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, 1996
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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 0-935
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BELL NATIONAL CORPORATION
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(Exact name of registrant as specified in its charter)
California 94-1451828
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(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
4209 Vineland Road, Suite J-1, Orlando, Florida 32811
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (407) 849-1090
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(Former name, former address and former fiscal year, if changed since last
report.)
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
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
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
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As of April 24, 1996, the number of shares of the registrant's common stock
outstanding is 5,283,114.
<PAGE>
Part I - Financial Information
ITEM 1. Financial Statements.
BELL NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
Cash and cash equivalents $ -- $ --
Accounts receivable, net 1,251 1,082
Inventory, net 3,531 4,083
Prepaid expenses and other current assets 166 114
-------------- -------------
Total current assets 4,948 5,279
Property and equipment, net 200 212
Goodwill, net 678 683
Deferred sample books, net 1,679 1,696
Other assets 36 40
-------------- -------------
$ 7,541 $ 7,910
============== =============
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
2
<PAGE>
BELL NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
Current Liabilities:
Accounts payable $ 1,606 $ 1,901
Current portion of capitalized lease obligations 3 3
Current portion of long-term debt 400 400
Accrued compensation and employee benefits 538 449
Accrued expenses 469 381
-------------- -------------
Total current liabilities 3,016 3,134
Long-term debt 2,465 2,642
Accrued stock appreciation rights 356 356
Capital lease obligations, less current portion 3 3
Other liabilities 201 201
-------------- -------------
6,041 6,336
Stockholders' equity:
Common stock, no par value;
authorized 12,000,000 shares, issued and
outstanding 5,283,114 shares at March 31,
1995 and December 31, 1994 15,800 15,800
Additional paid-in capital 10 10
Accumulated deficit (14,310) (14,236)
-------------- -------------
Total stockholders' equity 1,500 1,574
-------------- -------------
$ 7,541 $ 7,910
============== =============
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
3
<PAGE>
BELL NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------
1996 1995
---- ----
<S> <C> <C>
Net sales $ 3,167 $ 3,395
Costs and expenses:
Cost of sales 1,683 1,768
Selling, general and administrative 1,491 1,494
-------------- -------------
Operating income (7) 133
Other expense:
Interest expense (72) (85)
Other 5 (13)
-------------- -------------
Income (loss) before income taxes (74) 30
Provision for income taxes -- (6)
-------------- -------------
Net income (loss) $ (74) $ 24
=============== =============
Net income (loss) per common share $ (0.01) $ 0.00
============== =============
Weighted average number of common
shares outstanding 5,283,114 5,283,114
============== =============
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
4
<PAGE>
BELL NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional Accum- Total
---------------------------- Paid-in ulated Stockholders'
Shares Dollars Capital Deficit Equity
------ ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1995 5,283,114 $ 15,800 $ 10 $ (14,236) $ 1,574
Net income -- -- -- (74) (74)
----------- ------------- ----------- ------------ ------------
Balance at
March 31, 1996 5,283,114 $ 15,800 $ 10 $ (14,310) $ 1,500
=========== ============= =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
5
<PAGE>
BELL NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
---- ----
<S> <C> <C>
Operating activities:
Net income (loss) $ (74) $ 24
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 14 16
Amortization of goodwill 5 5
Amortization of deferred sample books 290 193
Amortization of deferred debt commitment fee 4 4
(Increase) decrease in assets:
Accounts receivable (169) (221)
Inventory 552 (33)
Prepaid expenses and other current assets (52) (103)
Increase (decrease) in liabilities:
Accounts payable (295) 383
Accrued compensation and employee benefits 89 (8)
Accrued expenses 88 25
Other liabilities -- (66)
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Net cash provided by operating activities 452 285
--------- -------
Investing activities:
Acquisition of property and equipment (2) (12)
Purchase of deferred sample books (273) (613)
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Net cash used in investing activities (275) (625)
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Financing activities:
Net proceeds (repayments) on long-term debt (177) 340
---------- -------
Net cash provided by financing activities $ (177) $ 340
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The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
6
<PAGE>
BELL NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
---- ----
<S> <C> <C>
Net decrease in cash and cash equivalents $ -- $ --
Cash and cash equivalents at beginning of period -- --
---------- ---------
Cash and cash equivalents at end of period $ -- $ --
========== =========
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Interest $ 73 $ 81
Income taxes -- 31
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
7
<PAGE>
BELL NATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(Unaudited)
Note 1. The Company
General. The information contained in this report is unaudited but, in
management's opinion, all adjustments necessary for a fair presentation have
been included and were of a normal and recurring nature. The results for the
three months ended March 31, 1996 are not necessarily indicative of results to
be expected for the entire year. These financial statements and notes should be
read in conjunction with Bell National Corporation's (the "Company") Annual
Report on Form 10-K for the year ended December 31, 1995.
Bell National Corporation's wholly owned subsidiary Payne Fabrics, Inc.
("Payne") is a designer and distributor of decorative drapery and upholstery
fabrics. Payne was acquired by Bell National Corporation on June 15, 1990.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations The Company's revenues and expenses result from the
operations of Payne Fabrics, Inc.
Quarter Ended March 31, 1996 The Company had net sales of $3,167,000, cost of
goods sold of $1,683,000, selling, general and administrative expenses of
$1,491,000 and an operating loss of $7,000 during the first quarter of 1996. The
operating loss was increased by interest expense of $72,000 and reduced by other
income of $5,000 resulting in a net loss of $74,000.
Quarter Ended March 31, 1995 The Company had net sales of $3,395,000, cost of
goods sold of $1,768,000, selling, general and administrative expenses of
$1,494,000 and operating income of $133,000 during the first quarter of 1995.
Operating income was reduced by interest expense of $85,000, other expense of
$18,000 and income taxes of $6,000 resulting in net income of $24,000.
Comparison Of First Quarter 1996 Results To 1995 The sales for the first quarter
of 1996 decreased by $228,000 compared to the corresponding period in 1995. All
fabric categories experienced declines with the exception of multipurpose which
has benefited from increased product introductions recently. Sales continue to
be weak in most markets and management does not expect a dramatic change in the
recent declining sales trend.
The gross profit percentage decreased by 1.0% from 47.9% in 1995 to 46.9% in
1996 as a result of a change in the mix of products sold. Drapery manufacturing
and outlet store sales which have
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<PAGE>
lower margins account for a larger segment of sales in the first quarter of
1996 than they did in the same period in 1995.
The resulting $143,000 decrease in gross profit during the first quarter of 1996
compared to 1995, was partially offset by a decrease in selling, general and
administrative expenses of $3,000. As a result of the above, 1996 operating
income decreased by $140,000 during the first quarter of 1996 compared to 1995.
Interest expense decreased $13,000 from $85,000 in 1995 to $72,000 in 1996
as a result of a lower average bank debt balance. Other expense decreased from
$18,000 in 1995 to an income of $5,000 in 1996.
The Company had a net loss of $74,000 in the first quarter of 1996 compared to
net income of $24,000 for the same period in 1995. The earnings (loss) per share
in the first quarter of 1996 was $(0.01) and $0.00 in 1995.
Liquidity and Capital Resources
Available Resources. In connection with the bank loan agreement, the Company
instituted a cash management system whereby the net cash generated by operations
is immediately used to reduce bank debt. The immediate reduction of outstanding
bank debt provides the Company with a greater reduction in interest expense than
could be offset with interest income from alternative investments. In the
absence of a bank agreement requiring such a system, the Company would continue
to use excess funds to immediately reduce bank debt. A review of the financial
statements, summary data, working capital and discussion of liquidity must take
into consideration the fact that the Company does not maintain any cash balances
in any of its accounts by design. Working capital needs, when they arise, are
met by daily borrowings.
Future Needs For and Sources of Capital.
During the first quarter of 1996, the Company generated $452,000 of cash from
operations. Although the Company experienced a loss of $74,000 in the period,
there were $313,000 of non-cash expenses included in the loss, primarily
amortization of deferred sample books. These two items, together with decreased
current assets of $331,000 and decreased liabilities of $118,000 created the
cash from operations. These funds were used to purchase $2,000 of fixed assets,
$273,000 of sample books and to pay down bank debt by $177,000.
During the first quarter of 1995, the Company generated $285,000 of cash from
operations. Net income of $24,000 together with $218,000 of non-cash expenses
included in the net income, primarily amortization of deferred sample books,
together with increased current assets of $291,000 and increased liabilities of
$334,000 created the cash from operations. These funds, with additional
borrowing of $340,000, were used to purchase $12,000 of fixed assets and
$613,000 of sample books.
On May 1, 1995 the Company entered into a Revolving Credit Agreement with Bank
One, Dayton, National Association ("Revolving Agreement"). The terms provide for
a total loan facility of $4,152,000 consisting of a term loan of $1,025,000
payable in seven quarterly
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<PAGE>
installments of $100,000 and a balloon payment of $325,000 due on June 1, 1997.
The remaining portion of the Revolving Agreement consists of a revolving line
of credit, which matures on June 1, 1998. Borrowings under the revolving line
of credit are based on a percentage of Payne's eligible accounts receivable and
eligible inventory, as defined. The Revolving Agreement is collateralized by
all of the assets of Payne, guaranteed by the Company and subject to restrictive
covenants.
PART II. OTHER INFORMATION
-none-
10
<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.
BELL NATIONAL CORPORATION
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(Registrant)
Date: May 15, 1996 /s/ Alexander M. Milley
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Alexander M. Milley, Chairman of the Board
and Secretary
Date: May 15, 1996 /s/ Thomas R. Druggish
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Thomas R. Druggish, Chief Financial Officer
(Principal Financial Officer and Accounting
Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,251,000
<ALLOWANCES> 77,000
<INVENTORY> 3,531,000
<CURRENT-ASSETS> 4,948,000
<PP&E> 200,000
<DEPRECIATION> 897,000
<TOTAL-ASSETS> 7,541,000
<CURRENT-LIABILITIES> 3,016,000
<BONDS> 0
0
0
<COMMON> 15,800,000
<OTHER-SE> (14,300,000)
<TOTAL-LIABILITY-AND-EQUITY> 7,541,000
<SALES> 3,167,000
<TOTAL-REVENUES> 3,167,000
<CGS> 1,683,000
<TOTAL-COSTS> 3,174,000
<OTHER-EXPENSES> (5,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,000
<INCOME-PRETAX> (74,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (74,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (74,000)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
