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 MARCH 31, 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 MAY 6, 1999
COMMON SHARES, $1.00 PAR VALUE 5,220,809 (exclusive of 402,759
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
March 31, 1999 and December 31, 1998 . . . . . . . 3, 4
Consolidated Statements of Operations for
the Three Months Ended March 31, 1999
and 1998 . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1999 and 1998 . . . . 6
Consolidated Statement of Shareholders' Equity
for the Three Months Ended March 31, 1999. . . . . 7
Notes to Consolidated Financial Statements . . . . 8,9,10,
11,12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . 13,14,15,16
Item 3. Quantitative and Qualitative Disclosures
About Market Risk . . . . . . . . . . . . . 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . 17
Item 6. Exhibits and Reports on Form 8-K . . . . . 17
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SELAS CORPORATION OF AMERICA
Consolidated Balance Sheets
Assets
March 31, December 31,
1999 1998
(Unaudited) (Audited)
Current assets
Cash, including cash equivalents of
$662,000 in 1999 and $313,000 in
1998 $ 1,861,145 $ 2,784,284
Accounts receivable (including unbilled
receivables of $4,324,000 in 1999 and
$3,898,000 in 1998, less allowance for
doubtful accounts of $1,313,000 in 1999
and $1,994,000 in 1998) 26,827,805 30,494,933
Inventories 12,528,357 12,628,623
Deferred income taxes 3,045,144 3,603,701
Other current assets 1,822,929 1,332,135
Total current assets 46,085,380 50,843,676
Investment in unconsolidated affiliate 523,121 538,913
Property, plant and equipment
Land 1,037,056 1,077,522
Buildings 11,743,135 12,129,811
Machinery and equipment 26,484,505 25,788,736
39,264,696 38,996,069
Less: Accumulated depreciation 20,657,658 20,038,177
Net property, plant and
equipment 18,607,038 18,957,892
Excess of cost over net assets of acquired
subsidiaries, less accumulated amortiza-
tion of $2,610,000 in 1999 and
$2,452,000 in 1998 16,562,015 16,813,073
Other assets including patents, less
amortization 878,071 627,009
$82,655,625 $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
March 31, December 31,
1999 1998
(Unaudited) (Audited)
Current liabilities
Notes payable $ 5,403,584 $ 4,701,279
Current maturities of long-term debt 3,116,869 3,178,241
Accounts payable 13,320,287 15,410,642
Federal, state and foreign income taxes 602,367 838,634
Customers' advance payments on contracts 1,386,636 697,270
Guarantee obligations and estimated
costs of service 1,437,789 2,294,889
Other accrued liabilities 5,436,601 6,512,016
Total current liabilities 30,704,133 33,632,971
Long-term debt 5,243,930 6,265,720
Other postretirement benefit obligations 4,051,008 4,096,057
Deferred income taxes 91,903 157,575
Contingencies and commitments
Shareholders' equity
Common shares, $1 par; 10,000,000 shares
authorized; 5,623,568 and 5,615,081
shares issued, respectively 5,623,568 5,615,081
Additional paid-in capital 11,969,343 11,941,498
Retained earnings 25,207,022 25,797,823
Accumulated other comprehensive income 231,105 655,775
Less: 378,214 and 363,564 common shares,
respectively, held in treasury,
at cost (466,387) (381,937)
Total shareholders' equity 42,564,651 43,628,240
$82,655,625 $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
March 31, March 31,
1999 1998
Sales, net $24,053,159 $21,866,723
Operating costs and expenses
Cost of sales 19,532,059 16,610,917
Selling, general and
administrative expenses 4,501,280 4,234,012
Operating income 19,820 1,021,794
Interest (expense) (261,779) (237,510)
Interest income 22,427 35,281
Other income (expense), net (164,087) 70,967
Income (loss) before income
taxes (benefit) (383,619) 890,532
Income taxes (benefit) (29,520) 331,322
Net income (loss) $ (354,099) $ 559,210
=========== ===========
Earnings (loss) per share
Basic ($.07) $.11
Diluted ($.07) $.10
Average shares outstanding
Basic 5,252,000 5,226,000
Diluted 5,252,000 5,340,000
Comprehensive income (loss) $ (778,769) $ 358,422
=========== ===========
(See accompanying notes to the consolidated financial statements)
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SELAS CORPORATION OF AMERICA
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31, March 31,
1999 1998
Cash flows from operating activities:
Net income (loss) $ (354,099) $ 559,210
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating
activities:
Depreciation and amortization 992,609 898,587
Equity in (income) loss of
unconsolidated affiliate 15,792 (255)
Deferred taxes 383,616 87,095
Changes in operating assets and liabilities:
Decrease in accounts receivable 1,707,662 2,833,813
(Increase) in inventories (86,752) (699,721)
(Increase) decrease in other assets (616,981) 141,206
(Decrease) in accounts payable (220,731) (4,828,516)
(Decrease) in accrued expenses (1,680,975) (349,811)
Increase (decrease) in customer
advances 779,078 (475,206)
Increase (decrease) in other liabilities (5,877) 618
Net cash provided (used) by operating
activities 913,342 (1,832,980)
Cash flows from investing activities:
Purchases of property, plant and equipment (781,969) (747,453)
Acquisition of subsidiary company, net of
cash acquired (1,888) (842,790)
Net cash (used) by investing
activities (783,857) (1,590,243)
Cash flows from financing activities:
Proceeds from short-term bank borrowings 1,255,811 2,351,141
Proceeds from borrowings to acquire
subsidiary company -- 2,459,016
Repayments of short-term bank borrowings (1,111,671) --
Repayments of long-term debt (787,238) (653,557)
Proceeds from exercise of stock options 32,004 6,425
Payment of dividends (236,702) (235,160)
Purchase of treasury stock (84,451) --
Net cash provided (used) by
financing activities (932,247) 3,927,865
Effect of exchange rate changes on cash (120,375) (71,120)
Net increase (decrease) in cash and cash
equivalents (923,137) 433,522
Cash and cash equivalents, beginning of
period 2,784,282 3,034,903
Cash and cash equivalents, end of period $ 1,861,145 $ 3,468,425
========== ===========
(See accompanying notes to the consolidated financial statements)
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SELAS CORPORATION OF AMERICA
Consolidated Statement of Shareholders' Equity
Three Months Ended March 31, 1999
(Unaudited)
Common Stock
Additional
Number of Paid-In
Shares Amount Capital
Balance, January 1, 1999 5,615,081 $ 5,615,081 $11,941,498
Net (loss)
Exercise of stock options 8,487 8,487 27,845
Cash dividends paid
($.045 per share)
Foreign currency translation
(loss)
Comprehensive (loss)
Purchase of 14,650 treasury
shares
Balance, March 31, 1999 5,623,568 $ 5,623,568 $11,969,343
============ =========== ===========
Accumulated
Other
Retained Comprehensive Comprehensive
Earnings Income (Loss)
Balance, January 1, 1999 $25,797,823 $ 655,775
Net (loss) (354,099) $ (354,099)
Exercise of stock options
Cash dividends paid
($.045 per share) (236,702)
Foreign currency translation
(loss) (424,670) (424,670)
Comprehensive (loss) $ (778,769)
==========
Purchase of 14,650 treasury
shares
Balance, March 31, 1999 $25,207,022 $ 231,105
=========== ===========
Total
Treasury Shareholders'
Stock Equity
Balance, January 1, 1999 $ (381,937) $43,628,240
Net (loss) (354,099)
Exercise of stock options 36,332
Cash dividends paid
($.045 per share) (236,702)
Foreign currency
translation (loss) (424,670)
Comprehensive (loss)
Purchase of 14,650 treasury
shares (84,450) (84,450)
Balance, March 31, 1999 $ (466,387) $42,564,651
=========== ===========
(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)
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 March 31, 1999 and
December 31, 1998, and the consolidated results of its operations for
the three months ended March 31, 1999 and 1998 and consolidated
statements of shareholders' equity and cash flows for the three
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. During the first quarter of 1999, the
Company adopted Statement of Position (SOP) 98-1 "Accounting For the
Costs of Computer Software Developed or Obtained for Internal Use"
and SOP 98-5 "Reporting on the Costs of Start-Up Activities" as
permitted by these pronouncements. The adoption of these standards
did not have a material impact on consolidated results, financial
condition or long-term liquidity.
3. Inventories consist of the following:
March 31, December 31,
1999 1998
Raw material $ 3,311,212 $ 3,418,891
Work-in-process 4,901,826 4,286,566
Finished products and components 4,315,319 4,923,166
$12,528,357 $12,628,623
=========== ===========
4. Income Taxes
Consolidated income taxes (benefit) for the three month periods ended
March 31, 1999 and 1998 are ($30,000) and $331,000 which result in
effective tax rates of (7.7%) and 37.2% respectively. The rate of
tax benefit in relation to pre-tax loss in 1999 is low because tax
benefits from certain foreign net operating losses could not be
utilized for income tax purposes.
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
-9-
SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
ITEM 1. Notes to Consolidated Financial Statements (Unaudited) -
(Continued)
5. Legal Proceedings (Continued)
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.
The Company was one of approximately 500 defendants in a class action
on behalf of approximately 2,700 present and former employees of a
Texas steel mill. The cases were being defended by one or more of
the Company's insurance carriers presently known to be "at risk". In
October, 1998 the class action suit was settled. The Company's
insurance carriers have not asked the Company to contribute to any
settlement payments made by them in connection with this settlement.
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.
6. Statements of Cash Flows
Three Months Ended
March 31, March 31,
1999 1998
Interest received . . . . . . . $ 22,426 $108,088
Interest paid . . . . . . . . . $200,402 $188,253
Income taxes paid . . . . . . . $ 47,874 $349,406
7. Accounts Receivable
At March 31, 1999, the Company had $2,373,664 of trade accounts
receivable due from the major U.S. automotive manufacturers and
$4,657,169 of trade accounts receivable due from hearing aid
manufacturers. The Company also had $9,322,747 in receivables from
long-term contracts for customers in the steel industry in North
America, Europe and Asia.
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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 March 31, 1999
(Loss) Shares Per Share
Numerator Denominator Amount
Basic (Loss) Per Share
(Loss) available to
common shareholders $ (354,099) 5,251,784 $ (.07)
=========
Effect Of Dilutive Securities
Stock options --
Diluted (Loss) Per Share
(Loss) available to
common shareholders plus
assumed conversions $ (354,099) 5,251,784 $ (.07)
=====================================
For the Three Months
Ended March 31, 1998
Income Shares Per Share
Numerator Denominator Amount
Basic Earnings Per Share
Income available to
common shareholders $ 559,210 5,225,840 $ .11
=========
Effect Of Dilutive Securities
Stock options 113,879
Diluted Earnings Per Share
Income available to common
shareholders plus assumed
conversions $ 559,210 5,339,719 $ .10
=====================================
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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
miniature 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 three
months ended March 31, 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 Precision
Holders, Miniature
Lifts and Medical and
For The Three Months Heat Related Electronic
Ended March 31, 1999 Technology Products Products Total
Sales, net $10,755,990 $4,596,008 $ 8,701,161 $24,053,159
==================================================
Net income (loss) $ (771,688) $ 235,001 $ 182,588 $ (354,099)
==================================================
Depreciation and
amortization $ 185,316 $ 52,836 $ 754,457 $ 992,609
==================================================
Property, plant and
equipment additions $ 160,808 $ 51,196 $ 569,965 $ 781,969
==================================================
Total assets $37,496,937 $7,035,164 $38,123,524 $82,655,625
==================================================
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SELAS CORPORATION OF AMERICA
9. Business Segment Information (Continued)
Segments
Tire Precision
Holders, Miniature
Lifts and Medical and
For The Three Months Heat Related Electronic
Ended March 31, 1998 Technology Products Products Total
Sales, net $ 8,760,751 $4,450,321 $ 8,655,651 $21,866,723
==================================================
Net income $ 875 $ 165,002 $ 393,333 $ 559,210
==================================================
Depreciation and
amortization $ 135,152 $ 54,216 $ 709,219 $ 898,587
==================================================
Property, plant and
equipment additions $ 59,978 $ 57,921 $ 629,554 $ 747,453
==================================================
Total assets $45,667,765 $6,759,281 $33,615,697 $86,042,743
==================================================
-13-
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 for the three months ended March 31, 1999
increased to $24 million from $21.9 million for the same period in 1998.
Net sales for the heat processing segment increased to $10.7 million for
the three months ended March 31, 1999 compared to $8.8 million for the
same period last year. The increase in sales is due to higher revenue
recognition on large engineered contracts and increased sales of CFR, the
French company acquired in February, 1998, slightly 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 decreased to $20.9 million at
March 31, 1999 compared to $26.9 million at the same time last year.
Sales for the Company's precision miniature medical and electronic
products segment of $8.7 million for the three months ended March 31,
1999 remained at the same level as sales for the comparable period in
1998. Sales to the hearing health customers for this segment decreased
by $.6 million 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 slightly higher due to the May, 1998 acquisition of IMB Electronic
Products, Inc., offset by decreased sales of other electronic products
due to increased price competition and the Asian economic situation. Net
sales of the tire holders, lifts and related products segment for the
three months ended March 31, 1999 increased slightly to $4.6 million from
$4.4 million for the same period in 1998. The increase in revenue is due
to higher tire lift unit sales to the Company's automotive customers.
The Company's gross profit margin as a percentage-of-sales decreased to
18.9% for the three months ended March 31, 1999 compared to 24.1% for the
same period last year. Gross profit margins for the heat technology
segment decreased to 10.8% for the three months ended March 31, 1999
compared to 21.4% for the same period 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 the first quarter of 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 miniature medical and
electronic products segment decreased to 29.4% for the three months ended
March 31, 1999 compared to 31% for the same period in 1998. The lower
margins in the current quarter are partially attributable to the mix of
product sales between the periods as precision miniature components,
precision miniature systems, plastic and electronic products have varying
profit margins. Also impacting the margins in 1999 were the costs
relating to combining the production
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SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
operations of RTI Electronics and IMB Electronics, Inc., which was
acquired in May, 1998, into one facility. Gross profit margins for the
tire holders, lifts and related products improved to 17.6% for the three
months ended March 31, 1999 compared to 16.2% for the prior year quarter.
The improvement in the current year is due to efficiencies from higher
production through increased sales of the tire lifts.
Selling, general and administrative expenses (SG&A) increased 6.3% to
$4,501,000 for the first quarter ended March 31, 1999 compared to
$4,234,000 for the same period in 1998. The higher SG&A costs are due
primarily to the 1998 acquisitions of CFR, IMB Electronics and RTI
Technologies PTE LTD.
Interest expense for the three months ended March 31, 1999 increased to
$262,000 compared to $237,000 for the same period in 1998. The increase
is due to higher average borrowings during the current quarter. Interest
income for the first three months of 1999 decreased to $22,000 from
$35,000 for the same period in 1998 due to less funds available for
investment.
Other income (expense) includes losses on foreign exchange of $162,000
for the first quarter of 1999 compared to gains of $56,000 for the same
period in 1998.
Consolidated income taxes (benefit) for the three month periods ended
March 31, 1999 and 1998 are ($30,000) and $331,000 which result in
effective tax rates of (7.7%) and 37.2% respectively. The rate of tax
benefit in relation to pre-tax loss in 1999 is low because tax benefits
from certain foreign net operating losses could not be utilized for
income tax purposes.
Consolidated operations for the first quarter ended March 31, 1999
resulted in a net loss of $354,000 compared to net income of $559,000 for
the same period in 1998. The decrease is attributable primarily to lower
profit margins on certain contracts and other products, losses on foreign
currency exchanges and lower tax benefits on operating losses not
available for utilization.
Liquidity and Capital Resources
Consolidated net working capital decreased to $15.4 million at March 31,
1999 from $17.2 million at December 31, 1998. The decrease is primarily
attributable to the net loss for the quarter, purchases of property and
equipment and pay-down of long-term debt. The major changes in
components of working capital for the quarter were a decrease in cash and
cash equivalents of $.9 million, lower accounts receivable of $3.7
million, a decrease in accounts payable of $2.1 million and lower accrued
liabilities of $1.1 million. These changes relate to the ongoing
operations of the Company during the quarter.
-15-
SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
The Company currently has a program underway to remediate by the second
quarter of 1999 all of the Company's significant computer systems that
are not Year 2000 compliant. The program is divided into three major
components: (1) identification of all information technology systems
("IT Systems") and non-information technology systems ("Non-IT Systems")
that are not Year 2000 compliant; (2) repair or replacement of the
identified non-compliant systems; and (3) testing of the repaired or
replaced systems. Parts (1) and (2) have been completed for both in-
house and commercially developed IT Systems. Part (3), testing is
underway and the Company has targeted the second quarter of 1999 as a
completion date.
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 to $250,000, primarily for
software and outside services, have been or are expected to be incurred.
As of March 31, 1999, $170,000 of costs have been expended.
The Company will continue to monitor and evaluate the impact of the Year
2000 issue on its operations. Until the Company has completed the final
testing part of its program, the risks from potential Year 2000 failures
cannot be fully assessed. Due to this situation, the Company cannot now
begin final contingency plans. These plans will be developed as
potential Year 2000 failures are identified in the final testing stages.
Nevertheless, if remediation is not accomplished successfully in a timely
fashion and successful contingency plans are not implemented, the Company
believes the Year 2000 issue could have a material adverse effect on the
Company.
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.
-16-
SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
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. 133, "Accounting for Derivative
Instruments and Hedging Activities" and SFAS No. 135, "Recission of FASB
Statement No. 75 and Technical Corrections." 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. The statement is
effective for fiscal years beginning after June 15, 1999. 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, 2000 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.
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.
-17-
SELAS CORPORATION OF AMERICA
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
See Note 5 to the Consolidated Financial Statements.
ITEM 6. Exhibits and Reports on Form 8-K
None
-18-
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: May 7, 1999 /s/ Francis A. Toczylowski
Francis A. Toczylowski
Vice President and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Selas Corporation of America for the three months
ended March 31, 1999 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,861,145
<SECURITIES> 0
<RECEIVABLES> 28,140,713
<ALLOWANCES> 1,312,908
<INVENTORY> 12,528,357
<CURRENT-ASSETS> 46,085,380
<PP&E> 39,264,696
<DEPRECIATION> 20,657,658
<TOTAL-ASSETS> 82,655,625
<CURRENT-LIABILITIES> 30,704,133
<BONDS> 5,243,930
0
0
<COMMON> 5,623,568
<OTHER-SE> 36,941,083
<TOTAL-LIABILITY-AND-EQUITY> 82,655,625
<SALES> 24,053,159
<TOTAL-REVENUES> 24,053,159
<CGS> 19,532,059
<TOTAL-COSTS> 19,532,059
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 14,640
<INTEREST-EXPENSE> 261,779
<INCOME-PRETAX> (383,619)
<INCOME-TAX> (29,520)
<INCOME-CONTINUING> (354,099)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (354,099)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
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