<PAGE>
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 March 31, 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 0-12362
Berger Holdings, Ltd.
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(Exact Name of Registrant as Specified in its Charter)
Pennsylvania 23-2160077
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(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
805 Pennsylvania Boulevard, Feasterville, PA 19053
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(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 May 12, 2000, the Registrant had outstanding 5,614,736 shares of
its common stock, par value $0.01 per share (the "Common Stock").
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BERGER HOLDINGS, LTD.
INDEX Page
PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Balance
Sheets at March 31, 2000 and
December 31, 1999 3
Condensed Consolidated Statements of
Operations for the three month periods
ended March 31, 2000 and 1999 4
Condensed Consolidated Statements
of Cash Flows for the three month periods
ended March 31, 2000 and 1999 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 9
PART II OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities and Use of Proceeds 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of
Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
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<PAGE>
BERGER HOLDINGS, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
(unaudited)
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<S> <C> <C>
Current assets
Cash and cash equivalents $ 123,054 $ 107,116
Accounts receivable, net of allowance for
doubtful accounts of $30,000 in 2000 and 1999 4,277,966 3,695,674
Inventories (Note 2) 6,391,001 5,619,008
Prepaid and other current assets 532,295 542,307
Deferred income taxes 370,760 370,760
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Total current assets 11,695,076 10,334,865
Property, plant and equipment, net 10,982,974 10,796,886
Deferred income taxes 1,394,459 1,440,419
Other assets, net 3,075,812 3,134,457
Goodwill, net 8,697,960 6,861,193
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Total assets $ 35,846,281 $ 32,567,820
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long term debt $ 1,612,520 $ 1,680,261
Accounts payable 2,967,821 1,219,531
Accrued expenses 1,435,105 1,334,052
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Total current liabilities 6,015,446 4,233,844
Long term debt 18,144,935 16,388,606
Redeemable common stock, 125,000 shares - 500,000
Stockholders' equity
Common stock $.01 par value
Authorized 20,000,000 shares
Issued and outstanding 5,614,736 shares in 2000
and 5,489,736 shares in 1999 56,147 54,897
Additional paid-in-capital 17,441,476 17,168,980
Accumulated deficit (4,891,384) (4,941,189)
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12,606,239 12,282,688
Less common stock subscribed (482,916) (482,916)
Less treasury stock at cost (Note 4)
158,400 shares in 2000
124,400 shares in 1999 (437,423) (354,402)
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Total stockholders' equity 11,685,900 11,445,370
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Total liabilities and stockholders' equity $ 35,846,281 $ 32,567,820
============= =============
</TABLE>
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BERGER HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
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<S> <C> <C>
Net sales $ 8,874,487 $ 8,207,982
Cost of sales 7,110,154 6,608,654
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Gross profit 1,764,333 1,599,328
Selling, administrative and general expenses 1,266,769 1,201,479
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Income from operations 497,564 397,849
Interest expense (399,747) (473,773)
Other (expenses) income, net (2,052) 3,427
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Income (loss) before income tax (benefit) 95,765 (72,497)
Provision for income tax (benefit) (Note 3) 45,960 (26,000)
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Net income (loss) available to common stockholders $ 49,805 $ (46,497)
============= =============
Basic earnings per share $ 0.01 $ (0.01)
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Weighted average common shares outstanding 5,456,138 5,507,705
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Diluted earnings per share $ 0.01 $ (0.01)
============= =============
Weighted average common shares outstanding 5,456,138 5,507,705
Add: effect of vested and non-vested dilutive securities 790,627 1,148,160
Add: effect of convertible debt and preferred stock 941,177 941,177
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Diluted weighted average common shares outstanding 7,187,942 7,597,042
============= =============
</TABLE>
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<PAGE>
BERGER HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
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<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 49,805 $ (46,497)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Deferred income tax 45,960 (26,000)
Depreciation and amortization 489,989 472,181
Change in operating assets and liabilities, excluding acquisitions
Accounts receivable (385,665) 142,102
Inventories (545,252) 229,810
Other current and long-term assets 38,275 (179,461)
Accounts payable and accrued expenses 1,469,033 458,675
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Net cash provided by operating activities 1,162,145 1,050,810
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Cash flows from investing activities
Acquisition of companies, net of cash acquired (2,202,585) -
Acquisition of property and equipment, net of retirements (314,159) (344,863)
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Net cash used in investing activities (2,516,744) (344,863)
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Cash flows from financing activities
Net proceeds (repayments) working capital line 1,389,020 (48,230)
Net proceeds (repayments) equipment term loan 31,736 (132,999)
Proceeds from long term debt 620,618 9,028
Repayments of long term debt (361,562) (421,109)
Net payment for redeemable common stock (226,254) -
Repurchase of common stock (83,021) -
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Net cash provided by (used in) financing activities 1,370,537 (593,310)
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Net increase (decrease) in cash 15,938 112,637
Cash, beginning of period 107,116 149,885
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Cash, end of period $ 123,054 $ 262,522
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Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest $ 399,747 $ 473,773
============= =============
</TABLE>
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<PAGE>
BERGER HOLDINGS, LTD. AND SUBSIDIARIES
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.
The financial statements include the accounts of the Company and its two
wholly owned subsidiaries, Berger Financial Corporation ("Financial") and
Financial's wholly owned subsidiary, Berger Bros Company, and the newly acquired
subsidiary, CopperCraft, Inc. All intercompany transactions and balances have
been eliminated.
Note 2. Inventories:
Inventories are valued at the lower of cost or market. Cost is determined
using the weighted average method.
Components of inventories at March 31, 2000 and December 31, 1999 consisted
of the following:
March 31, December 31,
2000 1999
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Raw materials net of provision $3,849,631 $3,515,537
Finished goods 2,392,127 2,008,856
Packaging material and supplies 149,243 94,615
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Total inventories $6,391,001 $5,619,008
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Note 3. Income Taxes:
Consolidated income tax for the three-month periods ended March 31, 2000
and 1999 result in an effective income tax rate and benefit of 48% and 35.9%,
respectively. The rate of tax in relation to pre-tax income in 2000 is
consistent with the year-end effective rate prior to the change in the valuation
allowance. The Company had approximately $5,500,000 federal income tax net
operating loss carryforward available at March 31, 2000.
Note 4. Treasury Stock:
On May 18, 1999 the Company's Board of Directors authorized the repurchase
of up to 540,000 shares, or approximately 10%, of the Company's common stock.
As of March 31, 2000, the Company had repurchased
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<PAGE>
158,400 shares. The repurchases will continue to be made from time to time
through open market purchases or privately negotiated transactions at the
discretion of the Company. The amount and timing of the repurchases will depend
on market conditions and other factors.
Note 5. Acquisition:
On March 31, 2000 the Company purchased all of the outstanding shares of
the common stock of CopperCraft, Inc., a Texas corporation ("CopperCraft"). As
consideration the Company paid $2,253,322 consisting of $1,537,500 in cash, a
note payable of $512,500 and assumed $203,322 in liabilities. CopperCraft
reported sales of approximately $2,400,000 and net income of $150,000 in 1999.
The Company utilized funds obtained from its Credit Facility from Summit Bank to
acquire CopperCraft.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
Results of Operations Three Months Ended
Sales for the three-month period ended March 31, 2000 (the "Current
Quarter") were $8,874,487, an increase of 8.1%, or $666,505, as compared to
$8,207,982 for the three month period ended March 31, 1999 (the "Comparable
Quarter"). The Company believes that this increase was due in large part to its
ability to expand its market base geographically through effective use of
advertising and internal marketing efforts.
During the Current Quarter, the Company reported net income of $49,805, as
compared to a net loss of $46,497 for the Comparable Quarter. The Current
Quarter's net income was attributable to the increased sales level, improved
gross profit margins, reduced delivery expenses, and decreased interest expense.
Income from operations in the Current Quarter was $497,564, versus $397,849
in the Comparable Quarter, an increase of 25.1%. The increase can be attributed
to the factors sited above, along with the Company's ongoing efforts to promote
and sell higher margin product lines.
Cost of sales was $7,110,154 in the Current Quarter, as compared to
$6,608,654 in the Comparable Quarter. As a percentage of net sales, cost of
sales decreased to 80.1% in the Current Quarter from 80.5% in the Comparable
Quarter. This percentage decrease is attributable to the improved product mix.
The effects of rising raw material costs during the Current Quarter were
partially offset by a price increase effective February 7, 2000.
Selling, administrative and general expenses were $1,266,769 in the Current
Quarter as compared to $1,201,479 in the Comparable Quarter. This increase in
expenses was in direct relation to the higher sales level. As a percentage of
net sales, selling, administrative and general expenses decreased to 14.3% in
the Current Quarter, compared to 14.6% in the Comparable Quarter.
Liquidity and Capital Resources
At March 31, 2000, the Company had long-term debt consisting of working
capital and term loans of $11,120,347, 10% Convertible Debentures of $4,000,000,
12.25% Subordinated Debenture of $500,000, a note payable of $512,500, leases of
$831,299 and a Mortgage for $2,793,309 for a total of $19,757,455. As of such
date, the Company had indebtedness under its working capital loan from Summit
Bank, N.A. (the "Working Capital Loan") of $7,220,607.
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<PAGE>
At March 31, 2000, working capital was $5,679,630, resulting in a ratio of
current assets to current liabilities of 1.94 to 1, as compared to working
capital of $6,101,021 and a ratio of 2.44 to 1 at December 31, 1999.
Current liabilities at March 31, 2000 totaled $6,015,446, and consisted
primarily of $4,402,926 in accounts payable and accrued expenses and $1,612,520
in current maturities of long-term debt. At December 31, 1999, total current
liabilities were $4,233,844, and consisted primarily of $2,553,583 in accounts
payable and accrued expenses and $1,680,261 in current maturities of long-term
debt. The increase in current liabilities is primarily due to the seasonal
growth related to support an increase in sales.
At March 31, 2000, the Company had stockholders' equity of $11,685,900, as
compared to $11,445,370 at December 31, 1999. This increase is primarily
attributable to the Current Quarter's net income and the Company's payment of
$226,254 pursuant to its obligation to a recipient of 125,000 shares of the
Common Stock in a prior acquisition. This payment equaled the difference
between $4.00 per share and the actual sale price of the shares.
Cash provided by operating activities for the Current Quarter was
$1,162,145 as compared to $1,050,810 in the Comparable Quarter. The change from
the Comparable Quarter is due to an increase in accounts payables in order to
support the seasonality of the Company's business and the acquisition of
CopperCraft.
Net cash used in investing activities was $2,202,585 in the Current
Quarter, as compared to $344,863 used in the Comparable Quarter. This change is
due to acquisition of CopperCraft.
Net cash provided by financing activities totaled $1,370,537 in the Current
Quarter, as compared to $593,310 used in the Comparable Quarter. This
difference is due to the debt used to acquire CopperCraft, the $226,254 payment
described above and payment for shares repurchased by the Company.
The Company believes that its sources of financing are adequate for its
anticipated needs. The cost and terms of any future financing arrangements will
depend on the market conditions and the Company's financial position at that
time.
New Accounting Pronouncements
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133 "Accounting for Derivative Instruments and Hedging Activities" (`SFAS
133"). This statement standardizes the accounting for derivative instruments by
requiring that an entity recognize those items as assets or liabilities in the
statement of financial position and measure them at fair value. The statement
was scheduled to be effective for fiscal years beginning after June 15, 1999.
In June 1999, the FASB issued Statement of Financial Accounting Standards No.
137 "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133" (SFAS 137"). SFAS 137 delayed the
effective date of SFAS 133 for one year, to fiscal years beginning after June
15, 2000. The implementation of SFAS 133 is not expected to have a material
impact on the net earnings of the Company.
Forward-Looking Statements
With the exception of the reported actual results, the information
presented herein contains predictions,
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estimates and other forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including without limitation, those statements herein, if any, which are
followed by an asterisk (*). Such forward looking statements involve known and
unknown risks, uncertainties and other factors that may cause actual results,
performance and achievements of the Company to differ materially from those
expressed or implied by such forward-looking statements. Although the Company
believes its plans, intentions and expectations reflected in such forward-
looking statements are based on reasonable assumptions, it can give no assurance
that such plans, intentions, expectations, objects or goals will be achieved.
Important factors that could cause actual results to differ materially from
those included in the forward-looking statements include but are not limited to:
the timing of customer orders and product mix; pricing pressure from customers;
the level of backlog; market acceptance of new products; the revenue; the
inability of the Company to acquire several competitors.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
For information regarding the company's exposure to certain market risks,
see Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
There have been no significant changes since December 31, 1999 in the Company's
portfolio of financial instruments or market risk exposures.
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<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None.
Item 2 - Changes in Securities and Use of Proceeds.
None.
Item 3 - Defaults Upon Senior Securities.
None.
Item 4 - Submission of Matters to a Vote of Securities Holders.
None.
Item 5 - Other Information.
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K.
None.
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<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: May 12, 2000
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 123,054
<SECURITIES> 0
<RECEIVABLES> 4,307,966
<ALLOWANCES> (30,000)
<INVENTORY> 6,391,001
<CURRENT-ASSETS> 11,695,076
<PP&E> 19,816,721
<DEPRECIATION> (8,833,747)
<TOTAL-ASSETS> 35,846,281
<CURRENT-LIABILITIES> 6,015,446
<BONDS> 18,144,935
0
0
<COMMON> 56,147
<OTHER-SE> 11,629,753
<TOTAL-LIABILITY-AND-EQUITY> 35,846,281
<SALES> 8,874,487
<TOTAL-REVENUES> 8,874,487
<CGS> 7,110,154
<TOTAL-COSTS> 7,110,154
<OTHER-EXPENSES> 1,268,821
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 399,747
<INCOME-PRETAX> 95,765
<INCOME-TAX> 45,960
<INCOME-CONTINUING> 49,805
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49,805
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
