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 June 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
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(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
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(Address of principal executive offices) (Zip Code)
201-767-1400
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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 August 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 June 30, 1997 and December 31, 1996
Consolidated Statements of Operations and Retained Earnings for the
Three and Six Months Ended June 30, 1997 and 1996
Consolidated Statements of Cash Flows for the Six Months Ended June 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)
June 30, December 31,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .......................................... $ 923,552 $ 1,114,659
Accounts receivable, net ........................................... 5,274,316 4,820,544
Inventories ........................................................ 12,750,701 13,713,660
Prepaid expenses ................................................... 409,240 308,850
Other .............................................................. 1,529,404 1,487,121
----------- -----------
Total current assets ...................................... 20,887,213 21,444,834
PROPERTY, PLANT AND EQUIPMENT, Net ................................... 10,543,560 10,759,258
TIMBER AND TIMBERLANDS ............................................... 6,697,166 6,445,828
OTHER ASSETS ......................................................... 636,309 665,495
----------- -----------
Total assets .............................................. $38,764,248 $39,315,415
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable ...................................................... $ 2,978,009 $ 3,600,000
Accounts payable ................................................... 2,483,254 2,860,363
Income tax payable ................................................. 61,534 --
Accrued salaries, wages and bonuses payable ........................ 548,719 596,139
Accrued expenses and other liabilities ............................. 948,737 911,243
Current portion of long-term debt .................................. 106,290 108,922
Current portion of obligation under capital lease .................. 324,433 294,784
----------- -----------
Total current liabilities ................................. 7,450,976 8,371,451
OBLIGATION UNDER CAPITAL LEASE ....................................... 1,502,947 1,679,985
LONG-TERM DEBT ....................................................... 224,766 276,620
UNION EMPLOYEE TERMINATION BENEFITS .................................. 328,065 306,367
----------- -----------
Total liabilities ......................................... 9,506,754 10,634,423
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</TABLE>
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<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 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 .................................................. 24,576,741 24,000,239
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Total stockholders' equity ................................ 29,257,494 28,680,992
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................... $38,764,248 $39,315,415
=========== ===========
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
Three Months Six Months
Ended June 30, Ended June 30,
------------------------------ ------------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES ................................... $ 14,393,076 $ 11,912,514 $ 27,659,723 $ 23,624,769
COST OF PRODUCTS SOLD ....................... 10,974,853 9,371,366 21,201,591 18,281,859
SELLING , GENERAL AND
ADMINISTRATIVE EXPENSES ................... 2,703,467 2,404,376 5,207,328 4,791,168
------------ ------------ ------------ ------------
Operating income ................ 714,756 136,772 1,250,804 551,742
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense ......................... (167,378) (161,038) (300,722) (338,754)
Foreign exchange loss .................... (64,194) (134,033) (149,987) (265,740)
Other, net ............................... 761 291 1,035 5,806
------------ ------------ ------------ ------------
Total other income (expense), net (230,811) (294,780) (449,674) (598,688)
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES .................. 483,945 (158,008) 801,130 (46,946)
INCOME TAX PROVISION (BENEFIT) .............. 136,330 (35,867) 224,628 (10,472)
------------ ------------ ------------ ------------
NET INCOME (LOSS)............................ 347,615 (122,141) 576,502 (36,474)
RETAINED EARNINGS,
BEGINNING OF PERIOD ....................... 24,229,126 23,635,962 24,000,239 23,550,295
------------ ------------ ------------ ------------
RETAINED EARNINGS,
END OF PERIOD ............................. $ 24,576,741 $ 23,513,821 $ 24,576,741 $ 23,513,821
============ ============ ============ ============
AVERAGE SHARES OUTSTANDING .................. 2,523,261 2,523,261 2,523,261 2,523,261
============ ============ ============ ============
NET INCOME (LOSS) PER COMMON SHARE .......... $ 0.14 $ (0.05) $ 0.23 $ (0.01)
============ ============ ============ ============
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months
Ended June 30,
----------------------------
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .......................................... $ 576,502 $ (36,474)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization ............................ 1,082,874 996,993
Foreign exchange loss .................................... 149,987 265,740
Deferred taxes ........................................... 8,378 (11,525)
(Increase) decrease in accounts receivable ............... (461,250) 991,696
Increase (decrease) in income tax payable/receivable , net 132,570 (186,887)
Decrease in inventories .................................. 962,959 529,010
Increase in prepaid expenses and other current assets .... (222,374) (190,600)
Decrease in other assets ................................. 19,464 10,063
Decrease in accounts payable and accrued expenses ........ (332,173) (387,114)
Other .................................................... 22,645 58,519
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Net cash provided by operating activities ......... 1,939,582 2,039,421
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CASH FLOWS FROM INVESTING ACTIVITIES:
Net acquisitions of property, plant and equipment .......... (611,132) (696,822)
Increase in timber and timberlands ......................... (507,347) (506,587)
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Net cash used in investing activities ............. (1,118,479) (1,203,409)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in notes payable .................................. (621,991) (472,423)
(Payments) borrowings of long-term debt .................... (54,486) 373,333
Principal payments under capital lease ..................... (147,389) (94,032)
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Net cash used in financing activities ............ (823,866) (193,122)
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EFFECT OF EXCHANGE RATE CHANGES ON CASH ...................... (188,344) (276,617)
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</TABLE>
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<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months
Ended June 30,
----------------------------
1997 1996
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<S> <C> <C>
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS .................................. (191,107) 366,273
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD ........................................ 1,114,659 841,056
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CASH AND CASH EQUIVALENTS,
END OF PERIOD .............................................. $ 923,552 $ 1,207,329
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ................................................. $ 177,670 $ 222,686
=========== ===========
Income taxes ............................................. $ 123,536 $ 189,067
=========== ===========
See notes to consolidated financial statements.
</TABLE>
<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:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
Raw materials .................... $ 4,465,910 $ 4,718,296
Work-in-process .................. 3,690,539 4,250,538
Finished goods ................... 4,594,252 4,744,826
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$12,750,701 $13,713,660
=========== ===========
</TABLE>
3. NEW ACCOUNTING STANDARD
In March 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share." This
Statement establishes standards for computing and presenting earnings per
share ("EPS") and applies to all entities with publicly held common stock.
This Statement replaces the presentation of primary and fully diluted EPS
with a presentation of basic and diluted EPS, respectively. Basic EPS
excludes dilution and is computed by dividing earnings available to common
stockholders by the weighted average number of common shares outstanding
for the period. Similar to fully diluted EPS, diluted EPS reflects the
potential dilution of securities that could share in the earnings. This
Statement is not expected to have a material effect on Baltek's reported
EPS amounts. This Statement is effective for Baltek's consolidated
financial statements for the year ended December 31, 1997.
<PAGE>
BALTEK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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 June 30, 1997 the equipment lines were not utilized.
******
<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 2.80:1 at June 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 and notes payable. 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 21% and 15% during the three and six month periods ended June
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 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
six months ended June 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 partially offset by continued
pricing pressure in the Balsa segment. The results for the six months ended June
30,1996 were negatively effected by inflationary pressures on costs at the
Company's production facility in Ecuador and start-up expenses related to the
Foam product line.
Selling , general and administrative expenses as a percentage of sales improved
in the three and six months ended June 30, 1997 due to a better absorption of
fixed expenses as a result of increased sales.
Income from operations improved during the three and six months ended June 30,
1997 as compared to the same periods in 1996. The increase is attributable to
both higher volume and prices in the Shrimp segment and higher sales volume in
the Balsa segment.
Interest expense was approximately $301,000 and $339,000 for the six months
ended June 30,1997 and 1996, respectively. The decrease was due to lower
interest rates partially offset by increased borrowings for working capital.
Foreign exchange losses were approximately $150,000 in the six month period
ended June 30,1997, as compared to a loss of $266,000 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 (benefit) for income taxes was at the rate of 28% and 22% of
pre-tax earnings for the three and six month periods ended June 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 six months ended June 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: August 6, 1997 /s/Jacques Kohn
---------------
Jacques Kohn
President
Date: August 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 six
months ended June 30, 1997 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 923,552
<SECURITIES> 0
<RECEIVABLES> 5,351,544
<ALLOWANCES> 77,228
<INVENTORY> 12,750,701
<CURRENT-ASSETS> 20,887,213
<PP&E> 29,312,731
<DEPRECIATION> 18,769,171
<TOTAL-ASSETS> 38,764,248
<CURRENT-LIABILITIES> 7,450,976
<BONDS> 0
0
0
<COMMON> 2,523,261
<OTHER-SE> 26,734,233
<TOTAL-LIABILITY-AND-EQUITY> 38,764,248
<SALES> 27,659,723
<TOTAL-REVENUES> 27,659,723
<CGS> 21,201,591
<TOTAL-COSTS> 26,408,919
<OTHER-EXPENSES> 449,674
<LOSS-PROVISION> 33,643
<INTEREST-EXPENSE> 300,722
<INCOME-PRETAX> 801,130
<INCOME-TAX> 224,628
<INCOME-CONTINUING> 576,502
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 576,502
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
