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 quarterly period ended November 30, 1998
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.
(Exact name of Registrant as specified in its charter)
DELAWARE 06-0659863
(State or other jurisdiction of incorporation or organization) (I.R.S.
Employer Identification No.)
515 Madison Avenue, New York, New York 10022
(Address of principal executive offices) (Zip Code)
(212) 826-8942
(Registrant's telephone number, including area code)
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 January 11, 1999, there were 1,842,811 shares of the Registrant's no par
value common stock outstanding.
Title Outstanding
Common Stock, $0.01 par value per share Authorized 6,000,000 shares;
Issued 1,958,478
ANDERSEN GROUP, INC.
FORM 10-Q
TABLE OF CONTENTS
Page No.
Part I - Financial Information
Item 1 - Financial Statements:
Consolidated Balance Sheets
November 30, 1998 and February 28, 1998 3
Consolidated Statements of Operations for the
Three and Nine Months Ended November 30, 1998 and 1997 4
Consolidated Statements of Cash Flows for the
Nine Months Ended November 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 10
Part II - Other Information
Item 1 - Legal Proceedings 11
Item 4 - Submission of Matters to a Vote of Security Holders 12
Item 6 - Exhibits and Reports on Form 8-K 12
Signatures 13
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
ANDERSEN GROUP, INC.
Consolidated Balance Sheets
(In thousands)
November 30, 1998 February 28, 1998
----------------- -----------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 3,983 $ 2,516
Marketable securities 6,122 9,001
Receivable from sale of subsidiary 532 3,521
Accounts and other receivables, less
allowances of $149 and $130 3,658 3,870
Inventories 5,755 8,076
Income taxes receivable 848 -
Prepaid expenses and other assets 56 142
-------- --------
Total current assets 20,954 27,126
-------- --------
Property, plant and equipment 22,285 21,854
Accumulated depreciation (13,170) (12,411)
------- --------
Property, plant and equipment, net 9,115 9,443
----- --------
Prepaid pension expense 5,023 4,665
Investments 206 1,815
Other assets 2,149 1,722
------- --------
$37,447 $44,771
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 470 $ 595
Short-term borrowings 1,187 2,183
Accounts payable 641 951
Other current liabilities 2,744 3,352
Deferred income taxes 134 1,286
-------- -------
Total current liabilities 5,176 8,367
Long-term debt, less current maturities 3,992 4,459
Subordinated note payable, net of unamortized discount 7,322 7,300
Other liabilities 1,689 1,888
Deferred income taxes 2,036 2,561
-------- -------
Total liabilities 20,215 24,575
-------- -------
Stockholders' equity:
Cumulative convertible preferred stock 4,776 4,769
Common stock 20 20
Additional paid-in capital 5,340 5,331
Retained earnings 7,176 10,158
Treasury stock (80) (82)
-------- -------
Total stockholders' equity 17,232 20,196
-------- --------
$37,447 $44,771
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
ANDERSEN GROUP, INC.
Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)
Three months ended Nine months ended
November 30, 1998 November 30,1997 November 30, 1998 November 30, 1997
Revenues:
Net sales $ 6,545 $ 6,854 $20,168 $18,520
Investment and other income (loss) 1,297 (458) (3,379) 3,560
------- ------- ------- -------
7,842 6,396 16,789 22,080
------- ------- ------- -------
Costs and expenses:
Cost of sales 4,330 4,627 13,352 12,283
Selling, general and administrative 1,583 1,595 5,029 4,608
Research and development 50 357 1,454 1,037
Interest expense 40 283 1,392 772
------- ------- ------- -------
6,821 6,862 21,227 18,700
------- ------- ------- -------
Income (loss) from continuing
operations before income taxes 1,021 (466) (4,438) 3,380
Income tax expense (benefit) 410 ( 183) (1,751) 1,358
------- ------- ------- ------
Income (loss) from continuing
operations 611 (283) (2,687) 2,022
Income from discontinued operations,
net of income taxes 0 100 0 173
------- ------- ------- ------
Net income (loss) 611 (183) (2,687) 2,195
Reversal of preferred dividends - - - 37
Preferred dividends (96) (122) (295) (356)
------- ------- ------- ------
Income (loss) applicable to common
shares $515 ($305) ($2,982) $1,876
======== ======= ======= ======
Earnings (loss) per common share:
Basic
Continuing operations $0.27 ($0.21) ($1.54) $0.88
Discontinued operations - 0.05 - 0.09
-------- ------- -------- -------
Net income (loss) $0.27 ($0.16) ($1.54) $0.97
======== ======= ======== =======
Diluted
Continuing operations $0.27 ($0.24) ($1.54) $0.80
Discontinued operations - 0.08 - 0.08
-------- ------- ------- ------
Net income (loss) $0.27 ($0.16) ($1.54) $0.88
======== ======= ======= ======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
ANDERSEN GROUP, INC.
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Nine months ended
November 30, 1998 November 30, 1997
Cash flows from operating activities:
Net (loss) income ($2,687) $2,195
Adjustments to reconcile net (loss) income to net cash provided by
(used in) operating activities:
Depreciation, amortization and accretion 1,059 1,099
Gain on sale of property (25) -
Deferred income taxes (1,677) 1,015
Pension income (358) (251)
Net losses (gains) from marketable securities
and investments 4,437 (2,945)
Purchases of marketable securities (1,732) (2,128)
Proceeds from sales of marketable securities 1,783 -
Changes in operating assets and liabilities:
Accounts and notes receivable 212 (1,535)
Income tax receivable (848) -
Inventories 2,321 (514)
Prepaid expenses and other assets 98 91
Accounts payable (310) (986)
Accrued expenses and other long-term obligations (280) 227
------ ------
Net cash provided by (used in) operating activities 1,993 (3,732)
------ ------
Cash flows from investing activities:
Purchases of property and equipment, net (1,268) (1,368)
Proceeds from sale of property 223 -
Proceeds from sale of subsidiary 2,400 -
Proceeds from investment in Digital GraphiX - 1,518
------ ------
Net cash provided by investing activities 1,355 150
------ ------
Cash flows from financing activities:
Principal payments on long-term debt (592) (838)
(Repayment) issuance of short term debt, net (996) 3,000
Redemption of preferred stock - (160)
Preferred dividends paid (304) -
Stock options exercised 49 -
Purchase of treasury stock, net (38) -
------ -------
Net cash (used in) provided by financing activities (1,881) 2,002
------ -------
Net increase (decrease) in cash and cash equivalents 1,467 (1,580)
Cash and cash equivalents - beginning of period 2,516 3,219
------ -------
Cash and cash equivalents - end of period $3,983 $1,639
====== ======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
ANDERSEN GROUP, INC.
Notes to Consolidated Financial Statements (Unaudited)
(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 28, 1998. 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) Marketable Securities
Marketable securities consisted of the following (in thousands):
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
November 30, 1998 February 28, 1998
----------------- -----------------
Common stock of savings banks $5,263 $5,611
Common stock of Centennial Cellular - 430
C A Emerging Russia Fund 294 2,422
Portfolio of Ukraine stocks 190 314
Common stock of Bank Handlowy (Poland) 265 348
Renaissance Russian Bond Fund 201 -
Valuation reserve - foreign investments (91) (617)
Municipal bonds - 493
------ - ----
$6,122 $9,001
====== ======
</TABLE>
At November 30, 1998, the valuation reserve was established only for the
portfolio of Ukraine stocks and the common stock of Bank Handlowy. Russian
investments were written down to 10% of their cost bases to reflect approximate
market value.
(3) Inventories
Inventories consisted of the following (in thousands):
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
November 30, 1998 February 28, 1998
----------------- -----------------
Raw material $ 1,853 $ 2,989
Work in process 3,462 6,509
Finished goods 2,888 657
------- -------
8,203 10,155
LIFO Reserve 2,448 2,079
------ ------
$ 5,755 $ 8,076
======= =======
</TABLE>
(4) Discontinued Operations
Effective February 28, 1998, the Company sold the net assets of Ney
Ultrasonics Inc., and recorded a net gain of $97,000 after income taxes. During
the quarter ended May 31, 1998, the Company received $2,400,000 of the purchase
price. An additional $500,000 is being held by an escrow agent pending a review
of the year-end financial information and finalization of the purchase price.
The process of finalizing the purchase price will be subject to the outcome of
counter claims between the Company and the purchaser of the business. The
Company expects to receive less consideration from the sale than originally
estimated. However, the estimate of the net gain on sale has not changed
because, in the opinion of management, accruals made at the Company's fiscal
year end will be adequate to cover the anticipated changes in the purchase
price.
(5) Income Taxes
Income tax expense (benefit) represents an estimate of the effective
income tax rates.
(6) Dividends
During February 1998, the Company amended its certificate of
incorporation to modify the terms of the Company's Series A Preferred Stock
(Preferred Stock) to provide for an annual fixed dividend rate of $1.50 per
share of Preferred Stock and to eliminate the mandatory redemption feature of
the preferred stock for the quarter ended May 31, 1998.
(7) Earnings Per Share
Earnings per share are computed based on the weighted average number of
common and common equivalent shares outstanding. Diluted net income 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, 1998, the effect of such
conversions were antidilutive.
(8) Stockholders' Equity
On June 23, 1998, the Company's stockholders approved a plan of
reincorporation in which the Company was merged into a wholly-owned Delaware
subsidiary so to effect a change in the Company's state of incorporation. As a
result, the common stock of the Company now has a par value of $0.01, and
appropriate adjustments have been made to common stock and additional paid-in
capital on the accompanying Consolidated Balance Sheet.
(9) Business Segments and Export Sales
During the nine months ended November 30, 1998, the Company operated in
two continuing segments, Electronics, which comprises the operations of J.M.
Ney, and Corporate, which includes the Company's investment, real estate and
corporate administrative activities. Operating income consists of net sales,
investment and other income, less cost of sales and selling, general and
administrative expenses directly allocated to the industry segments. Corporate
revenues consist of investment and other income not attributable to J.M. Ney.
Corporate identifiable assets include marketable securities and short-term
investments, and assets not directly attributable to J.M. Ney.
Summarized financial information for business segments is as follows (in
thousands):
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Nine months ended: November 30, 1998 November 30, 1997
----------------- -----------------
Revenues:
Electronics $ 20,161 $18,541
Corporate (3,372) 3,539
-------- -------
$ 16,789 $22,080
-------- -------
Operating income (loss):
Electronics $ 2,041 $ 2,237
Corporate (5,087) 1,915
-------- -------
($ 3,046) $ 4,152
-------- -------
Interest expense:
Electronics $ 1,005 $ 259
Corporate 387 513
-------- -------
$ 1,392 $ 772
-------- -------
Depreciation, amortization and accretion:
Electronics $ 940 $ 891
Corporate 119 139
Discontinued operations - 69
-------- -------
$ 1,059 $ 1,099
-------- -------
Capital expenditures:
Electronics $ 1,246 $ 1,314
Corporate 22 33
Discontinued operations - 21
------- -------
$ 1,268 $ 1,368
------- -------
As of: November 30, 1998 February 28, 1998
----------------- -----------------
Identifiable assets:
Electronics $25,186 $25,337
Corporate 12,261 19,434
------- -------
$37,447 $44,771
------- -------
</TABLE>
Export sales for the nine months ended November 30, 1998 and 1997 were
$3,140,000 and $3,178,000, respectively. Such sales were made primarily to
customers in Europe and the Pacific Rim.
During the nine months ended November 30, 1998, sales to two customers accounted
for 14.7% and 13.0% of net sales, respectively.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
For the three months ended November 30, 1998, the Company's net income
applicable to common shareholders was $515,000, or $0.27 per share, basic and
diluted. During the prior fiscal year's third quarter, the Company recorded a
net loss of $305,000, or $0.16 per share, basic and diluted. Such prior year
results included $100,000 of net income from discontinued operations.
For the nine months ended November 30, 1998, the Company recorded a net loss
applicable to common shareholders of $2,982,000, or $1.54 per share, basic and
diluted. This compares with the prior fiscal year-to-date net income applicable
to common shareholders of $1,876,000, or $0.97 basic and $0.88 diluted. Such
prior fiscal year results included $173,000 of net income from discontinued
operations.
REVENUES
Revenues for the three months ended November 30, 1998 totaled $7,842,000,
comprised of $6,545,000 of net sales from The J.M. Ney Company (J.M. Ney) and
$1,297,000 of investment and other income. For the nine months ended November
30, 1998, revenues totaled $16,789,000, which was comprised of $20,168,000 of
net sales and net investment losses from investments and other income sources of
$3,379,000. During the prior fiscal year, such year-to-date revenues totaled
$22,080,000, of which $18,520,000 was represented by net sales and $3,560,000
was from income from investments and other sources.
Sales during the quarter from J.M. Ney, the Company's wholly-owned manufacturer
of electronic materials and components, decreased by 4.5% from the prior fiscal
year's third quarter, while year-to-date sales have increased by 8.9%. Higher
selling prices for palladium-based products contributed to sales growth for both
the quarter and nine months, as the price of this precious metal in the current
year has been approximately $75 per ounce higher than in the prior fiscal year.
International sales softened in the most recent quarter, while year-to-date
sales were also negatively impacted by reduced demand from the automotive market
as a result of the labor strike against General Motors.
Investment and other income produced income of $1,297,000 during the quarter,
primarily due to increases in the value of the Company's portfolio of common
stocks of financial institutions. Year-to-date, the net loss of $3,379,000 is
due to losses recorded relating to investments in Russian securities, as well as
the domestic financial institution portfolio. Significant components of this
nine month net loss and the comparable amount recognized during the first nine
months of the prior fiscal year are as follows (in thousands):
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
November 30, 1998 November 30, 1997
Net (losses) gains from domestic investment portfolios ($ 724) $1,312
Net (losses) gains from Russian and Eastern European
portfolios and longer-term investments (3,417) 1,438
Interest and dividends 150 165
Rental income 398 314
Other, net 214 331
----- -----
($3,379) $3,560
------- ------
</TABLE>
During the Company's second fiscal quarter, Russian equity investments
for which a market quote was not available were written down to 10% of original
cost, which represents management's estimate of the net realizable value of
those investments. This writedown was also applied to the Company's longer-term
Russian investments. During the third fiscal quarter, the valuations did not
increase appreciably, and accordingly, the valuation of these Russian
investments was not changed during the quarter. Other Eastern European
investments have valuation reserves equal to 20% of quoted market to provide for
volatility and liquidity concerns.
COST OF SALES
Cost of sales for the three months ended November 30, 1998 represented 66.2% of
sales, versus 67.5% of sales for the third quarter of the prior fiscal year.
Improved performance from refining activities helped to effectively lower the
cost of the precious metals portion of the product costs during the current
quarter. Year-to-date, cost of sales totaled 66.2% of net sales, which is
relatively consistent with cost of sales, which were 66.3% of net sales, through
the first nine months of the prior fiscal year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the three months ended November
30, 1998 totaled $1,583,000, which is consistent with prior year levels.
Year-to-date, these costs total $5,029,000, which is 9.1% higher than the
expenses incurred in the first nine months of the prior fiscal year. The nine
month increase in these expenses primarily reflects costs incurred to convert
J.M. Ney's primary operating software to a version that is Year 2000 compliant.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses for the three months ended November 30, 1998
totaled $502,000, or 7.7% of net sales, versus $357,000, or 5.2% of net sales
for the prior fiscal year's third quarter. Year-to-date, these costs have
increased 40.2%, and represent 7.2% of net sales, versus 5.6% of net sales for
the first nine months of the prior fiscal year. Approximately $180,000 of the
increase represents lower allocations of these expenses to cost of sales, while
the remaining increase is due to increased research and engineering activities.
INTEREST EXPENSE
For the three months ended November 30, 1998, interest expense totaled $406,000,
which is a 43.5% increase over the prior fiscal year's third quarter.
Year-to-date, interest expense of $1,392,000 is 80.3% higher than was incurred
during the first nine months of the prior fiscal year. Most of the increase is
from interest on $7.5 million of subordinated debt which J.M. Ney obtained in
December 1997. In addition, high interest rate palladium leases have added to
the interest carry. Corporate level interest expense is lower in the current
year, due to repayments in February and October of term debt, which have been
offset somewhat by interest on short-term borrowings.
INCOME TAX EXPENSE (BENEFIT)
Income taxes have been accrued based upon estimated effective income tax rates.
PREFERRED DIVIDENDS
For the three and nine months ended November 30, 1998, dividends were accrued
based upon terms which were revised effective February 28, 1998, and provide for
quarterly payments of dividends at the annual rate of $1.50 per preferred share.
For the comparable three and nine month periods in the prior fiscal year,
dividends were accrued at the rates of $0.4375 and $1.2515 per preferred share,
respectively, in accordance with the prior terms of this security.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At November 30, 1998, the Company's consolidated cash and marketable securities
was approximately $10.1 million, which represents a decrease from $11.5 million
of such assets at February 28, 1998. Of these amounts, $2.8 million and $1.1
million, respectively, were held in the accounts of J.M. Ney, while the
Company's cash and short-term investments at November 30, 1998 totaled $7.3
million, which is a decline of $3.1 million from February 28, 1998 levels. J.M.
Ney's cash and short-term investments increased primarily from lower inventory
levels, while the decrease in the Company's corporate position resulted from
declines in the values of its domestic and Russian trading portfolios.
At November 30, 1998, 31.0% of the Company's consolidated stockholders' equity
was invested in the common stock of financial institutions, while 6.2% of
consolidated stockholders' equity was invested in both short-term and long-term
investments in Russia, the Ukraine and Poland, including a J.M. Ney investment
in a Russia income fund with a reported value of $201,000. Subsequent to
November 30, 1998, J.M. Ney received a distribution of approximately $102,000 of
this investment.
As a result of covenants contained in its borrowing agreements, J.M. Ney is
restricted from paying dividends or otherwise transferring funds to the Company
outside the ordinary course of business, except as defined in certain covenants.
At November 30, 1998, J.M. Ney's working capital and net worth (net of
liabilities to the Company) totaled approximately $9.1 million and $7.1 million,
respectively.
The Company is required to make sinking fund payments on its 10 1/2% debentures
and has interest, preferred dividend and operating expense cash flow
requirements. The Company anticipates that these working capital and debt
service requirements will be met from permitted payments from J.M. Ney, sales of
or additional leveraging of investments, or from other sources of income.
DISCLOSURE OF YEAR 2000 ISSUES
The "Year 2000 problem" arose because many existing computer programs use only
the last two digits to refer to a year. This does not allow programs to properly
recognize a year that begins with "20" instead of "19", and could result in
program failures or erroneous results.
The Company and J.M. Ney have evaluated all known exposures to applications
with embedded chips, including those that are informational and operational in
nature, which do not properly recognize all four digits of dates. To date, most
of the financial and operational effort has been expended in upgrading J.M.
Ney's enterprise resource planning (ERP) system, which is used to control its
operational activities from order entry through manufacturing to financial
reporting. Prior to the current fiscal year, approximately $128,000 had been
expended on this project, while identifiable costs expended during the current
fiscal year totals $479,000. As of the date of this filing, this major project
is substantially complete. Additional applications, which require
modification or
replacement to ensure Year 2000 compliance have been identified, and are planned
to be completed by no later than December 31, 1999. The costs of these
additional upgrades are estimated to total approximately $200,000.
Based upon a comprehensive review of exposure areas, which included among other
steps, analyses of the Company's and J.M. Ney's interdependence on outside
computer applications from vendors and customers, the Company and J.M. Ney
believe that manufacturing and other operational and administrative activities
will not be at significant risk due to the Year 2000 problem as long as outside
sources of power and communications remain operational.
FORWARD LOOKING STATEMENTS
This report contains forward-looking statements, estimates or plans which
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company to be materially
different from results or plans expressed or implied by such forward-looking
statements. Among the risk and uncertainty is the performance of the world's
equity markets, principally the U.S. stock market, precious metal prices,
general economic conditions, including demand for automobiles, and the degree of
success of identifying all critical Year 2000 exposures.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required.
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
Morton International, Inc. v. A.E. Staley Mfg. Co. et al. and Velsicol
Chemical Corp. v. A.E. Staley Mfg. Co. et al. As previously reported in the
Company's Form 10-K for the year ended February 28, 1997, in July 1996, two
companion lawsuits were filed in the United States District Court for the
District of New Jersey, by various owners and operators of the Ventron-Velsicol
Superfund Site (Site). The lawsuits, which were subsequently consolidated, were
filed under the Comprehensive Environmental Resource Compensation and Liability
Act (CERCLA), the Resource Conservation and Recovery Act, the New Jersey Spill
Act and New Jersey common law, alleging that the defendants (over 100 companies,
including J.M. Ney) were generators of certain wastes allegedly processed at the
site. The lawsuits seek recovery of costs incurred and a declaration of future
liability for costs to be incurred by the owners and operators in studying and
remediating the Site.
Based on preliminary disclosure of information relating to the claims made by
plaintiffs and defendants, J.M. Ney, which produced and refined precious metals
used in dental amalgams, is one of the smaller parties to have had any
transactions with one of the plaintiff's predecessors in interest. However,
under both CERCLA and the New Jersey Spill Act, a party is jointly and severally
liable, unless there is a basis for divisibility. At this time, there is
insufficient information to determine the appropriate allocation of costs as
between or among the defendant group, if liability to the generator defendants
is ultimately proven. Moreover, because of the incomplete status of discovery,
the Company is unable to predict the probable outcome of the lawsuit, whether
favorable or unfavorable, and has no basis to ascertain a range of loss, should
any occur, with respect to an outcome that might be characterized as
unfavorable.
The Company continues to investigate whether any liability, which may accrue at
some future date, may be subject to reimbursement in whole or in part from
insurance proceeds. The Company intends to continue to vigorously defend the
lawsuit.
James S. Cathers and Sylvia Jean Cathers, his wife v. Kerr Corporation,
Whip-Mix Corporation, The J.M. Ney Company and Dentsply Corporation, Inc.
As previously reported in the Company's Form 10-Q for the Quarter ended August
31, 1997, in August 1997, J.M. Ney was included as a defendant in an asbestos
related civil action for negligence and product liability filed in the Court of
Common Pleas of Allegheny County, Pennsylvania, in which the Plaintiffs claim
damages in excess of $30,000 (the jurisdictional limit) from being exposed to
asbestos and asbestos products alleged to have been manufactured and supplied by
the defendants, including Ney's former Dental Division, while one of the
Plaintiffs worked in a dental lab from 1960 to 1986 at an unspecified location
in Pittsburgh, Pennsylvania. The Plaintiffs allege that this exposure to
asbestos and asbestos products caused the wrongful death of one of the
Plaintiffs from cancer (mesothelioma). The Plaintiffs have not provided any
specific allegations of facts as to which defendants may have manufactured or
supplied asbestos and asbestos products which are alleged to have caused the
injury.
The Company has determined that it has insurance that potentially covers a
substantial portion of this claim and has called upon the insurance carriers to
provide reimbursement of defense costs and liability, should any arise. As of
this date, the Company has no basis to conclude that the litigation may be
material to the Company's financial condition or business. The Company intends
to vigorously defend the lawsuit.
CAE US Inc.
On October 28, 1998, CAE (U.S.) Inc. ("CAE"), purchaser under that certain
Asset Purchase Agreement dated February 28, 1998 (the "Agreement") with Ney
Technology, Inc. f/k/a Ney Ultrasonics, Inc. ("Ultrasonics") (the "Company"),
instituted suit in the Connecticut Superior Court. Claiming to rely on the terms
of the Agreement, the suit seeks to compel arbitration of the purchase price
payable by CAE to Ultrasonics thereunder. While the suit does not seek the
recovery of monetary damages, it is a prelude to the institution of an
arbitration by CAE in order to recover a claimed overpayment of the purchase
price of approximately $770,000.
The Company is vigorously defending CAE's efforts to compel arbitration and
has filed its own suit against CAE seeking an adjustment to the said purchase
price in the amount of approximately $1,100,000. Moreover, should arbitration be
ordered by the court, the Company will oppose CAE's efforts to adjust the
purchase price under the terms of the Agreement and will, instead, assert that
its own methodology for adjustment of the purchase price is proper.
At this point in time, it is impossible to assess the likelihood that the
Company will be successful in its defense of this action and any resulting
arbitration.
<PAGE>
Item 4. Submission of Maters to a Vote of Security Holders.
There were no votes submitted to security holders during the three months ended
November 30, 1998.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-K:
Exhibit Description
Exhibit 11 Statement Re: Computation of Per Share Earnings
Exhibit 27 Financial Data Schedule.
Exhibit 27.1 Restated Financial Data Schedule for the Nine
Months Ended November 30, 1997.
No reports on Form 8-K were filed during the quarter ended November 30, 1998.
<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/ Oliver R. Grace, Jr.
Oliver R. Grace, Jr.
President and Chief Executive Officer
Date: January 11, 1999
By: /s/ Andrew M. O'Shea
Andrew M. O'Shea
Chief Financial Officer
The J.M. Ney Company
(Principal Financial Officer of the Company)
Date: January 11, 1999
Exhibit 11
ANDERSEN GROUP, INC.
Statement Re: Computation of Per Share Earnings for
the Three and Nine Months Ended
November 30, 1998
(in thousands, except per share data)
Three Months Ended Nine Months Ended
Calculation of Basic Earnings November 30, 1998 November 30, 1998
----------------- -----------------
Per Share:
Net income (loss) $ 515 $ (2,982)
Weighted average
Number of shares outstanding
during the period 1,941 1,937
----- -----
Earnings (loss) per share $0.27 ($1.54)
===== ======
During the three and nine month periods ended November 30, 1998, the effects of
conversations of common stock equivalent securities would have been
anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> Exhibit 27
ANDERSEN GROUP, INC.
FINANCIAL DATA SCHEDULE
COMMERCIAL AND INDUSTRIAL COMPANIES
ARTICLE 5 OF REGULATION S-X
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> NOV-30-1998
<CASH> 3,983
<SECURITIES> 6,122
<RECEIVABLES> 3,807
<ALLOWANCES> (149)
<INVENTORY> 5,755
<CURRENT-ASSETS> 20,954
<PP&E> 22,285
<DEPRECIATION> (13,170)
<TOTAL-ASSETS> 37,447
<CURRENT-LIABILITIES> 5,176
<BONDS> 11,314
0
4,776
<COMMON> 20
<OTHER-SE> 12,436
<TOTAL-LIABILITY-AND-EQUITY> 37,447
<SALES> 20,168
<TOTAL-REVENUES> 16,789
<CGS> 13,352
<TOTAL-COSTS> 19,835
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 19
<INTEREST-EXPENSE> 1,392
<INCOME-PRETAX> (4,438)
<INCOME-TAX> (1,751)
<INCOME-CONTINUING> (2,687)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,982)
<EPS-PRIMARY> (1.54)
<EPS-DILUTED> (1.54)
<FN>
ANTI-DILUTIVE
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> Exhibit 27.1
ANDERSEN GROUP, INC.
FINANCIAL DATA SCHEDULE
COMMERCIAL AND INDUSTRIAL COMPANIES
ARTICLE 5 OF REGULATION S-X
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> NOV-30-1997
<CASH> 1,639
<SECURITIES> 10,246
<RECEIVABLES> 4,542
<ALLOWANCES> (234)
<INVENTORY> 9,554
<CURRENT-ASSETS> 25,933
<PP&E> 21,800
<DEPRECIATION> (12,597)
<TOTAL-ASSETS> 42,567
<CURRENT-LIABILITIES> 12,381
<BONDS> 5,986
4,760
0
<COMMON> 20
<OTHER-SE> 13,627
<TOTAL-LIABILITY-AND-EQUITY> 42,567
<SALES> 18,520
<TOTAL-REVENUES> 22,080
<CGS> 12,283
<TOTAL-COSTS> 17,928
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 24
<INTEREST-EXPENSE> 772
<INCOME-PRETAX> 3,380
<INCOME-TAX> 1,358
<INCOME-CONTINUING> 2,022
<DISCONTINUED> 173
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,876
<EPS-PRIMARY> .97
<EPS-DILUTED> .88
</TABLE>
