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, 1997
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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
----- ------
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, 1997, the number of shares of the registrant's common stock
outstanding is 5,488,114.
<PAGE>
Part I - Financial Information
ITEM 1. Financial Statements.
BELL NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
ASSETS
March 31, December 31,
1997 1996
--------- ------------
(Unaudited)
Cash and cash equivalents $ -- $ --
Accounts receivable, net 1,232 1,222
Inventory, net 2,729 2,740
Prepaid expenses and other current assets 30 95
---------- ----------
Total current assets 3,991 4,057
Property and equipment, net 143 157
Goodwill, net 659 663
Deferred sample books, net 1,103 1,242
---------- ----------
$ 5,896 $ 6,119
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
2
<PAGE>
BELL NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
1997 1996
--------- ------------
(Unaudited)
Current Liabilities:
Accounts payable $ 1,000 $ 1,047
Current portion of long-term debt 2,220 2,225
Accrued compensation and employee benefits 497 444
Accrued expenses 500 512
--------- --------
Total current liabilities 4,217 4,228
Accrued stock appreciation rights 248 268
Other liabilities 48 48
--------- --------
4,513 4,544
Stockholders' equity:
Common stock, no par value;
authorized 12,000,000 shares, issued and
outstanding 5,488,114 shares at March 31,
1997 and December 31, 1996 15,815 15,815
Additional paid-in capital 10 10
Accumulated deficit (14,442) 14,250)
--------- --------
Total stockholders' equity 1,383 1,575
--------- --------
$ 5,896 $ 6,119
========= ========
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE>
BELL NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended March 31,
----------------------------
1997 1996
---------- -----------
Net sales $ 2,574 $ 3,167
Costs and expenses:
Cost of sales 1,359 1,683
Selling, general and administrative 1,342 1,491
---------- ----------
Operating loss (127) (7)
Other expense:
Interest expense (55) (72)
Other (10) 5
---------- ----------
Loss before income taxes (192) (74)
Provision for income taxes -- --
---------- ----------
Net loss $ (192) $ (74)
========== ==========
Net loss per common share $ (0.03) $ (0.01)
========== ==========
Weighted average number of common
shares outstanding 5,488,114 5,283,114
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
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, 1996 5,488,114 $ 15,815 $ 10 $(14,250) $ 1,575
Net loss -- -- -- (192) (192)
---------- --------- --------- -------- -------
Balance at
March 31, 1997 5,488,114 $ 15,815 $ 10 $(14,442) $ 1,383
========== ========= ========= ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE>
BELL NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
---------- ----------
<S> <C> <C>
Operating activities:
Net loss $ (192) $ (74)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 14 14
Amortization of goodwill 4 5
Amortization of deferred sample books 303 290
Amortization of deferred debt commitment fee -- 4
(Increase) decrease in assets:
Accounts receivable (10) (169)
Inventory 11 552
Prepaid expenses and other current assets 65 (52)
Increase (decrease) in liabilities:
Accounts payable (47) (295)
Accrued compensation and employee benefits 53 89
Accrued expenses (12) 88
Accrued Stock Appreciation Rights (20) --
--------- --------
Net cash provided by operating activities 169 452
--------- --------
Investing activities:
Acquisition of property and equipment -- (2)
Purchase of deferred sample books (164) (273)
--------- --------
Net cash used in investing activities (164) (275)
--------- --------
Financing activities:
Net proceeds (repayments) on long-term debt (5) (177)
--------- --------
Net cash provided by financing activities $ (5) $ (177)
========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
6
<PAGE>
BELL NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
---- ----
<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 $ 59 $ 73
Income taxes -- --
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
7
<PAGE>
BELL NATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(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, 1997 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, 1996.
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, 1997 The Company had net sales of $2,574,000, cost of
goods sold of $1,359,000, selling, general and administrative expenses of
$1,342,000 and an operating loss of $127,000 during the first quarter of 1997.
The operating loss was reduced by interest expense of $55,000 and other expense
of $10,000 resulting in a net loss of $192,000.
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.
Comparison Of First Quarter 1997 Results To 1996 The sales for the first quarter
of 1997 decreased by $593,000 compared to the corresponding period in 1996. All
fabric and workroom categories experienced declines. 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 increased by 0.3% from 46.9% in 1996 to 47.2% in
1997. The resulting $269,000 decrease in gross profit during the first quarter
of 1997 compared to 1996, was partially offset by a decrease in selling, general
and administrative expenses of $149,000. As a result of the above, 1997
operating income decreased by $120,000 during the first quarter of 1997 compared
to 1996.
8
<PAGE>
Interest expense decreased $17,000 from $72,000 in 1996 to $55,000 in 1997 as a
result of a lower average bank debt balance. Other income decreased from $15,000
in 1996 to an expense of $10,000 in 1997.
The Company had a net loss of $192,000 in the first quarter of 1997 compared to
a net loss of $74,000 for the same period in 1996. The loss per share in the
first quarter of 1997 was $0.03 and $0.01 in 1996.
Liquidity and Capital Resources
Available Resources. The Company has in place a cash management system where the
net cash generated by operations is used to reduce bank debt. The 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 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 1997, the Company generated $169,000 of cash from
operations. Although the Company experienced a loss of $192,000 in the period,
there were $321,000 of non-cash expenses included in the loss, primarily
amortization of deferred sample books. These two items, together with decreased
current assets of $66,000 and decreased liabilities of $26,000 created the cash
from operations. These funds were used to purchase $164,000 of sample books and
to pay down bank debt by $5,000.
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 1996 and continuing in 1997, the Company did not meet certain covenants
of the existing loan facility with Bank One, Dayton, National Association. The
quarterly principal installments due after September 1, 1996 have not been made,
all interest payments are current. The Company has been in discussions with Bank
one, Dayton, National Association related to the Revolving Credit Agreement. The
outcome of these discussions are unknown and the Company has therefore
classified all amounts owing to the Bank as current liabilities reflecting the
Banks ability to require payment of the loan.
PART II. OTHER INFORMATION
-none-
9
<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 9, 1997 /s/ Alexander M. Milley
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Alexander M. Milley, Chairman of the Board
and Secretary
Date: May 9, 1997 /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-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,232,000
<ALLOWANCES> 67,000
<INVENTORY> 2,729,000
<CURRENT-ASSETS> 3,991,000
<PP&E> 143,000
<DEPRECIATION> 922,000
<TOTAL-ASSETS> 5,896,000
<CURRENT-LIABILITIES> 4,217,000
<BONDS> 0
0
0
<COMMON> 15,815,000
<OTHER-SE> (14,432,000)
<TOTAL-LIABILITY-AND-EQUITY> 5,896,000
<SALES> 2,574,000
<TOTAL-REVENUES> 2,574,000
<CGS> 1,359,000
<TOTAL-COSTS> 2,701,000
<OTHER-EXPENSES> 10,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55,000
<INCOME-PRETAX> (192,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (192,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (192,000)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
