9309710Q
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 September 30, 1997
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 0-12362
Berger Holdings, Ltd.
(Exact Name of Registrant as Specified in its Charter)
Pennsylvania 23-2160077
(State or Other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
805 Pennsylvania Boulevard, Feasterville, PA 19053
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 355-1200
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 ninety days.
YES X NO _____
Indicate by check mark whether the Registrant has filed
all documents and reports required to be filed by Section 12,
13 or 15(d) of the Securities Exchange Act of 1934 subsequent
to the distribution of securities under a plan confirmed by a
court.
YES X NO _____
As of September 30, 1997, the Registrant had outstanding
5,135,133 shares of Common Stock, par value $0.01 per share.
<PAGE>
BERGER HOLDINGS, LTD.
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated
Balance Sheets at September 30, 1997
and December 31, 1996 3
Condensed Consolidated Statement of
Operations for the three month periods
ended September 30, 1997 and 1996 5
Condensed Consolidated Statement of
Operations for the nine month periods
ended September 30, 1997 and 1996 6
Condensed Consolidated Statements
of Cash Flows for the nine month periods
ended September 30, 1997 and 1996 7
Notes to Condensed Consolidated
Financial Statements 9
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 10
PART II OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a
Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
<PAGE>
<TABLE>
BERGER HOLDINGS, LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS September 30, December 31,
1997 1996
----------------- -----------------
<S> <C> <C>
Current Assets
Cash $ 145,616 $1,236,709
Trade accounts receivable, net of
allowance for doubtful accounts
of $43,000 in 1997 & 1996 2,812,486 1,569,741
Inventories (Note 2) 2,616,753 2,133,895
Prepaid and other assets 70,641 153,733
Deferred income taxes 250,000 250,000
----------------- -----------------
Total current assets 5,895,496 5,344,078
----------------- -----------------
Other Assets
Property and equipment, net (Note 3) 6,157,112 6,080,755
Deferred income taxes 700,000 250,000
Other assets 1,021,252 145,654
Goodwill, net of accumulated
amortization 1,620,274 472,374
----------------- -----------------
Total other assets 9,498,638 6,948,783
----------------- -----------------
$ 15,394,134 $ 12,292,861
================= =================
</TABLE>
- 3 -
<PAGE>
<TABLE>
BERGER HOLDINGS, LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
----------------- -----------------
<S> <C> <C>
Current Liabilities
Current maturities of long term debt
and demand notes payable (Note 4) $ 727,713 $ 247,717
Accounts payable 522,211 110,867
Accrued expenses 488,531 557,222
----------------- -----------------
Total current liabilities 1,738,455 915,806
Long term debt, net of current
maturities 4,153,235 3,721,719
----------------- -----------------
Total liabilities 5,891,690 4,637,525
----------------- -----------------
Shareholders' Equity
Common stock $.01 par value
Authorized 20,000,000 shares
Issued and outstanding 5,135,133 shares
in 1997 and 4,858,150 in 1996 51,351 48,581
Additional paid-in-capital 17,132,115 16,753,862
Deficit (7,173,106) (8,634,191)
----------------- -----------------
10,010,360 8,168,252
Less common stock subscribed (507,916) (512,916)
----------------- -----------------
Total shareholders' equity 9,502,444 7,655,336
----------------- -----------------
$ 15,394,134 $ 12,292,861
================== =================
</TABLE>
- 4 -
<PAGE>
<TABLE>
BERGER HOLDINGS, LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Three Months
Ended Ended
September 30, September 30,
1997 1996
----------------- -----------------
<S> <C> <C>
Net Sales $ 5,878,929 $ 5,695,246
Cost of sales 4,552,603 4,382,870
----------------- -----------------
Gross profit 1,326,326 1,312,376
Operating expenses
Selling, administrative and general
expenses 729,029 631,136
----------------- -----------------
Income from operations 597,297 681,240
----------------- -----------------
Other (expenses) income
Interest expense (192,070) (158,279)
Interest income 3,222 517
----------------- -----------------
(188,848) (157,762)
Income from continuing operations ----------------- -----------------
before income tax benefit 408,449 523,478
Income tax benefit 250,000 -0-
----------------- -----------------
Net income $658,449 $523,478
================= =================
Earnings per common share
Earnings per common share and common
share equivalents
Net income $0.13 $0.14
================== =================
Weighted average number of common
shares outstanding 5,075,886 3,733,217
================== =================
Earnings per share assuming full dilution
Net income $0.11 $0.12
================== =================
Weighted average number of common
and common share equivalents
outstanding for the period 5,762,354 4,881,574
================== =================
</TABLE>
- 5 -
<PAGE>
<TABLE>
BERGER HOLDINGS, LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Nine Months Ended
September 30,
1997 1996
----------------- -----------------
<S> <C> <C>
Net Sales $ 15,892,258 $ 14,846,977
Cost of sales 12,267,776 11,647,274
----------------- -----------------
Gross profit 3,624,482 3,199,703
Operating expenses
Selling, administrative and general
expenses 2,148,835 1,742,552
----------------- -----------------
Income from operations 1,475,647 1,457,151
----------------- -----------------
Other (expenses) income
Interest expense (478,300) (468,048)
Interest income 13,738 721
----------------- -----------------
(464,562) (467,327)
Income from continuing operations ----------------- -----------------
before income tax benefit 1,011,085 989,824
Income tax benefit 450,000 -0-
----------------- -----------------
Net income $1,461,085 $989,824
================= =================
Earnings per common share
Earnings per common share and common
share equivalents
Net income $0.29 $0.27
================= ================
Weighted average number of common
shares outstanding 5,012,987 3,615,187
================= ================
Earnings per share assuming full dilution
Net income $0.26 $0.24
================= ================
Weighted average number of common
and common share equivalents
outstanding for the period 5,699,455 4,787,150
================= ================
</TABLE>
- 6 -
<PAGE>
<TABLE>
BERGER HOLDINGS, LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Nine Months Ended
September 30,
1997 1996
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities
Net Income $ 1,461,085 $ 989,824
----------------- -----------------
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities
Deferred income tax (450,000) -0-
Depreciation and amortization 562,249 522,576
(Increase) decrease in assets, net of
effects from purchase of Real-Tool, Inc.
Accounts receivable (1,151,582) (1,140,498)
Inventories (423,403) (857,553)
Other current and long-term assets (283,701) 304,362
(Decrease) increase in liabilities
Accounts payable and accrued expenses 342,653 (456,640)
----------------- -----------------
Total adjustments (1,403,784) (1,627,753)
----------------- -----------------
Net cash provided by (used in) operating activities 57,301 (637,929)
----------------- -----------------
Cash flows from investing activities
Acquisition of property and equipment (595,310) (791,692)
Payment for purchase of Real-Tool, Inc. (900,618) -0-
----------------- -----------------
Net cash used in investing activities (1,495,928) (791,692)
----------------- -----------------
</TABLE>
- 7 -
<PAGE>
<TABLE>
BERGER HOLDINGS, LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Nine Months Ended
September 30,
1997 1996
----------------- -----------------
<S> <C> <C>
Cash flows from financing activities
Proceeds from working capital line 566,304 1,152,614
Loan and mortgage repayments (404,792) 0
Net proceeds from issuance of stock 186,022 227,036
----------------- -----------------
Net cash provided by
financing activities 347,534 1,379,650
----------------- -----------------
Net (decrease) in cash (1,091,093) (49,971)
Cash, beginning of period 1,236,709 171,432
----------------- -----------------
Cash, end of period $ 145,616 $121,461
================= =================
</TABLE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for
Interest $478,300 $468,048
<TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
<CAPTION>
The Company purchased Real-Tool, Inc. for a combination of cash and common
stock totalling $1,850,618. In connection with the acquisition, the following
assets were acquired and liabilities incurred:
<S> <C>
Accounts Receivable $ 91,163
Inventory 59,455
Equipment and pattern dies 33,000
Goodwill and other intangible assets 1,667,000
Value assigned to common stock issued
in connection with acquisition (200,000)
Debt Incurred (750,000)
-----------------
Cash paid for capital stock and assets $ 900,618
=================
</TABLE>
- 8 -
<PAGE>
BERGER HOLDINGS, LTD. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
Note 1. Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
solely of normal recurring accruals) considered necessary for a fair
presentation have been included.
Note 2. Inventories:
Inventories are valued at the lower of cost or market. Cost is determined
using the first-in, first-out method ("FIFO").
Components of inventories at September 30, 1997 and December 31, 1996
consist of the following:
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
-------------------- ------------------
<S> <C> <C>
Raw materials $1,423,893 $1,291,490
Finished goods 1,173,505 816,719
Packaging materials
and supplies 65,355 71,686
Less provision for
Obsolescence (46,000) (46,000)
--------------- ---------------
$2,616,753 $2,133,895
=============== ===============
</TABLE>
All inventory is currently used in the business of the Company's
subsidiary, Berger Bros Company.
Note 3. Property, Plant and Equipment:
Property, plant and equipment is recorded at cost. Costs of major
additions and betterments are capitalized; maintenance and repair costs, which
do not improve or extend the life of the respective assets, are charged to
operations as incurred. Leasehold improvements are amortized over the shorter of
the lease term or useful life.
- 9 -
<PAGE>
When an asset is sold, retired, or otherwise disposed of, the cost of the
property and the related accumulated depreciation is removed from the respective
accounts, and any resulting gains or losses are included in income.
For financial reporting purposes, depreciation is computed on the
straight-line method over the estimated useful lives of the assets. For income
tax purposes, depreciation is computed on accelerated methods.
Note 4. Refinancing
On August 21, 1997 Berger Financial refinanced its CIT Financial Group
working capital and term loans with loans from Summit Bank (the "Bank"). The
working capital loan obtained from the Bank was increased to $3,500,000 which is
secured by the Company's subsidiary's accounts receivable and inventory. The
working capital loan bears interest at the Bank's Base Rate plus one-half
percent. Concurrently, the Company borrowed $1,300,000 which is repayable over
36 months with interest at the Bank's Base Rate plus one percent. This note is
secured by equipment. The refinancing results in an interest rate reduction of
at least 250 basis points compared to the former rates.
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation.
Results of Operations
The financial statements include the accounts of the Company and its
wholly-owned subsidiary, Berger Financial Corporation ("Financial") and
Financial's wholly-owned subsidiary, Berger Bros Company. All intercompany
transactions and balances have been eliminated.
During the quarter ended September 30, 1997 (the "Current Quarter"), the
Company reported net income of $658,449 on net sales of $5,878,929. This
compares to net income of $523,478 on net sales of $5,695,246 for the quarter
ended September 30, 1996 (the "Comparable Quarter").
Income from continuing operations in the Current Quarter was $408,449
versus $523,478 in the Comparable Quarter, a decrease of 22% which primarily can
be attributed to increased advertising, the introduction of the Real-Tool
snowguard product line and a more national sales distribution that increased
delivery costs.
Cost of Sales were $4,552,603 in the Current Quarter compared to
$4,382,870 in the Comparable Quarter. As a percentage of net sales, Cost of
Sales increased slightly to 77.4% in the Current Quarter from 77.0% in the
Comparable Quarter, due mainly to product mix.
- 10 -
<PAGE>
Selling, general and administrative expenses were $729,029 in the Current
Quarter as compared to $631,136 in the Comparable Quarter. This increase in
expenses is due to expanded national advertising in the Current Quarter, which
management expects will benefit subsequent periods. As a percentage of net
sales, selling, general and administrative expenses increased to 12.4% in the
Current Quarter as compared to 11.1% in the Comparable Quarter.
Sales for the nine month period ending September 30, 1997 (the "Current
Nine Months"), were $15,892,258 an increase of 7.0% or $1,045,281 as compared to
$14,846,977 for the nine month period ending September 30, 1996 (the "Comparable
Nine Months").
Income from continuing operations for the Current Nine Months was
$1,011,085 an increase of 2.2% or $21,261 compared to the Comparable Nine
Months. The improvement in both revenues and income is primarily attributable to
the contributions from the newly acquired Real-Tool product line and continued
expansion of the Company's copper products which helped offset an industry wide
decline in aluminum sales.
Net income for the Current Nine Months was $1,461,085 as compared to
$989,824 in the Comparable Nine Months. The Current Nine Months and the Current
Quarter income includes an adjustment to the deferred tax asset valuation
allowance (described below). The Current Quarter income includes $250,000
of the $450,000 tax benefit reported for the Current Nine Months.
Provision for income taxes for the nine months ended September 30:
1997 1996
Current, federal and state
at statutory rates $405,000 $396,000
Deferred, reduction of
valuation allowance (855,000) (396,000)
------------- -------------
($450,000) -0-
============= =============
Selling, general and administrative expenses in the Current Nine Months
increased to $2,148,835 from $1,742,552 in the Comparable Nine Months, mainly
due to increased national advertising, promotional costs related to the
introduction of new products in 1997 and increased distribution costs.
Liquidity and Capital Resources
On February 7, 1997, the Company acquired all of the stock of Real-Tool,
Inc. ("Real-Tool") for a combination of cash and stock totalling $1,850,618 plus
royalty payments described below. Real-Tool is a Virginia corporation that
manufactures snow guards for metal roofs. The Company purchased the assets for
$900,618, incurred a liability aggregating $750,000 which is payable in
quarterly installments over a one year period and issued an aggregate 100,000
shares of its common stock to the former owner and a former employee of
Real-Tool. The Company also entered into a royalty agreement through 2012 which
calls for minimum payments of $75,000 annually through the year 2002.
- 11 -
<PAGE>
At September 30, 1997, working capital was $4,157,041 resulting in a ratio
of current assets to current liabilities of 3.39 to 1, as compared to working
capital of $4,428,272 and a ratio of 5.84 to 1 at December 31, 1996. The decline
can be attributed to the cash used to purchase Real-Tool in February 1997.
Current liabilities at September 30, 1997 totaled $1,738,455 consisting
primarily of $1,010,742 in accounts payable and accrued expenses and $727,713 in
current maturities of long term debt. At December 31, 1996, total current
liabilities were $915,806 consisting primarily of $668,089 in accounts payable
and accrued expenses and $247,717 in current maturities of long term debt.
At September 30 1997, the Company had shareholders' equity of $9,502,444
as compared to $7,655,336 at December 31, 1996. The increase is attributable to
the Current Nine Month's net income, stock issued in connection with the
Real-Tool acquisition and the exercise of stock warrants.
Cash provided by operating activities for the Current Nine Months was
$57,301 as compared to ($637,929) used in the Comparable Nine Months. The
improvement occurred because the Company earned more income, acquired more trade
credit and purchased less inventory in the Current Nine Months versus the
Comparable Nine Months.
Net cash used in investing activities totaled $1,495,928 in the Current
Nine Months as compared to $791,692 used in the Comparable Half, primarily due
to the acquisition of Real-Tool.
Net cash provided by financing activities was $347,534 in the Current Nine
Months as compared to $1,379,650 provided in the Comparable Nine Months. The
unused credit line as of September 30, 1997 was approximately $2,000,000.
- 12 -
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None.
Item 2 - Changes in Securities.
None.
Item 3 - Defaults Upon Senior Securities.
None.
Item 4 - Submission of Matters to a Vote of Securities Holders.
The Company's 1997 Annual Meeting of Shareholders (the "Meeting") was held
on July 9, 1997 in Trevose, Pennsylvania. At the Meeting, Theodore A. Schwartz
and Irving Kraut were re-elected as directors of the Company, with terms to
expire in the year 2000 or until their successors in office have been duly
elected and qualified. With regard to Mr. Schwartz, 4,166,094 votes were cast in
favor of his election and 6,058 withheld. With regard to Dr. Kraut, 4,159,225
votes were cast in favor of his election and 12,927 withheld.
The following directors have terms of office that continued after the
Meeting: Joseph F. Weiderman, Jacob I. Haft, Paul L. Spiese, III and Larry
Falcon.
At the Meeting, the appointment of Goldenberg Rosenthal Friedlander, LLP as
the Company's independent auditors for 1997 was ratified by a vote of 4,155,714
for, and 4,133 against. There were 12,305 abstentions and broker non-votes.
Item 5 - Other Information.
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K.
None.
- 13 -
<PAGE>
Signatures
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.
BERGER HOLDINGS, LTD.
By:/s/ JOSEPH F. WEIDERMAN
Joseph F. Weiderman
President and
Chief Operating Officer
By:/s/ FRANCIS E. WELLOCK, JR.
Francis E. Wellock, Jr.
Chief Financial Officer
Date: November 13, 1997
- 14 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<CASH> 145,616
<SECURITIES> 0
<RECEIVABLES> 2,855,486
<ALLOWANCES> 43,000
<INVENTORY> 2,616,753
<CURRENT-ASSETS> 5,895,496
<PP&E> 12,135,390
<DEPRECIATION> 5,978,278
<TOTAL-ASSETS> 15,394,134
<CURRENT-LIABILITIES> 1,738,455
<BONDS> 0
0
0
<COMMON> 51,351
<OTHER-SE> 9,451,093
<TOTAL-LIABILITY-AND-EQUITY> 15,394,134
<SALES> 15,892,258
<TOTAL-REVENUES> 15,892,258
<CGS> 12,267,776
<TOTAL-COSTS> 12,267,776
<OTHER-EXPENSES> 2,148,835
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 478,300
<INCOME-PRETAX> 1,011,085
<INCOME-TAX> 450,000
<INCOME-CONTINUING> 1,461,085
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,461,085
<EPS-PRIMARY> .29
<EPS-DILUTED> .26
</TABLE>
