<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 June 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 0-12362
Berger Holdings, Ltd
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(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
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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 August 10, 2000, the Registrant had outstanding 5,313,136 shares
of its common stock, par value $0.01 per share (the "Common Stock").
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BERGER HOLDINGS, LTD.
<TABLE>
<CAPTION>
INDEX Page
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Balance
Sheets at June 30, 2000 (unaudited) and
December 31, 1999 3
Condensed Consolidated Statements of
Operations (unaudited) for the three month
periods ended June 30, 2000 and 1999 4
Condensed Consolidated Statements of
Operations (unaudited) for the six month
periods ended June 30, 2000 and 1999 5
Condensed Consolidated Statements
of Cash Flows (unaudited) for the six month
periods ended June 30, 2000 and 1999 6
Notes to Condensed Consolidated
Financial Statements 7
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of
Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
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BERGER HOLDINGS, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION> June 30, December 31,
ASSETS 2000 1999
(unaudited)
------------------- -----------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 100,634 $ 107,116
Accounts receivable, net of allowance for
doubtful accounts of $30,000 in 2000 and 1999 5,546,025 3,695,674
Inventories (Note 2) 5,723,267 5,619,008
Prepaid and other current assets 364,317 542,307
Deferred income taxes 370,760 370,760
------------------- -----------------
Total current assets 12,105,003 10,334,865
Property, plant and equipment, net 10,759,713 10,796,886
Deferred income taxes 1,119,205 1,440,419
Other assets, net 3,032,226 3,134,457
Goodwill, net 8,571,024 6,861,193
------------------- -----------------
Total assets $ 35,587,171 $ 32,567,820
=================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long term debt $ 2,040,066 $ 1,680,261
Accounts payable 3,228,873 1,219,531
Accrued expenses 1,928,100 1,334,052
------------------- -----------------
Total current liabilities 7,197,039 4,233,844
Long term debt 16,623,112 16,388,606
Redeemable common stock, 125,000 shares - 500,000
Commitments and contingencies - -
Stockholders' equity
Preferred stock - -
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 (4,593,193) (4,941,189)
------------------- -----------------
12,904,430 12,282,688
Less common stock subscribed (482,916) (482,916)
Less treasury stock at cost (Note 4)
258,700 shares in 2000 and 124,400 shares in 1999 (654,494) (354,402)
------------------- -----------------
Total stockholders' equity 11,767,020 11,445,370
------------------- -----------------
Total liabilities and stockholders' equity $ 35,587,171 $ 32,567,820
=================== =================
</TABLE>
See accompanying notes to condensed consolidated financial statements
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<PAGE>
BERGER HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30,
2000 1999
---------------------- ---------------------
<S> <C> <C>
Net sales $ 11,938,253 $ 11,091,149
Cost of sales 9,266,823 8,503,553
---------------------- ---------------------
Gross profit 2,671,430 2,587,596
Selling, administrative and general expenses 1,650,271 1,341,410
---------------------- ---------------------
Income from operations 1,021,159 1,246,186
Interest expense (452,997) (463,595)
Other income, net 5,283 6,566
---------------------- ---------------------
Income before income tax 573,445 789,157
Provision for income tax (Note 3) 275,254 284,096
---------------------- ---------------------
Net income $ 298,191 $ 505,061
====================== =====================
Basic earnings per share $ 0.06 $ 0.09
====================== =====================
Weighted average common shares outstanding 5,403,645 5,525,529
====================== =====================
Diluted earnings per share $ 0.05 $ 0.08
====================== =====================
Weighted average common shares outstanding 5,403,645 5,525,529
Add: effect of vested and non-vested dilutive securities 692,486 972,372
Add: effect of convertible debt and preferred stock 941,177 941,177
---------------------- ---------------------
Diluted weighted average common shares outstanding 7,037,308 7,439,078
====================== =====================
</TABLE>
See accompanying notes to condensed consolidated financial statements
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BERGER HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
------------------------ ---------------------
<S> <C> <C>
Net sales $ 20,812,739 $ 19,299,131
Cost of sales 16,376,977 15,112,207
------------------------ ---------------------
Gross profit 4,435,762 4,186,924
Selling, administrative and general expenses 2,917,040 2,542,889
------------------------ ---------------------
Income from operations 1,518,722 1,644,035
Interest expense (852,744) (937,368)
Other income, net 3,232 9,993
------------------------ ---------------------
Income before income tax 669,210 716,660
Provision for income tax (Note 3) 321,214 258,096
------------------------ ---------------------
Net income $ 347,996 $ 458,564
======================== =====================
Basic earnings per share $ 0.06 $ 0.08
======================== =====================
Weighted average common shares outstanding 5,429,891 5,516,666
======================== =====================
Diluted earnings per share $ 0.06 $ 0.08
======================== =====================
Weighted average common shares outstanding 5,429,891 5,516,666
Add: effect of vested and non-vested dilutive securities 578,210 1,068,058
Add: effect of convertible debt and preferred stock 941,177 941,177
------------------------ ---------------------
Diluted weighted average common shares outstanding 6,949,278 7,525,901
======================== =====================
</TABLE>
See accompanying notes to condensed consolidated financial statements
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<PAGE>
BERGER HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
------------- -------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 347,996 $ 458,564
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Deferred income taxes 321,214 258,096
Depreciation and amortization 1,141,247 934,992
Change in operating assets and liabilities, excluding acquisitions
Accounts receivable (1,653,724) (971,899)
Inventories 122,482 62,674
Other current and long-term assets 315,062 (358,697)
Accounts payable and accrued expenses 2,236,089 1,269,876
------------- -------------
Net cash provided by operating activities 2,803,366 1,653,606
------------- -------------
Cash flows from investing activities
Acquisition of subsidiary company, net of cash acquired (2,591,673) -
Acquisition of property and equipment (539,395) (514,726)
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Net cash used in investing activities (3,131,068) (514,726)
------------- -------------
Cash flows from financing activities
Proceeds from bank debt used for acquisition 2,262,099 -
Net repayments working capital line (709,771) (181,741)
Net repayments equipment term loan (453,289) (265,998)
Proceeds from long term debt 170,762 44,180
Repayments of long term debt (449,235) (732,983)
Net proceeds from issuance of stock - 1,313
Net payment for redeemable common stock (226,254) -
Repurchase of common stock (300,092) (59,846)
------------- -------------
Net cash provided by (used in) financing activities 294,220 (1,195,075)
------------- -------------
Net decrease in cash (6,482) (56,195)
Cash, beginning of period 107,116 149,885
------------- -------------
Cash, end of period 100,634 $ 93,690
============= =============
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest 852,744 $ 937,368
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements
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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 accounting principles generally accepted in the
United States of America 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 accounting principles generally
accepted in the United States of America 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. (as of the date of acquisition). 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 June 30, 2000 and December 31, 1999 consisted
of the following:
June 30, December 31,
2000 1999
-------------- ------------------
Raw materials $ 3,316,701 $ 3,515,537
Finished goods 2,274,203 2,008,856
Packaging material and supplies 132,363 94,615
-------------- ------------------
Total inventories $ 5,723,267 $ 5,619,008
============== ==================
Note 3. Income Taxes:
Consolidated income tax for the six month periods ended June 30, 2000 and
1999 result in an effective income tax rate of 48% and 35.9%, respectively. The
Company had an approximately $5,200,000 federal income tax net operating loss
carryforward available at June 30, 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 August 10, 2000, the Company had repurchased 301,600 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.
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<PAGE>
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 $2,642,410 consisting of $1,742,581 in cash, a
note payable of $512,500 and assumed $387,329 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. The acquisition was accounted for as a purchase and the
excess of the fair value of the assets (goodwill) is being amortized on a
straight-line basis generally over 20 years. The initial purchase price
allocation for the acquisition is preliminary and may be adjusted upon
completion of the final valuation work.
The following unaudited pro forma financial information presents the
combined results of operations of the Company as if the acquisition had occurred
as of January 1, 2000 after giving effect to certain adjustments, including
amortization of goodwill, increased interest expense on debt related to the
acquisition, and related income tax effects. The pro forma results of operations
are not indicative of the actual results that would have occurred had the
acquisition been consummated at the beginning of the period presented and is not
intended to be a projection of future results.
Six Months Ended
June 30, 2000
-------------
Total Revenues.................... $21,578,739
Net Earnings...................... $ 375,996
Diluted Earnings Per Share........ $ 0.06
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
Results of Operations
Sales for the three month period ended June 30, 2000 (the "Current
Quarter") were $11,938,253, an increase of 7.6%, or $847,104, as compared to
$11,091,149 for the three month period ended June 30, 1999 (the "Comparable
Quarter"). This increase was attributable to the CopperCraft acquisition.
During the Current Quarter, the Company reported net income of $298,191, as
compared to a net income of $505,061 for the Comparable Quarter. The Current
Quarter's net income decrease was attributable to a combination of rising raw
material prices, increases in operating expenses related to the CopperCraft
acquisition, and a higher effective tax rate.
Income from operations in the Current Quarter was $1,021,159 versus
$1,246,186 in the Comparable Quarter, a decrease of $225,027. This decrease is
primarily attributable to rising raw material prices, increases in operating
expenses related to the CopperCraft acquisition and increased depreciation
expense for fixed asset additions made in prior years.
Cost of sales was $9,266,823 in the Current Quarter, as compared to
$8,503,553 in the Comparable Quarter. As a percentage of net sales, cost of
sales increased to 77.6% in the Current Quarter from 76.7% in the Comparable
Quarter. This percentage increase is mainly attributable to the rising cost of
raw materials.
Selling, administrative and general expenses were $1,650,271 in the Current
Quarter as compared to $1,341,410 in the Comparable Quarter. As a percentage of
net sales, selling, administrative and general expenses increased to 13.8% in
the Current Quarter, compared to 12.1% in the Comparable Quarter. $194,000 of
the $308,861 increase in expenses is a result of CopperCraft operations.
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<PAGE>
Sales for the six month period ended June 30, 2000 (the "Current Half")
were $20,812,739, an increase of 7.8%, or $1,513,608, as compared to $19,299,131
for the six month period ended June 30, 1999 (the "Comparable Half"). This
increase was attributable to the CopperCraft acquisition and internal growth of
the Company's base business.
During the Current Half, the Company reported net income of $347,996, as
compared to a net income of $458,564 for the Comparable Half. The Current
Half's net income decrease was attributable to a combination of rising material
prices, increases in operating expenses and a higher effective tax rate.
Income from operations in the Current Half was $1,518,722 versus $1,644,035
in the Comparable Half, a decrease of 7.6%. The decrease is primarily
attributable to rising material prices and increases in operating expenses.
Cost of sales was $16,376,977 in the Current Half, as compared to
$15,112,207 in the Comparable Half. As a percentage of net sales, cost of sales
increased to 78.7% in the Current Half from 78.3% in the Comparable Half. This
percentage increase in cost of sales is the result of rising raw material costs.
Selling, administrative and general expenses were $2,917,040 in the Current
Half as compared to $2,542,889 in the Comparable Half. As a percentage of net
sales, selling, administrative and general expenses increased to 14.0% in the
Current Half, compared to 13.2% in the Comparable Half. This increase in
expenses was primarily a result of the CopperCraft acquisition.
Liquidity and Capital Resources
At June 30, 2000, the Company had long-term debt consisting of working
capital and term loans of $10,051,098, 10% Convertible Debentures of $4,000,000,
12.25% Subordinated Debenture of $500,000, a note payable of $512,500, leases of
$837,990 and a Mortgage for $2,761,590 for a total of $18,663,178. As of such
date, the Company had indebtedness under its working capital loan from Summit
Bank, N.A. (the "Working Capital Loan") of $6,471,649.
At June 30, 2000, working capital was $4,907,964, resulting in a ratio of
current assets to current liabilities of 1.68 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 June 30, 2000 totaled $7,197,039, consisted
primarily of $5,156,973 in accounts payable and accrued expenses and $2,040,066
in current maturities of long-term debt. At December 31, 1999, total current
liabilities were $4,233,844, 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 June 30, 2000, the Company had stockholders' equity of $11,767,020, as
compared to $11,445,370 at December 31, 1999. This change is primarily
attributable to the Current Half's net income, repurchase of treasury shares 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 Half was $2,830,366
as compared to $1,653,606 in the Comparable Half. The change from the
Comparable Half is primarily 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 $3,131,068 in the Current Half,
as compared to $514,726 used in the Comparable Half. This change is primarily
due to the acquisition of CopperCraft.
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<PAGE>
Net cash provided by financing activities totaled $294,220 in the Current
Half, as compared to $1,195,075 used in the Comparable Half. This difference is
due to the debt used to acquire CopperCraft, the $226,254 payment relating to an
obligation of prior acquisition 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.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements". This was followed by Staff Accounting Bulletin No. 101A,
"Implementation Issues Related to SAB 101", in March 2000 and by Staff
Accounting Bulletin No. 101B, "Second Amendment: Revenue Recognition in
Financial Statements" SAB 101B, in June 2000. These bulletins summarize certain
of the SEC's views about applying accounting principles generally accepted in
the United States of America to revenue recognition in financial statements.
The impact of SAB 101B on the Company was to delay the implementation date of
SAB 101 until fourth quarter of 2000. The SEC is providing guidance due, in
part, to the large number of revenue recognition issues that registrants
encounter. The Company is in the process of analyzing the implications of these
bulletins and is anticipating that further implementation guidance will be
forthcoming from the SEC.
Forward-Looking Statements
With the exception of the reported actual results, the information
presented herein contains predictions, 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. 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; material costs;
the impact of weather conditions on the Company's business; pricing pressure
from customers; the level of backlog; market acceptance of new products; the
Company's ability to complete and successfully integrate acquisitions.
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<PAGE>
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.
The Company's 2000 Annual Meeting of Shareholders (the "Meeting") was held
on June 21, 2000 at the Company's headquarters in Feasterville, Pennsylvania.
At the Meeting, Theodore A. Schwartz, Dr. Irving Kraut, and Jay Seid were re-
elected as directors of the Company, with terms to expire in the year 2003 or
until their successors in office have been duly elected and qualified. With
regard to Mr. Schwartz, 4,730,299 votes were cast in favor of his election,
1,739 against and 28,187 abstained. With regard to Dr. Kraut, 4,730,299 votes
were cast in favor of his election, 1,737 against and 28,187 abstained. With
regard to Mr. Jay Seid, 4,730,299 votes were cast in favor of his election,
1,737 against and 28,187 abstained.
The following directors have terms of office that continued after the
Meeting: Joseph F. Weiderman, Paul L. Spiese, III, Dr. Jacob I. Haft, Larry
Falcon and John P. Kirwin, III.
Item 5 - Other Information.
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K.
None.
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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: August 11, 2000
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