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 August 31, 1999
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 (I.R.S. Employer Identification No.)
of incorporation or organization)
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 October 6, 1999, there were 1,933,162 shares of the
Registrant's $.01 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
August 31, 1999 and February 28, 1999 3
Consolidated Statements of Operations for the
Three and Six Months Ended August 31, 1999 and 1998 4
Consolidated Statements of Cash Flows for the
Six Months Ended August 31, 1999 and 1998 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 6 - Exhibits and Reports on Form 8-K 12
Signatures 13
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
ANDERSEN GROUP, INC.
Consolidated Balance Sheets (In thousands)
August 31, 1999 February 28, 1999
--------------- -----------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 4,561 $ 2,541
Marketable securities 4,838 6,014
Accounts and other receivables, less
allowances of $128 and $110 4,088 4,098
Inventories 4,617 7,821
Prepaid expenses and other assets 169 100
------- -------
Total current assets 18,273 20,574
Property, plant and equipment, net 9,023 9,305
Prepaid pension expense 5,083 5,033
Investments 221 206
Other assets 2,404 2,001
----- -----
$35,004 $37,119
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 443 $ 443
Short-term borrowings 250 2,356
Accounts payable 829 659
Other current liabilities 1,183 1,501
Deferred income taxes 408 582
------ -----
Total current liabilities 3,113 5,541
Long-term debt, less current maturities 3,660 3,729
Subordinated note payable, net of
unamortized discount 7,344 7,329
Other liabilities 1,959 1,902
Deferred income taxes 2,394 2,189
----- -----
Total liabilities 18,470 20,690
------ ------
Commitments and contingencies
Stockholders' equity:
Cumulative convertible preferred stock 4,769 4,769
Common stock 20 20
Treasury stock (116) (142)
Receivable from officer (200) (250)
Additional paid-in capital 5,331 5,339
Retained earnings 6,730 6,693
----- -----
Total stockholders' equity 16,534 16,429
------ ------
$35,004 $37,119
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ANDERSEN GROUP, INC.
Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)
<S> <C> <C> <C> <C>
Three months ended Six months ended
August 31, 1999 August 31, 1998 August 31, 1999 August 31, 1998
Revenues:
Net sales $7,051 $ 5,938 $14,349 $13,623
Investment and other income (loss) 258 (4,822) 1,161 (4,676)
------ --------- ------- ------
7,309 1,116 15,510 8,947
------ --------- ------- -------
Costs and expenses:
Cost of sales 4,944 3,852 9,897 9,022
Selling, general and administrative 1,602 1,822 3,298 3,446
Research and development 561 465 1,133 952
Interest expense 383 525 771 986
------ -------- ------ ------
7,490 6,664 15,099 14,406
------ -------- ------ ------
Income (loss) from continuing
operations before income taxes (181) (5,548) 411 (5,459)
Income tax expense (benefit) (54) (2,197) 182 (2,161)
------ ------ ------ ------
Net income (loss) (127) (3,351) 229 (3,298)
Preferred dividends (96) (96) (192) (199)
------ -------- ----- ------
Income (loss) applicable to common
shares ($223) ($ 3,447) $ 37 ($3,497)
====== ======== ==== =======
Earnings (loss) per common share:
Basic ($0.12) ($1.77) $0.02 ($1.80)
======= ====== ===== ======
Diluted ($0.12) ($1.77) $0.02 ($1.80)
====== ====== ===== ======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANDERSEN GROUP, INC.
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
<S> <C> <C>
Six months ended
August 31, 1999 August 31, 1998
--------------- ---------------
Cash flows from operating activities:
Net income (loss) $ 229 ($3,298)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation, amortization and accretion 750 734
Deferred income taxes 31 (2,525)
Pension income (50) (214)
Net (gains) losses from marketable securities
and investments (578) 5,436
Purchases of marketable securities (113) (1,731)
Proceeds from sales of marketable securities 1,867 604
Disposals of property and equipment 160
Changes in operating assets and liabilities: -
Accounts and other receivables 10 915
Inventories 3,204 2,738
Prepaid expenses and other assets (116) 34
Accounts payable 170 (255)
Accrued liabilities and other long-term obligations (324) (81)
------ -------
Net cash provided by operating activities 5,080 2,517
------ ------
Cash flows from investing activities:
Purchases of property and equipment, net (761) (1,058)
Proceeds from sale of subsidiary - 2,400
--- -----
Net cash (used in) provided by investing activities (761) 1,342
------- -----
Cash flows from financing activities:
Principal payments on long-term debt (69) (89)
Repayment of short term debt, net (2,106) (813)
Stock options exercised - 50
Sales (purchases) of treasury stock, net 18 (42)
Collection of receivable from officer 50 -
Preferred dividends paid (192) (208)
------- -------
Net cash used in financing activities (2,297) (1,102)
------- -------
Net increase in cash and cash equivalents 2,020 2,757
Cash and cash equivalents - beginning of period 2,541 2,516
------- --------
Cash and cash equivalents - end of period $4,561 $5,273
======= ======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
ANDERSEN GROUP, INC.
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 28, 1999. 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>
August 31, 1999 February 28, 1999
--------------- -----------------
Common stock of savings banks $4,123 $5,362
F M Emerging Russia Fund 625 294
Portfolio of Ukraine stocks 172 108
Common stock of Bank Handlowy 217
Renaissance Russian Bond Fund 78 98
Valuation reserve - foreign investments (160) (65)
----- ------
$4,838 $6,014
====== ======
At August 31, 1999, the valuation reserve relates to the Company's
investments in the FM Emerging Russia Fund and a portfolio of Ukrainian common
stocks to provide for liquidity and volatility concerns. At February 28, 1999,
the Russian fund was recorded at 10% of its original cost as a result of a
significant decline in the market value for Russian securities and increased
liquidity concerns as a result of market conditions for these securities.
Accordingly, no amount was reflected as a valuation reserve with respect to such
Russian fund at that date. The valuation reserve at that date had been
established for the portfolio of Ukrainian common stocks and for the investment
in Bank Handlowy.
(3) Inventories
Inventories consisted of the following (in thousands):
August 31, 1999 February 28, 1999
--------------- -----------------
Raw material $ 930 $ 3,498
Work in process 3,985 4,661
Finished goods 2,750 2,710
-- ----- ----- -----
7,665 10,869
LIFO Reserve 3,048 3,048
-- ----- ---- -----
$4,617 $ 7,821
====== =======
</TABLE>
At August 31, 1999, the precious metal inventory levels of The J.M. Ney
Company ("JM Ney"), which are valued on a LIFO basis, were lower than the prior
fiscal year-end levels. Due to the interim nature of these financial statements,
no adjustment of the LIFO reserve has been recognized in the Consolidated
Statements of Operations. Had such inventory levels been determined to be
permanent in nature, at August 31, 1999, there would have been a decrease in the
LIFO reserve of approximately $1,321,000 and a corresponding reduction in cost
of sales.
(4) Income Taxes
Income tax expense represents an estimate of the effective income tax
rate for the current fiscal year.
(5) Earnings Per Share
Earnings per share are computed based on the weighted average number of
common and common equivalent shares outstanding. Diluted earnings per share
assumes full conversion of all convertible securities into common stock at the
later of the beginning of the applicable period or date of issuance, unless
antidilutive. For the three and six-month periods ended August 31, 1999, the
effects of such conversions have been antidilutive.
(6) Business Segments and Export Sales
During the six months ended August 31, 1999, the Company operated in two
segments: Electronics, which comprises the operations of JM Ney; and Corporate,
which includes the Company's investments, 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 JM Ney. Corporate
identifiable assets include marketable securities and short-term investments,
and assets not directly attributable to JM Ney.
Summarized financial information for business segments is as follows (in
thousands):
<TABLE>
<S> <C> <C>
Six months ended: August 31, 1999 August 31, 1998
--------------- ---------------
Revenues:
Electronics $14,463 $13,536
Corporate 1,047 (4,589)
------- -------
$15,510 $ 8,947
------- -------
Operating income (loss):
Electronics $848 $ 938
Corporate 334 (5,411)
------- ------
$ 1,182 ($4,473)
------- -------
Interest expense:
Electronics $ 542 $ 727
Corporate 229 259
------ ------
$ 771 $ 986
------- -----
Depreciation, amortization and accretion:
Electronics $ 674 $ 655
Corporate 76 79
------- -------
$ 750 $ 734
------- ------
Capital expenditures:
Electronics $ 746 $ 1,047
Corporate 15 11
------- --------
$ 761 $ 1,058
-------- -------
As of: August 31, 1999 February 28, 1999
--------------- -----------------
Identifiable assets:
Electronics $24,744 $25,900
Corporate 10,260 11,219
------ ------
$35,004 $37,119
------- -------
</TABLE>
Export sales for the six months ended August 31, 1999 and 1998 were
$2,648,000 and $2,225,000, respectively. Such sales were made primarily to
customers in Canada, Europe and the Pacific Rim.
During the six months ended August 31, 1999, sales to a single customer
accounted for 18.3% of net sales. During the six months ended August 31, 1998,
sales to this customer and another customer accounted for 13.0% and 11.7% of net
sales, respectively.
(7) Related Party Transactions
At August 31, 1999, the Company held a $200,000 note receivable due in
January 2001, which bears interest at 7% per annum. The note, which was received
in the prior fiscal year as part of the consideration for the purchase of 62,500
shares of the Company's common stock by an executive officer of the Company, is
presented in the Stockholders' Equity section of the Consolidated Balance Sheet.
An additional $50,000 relating to this transaction was paid to the Company
during the three months ended August 31, 1999.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
For the three months ended August 31, 1999, the Company incurred a net loss
applicable to common shares of $223,000, or $0.12 per share, basic and diluted.
During the prior fiscal year's second quarter, the Company reported a net loss
applicable to common shares of $3,447,000, or $1.77 per share, basic and
diluted. Year-to-date through August 31, 1999, the Company has generated income
applicable to common shares of $37,000, or $0.02 per share, basic and diluted.
This compares to the prior fiscal year's first six months for which a loss of
$3,497,000 or $1.80 per share was reported.
REVENUES
Revenues for the quarter ended August 31, 1999 totaled $7,309,000, as compared
to $1,116,000 of revenues for the comparable quarter in the prior fiscal year.
This increase is comprised of an 18.7% increase in sales from The J.M. Ney
Company (JM Ney) and the non-recurrence of significant investment portfolio
write-downs, which were noted in the second quarter of the prior fiscal year.
Through six months, a 5.3% increase in sales from JM Ney and year-to-date net
appreciation in the Company's trading portfolio have increased total revenues
from $8,947,000 in the prior fiscal year to $15,510,000 in the current year.
Sales to JM Ney's largest customer grew over the prior year as a result of
continued growth in demand for this customer's parts, and also the
non-recurrence of the effect of the GM labor strike in the prior year, which had
reduced demand for certain parts in the prior year. Also, year-to-date sales to
JM Ney's former dental affiliate were approximately $352,000 lower in the
current year due to the expiration in November 1998 of a three-year exclusive
manufacturing agreement. Continued increases in the price of palladium helped
boost sales during the three and six months periods ended August 31, 1999.
Average published prices per troy ounce for this precious metal were $336.50 and
$341.00, for the three and six months ended August 31, 1999, respectively, as
compared with $290.50 and $302.50, for the comparable periods in the prior
fiscal year. During the three and six month periods ended August 31, 1999, the
products JM Ney sold contained approximately 6,130 and 12,380 troy ounces of
palladium, respectively.
Investment and other income was $258,000 and $1,161,000, respectively,
during the three and six months ended August 31, 1999. Significant components
investment and other income of the six-month period and the comparable period
for the prior fiscal year are as follows (in thousands):
<TABLE>
<S> <C> <C>
Six months ended
August 31, 1999 August 31, 1998
--------------- ---------------
Net gains (losses) from domestic investment portfolio $ 114 ($1,712)
Net gains (losses) from Russian and
Eastern European portfolio 464 (3,722)
Interest and dividends 149 190
Rental income 232 267
Ultrasonics royalties 42 36
Other, net 160 265
---------- ---------
$1,161 ($4,676)
---------- ---------
</TABLE>
The domestic and foreign portfolio gains in the current year are comprised of
$798,000 of realized investment gains and a decrease of $220,000 in unrealized
gains.
COST OF SALES
Cost of sales for the three months ended August 31, 1999 represented 70.1%
of net sales, as compared to cost of sales during the comparable period in the
prior fiscal year, which were 64.9% of net sales. Cost of sales for the six
months ended August 31, 1999 are 69.0% of net sales in the current fiscal year,
as compared to 66.2% of net sales for the comparable six-month period in the
prior fiscal year. These decreases in net margins are due to a) the pass-through
effect of increasing palladium prices, b) lower fabrication sales to JM Ney's
former dental affiliate, c) decreased pension income component of costs, and d)
general pricing pressures.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the three months ended
August 31, 1999 totaled $1,602,000, a decrease of 11.9% from the prior fiscal
year's second quarter levels. Such current year expenses represented 22.7% of
net sales as compared to prior year expenses which totaled 30.7% of net sales.
Through the first six months of the fiscal year, these expenses total
$3,298,000, which is 4.3% lower than the comparable period in the prior fiscal
year prior year's spending levels. As a percentage of sales, the current year
these expenses for the six months ended August 31, 1999 equal 23.0% of net
sales, as compared to 25.3% for the prior fiscal year's first six months. Lower
costs to address Y2K compliance issues in the current fiscal year have
contributed to the overall decrease in these expenses.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses for the three months ended August 31,
1999 totaled $561,000, which is a 20.6% increase from the prior fiscal year's
second quarter expense level. For the six months ended August 31, 1999, these
expenses totaled $1,133,000, or 19.0% higher than the expense level in the
comparable period in the prior fiscal year. These increased costs reflect growth
in JM Ney's engineering staff to further expand its' technical capabilities.
INTEREST EXPENSE
Interest expense during the three and six month periods ended August 31,
1999 were 27.0% and 21.8% lower, respectively, than the interest costs incurred
during the comparable periods in the prior fiscal year. Lower interest costs
from the Company's 10 1/2% debentures as a result of their annual redemption,
lower margin loan borrowings, and significantly lower lease rates for palladium
consignment borrowing all factored into the overall decline in interest expense.
INCOME TAX EXPENSE
Income taxes have been accrued based upon estimated effective tax rates.
LIQUIDITY AND CAPITAL RESOURCES
At August 31, 1999, the Company's consolidated cash and marketable
securities totaled $9,399,000, which is a 9.9% increase from February 28, 1999
levels. Reduction in JM Ney's inventory levels and the increase in the value of
the Company's portfolio of marketable securities contributed to such increase.
In addition, short-term borrowings were reduced by more than $2.1 million from
seasonal inventory reductions and use of proceeds from the sales of securities.
Covenants contained in its borrowing agreements, restrict JM Ney from
paying dividends or otherwise transferring funds to the Company outside the
ordinary course of business except as defined in certain circumstances as
defined. At August 31, 1999, JM Ney's working capital net of intercompany
balances was $8,676,000, or 57.2% of consolidated net current assets, and its
net worth, net of a $4 million subordinated note payable to the Company, totaled
$7,216,000 or 43.6% of the Company's consolidated total net worth.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements, which are subject to a number
of risks and uncertainties that may cause actual results to differ materially
from expectations. Those uncertainties include, but are not limited to the
following:
The Company has expanded its investment and business development activities in
Russia and Eastern Europe. Economic and political developments in these
countries could significantly impact both the return on and the return of
capital employed in these regions. In addition, the price and volatility of
precious metals, particularly palladium and gold, could impact the market for
many of JM Ney's products, as users substitute less expensive materials.
YEAR 2000 ISSUE
The Year 2000 problems stem from three main issues: two-digit date storage, leap
year calculations, and special meanings for dates (i.e., 9/9/99). There is no
simple solution to the Year 2000 issue due to the fact that the use of dates for
calculations is pervasive throughout software and the use of these calculations
is not standardized.
The Company has formalized a comprehensive Year 2000 plan that encompasses its
products, vendors, customers, manufacturing equipment, technical infrastructure,
facilities, telecommunications, and business systems. The plan consists of the
following phases: inventory, assessment, remediation, testing, implementation,
and contingency planning for each area. The plan also contains the costs
associated with providing Year 2000 solutions for each area.
To date, most of the financial and operational effort has been expended in
implementing Year 2000 compliant solutions for JM Ney's enterprise resource
planning (ERP) systems, and technical infrastructure. This effort was completed
in October 1998. In addition, the Company believes that its Year 2000 objectives
for products, vendors, customers, manufacturing equipment, technical
infrastructure, facilities, and telecommunications are complete, with the
exception of three non-critical applications, which are scheduled for completion
in December 1999. The Company believes that viable contingency plans have been
developed for each area of exposure.
Through August 31, 1999, approximately $653,000 has been expended on Year
2000 projects, including approximately $44,000 expended in the six months ended
August 31, 1999. Additional Year 2000 expenses to be incurred have been
estimated to total less than $50,000. However, there can be no assurance that
the Company will not incur any unanticipated costs in completing its Year 2000
compliance project, due to the difficulty in determining remediation for
non-compliant manufacturing equipment.
Due to the unavailability of information regarding programmable logic
controls for certain of JM Ney's manufacturing equipment, there may be some risk
of failure due to date-sensitive logic controls not functioning properly.
Testing conducted to date has not revealed any noncompliance, but it has not
completely ruled out the possibility of exposure to interruptions in operating
this machinery. The Company has contacted all third parties for which it has
significant relationships, to determine the extent to which the Company could be
vulnerable to failure by any of them to obtain Year 2000 compliance. While the
Company has no direct control over the accuracy of their responses, the Company
has been assured that these third parties have taken the required steps to
assure that the flow of their products and services will not be significantly
impacted by the Year 2000 issue.
The Company has developed a detailed contingency plan addressing each Year
2000 discipline. Based upon a comprehensive review of exposure areas, the
Company believes that its manufacturing and other operational and administrative
activities will not be at significant risk due to the Year 2000 problem.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company and JM Ney are exposed to market risk from changes in equity
security prices, certain commodity prices, interest rates and from factors that
impact equity investments in Russia and the Ukraine, as discussed in the
Company's Annual Report on Form 10-K for the year ended February 28, 1999. The
following information is presented to update the status of the identified risks.
EQUITY SECURITIES RISK
At August 31, 1999, the Company's portfolio of savings bank stocks had a market
value of $4,123,000; part of which has been pledged as security for a margin
loan of $250,000.
FOREIGN INVESTMENT RISK
At August 31, 1999, the Company had a trading portfolio of Russian and Ukrainian
investments with market values totaling $797,000 and a net reported value of
$637,000. In addition, JM Ney's investment in a Russian bond fund has been
reduced to approximately $78,000, which is anticipated to be liquidated during
the next twelve months.
COMMODITY RATE RISK
During the six months ended August 31, 1999, the market price for gold declined
from $287 per troy ounce to $255 per troy ounce, while the market price for
palladium declined from $351 per ounce to $341 per ounce, although it ranged in
price from a high of $384 to a low of $285 per ounce. Subsequent to August 31,
1999, the prices for both gold and palladium increased significantly to $325 per
ounce and $390 per ounce, respectively. Such fluctuations impact selling prices
and can affect profitability through changes in the demand for JM Ney's
products, or from increased costs to replace sold metals.
As noted in Note 3 to the Consolidated Financial Statements as of August 31,
1999, JM Ney's precious metals inventory levels were below the prior fiscal year
end levels. For purposes of reporting cost of sales on a LIFO basis, at that
date such inventory levels, if remaining at February 29, 2000 would cause a
decrease in the LIFO reserve of approximately $2,321,000 and a corresponding
decrease to cost of sales. As a result of subsequent increases in precious
metals prices, the restoration of LIFO layer levels at these prices would result
in an increase in cost of sales of approximately $740,000.
INTEREST RATE RISK
The interest cost of JM Ney's use of precious metal hedges in the form of
consignment borrowing in recent years has experienced significant fluctuations.
During the quarter ended May 31,1999, the interest costs of such arrangements
fell from 38% per annum to 5% per annum. During the quarter ended August 31,
1999, JM Ney also reduced surcharges to its customers that were instituted to
offset the cost of hedging the purchases of precious metals from refining
customers. Subsequent to August 31, 1999, lease rates for palladium and platinum
have increased. Due to the increased levels of consignment borrowings,
particularly in palladium, JM Ney has increased risk with respect to the
additional costs associated with these higher lease rates.
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 originally 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 JM 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, JM 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 JM Ney Company and Dentsply Corporation, Inc.
As originally reported in the Company's Form 10-Q for the quarter ended August
31, 1997, in August 1997, JM 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 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.
Avisma Titano - Magnesium Kombinat v. Dart Management, Inc., Andersen
Group, Inc., Francis E. Baker et al
In August 1999, Avisma Titano - Magnesium Kombinat ("Avisma"), an
industrial company located in Berezniki, Sverdlovsk Russian Federation, filed a
suit in the United States District Court in New Jersey against several parties,
including the Company and the Company's Chairman, Francis E. Baker, seeking to
recover in excess of $150 million in damages for harm allegedly caused by fraud
and "money laundering" by which tens of millions of dollars were purportedly
misappropriated for the benefit of an investor group, of which the Company and
certain of its Directors were a part. The Company and Mr. Baker deny any and all
wrong doing alleged by the plaintiff. As disclosed in various of its filings
with the Securities and Exchange Commission, the Company, along with Mr. Baker
and other members of the Company's Board of Directors, made an investment in
Avisma, and, by virtue of the merger of Avisma into VSMPO, currently still holds
an investment interest through their holdings of VSMPO stock. However, this
investment did not result in any payments being made to the Company or Mr. Baker
for any purpose. scheme.
The Company and Mr. Baker intend to continue to vigorously defend this suit
as to which the Company believes it has numerous meritorious defenses. As of
this date, the Company has not provided for, nor does it expect to be required
to provide for any liability associated with this case nor does it believe any
reserve would be appropriate.
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.
(b) No reports on Form 8-K were filed during the quarter ended August 31,
1999.
<PAGE>
<TABLE>
<CAPTION> Exhibit 11
ANDERSEN GROUP, INC.
Statement Re: Computation of Per Share Earnings
(In thousands, except per share data)
<S> <C> <C>
Three Months Ended Six Months Ended
Calculation of basic earnings August 31, 1999 August 31, 1999
--------------- ---------------
per share:
Numerator for basic and diluted earnings per share:
Net (loss) income ($223) $ 37
====== ========
Denominator for basic earnings per share:
Weighted average number of shares outstanding during
the period 1,932 1,930
Effect of dilutive securities - stock options 20 13
------- --------
Denominator for diluted earnings per share 1,952 1,943
=======
Basic earnings per share ($0.12) $0.02
======= =====
Diluted earnings per share ($0.12) $0.02
======= =====
</TABLE>
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:
Oliver R. Grace
President and Chief Executive Officer
Date: October 12, 1999
By:
Peter R. Barker
Vice President and Chief Financial Officer
Date: October 12, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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 AUGUST 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-2000
<PERIOD-START> MAR-01-1999
<PERIOD-END> AUG-31-1999
<CASH> 4,561
<SECURITIES> 4,838
<RECEIVABLES> 4,216
<ALLOWANCES> (128)
<INVENTORY> 4,617
<CURRENT-ASSETS> 18,273
<PP&E> 23,140
<DEPRECIATION> (14,117)
<TOTAL-ASSETS> 35,004
<CURRENT-LIABILITIES> 3,113
<BONDS> 11,004
0
4,769
<COMMON> 20
<OTHER-SE> 11,745
<TOTAL-LIABILITY-AND-EQUITY> 35,004
<SALES> 14,349
<TOTAL-REVENUES> 15,510
<CGS> 9,897
<TOTAL-COSTS> 14,328
<OTHER-EXPENSES> 4,431
<LOSS-PROVISION> 18
<INTEREST-EXPENSE> 771
<INCOME-PRETAX> 411
<INCOME-TAX> 182
<INCOME-CONTINUING> 229
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02
</TABLE>
