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, 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
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 6, 2000, there were 1,934,732 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 November 30, 1999 and February 28, 1999 3
Consolidated Statements of Operations for the Three
and Nine Months Ended November 30, 1999 and 1998 4
Consolidated Statements of Cash Flows for the
Nine Months Ended November 30, 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 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>
ANDERSEN GROUP, INC.
Consolidated Balance Sheets
(In thousands)
<S> <C> <C>
November 30, 1999 February 28, 1999
----------------- -----------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 3,879 $ 2,541
Marketable securities 4,270 6,014
Accounts and other receivables less
allowances of $105 and $110 4,922 4,098
Inventories 3,653 7,821
Prepaid expenses and other assets 213 100
------- ------
Total current assets 16,937 20,574
Property, plant and equipment, net 8,990 9,305
Prepaid pension expense 5,108 5,033
Investments 221 206
Other assets 2,749 2,001
------- ------
$34,005 $37,119
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 565 $ 443
Short-term borrowings 368 2,356
Accounts payable 590 659
Other current liabilities 1,143 1,501
Deferred income taxes 408 582
------ -----
Total current liabilities 3,074 5,541
Long-term debt, less current maturities 3,187 3,729
Subordinated note payable, net of unamortized discount 7,351 7,329
Other liabilities 1,901 1,902
Deferred income taxes 2,394 2,189
------ -----
Total liabilities 17,907 20,690
------ ------
Commitments and contingencies
Stockholders' equity:
Cumulative convertible preferred stock 4,769 4,769
Common stock 20 20
Treasury stock (105) (142)
Receivable from officer (200) (250)
Additional paid-in capital 5,329 5,339
Retained earnings 6,285 6,693
----- -----
Total stockholders' equity 16,098 16,429
------ ------
$34,005 $37,119
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
ANDERSEN GROUP, INC.
Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)
<S> <C> <C> <C> <C>
Three months ended Nine months ended
November 30, 1999 November 30, 1998 November 30, 1999 November 30, 1998
Revenues:
Net sales $6,633 $ 6,545 $20,982 $20,168
Investment and other income (loss) (88) 1,297 1,073 (3,379)
------ ------- ------- -------
6,545 7,842 22,055 16,789
------ ------- ------- -------
Costs and expenses:
Cost of sales 4,693 4,330 14,590 13,352
Selling, general and administrative 1,499 1,583 4,797 5,029
Research and development 516 502 1,649 1,454
Interest expense 440 406 1,211 1,392
----- ------- ------ ------
7,148 6,821 22,247 21,227
----- ------- ------- ------
Income (loss) before income taxes (603) 1,021 (192) (4,438)
Income tax expense (benefit) (255) 410 (73) (1,751)
----- ------- ------ -----
Net income (loss) (348) 611 (119) (2,687)
Preferred dividends (97) (96) (289) (295)
----- -------- ------ ------
Income (loss) applicable to common
shares ($445) $ 515 ($408) ($2,982)
====== ===== ====== =======
Earnings (loss) per common share:
Basic ($0.23) $0.27 ($0.21) ($1.54)
====== ===== ====== ======
Diluted ($0.23) $0.27 ($0.21) ($1.54)
====== ===== ====== ======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
ANDERSEN GROUP, INC.
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
<S> <C> <C>
Nine months ended
November 30, 1999 November 30, 1998
Cash flows from operating activities:
Net loss ($119) ($2,687)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation, amortization and accretion 1,103 1,059
Gain on sale of property - (25)
Deferred income taxes 31 (1,677)
Pension income (75) (358)
Net (gains) losses from marketable securities
and investments (299) 4,437
Purchases of marketable securities (196) (1,732)
Proceeds from sales of marketable securities 2,239 1,783
Changes in operating assets and liabilities:
Accounts and other receivables (824) (636)
Inventories 4,168 2,321
Prepaid expenses and other assets (226) 98
Accounts payable (69) (310)
Accrued expenses and other long-term obligations (361) (280)
----- -----
Net cash provided by operating activities 5,372 1,993
----- -----
Cash flows from investing activities:
Purchases of property and equipment, net (1,413) (1,268)
Proceeds from sale of property - 223
Proceeds from sale of subsidiary - 2,400
------- -----
Net cash (used in) provided by investing activities (1,413) 1,355
------ -----
Cash flows from financing activities:
Principal payments on long-term debt (420) (592)
Repayment of short-term debt, net (1,988) (996)
Stock options exercised 5 49
Sale (purchase) of treasury stock, net 21 (38)
Preferred dividends paid (289) (304)
Officer receivable repaid 50 -
------ ------
Net cash used in financing activities (2,621) (1,881)
------ ------
Net increase in cash and cash equivalents 1,338 1,467
Cash and cash equivalents - beginning of period 2,541 2,516
------ ------
Cash and cash equivalents - end of period $3,879 $3,983
====== ======
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>
November 30, 1999 February 28, 1999
----------------- -----------------
Common stock of savings banks $3,616 $5,362
FM Emerging Russia Fund 572 294
Portfolio of Ukraine stocks 160 108
Common stock of Bank Handlowy - 217
Renaissance Russian Bond Fund 68 98
Valuation reserve - foreign investments (146) (65)
----- -----
$4,270 $6,014
====== ======
</TABLE>
At November 30, 1999, $114,000 of the valuation reserve relates to the Company's
investment in the FM Emerging Russia Fund to provide for liquidity and
volatility concerns. At February 28, 1999, this 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 at that date. The remaining valuation reserve has been
established for the portfolio of Ukrainian common stock and for the investment
in Bank Handlowy.
(3) Inventories
Inventories consisted of the following (in thousands):
<TABLE>
<S> <C> <C>
November 30, 1999 February 28, 1999
----------------- -----------------
Raw material $1,549 $ 3,498
Work in process 3,162 4,661
Finished goods 1,990 2,710
----- ------
6,701 10,869
LIFO Reserve 3,048 3,048
----- ------
$3,653 $ 7,821
====== =======
</TABLE>
At November 30, 1999, the precious metal inventory levels of The J.M. Ney
Company, 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 Statement
of Operations. Had such inventory levels been determined to be permanent in
nature, at November 30, 1999, there would have been a decrease in the LIFO
reserve of approximately $1,657,000. Due to the deferral of the price variance
impacts of certain transactions, the corresponding reduction in cost of sales
would have been approximately $1,543,000.
(4) Income Taxes
Income tax expense is based upon 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 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, 1999, the effect of such
conversions has been antidilutive.
(6) Business Segments and Export Sales
During the nine months ended November 30, 1999, the Company operated in
two segments; Electronics, which comprises the operations of The J.M. Ney
Company; 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>
Nine months ended: November 30, 1999 November 30, 1998
----------------- -----------------
Revenues:
Electronics $21,118 $20,161
Corporate 937 (3,372)
------- ------
$22,055 $16,789
------- -------
Operating income (loss):
Electronics $ 1,129 $ 2,041
Corporate (110) (5,087)
------- -------
$ 1,019 ($3,046)
------- -------
Interest expense:
Electronics $ 886 $ 1,005
Corporate 325 387
------- -------
$ 1,211 $ 1,392
------- -------
Depreciation, amortization and accretion:
Electronics $ 988 $ 940
Corporate 115 119
------ -------
$ 1,103 $ 1,059
------- -------
Capital expenditures:
Electronics $ 1,398 $ 1,246
Corporate 15 22
------- -------
$ 1,413 $ 1,268
------- -------
As of: November 30, 1999 February 28, 1999
----------------- -----------------
Identifiable assets:
Electronics $24,652 $25,900
Corporate 9,353 11,219
------- -------
$34,005 $37,119
------- -------
</TABLE>
Export sales for the nine months ended November 30, 1999 and 1998 were
$4,244,000 and $3,140,000, respectively. Such sales were made primarily to
customers in Europe and the Pacific Rim.
During the nine months ended November 30, 1999, sales to a single customer
accounted for 18.3% of net sales. During the nine months ended November 30,
1998, sales to this customer and another customer accounted for 14.7% and 13.0%
of net sales, respectively.
(7) Related Party Transactions
At November 30, 1999, the Company held a $200,000 note receivable from
a former executive officer of the Company. The note is due in January
2001, and bears interest at 7% per annum. The note 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 the former officer and
is secured by such shares. The amount due under the note is presented
in the Stockholders' Equity section of the Consolidated Balance Sheet.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
For the three months ended November 30, 1999, the Company incurred a net loss
applicable to common shares of $445,000, or $0.23 per share, basic and diluted.
For the comparable period in the prior fiscal year, the Company reported net
income applicable to common shares of $515,000, or $0.27 per share, basic and
diluted. Year-to-date through November 30, 1999, the Company has incurred a net
loss applicable to common shares of $408,000, or $0.21 per share, basic and
diluted. For the comparable period in the prior fiscal year, the Company
incurred a net loss applicable to common shares of $2,982,000, or $1.54 per
share, basic and diluted.
REVENUES
Revenues for the quarter ended November 30, 1999, totaled $6,545,000, as
compared to $7,842,000 for the comparable quarter in the prior fiscal year. This
decrease is the result of significant gains in the Company's domestic investment
portfolio in the prior year's third quarter, which were non-recurring in the
current year. Through nine months, a 4.0% increase in sales from JM Ney and the
non-recurrence of prior fiscal year declines in the Company's trading portfolio,
have increased in an increase in total revenues from $16,789,000 in the prior
fiscal year to $22,055,000 in the current year.
Year-to-date sales to JM Ney's former dental affiliate were approximately
$557,000 lower in the current year due to the expiration in November 1998 of a
three-year exclusive manufacturing agreement. The pass-through effect of
continued increases in the price of palladium helped boost sales during the
three and nine-month periods ended November 30, 1999. Average published prices
per troy ounce for palladium were $383 and $355, for the three and nine months
ended November, 30, 1999 respectively, as compared with $280 and $295, for the
comparable periods in the prior fiscal year. During the three and nine month
periods ended November 30, 1999, the products JM Ney sold contained
approximately 4,989 and 17,373 troy ounces of palladium, respectively.
Investment and other income (loss) totaled $(88,000) and $1,073,000,
respectively, during the three and nine months ended November 30, 1999.
Significant components of investment and other income (loss) for the nine-month
period and the comparable period of the prior fiscal year are as follows (in
thousands):
<TABLE>
<S> <C> <C>
Nine Months ended
November 30, 1999 November 30, 1998
----------------- -----------------
Net losses from domestic trading portfolio ($ 109) ($ 724)
Net gains (losses) from Russian and
Eastern European portfolio 457 (3,417)
Interest and dividends 199 150
Rental income 329 398
Other, net 197 214
----- -----
$1,073 ($3,379)
====== ========
</TABLE>
The domestic and foreign portfolio gains in the current year are comprised of
$762,000 of realized investment gains and net decreases of $414,000 in
unrealized gains.
COST OF SALES
Cost of sales for the three months ended November 30, 1999 represented 70.8% of
net sales, as compared to cost of sales during the comparable period in the
prior fiscal year, which were 66.2% of net sales. Cost of sales for the nine
months ended November 30, 1999 were 69.5% of net sales, as compared to 66.2% of
net sales for the comparable period in the prior fiscal year. On an absolute
basis gross margin of $1,940,000 during the three months ended November 30, 1999
was $275,000 lower gross margin during the comparable period in the prior fiscal
year, and year-to-date gross margin of $6,392,000 is $424,000 lower than gross
margin during the comparable 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 November
30, 1999 totaled $1,499,000, a decrease of 5.3% from the prior fiscal year's
third quarter levels. Such current year expenses represented 22.6% of net sales,
as compared to prior year expenses, which totaled 24.2% of net sales. Through
the first nine months of the fiscal year, these expenses totaled $4,797,000,
which is 4.6% lower than the comparable period in the prior fiscal year. As a
percentage of sales, these expenses for the nine months ended November 30, 1999
equal 22.9% of net sales, as compared to 24.9% of net sales for the comparable
period in the prior fiscal year. 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 November 30,1999
totaled $516,000, which is a 2.8% increase from the expense level in the
comparable period of the prior fiscal year. For the nine months ended November
30, 1999, these expenses totaled $1,649,000, or 13.4% more 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 nine months ended November 30, 1999 totaled
$1,211,000, which is 13.0% lower than the costs incurred during the comparable
period of the prior fiscal year. Lower interest costs from the Company's 10 1/2%
debentures as a result of the annual redemption, lower margin loan borrowings,
and lower average lease rates for palladium hedges all factored into the decline
in this expense.
INCOME TAX EXPENSE
Income taxes have been accrued based upon estimated effective tax rates.
LIQUIDITY AND CAPITAL RESOURCES
At November 30, 1999, the Company's consolidated cash and marketable securities
totaled $8,149,000, which is a 4.7% decrease from February 28, 1999 levels. This
reduction is primarily the result of a decrease in short-term borrowings and
long-term debt of approximately $2.4 million, which was partially offset by cash
generated from a reduction of JM Ney's inventory levels through sale and lease
back transactions and normal attrition of inventory.
As a result of covenants contained in its borrowing agreements, JM Ney is
restricted from paying dividends or otherwise transferring funds to the Company
outside the ordinary course of business except as permitted in certain
covenants. At November 30, 1999, JM Ney's working capital was $8,352,000, or 49%
of consolidated net current assets, and its net worth, net of a $4 million
subordinated note payable to the Company, totaled $7,127,000, or 44.3% 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. 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
The Year 2000 problem stems 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 problem due to the fact that the use of dates
for calculations is pervasive throughout software and the use of these
calculations is not standardized.
Over the past two years, the Company formalized and implemented a comprehensive
plan to address the Year 2000 problem which encompassed its products, vendors,
customers, manufacturing equipment, technical infrastructure, facilities,
telecommunications and business systems. In this process, the Company expended
approximately $653,000, including approximately $45,000 expended during the nine
months ended November 30, 1999. These amounts exclude the cost of system
upgrades that were required to be made to meet other operational requirements.
As of the date of this filing, the Company has not experienced any Year 2000
problems that have affected its operations, the realization of financial assets,
or its results of operations. The Company will continue to monitor its
operations for non-compliant components. The Company is also monitoring its open
transactions with customers and vendors to ensure that there are no undetected
Year 2000 problems that could have a material adverse effect on the Company or
its operations.
As of the date of this filing, the Company believes that there is no remaining
significant risk or exposure to the Company as a result of the Year 2000 issue.
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 November 30, 1999, the Company's portfolio of savings bank stocks had a
market value of $3,616,000, part of which has been pledged as security for a
margin loan of $368,000.
FOREIGN INVESTMENT RISK
At November 30, 1999, the Company had a trading portfolio of Russian and
Ukrainian investments with market values totaling $732,000 and a net reported
value of $586,000. In addition, JM Ney's investment in a Russian bond fund has
been reduced to approximately $68,000, which is anticipated to be liquidated
during the next twelve months.
COMMMODITY RATE RISK
During the quarter ended November 30, 1999, the market price for gold increased
from $255 per troy ounce to $292 per troy ounce, while the market price of
palladium increased from $340 per ounce to $394 per ounce. Gold prices ranged as
high as $325 per troy ounce during the quarter, while the high for palladium was
$415 per troy ounce. Such fluctuations impact selling prices and can affect
reported profitability and the demand for JM Ney's products.
As noted in Note 3 to the Consolidated Financial Statements as of November 30,
1999, JM Ney's precious metals inventory levels were below the prior fiscal
year-end levels. If such levels remain at February 29, 2000, the LIFO inventory
reserve would decrease by approximately $1,657,000 and thus, the reported values
of inventory would increase by a similar amount. Due to the deferral of the
price variance impacts of certain transactions, the cost of sales reported would
be reduced by approximately $1,543,000.
The restoration of LIFO layers at November 30, 1999 prices would result in an
increase in reported cost of sales of approximately $525,000, including the
recognition of currently deferred items.
As of November 30, 1999, the market value of the precious metal content of JM
Ney's inventory was approximately $440,000 higher than the recorded value, prior
to LIFO adjustment. This increase is primarily due to increases in the market
value of palladium and platinum at that date.
INTEREST RATE RISK
The interest cost of JM Ney's use of precious metal hedges in the form of
consignment borrowings in recent years has experienced significant fluctuations.
During the first nine months of this year, the interest costs of such
arrangements ranged from 38% per annum to 5% per annum and ended the third
quarter around 11% per annum. Subsequent rates have increased to 21%. During the
second quarter, JM Ney reduced surcharges to its customers that were instituted
to offset the cost of hedging the purchases of precious metals from refining
customers. The Company also has a margin loan of $368,000, which bears interest
at rates which fluctuate with market conditions.
<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 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 J.M. 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 JM 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
On August 18, 1999, Avisma Titano - Magnesium Kombinat ("Avisma"), an industrial
company located in Berezniki, Sverdlovsk, Russian Federation, and organized
under the laws of the Russian Federation, filed suit in the United States
District Court in New Jersey against numerous shareholder parties, including,
among others, the Company and the Company's Chairman, Francis E. Baker.
Recently, on December 10, 1999, Avisma filed an amended Complaint in which,
among other things, the Company was dropped from the lawsuit and is thus no
longer a party defendant. Mr. Baker, who also serves as a Director of the
company, remains a named defendant.
The suit purportedly seeks to recover in excess of $150 million in damages
allegedly arising out of harm allegedly caused by fraud and "money laundering",
that is, in which it was claimed that funds were purportedly misappropriated
away from Avisma for the benefit of the Western-based investor group of which
the Company and certain Directors are a part. The Company and Mr. Baker have
denied any and all wrong doing alleged by the plaintiff and believe that this
lawsuit was and continues to be motivated for purposes of using inflammatory
allegations in the U.S. to gain some kind of "leverage" in on-going business
relations in which the investors are seeking to bring Western-style accounting
and management controls to and for the benefit of the Russian company and its
shareholders.
As previously disclosed in various of its filings with the Securities and
Exchange Commission, both the Company and Mr. Baker, along with other members of
the Company's Board of Directors, made an investment in Avisma, and, by virtue
of the merger of Avisma into another Russian Federation corporation (namely,
"VSMPO") in 1998, currently still holds a small, minority investment interest
through the holdings of VSMPO stock.
Mr. Baker, who is indemnified by the Company for conduct within the scope of his
position as Chairman and Director, intends to continue to vigorously defend this
suit, as to which it is believed there are numerous meritorious defenses. As of
this date, the Company has not provided for any reserve for any liability
associated with this case, nor does it believe any reserve would be appropriate
since based on the Company's present understanding of the facts associated with
Avisma's operations and of relevant U.S. laws, liability of either Mr. Baker, or
derivatively, the Company, would be entirely speculative.
Item 4. Submission of Matters to a Vote of Security Holders - None
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.
No reports on Form 8-K were filed during the quarter ended November 30, 1999.
<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, 2000
By: /s/Andrew M. O'Shea
Andrew M. O'Shea
Chief Financial Officer
Date: January 11, 2000
<PAGE>
<TABLE>
Exhibit 11
ANDERSEN GROUP, INC.
Statement Re: Computation of Per Share Earnings
(In thousands, except per share data)
<S> <C> <C>
Three Months Ended Nine Months Ended
Calculation of basic earnings November 30, 1999 November 30, 1999
----------------- -----------------
per share:
Numerator for basic and diluted earnings per share:
Net loss ($445) ($ 408)
==== =====
Denominator for basic earnings per share:
Weighted average number of shares outstanding during
the period 1,934 1,931
Effect of dilutive securities - -
----- -----
Denominator for diluted earnings per share 1,934 1,931
===== =====
Basic earnings per share ($0.23) ($0.21)
====== ======
Diluted earnings per share ($0.23) ($0.21)
====== ======
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDING NOVEMBER 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
<ARTICLE> 5
<LEGEND>
ANDERSEN GROUP, INC.
FINANCIAL DATA SCHEDULE
COMMERCIAL AND INDUSTRIAL COMPANIES
ARTICLE 5 OF REGULATION S-X
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-START> MAR-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 3,879
<SECURITIES> 4,270
<RECEIVABLES> 5,027
<ALLOWANCES> (105)
<INVENTORY> 3,653
<CURRENT-ASSETS> 16,937
<PP&E> 23,454
<DEPRECIATION> (14,464)
<TOTAL-ASSETS> 34,005
<CURRENT-LIABILITIES> 3,074
<BONDS> 10,358
0
4,769
<COMMON> 20
<OTHER-SE> 11,309
<TOTAL-LIABILITY-AND-EQUITY> 34,005
<SALES> 20,982
<TOTAL-REVENUES> 22,055
<CGS> 14,590
<TOTAL-COSTS> 21,036
<OTHER-EXPENSES> 6,446
<LOSS-PROVISION> 5
<INTEREST-EXPENSE> 1,211
<INCOME-PRETAX> (192)
<INCOME-TAX> (73)
<INCOME-CONTINUING> (119)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (408)
<EPS-BASIC> 0.21
<EPS-DILUTED> 0.21
</TABLE>
