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, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 0-1460
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 4, 2001, there were 2,059,863 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 2,059,863
ANDERSEN GROUP, INC.
FORM 10-Q
TABLE OF CONTENTS
Page No.
Part I - Financial Information
Item 1 - Financial Statements:
Consolidated Balance Sheets
November 30, 2000 and February 29, 2000 3
Consolidated Statements of Operations for the
Three and Nine Months Ended November 30, 2000 and 1999 4
Consolidated Statements of Cash Flows for the
Nine Months Ended November 30, 2000 and 1999 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>
<TABLE>
<CAPTION>
Part I. Financial Information
Item 1. Financial Statements
ANDERSEN GROUP, INC.
Consolidated Balance Sheets
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
November 30, 2000 February 29, 2000
----------------- -----------------
ASSETS (Unaudited)
------
Current assets:
Cash and cash equivalents $ 1,063 $ 1,854
Marketable securities 819 926
Accounts and other receivables less
allowances of $112 and $111, respectively 6,026 4,657
Inventories 6,656 8,019
Prepaid expenses and other assets 309 468
------- ------
Total current assets 14,873 15,924
Property, plant and equipment, net 9,403 10,148
Prepaid pension expense 4,962 4,917
Investment in Moscow Broadband Communication Ltd. 3,565 4,084
Other assets 2,151 2,045
------- ------
$34,954 $37,118
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 537 $ 521
Notes payable to officer, net of unamortized discount 1,157 -
Short-term borrowings 2,500 3,054
Accounts payable 793 1,015
Other current liabilities 1,470 1,674
Deferred income taxes 525 456
------- ------
Total current liabilities 6,982 6,720
Long-term debt, less current maturities 2,676 3,190
Notes payable to officer, net of unamortized discount - 933
Subordinated note payable, net of unamortized discount 7,380 7,358
Other liabilities 1,913 1,973
Deferred income taxes 1,474 1,682
------- ------
Total liabilities 20,425 21,856
------- ------
Commitments and contingencies
Stockholders' equity:
Cumulative convertible preferred stock 3,799 4,033
Common stock 21 20
Treasury stock (28) (276)
Additional paid-in capital 6,276 6,141
Retained earnings 4,461 5,344
------- -----
Total stockholders' equity 14,529 15,262
------- ------
$34,954 $37,118
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANDERSEN GROUP, INC.
Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Three months ended Nine months ended
November 30, 2000 November 30, 1999 November 30, 2000 November 30, 1999
Revenues:
Net sales $ 9,736 $ 6,633 $29,096 $20,982
Investment and other (loss) income (216) (88) 347 1,073
------- ------- ------- -------
9,520 6,545 29,443 22,055
------- ------- ------- --------
Costs and expenses:
Cost of sales 7,456 4,693 21,896 14,590
Selling, general and administrative 1,474 1,499 4,678 4,797
Research and development 585 516 1,817 1,649
Interest expense 503 440 1,540 1,211
------- ------ ------- -------
10,018 7,148 29,931 22,247
------- ------ ------- -------
Loss from operations before equity in
losses of unconsolidated subsidiary
and income taxes (498) (603) (488) (192)
Equity in losses of Moscow
Broadband Communication Ltd. (203) - (519) -
------- ------ ------- -------
Net loss before income taxes (701) (603) (1,007) (192)
Income tax benefit (232) (255) (352) (73)
------- ------ ------- -------
Net loss (469) (348) (655) (119)
Preferred dividends (75) (97) (228) (289)
------- ------- ------- -------
Loss applicable to common
shares ($544) ($445) ($883) ($408)
======= ====== ======= =======
Loss per common share:
Basic and diluted ($0.26) ($0.23) ($0.43) ($0.21)
======= ====== ======= =======
Weighted average number of shares
outstanding 2,056,539 1,933,761 2,049,820 1,931,331
--------- --------- --------- ---------
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> <C> <C> <C> <C>
Nine months ended
November 30, 2000 November 30, 1999
----------------- -----------------
Cash flows from operating activities:
Net loss ($655) ($119)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Equity in losses of Moscow Broadband Communication Ltd. 519 -
Depreciation, amortization and accretion 1,210 1,103
Deferred income taxes (139) 31
Pension income (45) (75)
Net losses (gains) from marketable securities
and investments 14 (299)
Purchases of marketable securities - (196)
Proceeds from sales of marketable securities 93 2,239
Changes in operating assets and liabilities:
Accounts and other receivables (1,369) (824)
Inventories 1,363 4,168
Prepaid expenses and other assets 100 (226)
Accounts payable (222) (69)
Accrued expenses and other long-term obligations (206) (361)
------ ------
Net cash provided by operating activities 663 5,372
------ ------
Cash flows from investing activities:
Purchases of property and equipment, net (506) (1,413)
------ ------
Net cash used in investing activities (506) (1,413)
------ ------
Cash flows from financing activities:
Principal payments on long-term debt (498) (420)
Proceeds from issuance of secured note to officer 200 -
Repayment of short-term debt, net (554) (1,988)
Stock options exercised 74 5
Sale of treasury stock, net 58 21
Preferred dividends paid (228) (289)
Officer receivable repaid - 50
------ ------
Net cash used in financing activities (948) (2,621)
------ ------
Net (decrease) increase in cash and cash equivalents (791) 1,338
Cash and cash equivalents - beginning of period 1,854 2,541
------ ------
Cash and cash equivalents - end of period $1,063 $3,879
====== ======
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 29, 2000. 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>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
November 30, 2000 February 29, 2000
----------------- -----------------
FM Emerging Russia Fund $807 $825
Portfolio of Ukraine stocks 152 239
Renaissance Russian Bond Fund 52 75
Valuation reserve - foreign investments (192) (213)
---- ----
$819 $926
==== ====
</TABLE>
The valuation reserve relates to the Company's investment in the FM Emerging
Russia Fund and a portfolio of Ukrainian common stocks to provide for liquidity
and volatility concerns.
(3) Inventories
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
November 30, 2000 February 29, 2000
----------------- -----------------
Raw material $ 2,095 $ 5,727
Work in process 6,058 8,153
Finished goods 5,193 6,029
Consignment leases (1,752) (6,952)
------- -------
11,594 12,957
LIFO Reserve (4,938) (4,938)
------- -------
$ 6,656 $ 8,019
======= =======
</TABLE>
At November 30, 2000, 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, 2000, there would have been a decrease in the LIFO
reserve of approximately $292,000 and a corresponding decrease to cost of sales.
The interim financial statements have not been adjusted to reflect changes in
precious metals prices since the prior fiscal year-end. Had such changes been
made based on quoted metals prices as of November 30, 2000, the gross values of
inventories would have been increased by approximately $1,134,000, with a
corresponding increase in the LIFO reserve.
(4)
<PAGE>
Investment in Moscow Broadband Communication Ltd.
The Company records its investment in Moscow Broadband Communication Ltd.
("Moscow Broadband") using the equity method of accounting, which is at cost as
adjusted for its proportionate share of the equity in the earnings and losses of
Moscow Broadband. For the nine months ended November 30, 2000 the Company
recorded a loss of $519,000 which represents its 25% interest in Moscow
Broadband's nine month losses of $2,076,000, which in turn, include Moscow
Broadband's 50% equity interest in the losses of ComCor TV.
At November 30, 2000, the carrying value of the Company's investment in
Moscow Broadband was $3,565,000 and the Company's 25% equity in the net assets
of Moscow Broadband was approximately $4,111,000. The $546,000 difference is due
to a previous write down of this investment in a prior year and previous to
Moscow Broadband's investment in ComCor-TV and to the purchase of shares of
Moscow Broadband during the prior fiscal year using credited accounts receivable
for amounts previously expensed.
(5) Short-Term Borrowings
In October 2000, JM Ney and its primary bank signed amendments to their
loan agreements which, among other things, increased the credit limit on the
revolving credit line from $6 million to $8 million and formally changed certain
covenants. The amendments also provide for specific sublimits for JM Ney's
precious metals borrowings, which can be adjusted from time to time at JM Ney's
discretion.
(6) Income Taxes
Income tax (benefit) expense is based upon estimates of the effective
income tax rate for the current fiscal year.
(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, 2000, the effect of such
conversions has been antidilutive.
(8) Business Segments and Export Sales
During the nine months ended November 30, 2000, 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.
Summarized financial information for business segments is as follows (in
thousands):
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Nine months ended: November 30, 2000 November 30, 1999
----------------- -----------------
Revenues:
Electronics $29,114 $21,118
Corporate 329 937
------- -------
$29,443 $22,055
------- -------
Operating income (loss):
Electronics $ 1,785 $ 1,129
Corporate (733) (110)
------- -------
$ 1,052 $ 1,019
------- -------
Interest expense:
Electronics $ 1,191 $ 886
Corporate 349 325
------- -------
$ 1,540 $ 1,211
------- -------
<PAGE>
Depreciation, amortization and accretion:
Electronics $ 1,063 $ 988
Corporate 147 115
------- -------
$ 1,210 $ 1,103
------- -------
Capital expenditures:
Electronics $ 506 $ 1,398
Corporate - 15
----- -------
$ 506 $ 1,413
===== =======
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
As of: November 30, 2000 February 29, 2000
----------------- -----------------
Identifiable assets:
Electronics $26,545 $27,835
Corporate 8,409 9,283
------- -------
$34,954 $37,118
------- -------
</TABLE>
Export sales for the nine months ended November 30, 2000 and 1999 were
$6,514,000 and $4,244,000, respectively. Such sales were made primarily to
customers in Europe and the Pacific Rim.
During the nine months ended November 30, 2000 and 1999, sales to a single
customer accounted for 13.8% and 18.3% of net sales, respectively. At November
30, 2000, accounts receivable from this customer accounted for 11.9% of
consolidated net accounts and other receivables.
(9) Related Party Transactions
In April 2000, the Company borrowed $200,000 from its President in
exchange for a secured note bearing interest at the annual rate of 8.5% and a
warrant to purchase 5,393 shares of the Company's stock at $11.13 per share
through April 2003. This warrant has been valued at approximately $18,000, and
is presented as a discount to the note payable to officer which is being
amortized over the term of the note. Also, in April 2000, the Company received
$50,000 from its Chairman in exchange for an unsecured demand note bearing
interest at the annual rate of 10.0%. This loan and related interest was repaid
in May 2000.
(10) Supplemental Disclosure of Cash Flow Information
During the nine months ended November 30, 2000, the Company issued
24,499 shares of its common stock from the conversion of 12,603 shares of its
cumulative convertible preferred stock.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
For the three months ended November 30, 2000, the Company incurred a net loss
applicable to common shares of $544,000, or $0.26 per share, basic and diluted.
For the comparable period in the prior fiscal year, the Company incurred a net
loss of $445,000, or $0.23 per share, basic and diluted. The current year
results include the Company's equity interest in the losses of Moscow Broadband
Communication Ltd. ("MBC"), which in turn reflects MBC's direct expenses and its
50% equity interest in the start-up losses of ComCor-TV, a broadband cable
operator in Moscow, Russia which is licensed to provide video, Internet and
telephony to up to 1.5 million homes and businesses in Moscow. The Company's
pre-tax loss prior to its equity in MBC's losses totaled $498,000 for the three
months ended November 30, 2000, as compared to a pre-tax loss of $603,000 for
the three months ended November 30, 1999.
For the nine months ended November 30, 2000, the Company's net loss applicable
to common shares totaled $883,000, or $0.43 per share, basic and diluted. For
the comparable nine month period in the prior fiscal year, the Company reported
a net loss of $408,000, or $0.21 per share, basic and diluted. Before taxes and
its equity interest in MBC's losses, the Company's loss for the nine months
ended November 30, 2000 was $488,000 as compared to a pre-tax loss of $192,000
for the nine months ended November 30, 1999.
REVENUES:
Revenues for the three months ended November 30, 2000 totaled $9,520,000 as
compared to $6,545,000 for the comparable quarter in the prior fiscal year. For
the nine months ended November 30, 2000, revenues totaled $29,443,000, as
compared to $22,055,000 for the first nine months of the prior fiscal year.
Sales from the J. M. Ney Company ("JM Ney") for the three and nine months ended
November 30, 2000 grew 46.8% and 38.7%, respectively reflecting both the
pass-through effect of continuing increases in the prices of palladium and real
growth from sales of parts and materials, particularly into the automotive
market.
Investment and other income (loss) totaled ($216,000) and $347,000,
respectively, during the three and nine months ended November 30, 2000.
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> <C> <C> <C> <C>
Nine Months ended
November 30, 2000 November 30, 1999
----------------- -----------------
Net losses from domestic trading portfolio $ - ($ 109)
Net gains (losses) from Russian and
Eastern European portfolio ( 14) 457
Interest and dividends 24 199
Rental income 341 329
Ultrasonic royalties 54 58
Other, net (58) 139
----- ------
$ 347 $1,073
===== ======
</TABLE>
COST OF SALES
Cost of sales for the three months ended November 30, 2000 represented 76.6% of
sales and resulted in gross margin of $2,280,000. This compares to the prior
year's third fiscal quarter in which cost of sales were 70.8% of sales and
produced gross margin of $1,940,000. Year-to-date, cost of sales represents
75.3% of sales resulting in gross margin of $7,200,000, as compared to the prior
fiscal year's first nine months during which cost of sales which represented
69.5% of sales and,resulted in gross margin of $6,392,000. Declines in the gross
margin percentage have been the result of the pass-through effect of rising
palladium costs. However, the 17.5% and 12.6% increases in gross margin dollars
produced during the three and six month periods ended November 30, 2000 over the
comparable prior year periods represents the impact of sales growth.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the three months ended November
30, 2000 totaled $1,474,000, a decrease of 1.7% from the prior fiscal year's
third quarter levels. Through the first nine months of the current fiscal year,
these expenses totaled $4,678,000, which is 2.5% lower than the comparable
period in the prior fiscal year. The non-recurrence of expensed activities
relating to MBC's investment in ComCor-TV have contributed to decrease in these
costs.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses for the three months ended November 30, 2000
totaled $585,000, which is a 13.4% increase from the expense level in the
comparable period of the prior fiscal year. For the nine months ended November
30, 2000, these expenses totaled $1,817,000, or 10.2% 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 three and nine months ended November 30, 2000 was
14.3% and 27.2% higher, respectively, than the costs incurred during the
comparable periods of the prior fiscal year. These increases are primarily due
to higher borrowing costs incurred by JM Ney during the first half of the fiscal
year from palladium leases on which interest is partially based on the metal
value, which has been significantly higher than the prior year. Also, interest
on increased cash borrowings that were incurred to finance increased accounts
receivable that have resulted from higher sales, and from borrowings to pay down
consignment leases and deferred pricing loans contributed to the increase. The
increase in the third quarter interest cost over the prior year's third quarter
interest expense is primarily due to the cost of borrowings incurred by the
Company, primarily to increase its investment in MBC at the end of the prior
fiscal year. Lower outstanding principal amounts on the 10-1/2% subordinated
notes have partially offset this increase.
INCOME TAX EXPENSE
Income taxes have been accrued based upon estimated effective tax rates.
LIQUIDITY AND CAPITAL RESOURCES
At November 30, 2000, the Company's consolidated cash and marketable securities
totaled $1,882,000, which is a decrease of $898,000, or 32.3% from February 29,
2000 levels. This reduction is primarily the result of cash being used to
decrease short-term borrowings and long-term debt.
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, 2000, JM Ney's working capital was approximately
$7,785,000, or 98.7% of consolidated net current assets; and its net worth, net
of a $4 million subordinated note payable to the Company, totaled $6,559,000, or
45.1% of the Company's consolidated total net worth.
As noted in Note 6 to the consolidated financial statements, JM Ney has signed
amendments to its loan agreements with its primary bank. These amendments
increase the revolving credit limit to $8 million and provide for specific
dollar and ounce sublimits for precious metals borrowings. In addition,
amendments to financial covenants contained within the agreements are expected
to eliminate the need to request compliance waivers which had been noted in
prior quarters due to factors which include the effects of the volatility of
market prices and leasing rates for palladium during the fourth quarter of the
prior fiscal year and the first quarter of the current fiscal year.
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. Such precious metals
volatility can also expose JM Ney to certain pricing risks as they relate to the
sale of products and the purchase of these metals.
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 29, 2000. The
following information is presented to update the status of the identified risks.
FOREIGN INVESTMENT RISK
The Company has an investment in Moscow Broadband Communication Ltd. (MBC)
with a carrying value of $3,565,000. Moscow Broadband's primary asset is an
investment in ComCor-TV (CC-TV), a Moscow, Russia based broadband cable operator
licensed to provide video, Internet and telephony to up to 1.5 million homes and
businesses in Moscow. The success of the Company's investment in MBC is
dependent upon the success of CC-TV in demonstrating the validity of its
business plan through growth in the number of subscribers for its cable TV and
Internet services. In addition, in order for MBC to maintain its 50% ownership
in CC-TV, it is required to make approximately $20 million to $30 million in
additional cash capital investments into CC-TV. To do so, MBC must raise up to
$25 million in additional equity capital. MBC's failure to raise this capital
and make the additional investment in CC-TV could result in a significant
dilution of its ownership of CC-TV. The Company has the right and opportunity to
increase its investment in MBC, but has no obligation to do so. As a result of
any potential private placement of MBC's equity securities, the Company's
current 25% ownership in MBC is likely to be diluted. The value of the Company's
investment, and the degree of future value appreciation, if any, will also be
dependent on the valuation levels of any future private placements of MBC's
equity securities. The Company currently exercises significant operational
control over MBC's activities. This degree of management influence could be
reduced as a result of ownership dilution.
The Company also has a trading portfolio of Russian and Ukrainian investments
with market values totaling $1,011,000 and a net reported value of $819,000. In
addition, as a result of the receipt of an additional liquidating distribution,
JM Ney's investment in a Russian bond fund has been reduced to approximately
$52,000. All such investments bear the specific economic, currency and political
risks of this region.
COMMODITY RATE RISK
During the nine months ended November 30, 2000, the price of palladium as
measured by the daily Second London fix, fluctuated from a high of $852 per troy
ounce, to a low of $554 per troy ounce. During the three months ended November
30, 2000, the price of palladium averaged approximately $751 an ounce and
subsequently during December 2000, the price of palladium averaged $915 per
ounce. This volatility impacts selling prices and can affect profitability
through changes in the demand for JM Ney's products, from increased costs to
replace sold metals and, along with corresponding volatility in precious metal
lease rates, through increased interest expense on palladium consignment leases.
Although the market price for gold has not been as volatile during the nine
month period, ranging from approximately $264 an ounce to $294 per ounce,
volatility in price of this metal can have similar effects including affecting
JM Ney's inventory management strategies.
As noted in Note 3 to the Consolidated Financial Statements as of November 30,
2000, certain of 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 the date, if these inventory decrements are not replenished at February 28,
2001, the LIFO reserve would decrease by approximately $292,000 and there would
be a corresponding decrease to cost of sales. The restoration of all LIFO layer
levels at prices as of November 30, 2000 would result in an increase in cost of
sales of approximately $75,000.
INTEREST RATE RISK
The interest cost of JM Ney's precious metal borrowings in the form of
consignment leases or deferred pricing borrowing in recent years has experienced
significant fluctuations. During the first nine months, the interest costs of
such arrangements fell from 18% per annum to approximately 9% per annum. Since
February 29, 2000, JM Ney reduced the number of ounces of palladium leased or
borrowed from 11,166 troy ounces to 2,827 troy ounces as of November 30, 2000.
These reductions reduce J.M. Ney's exposure to the effects of such leasing cost
volatility. In addition, at November 30, 2000, JM Ney had $2,500,000 of short
term borrowings at rates that are subject to daily or monthly charge based on
market conditions.
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, 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 from being exposed to asbestos and asbestos products alleged to have
been manufactured and supplied by the defendants, including J.M. Ney's former
Dental Division. The Company intends to vigorously defend the lawsuit. 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.
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, 2000.
<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 9, 2001
By: /s/Andrew M. O'Shea
Andrew M. O'Shea
Chief Financial Officer
Date: January 9, 2001
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11
ANDERSEN GROUP, INC.
Statement Re: Computation of Per Share Earnings
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Three Months Three Months Ended Nine Months Nine Months
Ended Ended Ended Ended
November 30, 2000 November 30, 1999 November 30, 2000 November 30, 1999
T
Calculation of basic earnings
Numerator for basic and diluted
earnings per share:
Net loss ($544) ($445) ($ 883) ($ 408)
===== ===== ====== ======
Denominator for basic earnings per share:
Weighted average number of
shares outstanding during the
period 2,057 1,934 2,050 1,931
Effect of dilutive securities (a) - - - -
----- ------ ----- ------
Denominator for diluted earnings
per share 2,057 1,934 2,050 1.931
===== ===== ===== =====
Basic earnings per share
($0.26) ($0.23) ($0.43) ($0.21)
====== ====== ====== ======
Diluted earnings per share ($0.26) ($0.23) ($0.43) ($0.21)
====== ====== ====== ======
(a) For each of the three and nine month periods ended November 30, 2000 and
November 30, 1999, the effect of outstanding stock options, or the assumed
conversion of subordinated convertible notes or cumulative preferred stock, were
anti-dilutive to the reported basis losses per share.
</TABLE>
