UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 2-44764
BALTEK CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 13-2646117
-------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Fairway Court, P.O. Box 195, Northvale, New Jersey 07647
-------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
201-767-1400
------------
Registrant's telephone number, including area code
Indicated by check mark whether the registrant (1) has filed all
annual, quarterly and other reports required to be filed with the Commission and
(2) has been subject to the filing requirements for at least the past 90 days.
Yes [ X ] No [ ]
Common share of stock outstanding as of November 6, 1997: 2,523,261
shares
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BALTEK CORPORATION
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of September 30, 1997 and December 31, 1996
Consolidated Statements of Operations and Retained Earnings for the Three
and Nine Months Ended September 30, 1997 and 1996
Consolidated Statements of Cash Flows for the Nine Months Ended September
30, 1997 and 1996
Notes to Consolidated Financial Statements
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II OTHER INFORMATION:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
ASSETS 1997 1996
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents .......................................... $ 1,381,679 $ 1,114,659
Accounts receivable, net ........................................... 5,394,613 4,820,544
Inventories ........................................................ 13,064,682 13,713,660
Prepaid expenses ................................................... 457,485 308,850
Other .............................................................. 1,591,200 1,487,121
----------- -----------
Total current assets ...................................... 21,889,659 21,444,834
PROPERTY, PLANT AND EQUIPMENT, Net ................................... 10,630,513 10,759,258
TIMBER AND TIMBERLANDS ............................................... 6,445,140 6,445,828
OTHER ASSETS ......................................................... 500,426 665,495
----------- -----------
Total assets .............................................. $39,465,738 $39,315,415
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable ...................................................... $ 3,505,398 $ 3,600,000
Accounts payable ................................................... 2,188,487 2,860,363
Income tax payable ................................................. 41,222 --
Accrued salaries, wages and bonuses payable ........................ 751,644 596,139
Accrued expenses and other liabilities ............................. 809,909 911,243
Current portion of long-term debt .................................. 109,507 108,922
Current portion of obligation under capital lease .................. 330,554 294,784
----------- -----------
Total current liabilities ................................. 7,736,721 8,371,451
OBLIGATION UNDER CAPITAL LEASE ....................................... 1,423,131 1,679,985
LONG-TERM DEBT ....................................................... 213,941 276,620
UNION EMPLOYEE TERMINATION BENEFITS .................................. 342,310 306,367
----------- -----------
Total liabilities ......................................... 9,716,103 10,634,423
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</TABLE>
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<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
1997 1996
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<S> <C> <C>
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par; 5,000,000 shares authorized and unissued -- --
Common stock, $1.00 par; 10,000,000 shares authorized,
2,523,261 shares issued and outstanding .......................... 2,523,261 2,523,261
Additional paid-in capital ......................................... 2,157,492 2,157,492
Retained earnings .................................................. 25,068,882 24,000,239
----------- -----------
Total stockholders' equity ................................ 29,749,635 28,680,992
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................... $39,465,738 $39,315,415
=========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
Three Months Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES ................................... $ 14,048,124 $ 12,146,294 $ 41,707,847 $ 35,771,063
COST OF PRODUCTS SOLD ....................... 10,690,368 9,402,795 31,891,959 27,684,654
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES ................... 2,442,727 2,207,068 7,650,055 6,998,236
------------ ------------ ------------ ------------
Operating income ................ 915,029 536,431 2,165,833 1,088,173
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense ......................... (172,027) (125,924) (472,749) (464,678)
Foreign exchange loss .................... (63,067) (52,333) (213,054) (318,073)
Other, net ............................... 2,365 626 3,400 6,432
------------ ------------ ------------ ------------
Total other income (expense), net (232,729) (177,631) (682,403) (776,319)
------------ ------------ ------------ ------------
INCOME BEFORE
INCOME TAXES ............................. 682,300 358,800 1,483,430 311,854
INCOME TAX PROVISION ........................ 190,159 78,891 414,787 68,419
------------ ------------ ------------ ------------
NET INCOME .................................. 492,141 279,909 1,068,643 243,435
RETAINED EARNINGS,
BEGINNING OF PERIOD ....................... 24,576,741 23,513,821 24,000,239 23,550,295
------------ ------------ ------------ ------------
RETAINED EARNINGS,
END OF PERIOD ............................. $ 25,068,882 $ 23,793,730 $ 25,068,882 $ 23,793,730
============ ============ ============ ============
AVERAGE SHARES OUTSTANDING .................. 2,523,261 2,523,261 2,523,261 2,523,261
============ ============ ============ ============
NET INCOME
PER COMMON SHARE ......................... $ 0.19 $ 0.11 $ 0.42 $ 0.10
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
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<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months
Ended September 30,
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................ $ 1,068,643 $ 243,435
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ........................... 1,955,127 1,620,863
Foreign exchange loss ................................... 213,054 318,073
Deferred taxes .......................................... 12,566 (17,288)
(Increase) decrease in accounts receivable .............. (567,826) 161,935
Increase (decrease) in income tax payable/receivable, net 112,569 (121,020)
Decrease in inventories ................................. 648,978 495,438
Increase in prepaid expenses and other current assets ... (339,655) (257,135)
Decrease in other assets ................................ 151,403 24,707
Decrease in accounts payable and accrued expenses ....... (567,884) (23,546)
Other ................................................... 38,097 61,537
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Net cash provided by operating activities ........ 2,725,072 2,506,999
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CASH FLOWS FROM INVESTING ACTIVITIES:
Net acquisitions of property, plant and equipment ......... (1,125,495) (1,134,671)
Increase in timber and timberlands ........................ (676,824) (696,393)
----------- -----------
Net cash used in investing activities ............ (1,802,319) (1,831,064)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in notes payable ................................. (94,602) (600,158)
(Payments) borrowings of long-term debt ................... (85,422) 353,333
Principal payments under capital lease .................... (221,084) (141,048)
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Net cash used in financing activities ........... (401,108) (387,873)
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EFFECT OF EXCHANGE RATE CHANGES ON CASH ..................... (254,625) (321,534)
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</TABLE>
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<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months
Ended September 30,
1997 1996
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<S> <C> <C>
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS ................................. 267,020 (33,472)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD ....................................... 1,114,659 841,056
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD ............................................. $ 1,381,679 $ 807,584
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ................................................ $ 338,129 $ 341,221
=========== ===========
Income taxes ............................................ $ 311,479 $ 210,401
=========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
BALTEK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The information included in the accompanying interim financial statements
is unaudited. In the opinion of management, all adjustments, consisting of
normal recurring accruals necessary for a fair presentation of the results
of operations, financial position and cash flows for the interim periods
presented have been reflected herein. The results of operations for the
interim periods are not necessarily indicative of the results to be
expected for the entire year. The statements should be read in conjunction
with the accounting policies and notes to consolidated financial
statements included in the Company's 1996 Annual Report on Form 10-K.
2. INVENTORIES
Inventories are summarized as follows:
September 30, December 31,
1997 1996
---- ----
Raw materials ...... $ 4,839,491 $ 4,718,296
Work-in-process..... 4,086,632 4,250,538
Finished goods...... 4,138,559 4,744,826
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$13,064,682 $13,713,660
=========== ===========
3. NEW ACCOUNTING STANDARD
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of an
Enterprise and Related Information." This Statement establishes standards
that redefine how operating segments are determined and requires public
companies to report financial and descriptive information about its
reportable operating segments. This Statement supersedes SFAS 14,
"Financial Reporting for Segments of a Business Enterprise", but retains
the disclosure requirements relating to major customers. SFAS 131 is only
applicable to public companies. This Statement is effective for Baltek's
consolidated financial statements for periods beginning after December 15,
1997.
4. NOTES PAYABLE
During the quarter ended June 30,1997 the Company renewed its domestic
line of credit for a one-year period expiring on May 31,1998. The new line
was continued at substantially the same terms as the expiring facility.
The Company also established lines of credit for equipment financing
totaling $1,500,000. At September 30, 1997 the equipment lines were not
utilized.
<PAGE>
5. LEASES
The Company leased additional warehouse and manufacturing space in New
Jersey during September 1997. The lease, which requires monthly payments
of approximately $16,000, is for a five year period with a renewal option
for an additional five year period. The lease requires the Company to pay
real estate taxes and certain maintenance and insurance costs relating to
the facility. The lease has been accounted for as an operating lease.
6. SHRIMP OPERATIONS
In October 1997 the Company purchased an additional 444 acre shrimp farm
in Ecuador. The purchase price of the farm was approximately $965,000 plus
the value of inventory in process. The acquisition will be accounted for
under the purchase method of accounting.
******
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Liquidity and Capital Resources
The Company's working capital ratio of 2.83:1 at September 30, 1997, increased
from the ratio of 2.56:1 at December 31, 1996 due primarily to increases in
accounts receivable and decreases in accounts payable, partially offset by a
decrease in inventory. Unused lines of bank credit and the Company's working
capital are considered by management to be sufficient to support operations and
fixed asset acquisitions for the immediate future.
Results of Operations
Sales increased 16% and 17% during the three and nine month periods ended
September 30, 1997, respectively, as compared to the same periods in 1996. Sales
improved in both the Balsa and Shrimp segments during the periods. A large
portion of the increase in the Balsa segment, which includes Foam products, is
due to increased sales of the Company's Foam products. The Company is unable to
forecast future sales trends due to the changing commodity pricing of its shrimp
product and the effect of economic pressures on the pleasure boating industry,
the largest user of the Company's balsa products.
Cost of products sold as a percentage of sales decreased during the three and
nine months ended September 30,1997 as compared to the same periods in 1996. The
cost of products sold percentage has improved in 1997 due to an increase in the
selling price of the Company's shrimp products and slightly improved pricing in
the Balsa segment. The results for the nine months ended September 30,1996 were
negatively effected by inflationary pressures on costs at the Company's
production facility in Ecuador, start-up expenses related to the Foam product
line and pricing pressure in the Balsa segment.
Selling, general and administrative expenses as a percentage of sales improved
in the three and nine months ended September 30, 1997 due to a better absorption
of fixed expenses as a result of increased sales.
Income from operations improved during the three and nine months ended September
30, 1997 as compared to the same periods in 1996. The increase is primarily
attributable to higher volume in the Shrimp and Balsa segments.
Interest expense was approximately $473,000 and $465,000 for the nine months
ended September 30,1997 and 1996, respectively. The increase was due to higher
interest rates partially offset by lower borrowings. Foreign exchange losses
were approximately $213,000 in the nine month period ended September 30,1997, as
compared to a loss of $318,000 in the same period of 1996. Foreign exchange
gains and losses are caused by the relationship of the U.S. Dollar to the
foreign currencies in the countries where the company has operations, and arise
when translating foreign currency balance sheets into U.S. Dollars for the
purpose of presenting consolidated financial statements. Management is unable to
forecast the impact of translation gains or losses on future periods due to the
unpredictability of foreign exchange rates.
The provision for income taxes was at the rate of 28% and 22% of pre-tax
earnings for the three and nine month periods ended September 30 , 1997 and 1996
respectively.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits:
11. An exhibit showing the computation of per-share earnings is
omitted because the computation can be clearly determined from
the material contained in this Quarterly Report on Form 10-Q.
27. Financial Data Schedule.
(B) Reports on Form 8-K:
No report has been filed during the nine months ended September 30,
1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BALTEK CORPORATION
(Registrant)
Date: November 6, 1997 /s/Jacques Kohn
---------------
Jacques Kohn
President
Date: November 6, 1997 /s/Ronald Tassello
------------------
Ronald Tassello
Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from Baltek Corporation and
subsidiaries consolidated financial statements, and related exhibits for the
nine months ended September 30, 1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,381,679
<SECURITIES> 0
<RECEIVABLES> 5,489,491
<ALLOWANCES> 94,878
<INVENTORY> 13,064,682
<CURRENT-ASSETS> 21,889,659
<PP&E> 29,850,436
<DEPRECIATION> 19,219,923
<TOTAL-ASSETS> 39,465,738
<CURRENT-LIABILITIES> 7,736,721
<BONDS> 0
0
0
<COMMON> 2,523,261
<OTHER-SE> 27,226,374
<TOTAL-LIABILITY-AND-EQUITY> 39,465,738
<SALES> 41,707,847
<TOTAL-REVENUES> 41,707,847
<CGS> 31,891,959
<TOTAL-COSTS> 39,542,014
<OTHER-EXPENSES> 682,403
<LOSS-PROVISION> 52,280
<INTEREST-EXPENSE> 472,749
<INCOME-PRETAX> 1,483,430
<INCOME-TAX> 414,787
<INCOME-CONTINUING> 1,068,643
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,068,643
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
</TABLE>
