UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 March 31, 2000
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
(Former name, former address and formal fiscal year, if changed since last
report)
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. Yes [X] No [ ]
Common shares of stock outstanding as of May 8, 2000: 2,523,261 shares
<PAGE>
BALTEK CORPORATION and subsidiaries
TABLE OF CONTENTS
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Page
PART I. FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of March 31, 2000 and December 31,
1999 1
Consolidated Statements of Income and Retained Earnings for the
Three Months Ended March 31, 2000 and 1999. 2
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2000 and 1999. 3
Notes to Consolidated Financial Statements 4
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
PART II. OTHER INFORMATION:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 8
SIGNATURES 9
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<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, except per share data)
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March 31, December 31,
ASSETS 2000 1999
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,321 $ 967
Accounts receivable, net 9,983 9,285
Inventories 16,656 18,478
Prepaid expenses 614 551
Other 809 1,185
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Total current assets 30,383 30,466
PROPERTY, PLANT AND EQUIPMENT, Net 13,275 13,565
TIMBER AND TIMBERLANDS 8,087 8,200
OTHER ASSETS 656 674
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Total assets $52,401 $52,905
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 8,353 $ 8,079
Accounts payable 4,117 4,821
Income tax payable 223 211
Accrued salaries, wages and bonuses payable 480 1,211
Accrued expenses and other liabilities 828 683
Current portion of long-term debt 39 199
Current portion of obligation under capital lease 424 415
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Total current liabilities 14,464 15,619
OBLIGATION UNDER CAPITAL LEASE 434 547
LONG-TERM DEBT 51 44
UNION EMPLOYEE TERMINATION BENEFITS 91 99
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Total liabilities 15,040 16,309
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</TABLE>
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<TABLE>
<CAPTION>
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STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par; 5,000,000 shares authorized and unissued -- --
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Common stock, $1.00 par; 10,000,000 shares authorized,
2,523,261 shares issued and outstanding 2,523 2,523
Additional paid-in capital 2,157 2,157
Retained earnings 32,681 31,916
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Total stockholders' equity 37,361 36,596
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $52,401 $52,905
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</TABLE>
See notes to consolidated financial statements.
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<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (UNAUDITED)
(Dollars in Thousands, except per share data)
Three Months
Ended March 31,
2000 1999
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<S> <C> <C>
NET SALES $ 21,225 $ 18,099
COST OF PRODUCTS SOLD 16,216 13,396
SELLING , GENERAL AND
ADMINISTRATIVE EXPENSES 3,550 3,624
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Operating income 1,459 1,079
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OTHER INCOME (EXPENSE):
Interest expense (204) (262)
Foreign exchange (loss) gain (134) 13
Other, net 4 --
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Total (334) (249)
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INCOME BEFORE INCOME TAXES 1,125 830
INCOME TAX PROVISION 360 249
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NET INCOME 765 581
RETAINED EARNINGS,
BEGINNING OF PERIOD 31,916 29,100
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RETAINED EARNINGS,
END OF PERIOD $ 32,681 $ 29,681
=========== ===========
AVERAGE SHARES OUTSTANDING 2,523,261 2,523,261
=========== ===========
EARNINGS PER COMMON SHARE, BASIC
and DILUTED $ .30 $ 0.23
=========== ===========
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in Thousands)
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Three Months
Ended March 31,
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 765 $ 581
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 836 767
Foreign exchange loss (gain) 134 (13)
Deferred taxes -- 12
Changes in assets and liabilities, net of the effect of
foreign currency translation:
Accounts receivable (703) (2,761)
Income taxes 11 (22)
Inventories 1,823 (1,252)
Prepaid expenses and other current assets 312 (174)
Other assets 18 (19)
Accounts payable and accrued expenses (1,290) 655
Other (8) (52)
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Net cash provided by (used in) operating activities 1,898 (2,278)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Net acquisitions of property, plant and equipment (258) (447)
Increase in timber and timberlands (150) (183)
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Net cash used in investing activities (408) (630)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable, net 274 3,985
Borrowings of long-term debt -- --
Payments of long-term debt (177) (411)
Principal payments under capital lease (104) (95)
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Net cash (used in) provided by financing activities (7) 3,479
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EFFECT OF EXCHANGE RATE CHANGES ON CASH (129) 8
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<TABLE>
<CAPTION>
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NET INCREASE IN
CASH AND CASH EQUIVALENTS 1,354 579
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 967 1,056
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CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 2,321 $ 1,635
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 73 $ 211
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Income taxes $ 283 $ 208
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</TABLE>
See notes to consolidated financial statements.
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<PAGE>
BALTEK CORPORATION and subsidIaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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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 1999 Annual Report on Form 10-K.
2. INVENTORIES
Inventories are summarized as follows (amounts in thousands):
March 31, December 31,
2000 1999
Raw materials $ 5,407 $ 5,260
Work-in-process 2,522 3,050
Finished goods 8,727 10,168
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$16,656 $18,478
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3. SEGMENT INFORMATION
The Company and its subsidiaries operate in two segments, as a
manufacturer and supplier of core materials to various composite
industries, and in the seafood business as a shrimp producer and seafood
importer. The segments are managed and reported separately because of the
difference in products they produce and markets they serve. The Company
evaluates performance based on operating income, i.e. results of
operations before interest, income taxes and foreign exchange gains and
losses. There are no intersegment sales.
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<PAGE>
Information about the Company's operations by segment for the three months
ended March 31, 2000 and 1999 is as follows (amounts in thousands):
Three Months
Ended March 31,
2000 1999
Net Sales to unaffiliated customers
Core materials segment $ 16,060 $ 13,374
Seafood segment 5,165 4,725
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Total net sales $ 21,225 $ 18,099
======== ========
Operating Income
Core materials segment $ 1,670 $ 513
Seafood segment (211) 566
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Total operating income $ 1,459 $ 1,079
======== ========
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
The primary sources of liquidity historically have been and are
expected to continue to be cash flow generated from operations and available
borrowings under short-term lines of credit. The Company increased its borrowing
capacity under its domestic line of credit to $12.5 million in December 1999.
The Company also continues to have lines of credit in Ecuador and Europe
totaling approximately $4.7 million. Working capital and borrowing requirements
increased in 1999 and are expected to continue to increase as a result of the
Company's expanded operations as a seafood importer as well as organic growth in
its core material business. Capital expenditures are expected to be funded by a
combination of cash generated from operations and outside financing, if
necessary.
The Company's financial position remains strong. At March 31, 2000, the
Company had working capital of $15.9 million compared to $14.8 million at
December 31, 1999. The Company believes cash flows from operations and funds
available under its existing domestic and foreign credit facilities will be
adequate to meet the Company's needs during 2000.
Results of Operations for the Three Months
Ended March 31, 2000 and 1999
Total sales increased 17% during the three-month period ended March 31,
2000 as compared to the same period in 1999. The increase was due to increased
core materials and seafood sales.
Core material sales were $16,060,000 and $13,374,000 for the three
months ended March 31, 2000 and 1999, respectively. The favorable economy
continues to result in strong demand in all industries that use core materials,
including the largest customer group, the boating industry. Many of the
Company's end user markets, including boating, are highly cyclical. Demand
within those industries is dependent upon, among other factors, discretionary
income, inflation, interest rates and consumer confidence. Fluctuating interest
rates and other changes in economic conditions make it difficult to forecast
short or long range trends. The increase in core material sales in 2000 compared
to 1999 was attributable to higher volume.
Seafood sales were $5,165,000 and $4,725,000 for the three months ended
March 31, 2000 and 1999, respectively. The increase was the result of sales of
seafood products from the Company's new import business, which began during the
first quarter of 1999. These sales offset a decline in sales of shrimp during
the quarter.
The overall gross margin as a percentage of sales decreased in 2000 as
compared to 1999. The typical margin in the seafood import business is lower
than the company's historical margins realized as a core materials
manufacturer/distributor and shrimp producer. The overall margin was therefore
expected to decline in 2000 as compared to 1999 and prior years as a result of
the Company's importing activities. The margin for the Company's core products
remained approximately the same in 2000 as compared to last year. The margins
from seafood sales decreased in the three months ended March 31, 2000 as
compared to the period ended March 31, 1999. The "White Spot" virus continued to
affect the Company's shrimp farms during the first quarter, resulting in
significantly less revenues than historical levels. Lower revenues have resulted
in a lower gross margin for 2000 as compared to 1999. The Company is taking all
possible steps to mitigate the effect of this disease on its farms, but since
other farms in South America are affected, no determination can be made as to
its longevity and effect on shrimp prices in the marketplace.
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<PAGE>
Selling, general and administrative expenses as a percentage of sales
decreased in first quarter of 2000 as compared to 1999. The seafood import
business, which began during the first quarter of 1999, had a lower percentage
of S,G&A expenses to revenues as compared to the Company's historical
relationship. This, as expected, reduced S,G&A expenses as a percentage of
sales.
Sales and expenses were affected in all periods by the different
exchange rates applied in remeasuring the books of accounts of the Company's
foreign subsidiaries.
Interest expense decreased in the first quarter of 2000 as compared to
1999. In the three months ended March 31, 2000 and 1999, the Company's
short-term borrowings for working capital purposes in Ecuador were primarily
U.S. dollar denominated loans. The interest rates on U.S. dollar and sucre
denominated loans was significantly lower in 2000 compared to the first quarter
of 1999. The Company's interest rate on U.S. loans was higher in 2000 and its
average borrowings were higher in 2000 as compared to 1999. The level of
borrowing in all periods is related to the Company's working capital needs and
cash flows generated from operations.
The Company had a foreign exchange loss of $134,000 and a gain of
$13,000 for the periods ended March 31, 2000 and 1999, respectively. Translation
gains and losses are mainly caused by the relationship of the U.S. dollar to the
foreign currencies in the countries where the Company operates, and arise when
remeasuring foreign currency balance sheets into U.S. dollars. The Company
utilizes foreign exchange contracts to hedge certain inventory purchases. The
Company does not enter into foreign currency transactions for speculative
purposes. Management is unable to forecast the impact of translation gains or
losses on future periods due to the unpredictability in the fluctuation of
foreign exchange.
The provision for income taxes was at the rate of 32% and 30% of
pre-tax earnings for the quarters ended March 31, 2000 and 1999, respectively.
Ecuador - Dollarization
The Ecuadorian government has announced plans to adopt the U.S. dollar
as its national currency, a plan commonly being called "Dollarization". On April
1, 2000 the government began taking the steps necessary to implement its
Dollarization plan. In accordance with the local regulations the Company has
begun the process of converting its accounting and financial books and records
from the sucre to the U.S. dollar. This process is expected to be completed
during the second quarter of this year.
It is not clear at the present time how certain aspects of
Dollarization will be implemented and how they will affect the Ecuadorian
economy. Because of these uncertainties, the effect of Dollarization on the
Company cannot be determined at this time.
* * * * *
Forward Looking Statements - Cautionary Factors
The foregoing discussion and analysis contains forward-looking
statements regarding the Company. Because such statements include risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause actual
results to differ materially include, but are not limited to, economic
conditions in the United States, Europe and Ecuador that affect relative
interest rates, foreign exchange rates and other costs and prices related to the
Company's business.
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<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 three months ended March 31, 2000.
-8-
<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: May 12, 2000 /s/Jacques Kohn
---------------
Jacques Kohn
President
Date: May 12, 2000 /s/Ronald Tassello
------------------
Ronald Tassello
Chief Financial Officer and Treasurer
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<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
three months ended March 31, 2000 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,321,000
<SECURITIES> 0
<RECEIVABLES> 10,180,000
<ALLOWANCES> 197,000
<INVENTORY> 16,656,000
<CURRENT-ASSETS> 30,383,000
<PP&E> 36,810,000
<DEPRECIATION> 23,535,000
<TOTAL-ASSETS> 52,401,000
<CURRENT-LIABILITIES> 14,464,000
<BONDS> 0
0
0
<COMMON> 2,523,000
<OTHER-SE> 34,838,000
<TOTAL-LIABILITY-AND-EQUITY> 52,401,000
<SALES> 21,225,000
<TOTAL-REVENUES> 21,225,000
<CGS> 16,216,000
<TOTAL-COSTS> 19,766,000
<OTHER-EXPENSES> 334,000
<LOSS-PROVISION> 25,000
<INTEREST-EXPENSE> 204,000
<INCOME-PRETAX> 1,125,000
<INCOME-TAX> 360,000
<INCOME-CONTINUING> 765,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 765,000
<EPS-BASIC> 0.30
<EPS-DILUTED> 0.30
</TABLE>
