UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED JUNE 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-5005
SELAS CORPORATION OF AMERICA
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PENNSYLVANIA 23-1069060
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
DRESHER, PENNSYLVANIA 19025
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(215) 646-6600
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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.
(X) YES ( ) NO
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
CLASS OUTSTANDING AT AUGUST 4, 1999
COMMON SHARES, $1.00 PAR VALUE 5,178,009 (exclusive of 456,959
treasury shares)
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SELAS CORPORATION OF AMERICA
I N D E X
Page
Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
June 30, 1999 and December 31, 1998 . . . . . . . . 3, 4
Consolidated Statements of Operations for
the Three Months Ended June 30, 1999
and 1998. . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Operations for the
Six Months Ended June 30, 1999 and 1998 . . . . . . 6
Consolidated Statements of Cash Flows
for the Six Months Ended June 30,
1999 and 1998 . . . . . . . . . . . . . . . . . . . 7
Consolidated Statement of Shareholders' Equity
for the Six Months Ended June 30, 1999 . . . . . 8
Notes to Consolidated Financial Statements . . . . 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . 19
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . 19
Item 6. Exhibits and Reports on Form 8-K . . . . . . 19
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SELAS CORPORATION OF AMERICA
Consolidated Balance Sheets
Assets
June 30, December 31,
1999 1998
(Unaudited) (Audited)
Current assets
Cash, including cash equivalents of
$1,249,000 in 1999 and $313,000 in
1998 . . . . . . . . . . . . . . . . . . $ 2,449,806 $ 2,784,284
Accounts receivable (including unbilled
receivables of $8,178,000 in 1999 and
$3,898,000 in 1998 less allowance for
doubtful accounts of $1,145,000 in 1999
and $1,994,000 in 1998) . . . . . . . . 26,452,263 30,494,933
Inventories . . . . . . . . . . . . . . 13,072,989 12,628,623
Deferred income taxes . . . . . . . . . . 2,703,577 3,603,701
Other current assets . . . . . . . . . . . 2,021,588 1,332,135
Total current assets . . . . . . . . . 46,700,223 50,843,676
Investment in unconsolidated affiliate . . 523,160 538,913
Property, plant and equipment
Land . . . . . . . . . . . . . . . . . . . 1,014,458 1,077,522
Buildings . . . . . . . . . . . . . . . . 11,518,512 12,129,811
Machinery and equipment . . . . . . . . . 27,751,941 25,788,736
40,284,911 38,996,069
Less: Accumulated depreciation . . . . . 21,355,049 20,038,177
Net property, plant and equipment . . . 18,929,862 18,957,892
Excess of cost over net assets of acquired
subsidiaries, less accumulated amortization
of $2,798,000 and $2,452,000 . . . . . . . 16,460,661 16,813,073
Other assets including patents, less
amortization . . . . . . . . . . . . . . . 744,884 627,009
$83,358,790 $87,780,563
=========== ===========
(See accompanying notes to the consolidated financial statements)
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SELAS CORPORATION OF AMERICA
Consolidated Balance Sheets
Liabilities and Shareholders' Equity
June 30, December 31,
1999 1998
(Unaudited) (Audited)
Current liabilities
Notes payable . . . . . . . . . . . . . $ 6,026,994 $ 4,701,279
Current maturities of long-term debt . . 2,828,350 3,178,241
Accounts payable . . . . . . . . . . . . 14,615,603 15,410,642
Federal, state and foreign income taxes . 24,558 838,634
Customers' advance payments on contracts. 2,375,948 697,270
Guarantee obligations and estimated future
costs of service . . . . . . . . . . . 1,254,432 2,294,889
Other accrued liabilities . . . . . . . . 5,686,758 6,512,016
Total current liabilities . . . . . . 32,812,643 33,632,971
Long-term debt . . . . . . . . . . . . 4,482,481 6,265,720
Other postretirement benefit obligations . 4,127,884 4,096,057
Deferred income taxes . . . . . . . . . . 57,203 157,575
Contingencies and commitments
Shareholders' equity
Common shares, $1 par; 10,000,000 shares
authorized; 5,634,968 and 5,615,081 shares
issued, respectively . . . . . . . . . 5,634,968 5,615,081
Additional paid-in capital . . . . . . 12,012,541 11,941,498
Retained earnings . . . . . . . . . . . . 25,004,393 25,797,823
Accumulated other comprehensive income . 13,544 655,775
Less: 432,959 and 363,564 common shares,
respectively, held in treasury, at cost (786,867) (381,937)
Total shareholders' equity . . . . . 41,878,579 43,628,240
$83,358,790 $87,780,563
=========== ===========
(See accompanying notes to the consolidated financial statements)
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SELAS CORPORATION OF AMERICA
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
June 30, June 30,
1999 1998
Sales, net $25,391,053 $25,221,639
Operating costs and expenses
Cost of sales 20,428,015 18,734,335
Selling, general and
administrative expenses 4,444,317 4,698,080
Operating income 518,721 1,789,224
Interest (expense) (233,409) (304,731)
Interest income 18,248 12,396
Other income (expense), net (169,251) (126,563)
Income before income taxes 134,309 1,370,326
Income taxes (benefit) 102,734 (395,590)
Net income $ 31,575 $ 1,765,916
=========== ===========
Earnings per share
Basic $0.01 $0.34
Diluted $0.01 $0.33
Average shares outstanding
Basic 5,219,000 5,227,000
Diluted 5,232,000 5,325,000
Comprehensive income (loss) $ (185,986) $ 1,903,693
=========== ===========
(See accompanying notes to the consolidated financial statements)
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SELAS CORPORATION OF AMERICA
Consolidated Statements of Operations
(Unaudited)
Six Months Ended
June 30, June 30,
1999 1998
Sales, net $49,444,212 $47,088,362
Operating costs and expenses
Cost of sales 39,960,074 35,345,252
Selling, general and
administrative expenses 8,945,597 8,932,092
Operating income 538,541 2,811,018
Interest (expense) (495,188) (542,241)
Interest income 40,675 47,677
Other income (expense), net (333,338) (55,596)
Income (loss) before income taxes
(benefit) (249,310) 2,260,858
Income taxes (benefit) 73,214 (64,268)
Net income (loss) $ (322,524) $ 2,325,126
=========== ===========
Earnings (loss) per share
Basic ($0.06) $0.44
Diluted ($0.06) $0.44
Average common shares outstanding
Basic 5,235,000 5,226,000
Diluted 5,235,000 5,287,000
Comprehensive income (loss) $ (964,755) $ 2,262,115
=========== ===========
(See accompanying notes to the consolidated financial statements)
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SELAS CORPORATION OF AMERICA
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30, June 30,
1999 1998
Cash flows from operating activities:
Net income (loss) $ (322,524) $ 2,325,126
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating
activities:
Depreciation and amortization 2,010,523 1,848,561
Equity in (income) loss of unconsolidated
affiliate 1,277 (8,579)
(Gain) on sale of property and equipment (3,455) (905)
Deferred taxes 641,662 (624,508)
Changes in operating assets and liabilities:
Decrease in accounts receivable 3,080,304 7,797,760
(Increase) in inventories (744,778) (1,910,507)
(Increase) decrease in other assets (858,478) 589,309
Increase (decrease) in accounts payable 1,247,130 (5,829,954)
(Decrease) in accrued expenses (3,330,125) (1,630,170)
Increase in customer advances 1,899,232 913,265
Increase (decrease) in other
liabilities (8,010) 1,231
Net cash provided by
operating activities 3,612,758 3,470,629
Cash flows from investing activities:
Purchases of property, plant and equipment (2,190,764) (1,382,785)
Proceeds from sale of property and equipment 3,455 5,900
Acquisition of subsidiary companies, net
of cash acquired (5,388) (1,726,764)
Receipt of dividend from unconsolidated
affiliate 14,476 -
Net cash (used) by investing
activities (2,178,221) (3,103,649)
Cash flows from financing activities:
Proceeds from short-term bank borrowings 1,017,955 1,239,240
Proceeds from long-term bank borrowings 1,016,320 --
Proceeds from borrowings to acquire
subsidiary company -- 2,475,248
Repayments of short-term bank borrowings (57,535) --
Repayments of long-term debt (2,688,546) (1,307,976)
Proceeds from exercise of stock options 83,540 6,425
Payment of dividends (470,906) (470,375)
Purchase of treasury stock (404,930)
Net cash provided (used) by
financing activities (1,504,102) 1,942,562
Effect of exchange rate changes on cash (264,913) (7,611)
Net increase (decrease) in cash and cash
equivalents (334,478) 2,301,931
Cash and cash equivalents, beginning of
period 2,784,284 3,034,903
Cash and cash equivalents, end of period $ 2,449,806 $ 5,336,834
============= =============
(See accompanying notes to the consolidated financial statements)
-8-
SELAS CORPORATION OF AMERICA
Consolidated Statement of Shareholders' Equity
Six Months Ended June 30, 1999
(Unaudited)
Common Stock
Additional
Number of Paid-In
Shares Amount Capital
Balance, January 1, 1999 5,615,081 $ 5,615,081 $11,941,498
Net (loss)
Exercise of stock options 19,887 19,887 71,043
Cash dividends paid
($.09 per share)
Foreign currency
translation (loss)
Comprehensive (loss)
Purchase of 69,395
treasury shares
Balance, June 30, 1999 5,634,968 $ 5,634,968 $12,012,541
=========== =========== ===========
Accumulated
Other
Retained Comprehensive
Comprehensive
Earnings Income Income
Balance, January 1, 1999 $25,797,823 $ 655,775 $
Net (loss) (322,524) (322,524)
Exercise of stock options
Cash dividends paid
($.09 per share) (470,906)
Foreign currency
translation (loss) (642,231) (642,231)
Comprehensive (loss) $ (964,755)
==========
Purchase of 69,395
treasury shares
Balance, June 30, 1999 $25,004,393 $ 13,544
=========== ===========
Total
Treasury Shareholders'
Stock Equity
Balance, January 1, 1999 $ (381,937) $43,628,240
Net (loss) (322,524)
Exercise of stock options 90,930
Cash dividends paid
($.09 per share) (470,906)
Foreign currency
translation (loss) (642,231)
Comprehensive (loss) --
Purchase of 69,395
treasury shares (404,930) (404,930)
Balance, June 30, 1999 $ (786,867) $41,878,579
=========== ===========
(See accompanying notes to the consolidated financial statements)
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SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
ITEM 1. Notes to Consolidated Financial Statements (Unaudited)
(Continued)
1. In the opinion of management, the accompanying consolidated
condensed financial statements contain all adjustments (consisting
of normal recurring adjustments) necessary to present fairly Selas
Corporation of America's consolidated financial position as of June
30, 1999 and December 31, 1998, and the consolidated results of its
operations for the three and six months ended June 30, 1999 and
1998 and consolidated statements of shareholders' equity and cash
flows for the six months then ended.
2. The accounting policies followed by the Company are set forth in
note 1 to the Company's financial statements in the 1998 Selas
Corporation of America Annual Report.
3. Inventories consist of the following:
June 30, December 31,
1999 1998
Raw material $ 3,513,186 $ 3,418,891
Work-in-process 5,321,978 4,286,566
Finished products and
components 4,237,825 4,923,166
Total $13,072,989 $12,628,623
=========== ===========
4. Income Taxes
Consolidated income taxes (benefit) for the six month periods ended
June 30, 1999 and 1998 are $73,000 and $(64,000) which result in
effective tax rates of 29.3% and (2.8%), respectively. The rate of
tax in relation to pre-tax loss in 1999 results from tax benefits
from certain foreign net operating losses which could not be
utilized for income tax purposes. The rate of tax benefit in
relation to pre-tax income in 1998 is low because the Company
reduced the valuation allowance applied against deferred tax
benefits associated with domestic postretirement benefit
obligations by $724,512 and against certain domestic employee
pension plan obligations by $33,694. The Company had determined
that it is more likely than not that the $758,206 of deferred tax
assets will be realized.
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SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
ITEM 1. Notes to Consolidated Financial Statements (Unaudited)
5. Legal Proceedings
The Company is a defendant along with a number of other parties in
approximately 147 lawsuits as of December 31, 1998 (215 as of
December 31, 1997) alleging that plaintiffs have or may have
contracted asbestos-related diseases as a result of exposure to
asbestos products or equipment containing asbestos sold by one or
more named defendants. Due to the noninformative nature of the
complaints, the Company does not know whether any of the complaints
state valid claims against the Company. The lead insurance
carrier has informed the Company that the primary policy for the
period July 1, 1972 - July 1, 1975 has been exhausted and that the
lead carrier will no longer provide a defense under that policy.
The Company has requested that the lead carrier substantiate this
situation. The Company has contacted representatives of the
Company's excess insurance carrier for some or all of this period.
The Company does not believe that the asserted exhaustion of the
primary insurance coverage for this period will have a material
adverse effect on the financial condition, liquidity, or results of
operations of the Company. Management is of the opinion that the
number of insurance carriers involved in the defense of the suits
and the significant number of policy years and policy limits to
which these insurance carriers are insuring the Company make the
ultimate disposition of these lawsuits not material to the
Company's consolidated financial position or results of operations.
In 1995, a dispute which was submitted to arbitration, arose under
a contract between a customer and a subsidiary of the Company.
Substantial claims were asserted against the subsidiary Company
under the terms of the contract. The Company recorded revenue of
approximately $1,400,000 in 1994 and has an uncollected receivable
of $140,000. In June, 1998, the arbitrator found in favor of the
customer. The Company has refused to recognize the validity of the
arbitration proceedings and decision and believes it is entitled to
a new hearing before an international or French tribunal. The
Company believes that the disposition of this claim will not
materially affect the Company's consolidated financial position or
results of operations.
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SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
ITEM 1. Notes to Consolidated Financial Statements (Unaudited)
(Continued)
6. Statements of Cash Flows
Supplemental disclosures of cash flow information:
Six Months Ended
June 30, June 30,
1999 1998
Interest received . . . . . . . $ 23,879 $ 50,950
Interest paid . . . . . . . . . $ 453,466 $ 448,079
Income taxes paid . . . . . . . $ 950,342 $ 928,238
7. Accounts Receivable
At June 30, 1999, the Company had $2,143,178 of trade accounts
receivable due from the major U.S. automotive manufacturers and
$4,094,936 of trade accounts receivable due from hearing aid
manufacturers. The Company also had $11,372,890 in receivables
from long-term contracts for customers in the steel industry in
North America, Europe and Asia.
-12-
SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
ITEM 1. Notes to Consolidated Financial Statements (Unaudited)
(Continued)
8. Earnings (Loss) Per Share
The following table sets forth the computation of basic and diluted
earnings (loss) per share:
For the Three Months
Ended June 30, 1999
Income Shares Per Share
Numerator Denominator Amount
Basic Earnings Per Share
Income available to
common shareholders $ 31,575 5,219,313 $ 0.01
=========
Effect Of Dilutive Securities
Stock options 12,252
------------------------
Diluted Earnings Per Share $ 31,575 5,231,565 $ 0.01
=====================================
For the Six Months
Ended June 30, 1999
Income Shares Per Share
Numerator Denominator Amount
Basic (Loss) Per Share
(Loss) available to
common shareholders $ (322,524) 5,235,458 $ (0.06)
=========
Effect Of Dilutive Securities
Stock options --
-----------------------
Diluted (Loss) Per Share $ (322,524) 5,235,458 $ (0.06)
=====================================
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SELAS CORPORATION OF AMERICA
9. Business Segment Information
The company has three operating segments. The Company is engaged in
providing engineered heat technology equipment and services to
industries throughout the world, the manufacture of precision medical
and electronic products and the manufacture of original equipment for
light trucks and vans. The results of operations and assets of these
segments are prepared on the same basis as the condensed consolidated
financial statements for the six months ended June 30, 1999 and 1998
and the consolidated financial statements included in the 1998 Form
10-K.
The Company's reportable segments reflect separately managed,
strategic business units that provide different products and
services, and for which financial information is separately prepared
and monitored.
Segments
Tire
Holders, Precision
Lifts and Medical and
For The Six Months Heat Related Electronic
Ended June 30, 1999 Technology Products Products Total
Sales, net $22,330,989 $9,459,926 $17,653,297 $49,444,212
==================================================
Net income (loss) $(1,354,531) $ 594,158 $ 437,849 $ (322,524)
==================================================
Depreciation and
amortization $ 369,559 $ 105,672 $ 1,535,292 $ 2,010,523
==================================================
Property, plant and
equipment additions $ 467,369 $ 74,580 $ 1,648,815 $ 2,190,764
==================================================
Total assets $38,792,052 $6,619,057 $37,947,681 $83,358,790
==================================================
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SELAS CORPORATION OF AMERICA
9. Business Segment Information (Continued)
Segments
Tire
Holders, Precision
Lifts and Medical and
For The Six Months Heat Related Electronic
Ended June 30, 1998 Technology Products Products Total
Sales, net $20,804,554 $8,390,004 $17,893,804 $47,088,362
==================================================
Net income $ 950,667 $ 499,093 $ 875,366 $ 2,325,126
==================================================
Depreciation and
amortization $ 297,864 $ 108,432 $ 1,442,265 $ 1,848,561
==================================================
Property, plant and
equipment additions $ 171,145 $ 110,122 $ 1,101,518 $ 1,382,785
==================================================
Total assets $43,687,356 $6,587,459 $34,696,514 $84,971,329
==================================================
-15-
SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Consolidated net sales increased to $25.4 million and $49.4 million for
the three and six months ended June 30, 1999 compared to $25.2 million
and $47.1 million for the same periods ended June 30, 1998. Net sales
for the heat technology segment decreased slightly to $11.6 million for
the three months ended June 30, 1999 compared to $12 million for the
same period in 1998 and increased to $22.3 million for the six months
ended June 30, 1999 compared to sales of $20.8 million in 1998. The
increase in sales in 1999 is due to several large engineered contracts
nearing completion offset by decreased spare and replacement part sales.
Sales and earnings of large engineered contracts are recognized on the
percentage-of-completion method and generally require more than twelve
months to complete. Consolidated backlog for the heat technology
segment increased to $38.5 million at June 30, 1999 compared to $32.2
million for the same period in 1998. Sales for the Company's precision
medical and electronic products segment decreased to $8.9 million and
$17.6 million for the three and six month periods ended June 30, 1999
compared to $9.2 million and $17.9 million for the same periods in 1998.
Sales to hearing health customers decreased compared to 1998 due to the
down conditions in this market, offset by increased revenue from RTI
Technologies PTE LTD, the Singapore company acquired in October, 1998.
Sales of RTI Electronics were lower in 1999 compared to 1998 due to
increased price competition and the Asian economic situation, slightly
offset by sales of IMB Electronics Products, which was acquired in May,
1998. Net sales of the tire holders, lifts and related products segment
increased for the three and six months ended June 30, 1999 to $4.9
million and $9.5 million compared to $3.9 million and $8.4 million for
the same periods in 1998. The increase in revenue is due to higher tire
lift sales to the Company's automotive customers.
The Company's gross profit margin as a percentage-of-sales decreased to
19.6% and 19.3% for the three and six month periods ended June 30, 1999
compared to 25.8% and 25% for the same periods in 1998. Gross profit
margins for the heat technology segment decreased to 9.6% and 11% for
the three and six months ended June 30, 1999 compared to 21.3% for the
same periods in 1998. Heat technology gross profit margins vary
markedly from contract to contract, depending on customer specifications
and other conditions relating to the project. The gross profit margins
for 1999 were impacted by revenue recognized on several large engineered
contracts whose margins were not as profitable as contracts completed in
1998 and reduced sales of spare and replacement parts, which generally
have higher profit margins. Gross profit margins for the precision
medical and electronic products segment decreased to 29.8% and 29.7% for
the three and six months ended June 30, 1999 compared to 32.1% and 31.6%
for the same periods in 1998. The lower margins in 1999 are partially
attributable to the mix of sales between the periods as precision
components, precision systems, plastic and electronic products have
varying profit margins. Also impacting the margins in 1999 were the
costs relating to combining the production operations of RTI Electronics
and IMB Electronics, Inc. into one facility. Gross profit margins for
the tire holders, lifts and related products segment decreased to 21.2%
and 19.5% for the three and six months ended June 30, 1999 compared to
24.9% and 20.3% for the same periods in
-16-
SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
1998. The margins in 1998 are higher primarily because of a refund of
excess insurance premiums during the second quarter of 1998.
Selling, general and administrative expenses (SG&A) decreased slightly
for the three months ended June 30, 1999 to $4.4 million compared to
$4.7 million for the same period in 1998, while SG&A for the six month
periods ended June 30, 1999 and 1998 remained constant at $8.9 million.
The slight decrease for the quarter results from cost reductions in
certain areas of the Company's operations.
Interest expense for the three and six months ended June 30, 1999 was
$233,000 and $495,000 compared to $305,000 and $542,000 for the same
periods in 1998. The decrease in expense is due to lower average
borrowings during the current year. Interest income for the second
quarter of 1999 increased slightly to $18,000 compared to $12,000 for
the same period in 1998, while it decreased to $41,000 from $47,000 for
the six month periods ended June 30, 1999 and 1998. The slight decline
for six months is due to lower balances available for investment.
Other income (expense) includes losses on foreign exchange of $133,000
and $296,000 for the three and six months ended June 30, 1999 compared
to losses of $49,000 for the 1998 second quarter and gains of $7,000 for
1998 year to date.
Consolidated income taxes (benefit) for the six month periods ended June
30, 1999 and 1998 are $73,000 and $(64,000) which result in effective
tax rates of 29.3% and (2.8%), respectively. The rate of tax in
relation to pre-tax loss in 1999 results from tax benefits from certain
foreign net operating losses which could not be utilized for income tax
purposes. The rate of tax benefit in relation to pre-tax income in 1998
is low because the Company reduced the valuation allowance applied
against deferred tax benefits associated with domestic postretirement
benefit obligations by $724,512 and against certain domestic employee
pension plan obligations by $33,694. The Company had determined that it
is more likely than not that the $758,206 of deferred tax assets will be
realized.
Consolidated operations for the three and six month periods ended June
30, 1999 resulted in net income of $32,000 for the second quarter of
1999 and a net loss of $323,000 for the six months then ended compared
with net income of $1,766,000 and $2,325,000 for the same periods in
1998. The decrease in 1999 is attributable to lower profit margins on
certain contracts and other products, losses on foreign currency
exchange and lower tax benefits on operating losses not available for
utilization. The earnings for 1998 were favorably impacted by a
reduction in the valuation allowance of deferred income tax assets which
resulted in a tax benefit for the quarter and year-to-date of
approximately $750,000.
-17-
SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Liquidity and Capital Resources
Consolidated net working capital decreased to $13.9 million at June 30,
1999 from $17.2 million at December 31, 1998. The decrease is primarily
attributable to the net loss year-to-date, purchases of property and
equipment, pay-down of long-term debt, payment of dividends and purchase
of treasury stock. The major changes in components of working capital
for the six months were lower accounts receivable of $4 million,
increased notes payable of $1.3 million, lower accounts payable of $.8
million, increased customer advance payments of $1.7 million, lower
guaranteed obligations of $1 million and decreased accrued liabilities
of $.8 million. These changes relate to the ongoing operations of the
Company year-to-date.
In June, 1999, the Company refinanced existing mortgage debt of $900,000
with a commercial bank. The original mortgage was assumed at the date
of acquisition of Resistance Technology, Inc. (RTI) and was secured by
certain land and building of RTI. The refinanced debt is payable in
monthly installments of $7,500, excluding interest, and is set to mature
on July 1, 2004. The mortgage carries an interest rate at the Market
Index London Interbank Offered Rate (LIBOR) plus 1.25%. The agreement
is subject to the same financial reporting requirements and maintenance
of certain financial ratios as the Company's other term loan agreements
with the commercial bank.
The Company has completed a program during the second quarter of 1999
designed to remediate all of the Company's significant computer systems
that were not Year 2000 compliant. The program was divided into three
major components: (1) identification of all information technology
systems ("IT Systems") and non-information technology systems ("Non-IT
Systems") that were not Year 2000 compliant; (2) repair or replacement
of the identified non-compliant systems; and (3) testing of the repaired
or replaced systems. All three parts have been completed for both in-
house and commercially developed IT Systems. However, the Company will
continue to monitor and evaluate the impact of any other Year 2000
issues on its operations.
The Company has been inquiring of certain key suppliers and business
partners about their Year 2000 readiness. While no assurances can be
given that key suppliers and business partners will remedy their own
Year 2000 issues, the Company to date has not identified any material
impact on its ability to continue normal business operations with
suppliers or other third parties who fail to address the Year 2000
issue.
Actual costs associated with implementation of the Company's Year 2000
program are expected to be insignificant to the Company's operations and
financial condition. Costs of $200,000, primarily for software and
outside services, have been or are expected to be incurred. As of June
30, 1999, $170,000 of costs have been expended.
-18-
SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
On January 1, 1999, eleven of fifteen member countries of the European
Union established fixed conversion rates between their existing
currencies ("legacy currencies") and one common currency -- the Euro.
The Euro trades on currency exchanges and may be used in business
transactions. The conversion to the Euro will eliminate currency
exchange risk between the member countries. Beginning in January 2002,
new Euro-denominated bills and coins will be issued, and legacy
currencies will be withdrawn from circulation. The Company has
recognized this situation and has been developing a plan to address any
issue being raised by the currency conversion. Possible issues include,
but are not limited to, the need to adapt computer and financial systems
to recognize Euro-denominated transactions, as well as the impact of one
common European currency on pricing. The Company anticipates that any
unaddressed issues will be resolved during 1999.
The Financial Accounting Standards Board (FASB) has issued Statements of
Financial Accounting Standard (SFAS) No. 137, Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of
FASB Statement No. 133, SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" and SFAS No. 135, "Recision of FASB
Statement No. 75 and Technical Corrections." SFAS No. 137 delays the
effective date of SFAS No. 133 to be effective for all fiscal quarters
of all fiscal years beginning after June 15, 2000. SFAS No. 133
standardizes the accounting for derivative instruments, including
derivative instruments embedded in other contracts, by requiring that an
entity recognize those items as assets or liabilities in the statement
of financial position and measure them at fair value. SFAS No. 135
provides technical corrections to some 29 accounting pronouncements. It
is effective for fiscal years ending after February 15, 1999.
Management has not yet determined the impact that the adoption of these
statements may have on earnings, financial condition and liquidity of
the Company. The Company plans to adopt SFAS No. 133 by January 1, 2001
and SFAS No. 135 by December 31, 1999, respectively, as permitted by
these accounting standards.
The Company believes that its present working capital position, combined
with funds expected to be generated from operations and the available
borrowing capacity through its revolving credit loan facilities, will be
sufficient to meet its anticipated cash requirements for operating needs
and capital expenditures for 1999.
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 Annual Report on Form 10-K for 1998. There have
been no significant changes in the Company's portfolio of financial
instruments or market risk exposures which have occurred since year-end.
-19-
SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
Forward-Looking and Cautionary Statements
The Company may from time to time make written or oral forward-looking
statements, including those contained in the foregoing Management's
Discussion and Analysis. In order to take advantage of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of
1995, the Company has identified in its Annual Report on Form 10-K for
the year ending December 31, 1998, certain important factors which could
cause the Company's actual results, performance or achievement to differ
materially from those that may be contained in or implied by any
forward-looking statement made by or on behalf of the Company. All such
forward-looking statements are qualified by reference to the cautionary
statements herein and in such Report on Form 10-K.
-20-
SELAS CORPORATION OF AMERICA
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
See Note 5 to the Consolidated Financial Statements.
ITEM 4. Submission of Matters to a Vote of Security Holders
The 1999 Annual Meeting of Shareholders of the Company was held on April
20, 1999.
At the 1999 Annual Meeting:
(i) Messrs. John H. Austin, Jr. and Ralph R. Whitney, Jr. were
re-elected to the Board of Directors of the Company for terms expiring
at the 2002 Annual Meeting. In such election, 3,966,651 votes were cast
for Mr. Austin and 3,979,020 votes were cast for Mr. Whitney. Under
Pennsylvania law, votes cannot be cast against a candidate. Proxies
filed at the 1999 Annual Meeting by the holders of 418,507 shares
withheld authority to vote for Mr. Austin and those filed by the holders
of 406,138 shares withheld authority to vote for Mr. Whitney. No
"broker nonvotes" were received at the 1999 Annual Meeting with respect
to the election of directors;
(ii) 4,373,239 shares were voted in favor of ratifying the
appointment of KPMG LLP as the Company's auditors for 1999 and 6,219
shares were voted against such proposal. Proxies filed at the 1999
Annual Meeting by the holders of 5,700 shares instructed the proxy
holders to abstain from voting on such proposal. No "broker nonvotes"
were received at the 1999 Annual Meeting with respect to this proposal.
ITEM 6. Exhibits and Reports on Form 8-K
(a) The following Exhibit is filed with this report.
Amendment to Amended and Restated Credit Agreement dated June 30,
1999.
(b) Reports on Form 8-K - There were no reports on Form 8-K filed
for the six months ended June 30, 1999.
-21-
SELAS CORPORATION OF AMERICA
SIGNATURE
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.
SELAS CORPORATION OF AMERICA
(Registrant)
Date: August 6, 1999 /s/Francis A. Toczylowski
Francis A. Toczylowski
Vice President and Treasurer
AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
("AMENDMENT" together with all amendments and modifications hereto,
this "AGREEMENT"), dated as of June 30, 1999, is by and among
FIRST UNION NATIONAL BANK, a national banking association, with an
office at Broad and Walnut Streets, Philadelphia, Pennsylvania
19109 (the "BANK"), SELAS CORPORATION OF AMERICA, a Pennsylvania
business corporation with offices located at 2034 Limekiln Pike,
Dresher, Pennsylvania 19025 ("SELAS" or "BORROWER"), DEUER
MANUFACTURING, INC., an Ohio business corporation with offices
located at 2985 Springboro West, Dayton, Ohio 45439 ("DEUER"),
RESISTANCE TECHNOLOGY, INC., a Minnesota business corporation with
offices located at 1260 Red Fox Road, Arden Hills, Minnesota 55112
("RTI"), RTI EXPORT, INC., a Barbados corporation with offices
located at c/o 2034 Limekiln Pike, Dresher, Pennsylvania 19025
("RTIE") and RTI ELECTRONICS, INC., a Delaware corporation with
offices located at 1800 Via Burton Street, Anaheim, California
92806 ("RTI ELECTRONICS", and together with Deuer, RTI and RTIE,
the "GUARANTORS").
BACKGROUND
. The Bank, the Borrower and the Guarantors entered into
that certain Amended and Restated Credit Agreement dated as of July
31, 1998 (as so amended, the "CREDIT AGREEMENT"), pursuant to which
the Bank agreed to make available to Selas, a revolving credit
facility in a maximum principal amount of $4,000,000 in addition to
the existing term loans referred to therein (collectively, the
"EXISTING LOANS").
. The Existing Loans are evidenced by the following
promissory notes of the Borrower: (a) a Term Note A dated as of
October 20, 1993 in the original principal amount of $11,550,000,
(b) a Term Note C dated as of February 21, 1997 in the original
principal amount of $3,500,000, and (c) Amended and Restated
Revolving Credit Note dated as of July 31, 1998 in the principal
amount of $4,000,000 (collectively, the "EXISTING NOTES").
. The Credit Agreement, the Existing Notes, and all of the
documents, instruments and agreements executed and delivered in
connection therewith, together with all amendments and
modifications thereto, shall be referred to hereinafter as the
"LOAN DOCUMENTS."
. The Bank, the Borrower and the Guarantors, pursuant to
the terms hereof, wish to amend certain of the terms of the Loan
Documents.
NOW, THEREFORE, incorporating the foregoing Background herein
by reference and for other good and valuable consideration, the
receipt and legal sufficiency of which is hereby acknowledged, and
intending to be legally bound hereby, the parties agree as follows:
. DEFINED TERMS. Terms used herein which are capitalized
but not defined herein shall have the meanings ascribed to such
terms in the Credit Agreement.
. AMENDMENTS.
(a) Section 1.1 of the Credit Agreement is hereby
amended by adding the following defined terms which shall appear in
alphabetical order:
"RTI Mortgage" shall mean that certain Mortgage, Security Agreement
and Fixture Financing Statement dated June 30, 1999
(together with all amendments and modifications thereto) covering
the Minnesota Real Property as security for RTI's obligations to
the Bank under this Agreement and the RTI Guaranty."
"Term Loan D" means the term loan made pursuant to
Section 2.1(c) of this Agreement.
"Term Note D" means the promissory note of Borrower
dated June 30, 1999 payable to the order of the Bank in
the principal amount of $900,000.00, in the form of
Exhibit A attached to the Amendment to this Agreement
dated as of June 30, 1999, to be delivered to the
Bank by Selas pursuant to Section 5(b) of such Amendment,
as such Note may be amended, modified, extended or
restated from time to time.
(b)The definition of "RTI Security Documents" which
appeared in the Background Section of the Credit
Agreement is hereby added to Section 1.1 of the Credit
Agreement as follows:
"RTI Collateral Security Documents" shall mean collectively the RTI
Collateral Security Documents described in Section C3 of the
Background section of this Agreement, together with the RTI
Mortgage.
(c)Section 1.1 of the Credit Agreement is hereby amended
by amending and restating the following defined terms as
follows:
"Term Loans" means Term Loan A, Term Loan C and Term
Loan D.
"Term Notes" means Term Note A, Term Note C and Term
Note D.
(d) Section 2.1 of the Credit Agreement is hereby
amended by adding the following new subsection (c) after
subsection (b):
(c) Term Loan D. On the date of the Amendment to
this Agreement dated as of June 30, 1999, the Bank
will make a term loan to the Borrower in the principal
amount of $900,000.00 ("TERM LOAN D"). Any amounts of
Term Loan D that are repaid or prepaid may not be
reborrowed hereunder.
(e) Section 2.2 of the Credit Agreement is hereby
amended by adding new subsection 2.2.1 after Section 2.2:
2.2.1 Term Loan D. The indebtedness of Borrower
under Term Loan D shall be evidenced by Term Note D.
(f) Section 2.3 of the Credit Agreement is hereby
amended by adding the following new subsection 2.3.1 after Section
2.3:
2.3.1 Term Loan D. Funds advanced under Term Loan
D shall be used by the Borrower to fund advances to RTI
to refinance existing debt on the Minnesota Real
Property.
(g) Section 2.4 of the Credit Agreement is hereby
amended by adding the following new subsection (d) after subsection
(c):
(d) Term Loan D.
(i) Scheduled Payments. Term Loan D shall
be payable in fifty-nine (59) consecutive monthly
principal installments of $7,500.00 each, commencing
August 1, 1999 and continuing on the first day of each
month thereafter, with the final, sixtieth (60th)
installment of the remaining principal balance of Term
Loan D, together with all interest accrued thereon and
all fees and costs payable in connection therewith, due
and payable on July 1, 2004.
(ii) Optional Prepayments. The Borrower may
prepay Term Loan D in whole at any time or in part from
time to time; provided, however, that (A) any such
prepayment shall be applied to the outstanding principal
of Term Loan D in the inverse order of maturity of the
installments thereof, and (B) any such prepayment shall
be accompanied by any additional payment required to
compensate the Bank for any loss, cost or expense
incurred as a result of such prepayment as provided in
Section 2.14 hereof and any amount due in connection with
the termination of any Swap Agreement entered into for
purposes of hedging Term Loan D.
(iii) Swap Agreements. Any prepayment of
Term Loan D shall not release the obligations of the
Borrower under any Swap Agreement.
(h) Section 2.5 of the Credit Agreement is hereby amended by
adding the following new subsection (d) after subsection (c):
(d) Term Loan D. In the absence of an Event of
Default or Default hereunder, the outstanding principal
balance of Term Loan D shall continue to bear interest at
the LIBOR Market Index Rate plus 125 basis points
(1.25%), payable by the Borrower monthly on the first day
of each month and upon the maturity of Term Loan D.
Interest will be calculated on the basis of a 360-day
year and the actual number of days elapsed.
and the references in the former subsection (d) (which shall be
redesignated as subsection (e)) to "subsections (a), (b) and (c)"
and "Sections 2.5(a), (b) and (c)" shall be amended to read
"subsections (a), (b), (c) and (d)" and "Sections 2.5(a), (b),
(c)and (d)", respectively.
(i) Section 4 of the Credit Agreement is amended by
adding the following as new Section 4.23 after Section 4.22:
4.23 YEAR 2000. The Borrower and the Guarantors each have
reviewed the areas within their respective businesses and
operations which could be adversely affected by, and have developed
or are developing a program to address on a timely basis the risk
that certain computer applications used by the Borrower and/or the
Guarantors may be unable to recognize and perform properly
date-sensitive functions involving dates prior to and after
December 31, 1999 (the "YEAR 2000 PROBLEM"). The Year 2000 Problem
is not reasonably expected to result in any material adverse effect
on the business, properties, assets, financial condition, results
of operations or prospects of the Borrower and/or the Guarantors,
or the ability of the Borrower and/or the Guarantors to duly and
punctually pay or perform its obligations hereunder and under the
other Loan Documents.
(j) Section 6.15 of the Credit Agreement is amended and restated as
follows:
6.15 CONSOLIDATED TANGIBLE CAPITAL FUNDS. Maintain, as
of each June 30 and December 31, Consolidated Tangible
Capital Funds for the Borrower and its Consolidated
Subsidiaries of not less than $23,713,339.00, increasing
semiannually commencing as of June 30, 1999 and on each
June 30 and December 31 thereafter, on a cumulative
basis, by an amount equal to (i) sixty percent (60%) of
consolidated net income (as determined in accordance with
GAAP) for the preceding semiannual period, with no
reduction for losses accrued during any such semiannual
period; and (ii) sixty percent (60%) of the aggregate
amount of contributions to capital during such semiannual
period. The Borrower and Guarantors acknowledge that
$23,713,339.00 was the Consolidated Tangible Capital
Funds minimum as of December 31, 1998 and that the first
increase will be on June 30, 1999.
3. ADDITIONAL COLLATERAL. The RTI Mortgage shall be
considered Additional Collateral for the Loans as required by
Section 6.11(i) of the Credit Agreement.
4. FACILITY FEE. On the date of execution of this
Agreement, the Borrower shall pay to the Bank a nonrefundable
facility fee (the "FACILITY FEE") equal to one-quarter percent
(0.25%) of the principal amount of Term Loan D.
5. CONDITIONS PRECEDENT. The effectiveness of this
Agreement and the Bank's obligations hereunder are conditioned upon
the satisfaction of the following conditions precedent:
() The Borrower and Guarantors shall have delivered to
the Bank this Agreement, duly executed by Borrower and each of the
Guarantors.
() The Borrower shall have delivered to the Bank Term
Note D, dated as of the date hereof, duly executed by the Borrower;
(c) RTI shall have delivered to the Bank the RTI
Mortgage, dated as of the date hereof, duly executed by RTI in
recordable form;
(d) The Borrower or RTI shall have delivered to the Bank
a title insurance policy in form and substance satisfactory to the
Bank with respect to the Minnesota Real Property;
(e) The Bank shall have received an opinion of counsel
from Drinker Biddle & Reath, counsel for the Borrower and
Guarantors, in form and substance satisfactory to the Bank and its
counsel;
(f) The Borrower shall have paid the Facility Fee to the
Bank;
(g) All proceedings required to be taken by the Borrower
and Guarantors in connection with the transactions contemplated by
this Agreement shall be satisfactory in form and substance to the
Bank and its counsel, and the Bank shall have received all such
counterpart originals or certified or other copies of such
documents as the Bank may reasonably request;
(h) The Borrower and Guarantors shall have executed and
delivered to the Bank such other documents, instruments and
agreements as the Bank may reasonably request.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS. In order to
induce the Bank to enter into this Agreement, the Borrower and
Guarantors each hereby represent, warrant and covenant to the Bank
as follows:
() The representations and warranties contained in the
Loan Documents are true and correct on and as of the date of this
Agreement and, after giving effect hereto, no Event of Default
(other than those that have been waived in writing by the Bank)
will be in existence or will occur as a result of giving effect
hereto.
() The execution, delivery and performance of this
Agreement will not violate any provision of any law or regulation
or of any writ or decree of any court or governmental
instrumentality, of the Borrower's or of any of the Guarantors'
certificate or articles of incorporation, by-laws or other similar
organizational documents.
() The Borrower and each of the Guarantors have the
power to execute, deliver and perform this Agreement and each of
the documents, instruments and agreements to be executed and/or
delivered in connection herewith and have taken all necessary
action to authorize the execution, delivery and performance of this
Agreement and each of the documents, instruments and agreements
executed and/or delivered in connection herewith and the
performance of the Credit Agreement as amended hereby.
() The execution, delivery and performance of this
Agreement and each of the documents, instruments and agreements to
be executed and/or delivered in connection herewith does not
require the consent of any other party or the consent, license,
approval or authorization of, or registration or declaration with,
any governmental body, authority, bureau or agency and the Loan
Documents, this Agreement and each of the documents, instruments
and agreements executed and/or delivered in connection herewith
constitute legal, valid and binding obligations of the Borrower and
each of the Guarantors, enforceable in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or affecting
creditors' rights and except as enforcement may be subject to
general equitable principles.
7. REAFFIRMATION BY BORROWERS AND GUARANTORS. Except as
amended hereby, all of the terms, covenants and conditions of the
Credit Agreement and each of the other Loan Documents (INCLUDING,
BUT NOT LIMITED TO, PROVISIONS RELATING TO ANY AUTHORITY GRANTED TO
THE BANK TO CONFESS JUDGMENT AGAINST THE BORROWER, GUARANTORS, OR
ANY OF THEM, AND ANY WAIVER OF THE RIGHT TO TRIAL BY JURY) are
ratified, reaffirmed and confirmed and shall continue in full force
and effect as therein written and are not intended to be reenacted
as of the above date, but rather to be effective as of the original
date of such documents. The Borrower and each of the Guarantors
hereby reaffirm and ratify all of the terms, covenants, and
conditions contained in each of their respective guarantees and
confirms that such guarantees are binding and enforceable against
the parties thereto as if such guarantees had been executed as of
the date hereof. The Borrowers and each Guarantor hereby
acknowledge and agree that the term "Obligations," as defined in
their respective Security Agreements and Guaranty and Suretyship
Agreements (and, as to RTI, its Patent and Trademark Security
Agreement), includes all of the obligations of Borrower under Term
Note D and all of their respective obligations under the Loan
Documents as amended by this Amendment.
8. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the Borrower, the Guarantors and the Bank
and their respective heirs, executors, administrators, successors
and assigns; provided, however, that the Borrower and/or the
Guarantors may not assign any of their rights, nor delegate any of
their obligations, under this Agreement without the prior written
consent of the Bank and any purported assignment or delegation
absent such consent shall be void.
9. COUNTERPARTS; EFFECTIVENESS. This Agreement may be
executed in any number of counterparts and by the different parties
on separate counterparts. Each such counterpart shall be deemed to
be an original, but all such counterparts shall together constitute
one and the same agreement. This Agreement shall be deemed to have
been executed and delivered when the Bank has received counterparts
hereof executed by all parties listed on the signature page(s)
hereto.
10. AMENDMENT AND WAIVER. No amendment of this Agreement,
and no waiver of any one or more of the provisions hereof shall be
effective unless set forth in a writing and signed by the parties
hereto.
11. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the Commonwealth
of Pennsylvania
12. SEVERABILITY. Any provision of this Agreement that is
held to be inoperative, unenforceable, voidable or invalid in any
jurisdiction shall, as to that jurisdiction, be ineffective,
unenforceable, void or invalid without affecting the remaining
provisions in that or any other jurisdiction, and to this end the
provisions of this Agreement are declared to be severable.
13. JUDICIAL PROCEEDINGS. Each party to this Agreement
agrees that any suit, action or proceeding, whether claim or
counterclaim, brought or instituted by any party hereto or any
successor or assign of any party, on or with respect to this
Agreement, the documents, instruments and agreements executed in
connection herewith, the Loan Documents or the dealings of the
parties with respect hereto and thereto, shall be tried only by a
court and not by a jury. EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH
SUIT, ACTION OR PROCEEDING. Further, each party waives any right
it may have to claim or recover, in any such suit, action or
proceeding, any special, exemplary, punitive or consequential
damages or damages other than, or in addition to, actual damages.
THE BORROWER AND THE GUARANTORS ACKNOWLEDGE AND AGREE THAT THIS
SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND
THAT THE BANK WOULD NOT ENTER INTO THIS AGREEMENT IF THE WAIVERS
SET FORTH IN THIS SECTION WERE NOT A PART OF THIS AGREEMENT.
14. EXPENSES. The Borrower agrees to pay all reasonable
costs and expenses of the Bank, including without limitation the
costs incurred by the Bank for regulatory compliance audits,
environmental investigations, reasonable fees and costs of its
legal counsel, filing and recording costs, and other expenses
incurred in connection with the preparation, execution and delivery
of this Agreement and the transactions contemplated hereby.
SIGNATURES BEGIN ON NEXT PAGE
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above
written.
SELAS CORPORATION OF AMERICA
Attest:
By: By:
Name: Name:
Title: Title:
DEUER MANUFACTURING, INC.
Attest:
By: By:
Name: Name:
Title: Title:
RESISTANCE TECHNOLOGY, INC.
Attest:
By: By:
Name: Name:
Title: Title:
RTI EXPORT, INC.
Attest:
By: By:
Name: Name:
Title: Title:
RTI ELECTRONICS, INC.
Attest:
By: By:
Name: Name:
Title: Title:
FIRST UNION NATIONAL BANK
By:
Name:
Title:
EXHIBIT "A"
TERM NOTE D
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SELAS CORPORATION OF AMERICA FOR THE SIX MONTHS
ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,449,806
<SECURITIES> 0
<RECEIVABLES> 27,597,695
<ALLOWANCES> 1,145,432
<INVENTORY> 13,072,989
<CURRENT-ASSETS> 46,700,223
<PP&E> 40,284,911
<DEPRECIATION> 21,355,049
<TOTAL-ASSETS> 83,358,790
<CURRENT-LIABILITIES> 32,812,643
<BONDS> 4,482,481
0
0
<COMMON> 5,634,698
<OTHER-SE> 36,243,611
<TOTAL-LIABILITY-AND-EQUITY> 83,358,790
<SALES> 49,444,212
<TOTAL-REVENUES> 49,444,212
<CGS> 39,960,074
<TOTAL-COSTS> 39,960,074
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 17,873
<INTEREST-EXPENSE> 495,188
<INCOME-PRETAX> (249,310)
<INCOME-TAX> 73,214
<INCOME-CONTINUING> (322,524)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (322,524)
<EPS-BASIC> .06
<EPS-DILUTED> .06
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