<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended November 30, 1996
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: 0-1460
ANDERSEN GROUP, INC.
State or other jurisdiction of (I.R.S.
Employer incorporation or organization
Identification No.)
CONNECTICUT 06-0659863
ANDERSEN GROUP, INC.
Ney Industrial Park, Bloomfield, CT 06002-3690
(860) 242-0761
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 ____
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes ____ No ____
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of January 14, 1997.
Title Outstanding
Common Stock, no par value Authorized
6,000,000 shares; Issued 1,958,478
<PAGE>
Amendment No.1 to the Quarterly Report on Form 10-Q, for the quarter ended
November 30, 1996, is filed for the purpose of amending the Consolidated
Statements of Operations contained in Part I - Financial Information, Item 1
Financial Statements. The Preferred dividend requirement for the three months
ended November 30, 1996 should have been $86,000, not $100,000 as previously
reported. Accordingly, the amount of the Company's loss applicable to common
shares for the three months ended November 30,1996 should have been $1,027,000.
There are no changes to the results of operations for the nine month period
ended November 30, 1996 as originally reported. In addition, the discussion
concerning the Preferred Dividend Requirement contained in Item 2, Management's
Discussion and Analysis of Financial Condition and Results of Operations, has
also been amended to reflect the above referenced change regarding the amount of
the Preferred dividend requirement for the three months ended November 30, 1996.
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
ANDERSEN GROUP, INC.
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
November 30,1996 February 29, 1996
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,475 $ 4,116
Marketable securities 4,470 3,809
Accounts and other receivables less
allowances of $199 and $124 3,764 4,337
Inventories 7,518 8,612
Prepaid expenses and other assets 769 92
------- -------
Total current assets 18,996 20,966
------- -------
Property, plant and equipment, net 8,972 9,116
Prepaid pension expense 4,212 4,027
Investment in Digital GraphiX 1,259 1,259
Other assets 2,347 3,430
------- -------
$ 35,786 $ 38,798
======== ========
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND COMMON AND OTHER STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 941 $ 2,923
Current maturities of long term debt 1,208 1,136
Short term borrowing 1,028 -
Other current liabilities 4,630 5,145
-------- -------
Total current liabilities 7,807 9,204
-------- -------
Long term debt, less current maturities 6,986 7,349
Other liabilities 1,129 1,143
Deferred income taxes 1,939 2,197
Redeemable convertible preferred stock 5,324 5,280
-------- -------
Stockholders' equity:
Common stock 2,103 2,103
Additional paid-in capital 3,248 3,248
Retained earnings 7,340 8,364
Treasury stock (90) (90)
-------- -------
Total stockholders' equity 12,601 13,625
-------- -------
$ 35,786 $ 38,798
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ANDERSEN GROUP, INC.
Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
November November November November
30, 1996 30, 1995 30, 1996 30, 1995
<S> <C> <C> <C> <C>
Sales and revenues:
Net sales $ 5,920 $ 5,379 $19,253 $17,543
Investment and other
income (loss) (1,119) 137 (860) 1,007
------- ------- ------- -------
4,801 5,516 18,393 18,550
------- ------- ------- -------
Costs and expenses:
Cost of sales 3,860 3,411 12,452 11,508
Selling, general and
administrative 1,844 2,080 5,310 6,413
Research and development 378 314 1,103 1,256
Interest expense 198 298 599 884
------- ------- ------- -------
6,280 6,103 19,464 20,061
------- ------- ------- -------
Loss from
continuing operations
before income taxes (1,479) (587) (1,071) (1,511)
Income tax benefit 538 254 375 581
-------- -------- ------- -------
Loss from
continuing operations (941) (333) (696) (930)
Income from discontinued
operations,
net of income taxes - 44 - 413
Gain on sale of
discontinued segment
net of income taxes - 3,740 - 3,740
------- -------- ------- -------
Net income (loss) Preferred dividend (941) 3,451 (696) 3,223
requirement
(86) (147) (328) (443)
------- -------- ------- -------
Income (loss) applicable
to common share ($1,027) $3,304 ($1,024) $2,780
======= ======= ======= ======
Earnings (loss) per common share:
Continuing operations ($0.53) ($0.25) ($0.53) ($0.71)
Discontinued operations - 1.96 - 2.15
------- -------- ------- -------
Income (loss) per common
share ($0.53) $1.71 ($0.53) $1.44
======= ======== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ANDERSEN GROUP, INC.
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine months ended November 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($696) $3,223
Adjustments to reconcile net income (loss)
to net cash provided by (used for) operating
activities:
Depreciation, amortization and accretion 1,004 1,561
Gain on sale of Dental segment - (3,740)
Pension income (185) (108)
Net losses (gains) from marketable securities
and investments 1,580 (652)
Purchases of marketable securities (1,124) (1,659)
Sales of marketable securities 437 1,722
Deferred income taxes (258) (219)
Changes in operating assets and liabilities:
Accounts and notes receivable 573 (1,820)
Inventories 1,094 (386)
Prepaid expenses and other assets (878) (54)
Accounts payable (2,266) (263)
Accrued expenses and other long-term
obligations (529) 137
-------- -------
Net cash used for operating activities (1,248) (2,258)
------- -------
Cash flows from investing activities:
Purchases of property and equipment (1,053) (860)
Proceeds from sale of property, plant
and equipment 28 256
Investments in other assets (105) (773)
Proceeds from sale of Dental segment - 15,048
------- ------
Net cash (used for) provided by investing
activities (1,130) 13,671
------- ------
Cash flows from financing activities:
Principal payments on long-term debt (698) (348)
Issuance (repayment) of short term debt, net 1,028 (3,200)
Capitalized lease obligations incurred 407 -
------- -------
Net cash provided by (used for) financing
activities 737 (3,548)
------- -------
Net increase (decrease) in cash and cash
equivalents (1,641) 7,865
Cash and cash equivalents - beginning of
period 4,116 2,709
------- -------
Cash and cash equivalents - end of period $ 2,475 $10,574
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Accounting Policies
The accompanying interim financial statements and related notes should
be read in conjunction with the Consolidated Financial Statements of Andersen
Group, Inc. and related notes as contained in the Annual Report on Form 10-K for
the fiscal year ended February 29, 1996. The interim financial statements
include all adjustments (consisting only of normal recurring adjustments) and
accruals necessary in the judgment of management for a fair presentation of such
statements. In addition, certain reclassifications have been made to the prior
period financial information so that it conforms to the current period
presentation.
(2) Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
(In thousands)
November 30, February 29,
1996 1996
<C> <C>
Raw materials $ 1,555 $ 3,147
Work in process 4,362 3,413
Finished goods 2,947 3,398
--------- ---------
8,864 9,958
LIFO Reserve (1,346) (1,346)
--------- ---------
$ 7,518 $ 8,612
======== ========
</TABLE>
(3) Income Taxes
Income tax (expense) benefit represents an estimate of the effective
income tax rate for the current fiscal year.
(4) Dividends
The Company's cumulative convertible preferred stock (the "Preferred
Stock") is entitled to accrue quarterly dividends ranging from $.1875 to $.4375
per share, based upon the operating income (as defined) of The J.M. Ney Company
("Ney"), a wholly-owned subsidiary of the Company. Due to restrictions in the
Company's debt covenants as discussed below, no dividends were declared on the
Preferred Stock during the three or nine month periods ended November 30, 1996,
although they were accrued at the rate of $0.2491 and $0.9822 per share,
respectively.
Under the terms of the Indenture applicable to the Company's 10 1/2%
Convertible Subordinated Debentures, the Company has been restricted from paying
dividends on its capital stock since April 1993 and the Company anticipates that
it will be precluded from paying the quarterly Preferred Stock dividend for the
foreseeable future. Through November 30, 1996, approximately $944,357 has been
accrued for this arrearage. (For further information concerning the Company's
ability to pay dividends on or purchase or redeem its capital stock see the
Liquidity and Capital Resources Section of Management's Discussion and Analysis
of Results of Operations and Financial Condition and Part II, Item 3--Defaults
Upon Senior Securities, below).
<PAGE>
(5) Earnings Per Share
Earnings per share is computed based on the weighted average number of
common and common equivalent shares outstanding. Fully diluted net income (loss)
per share assumes full conversion of all convertible securities into common
stock at the later of the beginning of the year or date of issuance, unless
antidilutive. For the three and nine month periods ended November 30, 1996 and
1995, the effect of such conversions has been antidilutive.
(6) Contingencies
Ney is contingently liable under a $500,000 standby letter of credit
issued by its primary lending bank. This letter of credit, which names Phoenix
Shannon, p.l.c., the buyer of the Company's former Dental segment, as the
beneficiary, will enable the release of funds which have been escrowed pursuant
to the Asset Purchase Agreement.
The Company is involved in litigation with one of its business partners
in connection with the unauthorized transfer of shares underlying the Company's
investment in a Russian telecommunications company. The Company is contesting
this transfer and believes that this matter will not result in an impairment of
the value of the investment, although there cannot be any assurances at this
time. At November 30, 1996, the carrying value of this investment was recorded
at $746,000.
As previously reported in the Company's Quarterly Report on Form 10-Q
for the quarter ended August 31, 1996, the Company's subsidiary, The J.M. Ney
Company, has been named a defendant in a lawsuit to cleanup a Superfund site.
See the discussion below in Part II, Item 1-- Legal Proceedings for further
information.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
REVENUES
Revenues declined 13.0% and 0.8% for the three and nine months ended
November 30, 1996, respectively, as compared to the same periods in the prior
year. These declines are comprised of increases in net sales of 10.1% and 9.7%,
respectively, for the three and nine month periods, and net investment losses of
$1,119,000 and $860,000, respectively, for the three and nine month periods as
compared to investment gains and income of $137,000 and $1,007,000 in the same
periods of the prior fiscal year.
Sales growth during the three months ended November 30, 1996 in the
automotive and medical markets and sales to the Company's former Dental
subsidiary were only partially offset by sales declines for ultrasonic cleaning
products, due to a softening in the semi-conductor industry. The prior year's
nine month sales include approximately $2,079,000 of sales from the Company's
formerly consolidated Video Products segment which is no longer consolidated as
a result of a dilution of ownership pursuant to a stock offering that became
effective in May 1995.
Investment losses for the three and nine months ended November 30, 1996
were primarily the result of market declines in the value of the common stock of
Phoenix Shannon, p.l.c., the buyer of the Company's former Dental segment, and
management's decision to write to zero both the common stock and a $1,000,000
note receivable from Phoenix Shannon which had been received as part of the
consideration of the sale of the Dental segment. Investment losses associated
with Phoenix Shannon totaled $1,775,000 and $2,175,000 during the three and nine
month periods, respectively. The decision to write down the Phoenix Shannon
investments to zero was made based upon factors including operating losses,
deferrals of required interest payments on senior convertible notes and market
conditions for Phoenix Shannon's publicly traded securities. Gains associated
with investments in common stock, primarily in certain financial institutions,
rental income and interest earned on short term investments and other notes
receivable provided the balance of the investment income.
<PAGE>
COST OF SALES
Cost of sales increased by 13.2% and 8.2% for the three and nine month
periods ended November 30, 1996 as compared to the same periods in the prior
fiscal year. The increase reflects a decline in gross margins during the three
month period from 36.6% to 34.8%, while nine month margins improved from 34.4%
to 35.3%.
Sales of fabrication services sold to the Company's former Dental
segment at lower than average margins, increased low margin tooling sales and
lower margins in the ultrasonic cleaning equipment operations due to unabsorbed
costs because of lower volumes, all contributed to the margin decline for the
three month period. Increased sales volume, particularly in the automotive and
medical markets, and improved operating efficiencies within the Ultrasonics
Cleaning Equipment Division have contributed to help produce the margin
improvement for the nine month period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the three and nine
month periods ended November 30, 1996 were 11.3% and 17.2% lower, respectively,
as compared with the same periods in the prior fiscal year. The decrease
represents the net of increased variable expenses associated with sales and
activity growth, and lower legal costs and other costs due to the prior year
settlement of a suit brought against a former subsidiary of the Company.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses for the three months ended November
30, 1996 increased by 20.4% over the comparable period in the prior fiscal year,
and decreased by 12.2% for the nine months ended November 30, 1996 over the
comparable period in the prior fiscal year. These costs as a percentage of sales
were 6.4% and 5.7% respectively for the three and nine months ended November 30,
1996 as compared with 5.8% and 7.2% of sales for the three and nine months ended
November 30, 1995.
INTEREST EXPENSE
Interest expense for the three and nine months ended November 30, 1996
declined 33.6% and 32.2% respectively from the comparable periods in the prior
fiscal year. Lower short term borrowings in the current year due to liquidity
provided from the sale of the Dental segment in November 1995, and principal
payments on certain long term obligations, have resulted in the lower financing
costs.
INCOME TAX BENEFIT
For the three and nine months ended November 30, 1996, income tax
benefits of $538,000 and $375,000 respectively have been accrued based upon
estimated effective income tax rates. This compares to income tax benefits of
$254,000 and $581,000, respectively, for the comparable three and nine month
periods in the prior fiscal year.
DISCONTINUED OPERATIONS
At the end of the third quarter of the prior fiscal year, the Company
sold its Dental segment and recognized a gain of $3,740,000, net of income
taxes. For the three and nine months ended November 30, 1995, these discontinued
operations earned $44,000 and $413,000, respectively, net of taxes.
PREFERRED DIVIDEND REQUIREMENT
The preferred dividend requirement, including the amortization of the
issuance discount, for the three and nine months ended November 30, 1996 totaled
$86,000 and $328,000, respectively. This compares with $147,000 and $443,000 of
such requirement for the comparable three and nine month periods in the prior
fiscal year. The decrease is due to there being approximately one-half the
number of preferred shares outstanding in the current year, netted by an
increase in the per share dividend due to the improved operating results of The
J. M. Ney Company.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash and short term investments decreased by $980,000 during the nine
month period ended November 30, 1996 to $6,945,000. Due to a reclassification of
escrowed cash from other assets to short term investments based on anticipated
collection, the decrease from February 29, 1996 is approximately $1,530,000.
Approximately $640,000 of this decline is the result of net unrealized losses on
short term investments which is represented by the loss on the Phoenix Shannon
stock net of gains on other common stock investments.
During the third quarter, the Company secured the consent of a majority
of the non-affiliated holders of its outstanding 10 1/2% Convertible
Subordinated Debentures and one of its Senior Lenders, and reached agreement
with another Senior Lender to permit the Company to use up to $6.0 million to
repurchase shares of the Company's Capital Stock (the "Capital Stock Purchase
Program"). The first phase of the Capital Stock Purchase Program will be
centered around repurchases of the Company's Series A cumulative Convertible
Preferred Stock, of which there were 289,475 shares outstanding on November 30,
1996.
In order to obtain the Consent of the Senior Lenders, during the third
quarter the Company made an additional principal payment of approximately
$244,000 to one Senior Lender, and in December 1996, paid off the remaining
balance outstanding of approximately $465,800 to another Senior Lender.
Also during the quarter ended November 30, 1996, The J. M. Ney Company,
the Company's primary subsidiary closed on a $6,000,000 Revolving Credit and
Deferred Payment Sales Agreement with two banks under which it can borrow funds
or acquire precious metals on a deferred payment basis based on defined advance
rates. At November 30, 1996, Ney had outstanding borrowings under this line
valued at $1,028,000. Additionally, a $500,000 standby letter of credit has been
issued which will enable the release of certain escrowed funds relating to the
sale of the Company's former Dental segment.
The Company believes that, in addition to the potential borrowings
under the Ney Revolving Credit and Deferred Payment Sales Agreement and under
available lease lines, funds from operations, sales of existing investments, the
realization of certain assets not presently included among current assets and
potential future refinancings will be sufficient to meet its anticipated working
capital and debt service requirements for the foreseeable future.
The Indenture relating to the Company's 10 1/2% Convertible
Subordinated Debentures contains covenants restricting the payment of dividends
on or repurchases or redemptions of the Company's capital stock. As the result
of preferred stock repurchases and losses incurred in recent years, the Company
is currently prohibited by such covenants (except as provided by the Capital
Stock Purchase Program discussed above) from making such payments on the
Preferred Stock or the Common Stock until such time as the sum of (i) the
aggregate cumulative consolidated net income; (ii) the aggregate net cash
proceeds received by the Company from sales of shares of its capital stock for
cash; and (iii) the aggregate net cash proceeds received by the Company from
sales of indebtedness of the Company convertible into stock of the Company, to
the extent such stock has been converted into stock of the Company
(collectively, the "Consolidated Net Income"), exceeds the sum of the aggregate
amount of all dividends declared and all such other payments and distributions
on account of the purchase, redemption or other retirement of any shares of
stock of the Company (collectively, the "Distributions"). As of November 30,
1996 the Distributions exceed the Consolidated Net Income by approximately
$4,885,000.
<PAGE>
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.
ANDERSEN GROUP, INC.
By: /s/ Francis E. Baker
Francis E. Baker
President and Chief Executive Officer
By: /s/ Robert P. Belcher
Robert P. Belcher
Treasurer and Chief Financial Officer
Date: May 1, 1997
