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 April 1, 2000
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 4, 2000, the Registrant had issued 3,932,950 shares of common stock, $.01
par value per share, and had outstanding 3,923,150 shares.
<PAGE>
CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING
INFORMATION FOR THE PURPOSES 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 APRIL 1, 2000
TABLE OF CONTENTS
PART I Page No.
----------
Item 1. Financial Statements ..................................... 2 - 6
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition....................................... 7 - 9
PART II
Item 1. Legal Proceedings......................................... 10
Item 6. Exhibits and Reports on Form 8-K.......................... 10
Signature ...................................................... 11
1
<PAGE>
GENERAL BEARING CORPORATION
AND SUBSIDIARIES
Item 1. CONSOLIDATED BALANCE SHEETS
(In Thousands - Except for Shares and Per Share Data)
<TABLE>
<CAPTION>
April 1, January 1,
2000 2000
ASSETS (Unaudited)
-------------- ---------------
<S> <C> <C>
Current:
Cash and cash equivalents $ 234 $ 2,272
Accounts receivable - trade, less allowance for
doubtful accounts of $138 and $137 7,694 6,205
Inventories 20,042 18,896
Prepaid expenses and other current assets 619 836
Advances to affiliates 1,160 1,040
Advances to parent 801 588
Deferred tax asset 238 587
------------ ------------
Total current assets 30,788 30,424
Fixed assets, net 2,756 2,811
Investment in affiliates 2,691 2,388
Advances to affiliates 1,347 442
Other assets 268 262
------------ ------------
Total Assets $ 37,850 $ 36,327
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Accounts payable:
Trade $ 2,770 $ 1,056
Affiliates -- 133
Accrued expenses and other current liabilities 1,063 1,184
Current maturities of long-term debt 161 63
------------ ------------
Total current liabilities 3,994 2,436
------------ ------------
Long-term debt, less current maturities:
Bank 9,528 11,406
Other 768 440
Affiliate 1,007 996
------------ ------------
Total long-term debt 11,303 12,842
------------ ------------
Deferred taxes 235 205
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, outstanding 3,925,950
and 3,924,950 shares. 39 39
Treasury stock at cost, 7,000 shares (33) -
Additional paid-in capital 28,847 28,804
Deficit ( 6,535) (7,999)
------------ ------------
Total stockholders' equity 22,318 20,844
----------------------------
Total liabilities and stockholder's equity $ 37,850 $ 36,327
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements
2
<PAGE>
GENERAL BEARING CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands - Except for Shares and Per Share Data)
(UNAUDITED)
<TABLE>
<CAPTION>
13 Weeks Ended
------------------------------
April 1, April 3,
2000 1999
------------ ------------
<S> <C> <C>
Sales $ 14,632 $ 13,722
Cost of sales 9,800 9,383
------------ ------------
Gross profit 4,832 4,339
Selling, general and administrative expenses 2,610 2,531
------------ ------------
Operating income 2,222 1,808
Interest, net, including $17 and $7 from parent 205 204
Income of affiliate (203) --
------------- -------------
Income before income tax 2,220 1,604
Income tax 756 602
------------ ------------
Net income $ 1,464 $ 1,002
============ ============
Net income per common share:
Basic $ 0.37 $ 0.26
------------ ------------
Diluted $ 0.37 $ 0.26
------------ ------------
Weighted average number of common shares:
Basic 3,921,840 3,918,950
------------ ------------
Diluted 3,921,840 3,919,946
------------ ------------
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
<PAGE>
GENERAL BEARING CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
13 Weeks ended
--------------------------------
April 1, April 3,
2000 1999
-------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,464 $ 1,002
Add (deduct) noncash items charged (credited) to
income:
Deferred income taxes 379 548
Depreciation and amortization 134 119
Equity in income of affiliate (203) -
Loss on disposal of fixed assets - 4
Other non-cash items charged to income 43 -
Add (deduct) changes in operating assets and
liabilities:
Accounts receivable (1,489) (1,013)
Inventories (1,146) (308)
Prepaid expenses and other assets 195 (374)
Due to (from) affiliates (247) 316
Accounts payable and accrued expenses 1,592 (16)
------------ -------------
Net cash provided by operating activities 722 278
------------ ------------
Cash flows from investing activities:
Investment in affiliate (100) -
Advance to affiliate (900) -
Fixed asset purchases (61) (94)
------------- -------------
Net cash used in investing activities (1,061) (94)
------------- -------------
Cash flows from financing activities:
Purchase of treasury stock (33) -
Repayment of long-term debt - bank - (56)
Decrease in note payable - bank - (116)
Proceeds from equipment financing 950 -
Repayment of long-term debt - other (524) -
Net proceeds from revolving credit facility (1,878) -
Change in due from parent (214) (28)
------------- -------------
Net cash used in financing activities (1,699) (200)
------------- -------------
Net decrease in cash and cash equivalents (2,038) (16)
Cash and cash equivalents, beginning of period 2,272 29
------------ ------------
Cash and cash equivalents, end of period $ 234 $ 13
============ ============
Cash paid during the 13 weeks for:
Interest $ 314 $ 203
Income taxes $ 2 $ 10
</TABLE>
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 financial
Presentation 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 April 1, 2000 are not necessarily
indicative of the results that may be expected for the year
ending December 30, 2000. 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 January 1, 2000.
2. Inventories Inventories consist of the following: (In Thousands)
January 1, 2000 April 1, 2000
-----------------------------------------------------------------
Finished Goods $ 6,738 $ 6,564
Raw materials, purchased parts
and work-in-process 12,158 13,478
-----------------------------------------------------------------
$ 18,896 $ 20,042
-----------------------------------------------------------------
3. Earnings Per Basic earnings per share includes no dilution and is
Share computed by dividing net income by the weighted average number
of common shares outstanding for the period. Diluted earnings
per share reflect, in periods in which they have a dilutive
effect, the dilution which would occur upon the exercise of
stock options. A reconciliation of the shares used in
calculating basic and diluted earnings per share follows:
Quarter Ended
------------------------------
April 3, 1999 April 1, 2000
------------------------------
Diluted earnings per share computation:
Basic weighted average common shares
outstanding 3,918,950 3,921,840
Incremental shares from assumed exercise
of dilutive options 996 --
----------------------------
3,919,946 3,921,840
----------------------------
For the quarters ended April 3, 1999 and April 1, 2000,
220,000 and 344,800 options and warrants outstanding,
respectively, were anti-dilutive.
5
<PAGE>
GENERAL BEARING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Litigation Except as explained in Part II of this report, there has
been no material change in litigation since the events
reported in the Company's 10-K for the fiscal year ended
January 1, 2000. See Part II of this report for further
disclosure.
5. Segment During 1998, the Company adopted Statement of Financial
Information Accounting Standards No. 131 ("SFAS 131"), Disclosures about
Segments of an Enterprise and Related Information. SFAS 131
supersedes SFAS 14,Financial Reporting for Segments of a
Business Enterprise, replacing the "industry segment" approach
with the"management" approach. The management approach
designates the internal reporting that is used by management
for making operating decisions and assessing performance as
the source of the Company's reportable segments.
The Company operates in two divisions: the OEM Division,
which supplies Original Equipment Manufacturers (OEMs), and
the Distribution Division, which serves distributors that
supply the repair and maintenance aftermarket and small OEMs.
The two divisions supply principally in the United States.
The accounting policies of the segments are the same as
those described in the summary of significant accounting
policies outlined in the Company's 10-K for the fiscal year
ended January 1, 2000. The Company evaluates segment
performance based on operating income.
The table below presents information about the Company's business segments.
(In Thousands)
<TABLE>
<CAPTION>
Quarter Ended April 1, 2000
OEM DISTRIBUTOR OTHER TOTAL
<S> <C> <C> <C> <C>
Net Sales from External Customers $10,999 $3,633 $ - $14,632
Gross Profit 2,880 1,952 - 4,832
Operating Income 1,544 678 - 2,222
Depreciation / Amortization 108 26 - 134
Capital Expenditures 51 0 10 61
Total Assets $23,153 $6,652 $8,045 $37,850
<CAPTION>
Quarter Ended April 3, 1999
OEM DISTRIBUTOR OTHER TOTAL
--------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales from External Customers $10,102 $3,620 $ - $13,722
Gross Profit 2,454 1,885 - 4,339
Operating Income 1,118 690 - 1,808
Depreciation / Amortization 81 38 - 119
Capital Expenditures 63 10 21 94
Total Assets $18,549 $7,227 $5,356 $31,132
</TABLE>
Depreciation expense was allocated based on material, labor, and overhead.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Results of Operations
Sales. Sales of $14,632,000 for the first fiscal quarter of 2000 were
$910,000 or 7% higher than the same period in 1999. Sales in the OEM Division
increased 9% over 1999 to $10,999,000 primarily as a result of strong demand and
new business won during 1999. The largest increase was in tapered roller
bearings to the heavy duty truck trailer market. There were also increased sales
of industrial ball bearings. The Company had a net increase in sales of ball
bearings and drive line components to the automotive industry. Distribution
Division sales were essentially the same as last year, increasing by $13,000 to
$3,633,000.
Gross Profit. Gross profit for the quarter of $4,832,000 represents an 11%
increase over the first fiscal quarter of 1999. As a percentage of sales, gross
profit (GP%) was 33.0% compared to 31.6% in the first fiscal quarter of 1999.
The Company has increased sourcing from joint ventures and believes that the
improvement in GP% reflects, in part, savings associated with this lower cost
sourcing method. Partially offsetting these increases, GP% was adversely
impacted by product mix resulting from growth in sales to original equipment
manufacturers. GP% for the OEM Division was 26.2% in 2000 compared to 24.3% in
1999 primarily as a result of increased sales volume and material cost
reductions. GP% for the Distribution Division was 53.7% in 2000 compared to
52.1% in 1999 due to product mix and lower material cost.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (S,G&A) as a percentage of sales were 17.8% for the
first fiscal quarter of 2000 compared to 18.4% in the first fiscal quarter of
1999. This reduction reflects the effect of the increased sales volume. S,G&A
increased by $79,000. This is primarily attributable to increases in employee
costs. This was partially offset by reduced commissions in the OEM Division as
certain of these costs reflect a change from commissioned representatives to
salaried sales personnel.
Operating Income. Operating income of $2,222,000 for the first fiscal quarter
of 2000 represents a 23% increase over the same period in 1999. The increase in
the OEM Division of 38% over 1999 to $1,544,000 was due primarily to the sales
and gross profit increases partially offset by increased S,G&A as detailed
above. Operating income in the Distribution Division decreased 2% compared to
1999 to $678,000 due to higher S,G&A.
Interest Expense, Net. Net interest expense was $205,000 for the first fiscal
quarter of 2000 compared to $204,000 during the same period in 1999 as lower
interest rates in 2000 offset higher average debt. The interest rate reduction
resulted from a new credit facility that became effective during the fourth
quarter of 1999.
Income of Affiliate. Affiliate income of $203,000 in the first fiscal
quarter of 2000 represents the Company's share of earnings in Jiangsu General
Ball and Roller Co., Ltd. which began operations during the quarter.
7
<PAGE>
Income Tax. The Company's effective income tax rate was 34.1% in the first
fiscal quarter of 2000 compared to 37.5% for the same period in 1999. Both
amounts reflect a normal rate of taxation.
Net Income. As a result of the factors discussed above, net income for the
first fiscal quarter of 2000 increased by 46% to $1,464,000 or $.37 per basic
and diluted share from $1,002,000 or $.26 per basic and diluted share for the
same period in 1999.
Financial Condition, Liquidity and Capital Resources
The Company's primary sources of capital have been net cash provided by
operating activities, a term loan, sale of common stock and financing from
affiliates. Working capital requirements also have been financed by 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. At January 1, 2000 and April 1, 2000, the Company had
working capital of $27,988,000 and $26,794,000, respectively.
Cash provided by operating activities during the first fiscal quarter of 2000
was $722,000. Cash provided from net income and increased accounts payable and
accrued expenses was partially offset by increased accounts receivable and
inventory. The accounts receivable increase is directly related to the increased
sales volume as days sales outstanding are comparable with historic results. The
primary reasons for the inventory increase are to support current and future
demand for tapered roller bearings and automotive components.
Cash used in investing activities during the first fiscal quarter of 2000 was
$1,061,000. Included in this amount is $1,000,000 for the Company's 50% interest
in a new joint venture, NN General, LLC ("NNG"). This was structured as a
$100,000 investment and a $900,000 loan. Cash used in investing activities also
includes $61,000 for capital expenditures.
Cash used in financing activities during the first fiscal quarter of 2000 was
$1,699,000. The Company refinanced certain of its previously purchased machinery
and equipment in the amount of $950,000 under a lease finance facility. Part of
these proceeds was used to repay its existing $504,000 capital lease. At January
1, 2000, the Company had collateralized letters of credit outstanding with its
former lender with $1,818,000 in cash. At April 1, 2000, all such cash has
either been used to fund inventory purchases or been returned to the Company.
During the quarter, the Company repaid $1,878,000 of debt under its Revolving
Credit Facility.
At April 1, 2000, the Company had outstanding debt of $9,528,000 under its
Revolving Credit Facility and had further availability of approximately $7.1
million.
The Company believes that funds generated from continuing operations, capital
lease financing and borrowing under the revolving credit facility will be
sufficient to finance the Company's stock buyback program, its commitment to
provide up to $1,500,000 of additional funding to NNG, if necessary, as well as
its anticipated working capital and capital expenditure requirements for at
least the next 24 months.
8
<PAGE>
Year 2000 Compliance
The Company has experienced no year 2000 problems and, to the Company's
knowledge, none of its significant vendors or customers have suffered material
problems related to year 2000 compliance. However, there can be no assurances
that the Company will not experience any negative effects or disruptions of
business in the future as a result of year 2000 issues.
Inflation
The effect of inflation on the Company has not been significant during the
last two fiscal years.
Quantitative and Qualitative Disclosure about Market Risk
Interest Rate Risk
The Company's primary market risks are fluctuations in interest rates and
variability in interest rate spread relationships (i.e., prime to LIBOR spreads)
on its bank debt. The Company does not use derivative financial instruments.
The Company's management believes that fluctuations in interest rates in the
near term would not materially affect the Company's consolidated operating
results, financial position or cash flows as the Company has limited risks
related to interest rate fluctuations.
Foreign Currency Risk
The Company does not use foreign currency forward exchange contracts or
purchased currency options to hedge local currency cash flows or for trading
purposes. All sales arrangements with international customers are denominated in
U.S. dollars. Only a small fraction of the Company's purchases are denominated
in foreign currency. Due to this limited activity, the Company does not expect
any material loss with respect to foreign currency risk.
9
<PAGE>
PART II
Item 1. Legal Proceedings.
There have been no material developments in any legal proceedings subsequent
to the events reported in the Company's 10-K filed March 31, 2000.
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.
10
<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 12, 2000
GENERAL BEARING CORPORATION
(Registrant)
/s/ David L. Gussack
---------------------
David L. Gussack
President
/s/ Barry A. Morris
----------------------
Barry A. Morris
Chief Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-END> APR-01-2000
<CASH> 234
<SECURITIES> 0
<RECEIVABLES> 7,832
<ALLOWANCES> 138
<INVENTORY> 20,042
<CURRENT-ASSETS> 30,788
<PP&E> 6,153
<DEPRECIATION> 3,397
<TOTAL-ASSETS> 37,850
<CURRENT-LIABILITIES> 3,994
<BONDS> 0
0
0
<COMMON> 39
<OTHER-SE> 22,279
<TOTAL-LIABILITY-AND-EQUITY> 37,850
<SALES> 14,632
<TOTAL-REVENUES> 14,632
<CGS> 9,800
<TOTAL-COSTS> 9,800
<OTHER-EXPENSES> 2,610
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 205
<INCOME-PRETAX> 2,220
<INCOME-TAX> 756
<INCOME-CONTINUING> 1,464
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,464
<EPS-BASIC> .37
<EPS-DILUTED> .37
</TABLE>
