The
increase in gross profit as a percentage of sales also reflects a
5% price increase in the Distributor Bearing Division product
lines, which have higher margins, as well as the Company's
strategy to de-emphasize sales of low margin commodity bearings.
Additionally, the Company increased sourcing from joint
ventures, and believes that the improvement in gross profits
reflect, in part, savings associated with this lower cost
sourcing method.
Selling, General and Administrative Expenses. Selling,
general and administrative expenses as a percentage of sales were
21.9% in the first fiscal quarter of 1997 as compared to 18.4% in
the same period in 1996. Such percentage increase reflects
$271,018 of additional expenditures in 1997 mainly attributable
to additional advertising, travel and entertainment, and
personnel expense related to new hires, salary increases and
insurance costs.
Income Tax (Benefit). For the first fiscal quarter of
1997, the Company accrued an additional $(389,000) benefit
relating to the anticipated use of net operating loss
carryfowards as compared to a $114,000 tax expense recorded in
the same quarter of 1996.
Net Income (Loss). As a result of the factors discussed
above, net income for the first fiscal quarter of 1997 increased
to $ 866,659, or $.25 per common share, as compared to $185,735,
or $.06 per common share, for the same period in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of capital have been net cash
provided by operating activities, bank borrowings and financing
from affiliates. Working capital requirements also have been
financed through borrowings under a Revolving Credit Facility.
The primary demands on the Company's capital resources have been
the need to fund inventory and receivables growth created in
normal business expansion. In 1996 there was an additional need
for liquidity to fund expenses associated with a product recall,
as well as the related carrying costs of inventory buildup. These
liquidity demands were met through cash from operations and
borrowings under the Revolving Credit Facility.
6
<PAGE>
On February 7, 1997, the Company successfully sold 900,000
shares of common stock to the public at $7 per share. The
Company recognized net proceeds of $4,946,867 after expenses of
the offering.
Cash flows from operations were ($1,965,279) for the first
fiscal quarter of 1997 as compared to $451,999 for the comparable
period of 1996. The change in cash flow for the first fiscal
quarter of 1997 reflects payments of accounts payable and other
accrued expenses. The Company initially used the proceeds from
the public offering to pay down its revolving credit facility.
The Company subsequently borrowed approximately $2,700,000 to pay
down accounts payable including those to affiliated and non-
affiliated vendors. At March 29, 1997, the Company had
outstanding borrowings of $7,144,894 under its Revolving Credit
Facility and had further availability thereunder of approximately
$2.3 million. Inventories at March 29, 1997 decreased by
approximately 3% to 13.5 million from $13.9 million at December
29, 1996. The decrease in inventory was offset by the increase
in receivables by 17.1% to $5,358,134 at March 29, 1997 from
$4,575,493 at December 29, 1996. Additionally, cash flows from
financing activities were $2,195,691 for the first fiscal quarter
of 1997 as compared to ($255,434) for the comparable period of
1996. Primarily as a result of the reduction in borrowings and
accounts payable and the increase in accounts receivable, the
Company's working capital increased by $6.0 million or 154% to
$9.9 million March 29, 1997 from $3.9 million at December 29,
1996.
The Company believes that funds generated from continuing
operations, the net proceeds of the recently completed public
offering of common stock and borrowings under the Revolving
Credit Facility will be sufficient to finance the Company's
anticipated working capital needs and capital expenditure
requirements for at least the next 24 months.
7
<PAGE>
PART II
Item 1. Legal Proceedings.
In the action* pending in the United States District Court for
the Southern District of New York, brought by the Company and
WMW Machinery Inc. against a former East German trade agency and
its successor (collectively referred to as "WEMEX"), its
liquidator, Werner P. Muender ("Muender"), the Treuhandanstalt
("Treuhand") and Bundesanstalt Fuer Vereinigungsbedingte
Sonderaufgaben, the defendants had filed a motion for summary
judgment which was pending at the time of the Company's initial
public offering in February, 1997. By order of March 27, 1997,
the Court granted the motion in part and denied it in part. The
Court granted that portion of the motion seeking dismissal of
the claims for breach of fiduciary duty by defendants, Muender
and WEMEX based on a finding that those defendants owed no such
duty to the plaintiffs. The Court also granted that portion of
the motion seeking dismissal of the conversion claim against
WEMEX and Muender based on a finding that a contractual forum
selection clause relegated resolution of such claim to the German
courts. The court denied those portions of the motion seeking
dismissal of the remaining claims against the Treuhand and/or
WEMEX based on the defenses of foreign sovereign immunity, lack
of personal jurisdiction, the Act of State Doctrine, changed
circumstances and forum non conveniens. The defendants have filed
---------------------
a motion for reargument on the issues of personal jurisdiction
and forum non conveniens or, in the alternative, for
--------------------
certification of the foreign sovereign immunity issue for appeal
to the United States Court of Appeals. The Company has opposed
such motion.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27. Financial Data Schedule
(b) The Registrant has not filed a report on Form 8-K
during the quarter just ended.
* previously disclosed by the Company in its 10-K for fiscal year
1996
8
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this Quarterly Report on
Form 10-Q to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: May 8, 1997.
GENERAL BEARING CORPORATION
---------------------------
(Registrant)
/s/ David L. Gussack
---------------------------------
David L. Gussack
President
/s/ Christopher Moore
----------------------------------
Christopher Moore
Vice President Finance
(Principal Financial and Accounting Officer)
9
<PAGE>
EXHIBIT INDEX
Exhibit Description
------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-END> MAR-29-1997
<CASH> 139
<SECURITIES> 0
<RECEIVABLES> 5,593
<ALLOWANCES> 235
<INVENTORY> 13,470
<CURRENT-ASSETS> 20,887
<PP&E> 5,656
<DEPRECIATION> 3,230
<TOTAL-ASSETS> 25,381
<CURRENT-LIABILITIES> 10,986
<BONDS> 0
0
0
<COMMON> 39
<OTHER-SE> 9,913
<TOTAL-LIABILITY-AND-EQUITY> 25,381
<SALES> 9,593
<TOTAL-REVENUES> 9,593
<CGS> 6,735
<TOTAL-COSTS> 6,735
<OTHER-EXPENSES> 2,098
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 282
<INCOME-PRETAX> 478
<INCOME-TAX> (389)
<INCOME-CONTINUING> 867
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 867
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
