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, 2000
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, 2000
COMMON SHARES, $1.00 PAR VALUE 5,120,714 (exclusive of
514,254 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, 2000 and December 31, 1999 . . . . . . . . 3, 4
Consolidated Statements of Operations for
the Three Months Ended June 30, 2000
and 1999. . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Operations for the
Six Months Ended June 30, 2000 and 1999 . . . . . . 6
Consolidated Statements of Cash Flows
for the Six Months Ended June 30,
2000 and 1999 . . . . . . . . . . . . . . . . . . . 7
Consolidated Statement of Shareholders' Equity
for the Six Months Ended June 30, 2000 . . . . . 8
Notes to Consolidated Financial Statements . . . . 9-14
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . 15-18
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,
2000 1999
(Unaudited) (Audited)
Current assets
Cash, including cash equivalents of
$510,000 in 2000 and $151,000 in
1999 . . . . . . . . . . . . . . . . . . $ 3,255,296 $ 1,756,008
Accounts receivable (including unbilled
receivables of $18,894,000 in 2000 and
$6,043,000 in 1999 less allowance for
doubtful accounts of $958,000 in 2000
and $978,000 in 1999) . . . . . . . . 37,783,054 28,795,466
Inventories . . . . . . . . . . . . . . 13,446,270 12,769,618
Deferred income taxes . . . . . . . . . . 2,405,612 2,428,243
Other current assets . . . . . . . . . . . 2,767,639 2,181,281
Total current assets . . . . . . . . . 59,657,871 47,930,616
Investment in unconsolidated affiliate . . -- 588,965
Property, plant and equipment
Land . . . . . . . . . . . . . . . . . . . 980,921 1,005,537
Buildings . . . . . . . . . . . . . . . . 11,209,159 11,435,428
Machinery and equipment . . . . . . . . . 30,333,812 28,794,569
42,523,892 41,235,534
Less: Accumulated depreciation . . . . . 23,736,835 22,441,750
Net property, plant and equipment . . . 18,787,057 18,793,784
Excess of cost over net assets of acquired
subsidiaries, less accumulated amortization
of $3,538,000 and $3,165,000 . . . . . . . 15,970,322 16,214,999
Deferred income taxes 571,320 562,243
Other assets including patents, less
amortization . . . . . . . . . . . . . . . 972,452 959,093
$95,959,022 $85,049,700
=========== ===========
(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,
2000 1999
(Unaudited) (Audited)
Current liabilities
Notes payable . . . . . . . . . . . . . $ 7,135,406 $ 9,417,666
Current maturities of long-term debt . . 1,703,405 1,958,951
Accounts payable . . . . . . . . . . . . 23,926,495 13,191,213
Federal, state and foreign income taxes . 1,742,705 679,997
Customers' advance payments on contracts. 525,770 1,221,946
Guarantee obligations and estimated future
costs of service . . . . . . . . . . . 1,602,179 1,483,624
Other accrued liabilities . . . . . . . . 6,511,540 6,247,938
Total current liabilities . . . . . . 43,147,500 34,201,335
Long-term debt . . . . . . . . . . . . 4,191,791 3,695,181
Other postretirement benefit obligations . 4,231,189 4,130,261
Contingencies and commitments
Shareholders' equity
Common shares, $1 par; 10,000,000 shares
authorized; 5,634,968 shares, issued . . 5,634,968 5,634,968
Additional paid-in capital . . . . . . 12,012,541 12,012,541
Retained earnings . . . . . . . . . . . . 28,351,077 26,592,680
Accumulated other comprehensive (loss) . (352,166) (14,496)
Less: 514,254 and 504,854 common shares,
respectively, held in treasury, at cost (1,257,878) (1,202,770)
Total shareholders' equity . . . . . 44,388,542 43,022,923
$95,959,022 $85,049,700
=========== ===========
(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,
2000 1999
Sales, net $31,996,300 $25,391,053
Operating costs and expenses
Cost of sales 25,764,738 20,428,015
Selling, general and
administrative expenses 4,556,664 4,444,317
Operating income 1,674,898 518,721
Interest (expense) (334,159) (233,409)
Interest income 15,409 18,248
Other income (expense), net 180,790 (169,251)
Income before income taxes 1,536,938 134,309
Income taxes 517,879 102,734
Net income $ 1,019,059 $ 31,575
=========== ===========
Earnings per share
Basic $0.20 $0.01
Diluted $0.20 $0.01
Average shares outstanding
Basic 5,121,000 5,219,000
Diluted 5,133,000 5,232,000
Comprehensive income (loss) $ 993,277 $ (185,986)
=========== ===========
(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,
2000 1999
Sales, net $62,519,308 $49,444,212
Operating costs and expenses
Cost of sales 49,198,359 39,960,074
Selling, general and
administrative expenses 9,339,699 8,945,597
Operating income 3,981,250 538,541
Interest (expense) (602,083) (495,188)
Interest income 31,689 40,675
Other income (expense), net 126,810 (333,338)
Income (loss) before income taxes 3,537,666 (249,310)
Income taxes 1,318,014 73,214
Net income (loss) $ 2,219,652 $ (322,524)
=========== ===========
Earnings (loss) per share
Basic $0.43 ($0.06)
Diluted $0.43 ($0.06)
Average common shares outstanding
Basic 5,123,000 5,235,000
Diluted 5,129,000 5,235,000
Comprehensive income (loss) $ 1,881,982 $ (964,755)
=========== ===========
(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,
2000 1999
Cash flows from operating activities:
Net income (loss) $ 2,219,652 $ (322,524)
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating
activities:
Depreciation and amortization 2,001,974 2,010,523
Equity in loss of unconsolidated
affiliate 9,341 1,277
(Gain) on sale of property and equipment (4,229) (3,455)
Deferred taxes (9,594) 641,662
Changes in operating assets and liabilities:
(Increase) decrease in accounts
receivable (7,717,642) 3,080,304
(Increase) in inventories (416,829) (744,778)
(Increase) in other assets (1,096,586) (858,478)
Increase in accounts payable 10,379,904 1,247,130
Increase (decrease) in accrued expenses 912,134 (3,330,125)
Increase (decrease) in customer advances (803,043) 1,899,232
(Decrease) in other liabilities (135,362) (8,010)
Net cash provided by
operating activities 5,339,720 3,612,758
Cash flows from investing activities:
Purchases of property, plant and equipment (1,728,807) (2,190,764)
Proceeds from sale of property and equipment 13,150 3,455
Acquisition of subsidiary companies, net
of cash acquired 278,110 (5,388)
Receipt of dividend from unconsolidated
affiliate -- 14,476
Net cash (used) by investing
activities (1,437,547) (2,178,221)
Cash flows from financing activities:
Proceeds from short-term bank borrowings 1,454,699 1,017,955
Proceeds from long-term bank borrowings -- 1,016,320
Proceeds from borrowings to acquire
subsidiary company 1,682,292 --
Repayments of short-term bank borrowings (3,469,554) (57,535)
Repayments of long-term debt (1,281,110) (2,688,546)
Proceeds from exercise of stock options -- 83,540
Payment of dividends (461,255) (470,906)
Purchase of treasury stock (55,108) (404,930)
Net cash (used) by
financing activities (2,130,036) (1,504,102)
Effect of exchange rate changes on cash (272,849) (264,913)
Net increase (decrease) in cash and cash
equivalents 1,499,288 (334,478)
Cash and cash equivalents, beginning of
period 1,756,008 2,784,284
Cash and cash equivalents, end of period $ 3,255,296 $ 2,449,806
============= =============
(See accompanying notes to the consolidated financial statements)
-8-
SELAS CORPORATION OF AMERICA
Consolidated Statement of Shareholders' Equity
Six Months Ended June 30, 2000
(Unaudited)
Common Stock
Additional
Number of Paid-In
Shares Amount Capital
Balance, January 1, 2000 5,634,968 $ 5,634,968 $12,012,541
Net income
Cash dividends paid
($.09 per share)
Foreign currency
translation (loss)
Comprehensive income
Purchase of 9,400
treasury shares
Balance, June 30, 2000 5,634,968 $ 5,634,968 $12,012,541
=========== =========== ===========
Accumulated
Other
Retained Comprehensive Comprehensive
Earnings Income Income
Balance, January 1, 2000 $26,592,680 $ (14,496)
Net income 2,219,652 $2,219,652
Cash dividends paid
($.09 per share) (461,255)
Foreign currency
translation (loss) (337,670) (337,670)
Comprehensive income $1,881,982
==========
Purchase of 9,400
treasury shares
Balance, June 30, 2000 $28,351,077 $ (352,166)
=========== ===========
Total
Treasury Shareholders'
Stock Equity
Balance, January 1, 2000 $(1,202,770) $43,022,923
Net income 2,219,652
Cash dividends paid
($.09 per share) (461,255)
Foreign currency
translation (loss) (337,670)
Comprehensive income --
Purchase of 9,400
treasury shares (55,108) (55,108)
Balance, June 30, 2000 $(1,257,878) $44,388,542
=========== ===========
(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 June
30, 2000 and December 31, 1999, and the consolidated results of its
operations for the three and six months ended June 30, 2000 and
1999 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 consolidated financial statements in the
1999 Selas Corporation of America Annual Report.
3. Acquisitions
In June, 2000, the Company acquired the remaining 50% equity
interest in Nippon Selas, a Japanese sales and engineering firm
previously accounted for on the equity method. The purchase price
was $50,000 and the acquisition was accounted for as a purchase.
4. Inventories consist of the following:
June 30, December 31,
2000 1999
Raw material $ 3,507,186 $ 2,858,196
Work-in-process 4,757,557 5,520,707
Finished products and
components 5,181,527 4,390,715
Total $13,446,270 $12,769,618
=========== ===========
5. Income Taxes
Consolidated income taxes for the six month periods ended June 30,
2000 and 1999 are $1,318,000 and $73,000 which result in effective
tax rates of 37.3% and 29.3% 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.
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SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
ITEM 1. Notes to Consolidated Financial Statements (Unaudited)
(Continued)
6. Legal Proceedings
The Company is a defendant along with a number of other parties in
approximately 200 lawsuits as of December 31, 1999 (150 as of
December 31, 1998) 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. 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.
The Company is also involved in other lawsuits arising in the
normal course of business. While it is not possible to predict
with certainty the outcome of these matters, management is of the
opinion that the disposition of these lawsuits and claims will not
materially affect the Company's consolidated financial position,
liquidity, 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)
7. Statements of Cash Flows
Supplemental disclosures of cash flow information:
Six Months Ended
June 30, June 30,
2000 1999
Interest received . . . . . . . $ 31,563 $ 23,879
Interest paid . . . . . . . . . $ 538,023 $ 453,466
Income taxes paid . . . . . . . $ 321,530 $ 950,342
8. Accounts Receivable
At June 30, 2000, the Company had $2,311,455 of trade accounts
receivable due from the major U.S. automotive manufacturers and
$4,187,163 of trade accounts receivable due from hearing aid
manufacturers. The Company also had $13,640,128 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
9. Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share:
For the Three Months
Ended June 30, 2000
Income Shares Per Share
Numerator Denominator Amount
Basic Earnings Per Share
Income available to
common shareholders $1,019,059 5,120,879 $ 0.20
=========
Effect Of Dilutive Securities
Stock options 12,052
Diluted Earnings Per Share $1,019,059 5,132,931 $ 0.20
=====================================
For the Six Months
Ended June 30, 2000
Income Shares Per Share
Numerator Denominator Amount
Basic Earnings Per Share
Income available to
common shareholders $2,219,652 5,123,152 $ 0.43
=========
Effect Of Dilutive Securities
Stock options 5,814
Diluted Earnings Per Share $2,219,652 5,128,966 $ 0.43
=====================================
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SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
ITEM 1. Notes to Consolidated Financial Statements (Unaudited)
(Continued)
10. 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
consolidated financial statements for the six months ended June 30,
2000 and 1999 and the consolidated financial statements included in
the 1999 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, 2000 Technology Products Products Total
Sales, net $33,941,685 $10,049,519 $18,528,104 $62,519,308
==================================================
Net income $ 455,919 $ 941,658 $ 822,075 $2,219,652
==================================================
Depreciation and
amortization $ 418,631 $ 102,546 $ 1,480,797 $2,001,974
==================================================
Property, plant and
equipment additions $ 137,262 $ 125,752 $ 1,465,793 $1,728,807
==================================================
Total assets $50,356,691 $7,107,117 $38,495,214 $95,959,022
==================================================
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SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
ITEM 1. Notes to Consolidated Financial Statements (Unaudited)
(Continued)
10. Business Segment Information (Continued)
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
PART I - FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Consolidated net sales increased to $32 million and $62.5 million for
the three and six months ended June 30, 2000 compared to $25.4 and $49.4
million for the same periods ended June 30, 1999. Net sales for the
heat technology segment increased to $18.1 million and $33.9 million for
the three and six months ended June 30, 2000 compared to $11.6 million
and $22.3 million for the same periods in 1999. The increase in sales
is due to increased revenue recognized on large engineered contracts in
backlog at the beginning of the year, increased sales of smaller heat
treating furnaces, and sales from Ermat, the French furnace manufacturer
acquired in January, 2000. Sales and earnings of 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 $32.5 million at June 30, 2000
compared to $38.5 million at the same time last year. Sales for the
Company's precision miniature medical and electronic products segment
increased to $9.1 million and $18.5 million for the three and six month
periods ended June 30, 2000 compared to $8.9 million and $17.6 million
for the same periods in 1999. Sales to hearing health customers decreased
due to the continuing flat sales for certain products, partially offset
by increased revenue from products sold to medical infusion customers.
Sales of electronics components increased by $.5 million and $1 million
for the three and six month periods ended June 30, 2000, compared to the
same periods in 1999 due to the improvement in the electronics industry
market and the Asian economic situation. Net sales of the tire holders,
lifts and related products segment decreased slightly to $4.8 million for
the three months ended June 30, 2000 compared to $4.9 million for the
same period in 1999 and increased to $10 million for the six months ended
June 30, 2000 compared to $9.5 million in revenue for 1999. The decrease
in tire lift sales for the quarter is due to the effects of an overpro-
duction earlier in the year of new vehicles by several of the automakers
served by the Company. The overall increase in tire lift sales for the
first six months of 2000 is due to higher shipments to some of the Com-
pany's automotive customers.
The Company's gross profit margin as a percentage-of-sales decreased
slightly to 19.5% for the three months ended June 30, 2000 from 19.6%
for the same period in 1999 and increased to 21.3% for the six months
ended June 30, 2000 compared to 19.3% in 1999. Gross profit margins for
the heat technology segment increased to 12.6% and 15.4% for the three
and six months ended June 30, 2000 compared to 11.1% and 11% for the
same periods in 1999. Heat technology gross profit margins vary
markedly from contract to contract, depending on customer specifications
and other conditions related to the project. The gross profit margins
for the first six months of 2000 were impacted by revenue recognized on
several engineered contracts whose margins were more profitable
than contracts completed in 1999 and higher sales of spare and
replacement parts, which generally have better profit margins. Gross
profit margins for the precision miniature medical and electronic
products segment increased to 30.5% and 31% for the three and six months
ended June 30, 2000 compared to 29.8% and 29.7% for the same periods in
1999. The higher margins in the current year are partially attributable
to the mix of product sales between the periods as
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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)
precision miniature components, precision miniature systems, plastic and
electronics products have varying profit margins. Also impacting the
margins in 2000 were lower costs resulting from the consolidation of the
production facilities of RTI Electronics into one location, which was
completed during the latter stages of 1999. Gross profit margins for
the tire holders, lifts and related products segment increased to 24.9%
and 23.5% for the three and six month periods ended June 30, 2000
compared to 21.2% and 19.5% for the same periods in 1999. The
improvement in the current year is due to efficiencies from higher
production through increased sales of tire lifts.
Selling, general and administrative expenses (SG&A) increased to $4.6
million and $9.3 million for the three and six month periods ended June
30, 2000 compared to $4.4 million and $8.9 million for the same periods
in 1999. The higher SG&A costs in the current year are primarily due to
the acquisition in January, 2000 of Ermat SA., a French furnace
manufacturer.
Interest expense for the three and six months ended June 30, 2000
increased to $334,000 and $602,000 compared to $233,000 and $495,000 for
the same periods in 1999. The increase is due to higher average
borrowings and higher interest rates during the current year. Interest
income for the three and six months ended June 30, 2000 decreased to
$15,000 and $32,000 compared to $18,000 and $41,000 for the same periods
in 1999 because of less funds available for investment.
Other income (expense) includes gains on foreign exchange of $11,000 and
losses on foreign exchange of $87,000 for the three and six months ended
June 30, 2000 compared to losses on foreign exchange of $133,000 and
$296,000 for the same periods in 1999.
Consolidated income taxes for the six month periods ended June 30, 2000
and 1999 are $1,318,000 and $73,000 which result in effective tax rates
of 37.3% and 29.3% 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.
Consolidated operations for the three and six month periods ended June
30, 2000 resulted in net income of $1,019,000 and $2,220,000 compared
with net income of $32,000 for the second quarter of 1999 and a net loss
of $323,000 for the six months ended June 30, 1999. The improvement in
the current year is attributable primarily to increased sales and higher
profit margins on certain contracts and other products and lower losses
on foreign currency exchange, partially offset by higher SG&A expenses.
-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 increased to $16.5 million at June 30,
2000 from $13.7 million at December 31, 1999. The increase is primarily
due to the net income for the six months and borrowings to acquire
acquire a subsidiary company, offset by purchases of property and
equipment, paydown of long-term debt and payment of dividends. The
major changes in components of working capital for 2000 were an increase
in cash and cash equivalents of $1.5 million, higher accounts
receivable of $9 million, higher accounts payable of $10.7 million and
higher income taxes payable of $1.1 million offset by lower notes payable
to bank and current maturities of long-term debt of $2.5 million combined.
The increase in cash and cash equivalents partly results from the 2000
acquisitions of Ermat S.A. and Nippon Selas. At the time of the
acquisitions, Ermat and Nippon Selas had cash and cash equivalent
balances combined of approximately $2.1 million, exceeding the purchase
prices of nearly $1.8 million. The other changes in working capital
relate to the ongoing operations of the Company during the first six
months.
During the first quarter of 1999, the Company implemented a program to
repurchase up to 250,000 shares of its common stock, which at the time
represented approximately 5% of its total shares outstanding. The
shares have been purchased from time to time on the open market. As of
June 30, 2000, the Company has repurchased a total of 150,690 shares of
its common stock.
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 2000.
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 1999. There have
been no significant changes in the Company's portfolio of financial
instruments or market risk exposures which have occurred since year-end.
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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, 1999, 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.
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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 2000 Annual Meeting of Shareholders of the Company was held on April
18, 2000.
At the 2000 Annual Meeting:
(i) Messrs. Frederick L. Bissinger and Roy C. Carriker were re-
elected to the Board of Directors of the Company for terms expiring at
the 2003 Annual Meeting. In such election, 4,363,169 votes were cast
for Mr. Bissinger and 4,363,619 votes were cast for Mr. Carriker. Under
Pennsylvania law, votes cannot be cast against a candidate. Proxies
filed at the 2000 Annual Meeting by the holders of 171,585 shares
withheld authority to vote for Mr. Bissinger and those filed by the
holders of 171,135 shares withheld authority to vote for Mr. Carriker.
No "broker nonvotes" were received at the 2000 Annual Meeting with
respect to the election of directors;
(ii) 4,520,328 shares were voted in favor of ratifying the
appointment of KPMG LLP as the Company's auditors for 2000 and 11,060
shares were voted against such proposal. Proxies filed at the 2000
Annual Meeting by the holders of 3,366 shares instructed the proxy
holders to abstain from voting on such proposal. No "broker nonvotes"
were received at the 2000 Annual Meeting with respect to this proposal.
ITEM 6. Exhibits and Reports on Form 8-K
Reports on Form 8-K - There were no reports on Form 8-K filed
for the six months ended June 30, 2000.
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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 , 2000 /s/Francis A. Toczylowski
Francis A. Toczylowski
Vice President and Treasurer
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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 , 2000
Francis A. Toczylowski
Vice President and Treasurer
