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 QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996, 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 1-14120
BLONDER TONGUE LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1611421
- ------------------------------------------------------------- ------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
One Jake Brown Road, Old Bridge, New Jersey 08857
- ------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 679-4000
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
--- ------
Number of shares of common stock, par value $.001, outstanding as of November 7,
1996: 8,188,546.
The Exhibit Index appears on page 13.
BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
September 30, December 31,
1996 1995
------------- ------------
(unaudited)
Assets (Note 5)
Current assets:
Cash......................................................................... $ 222 $ 477
Accounts receivable, net of allowance for doubtful
accounts of $245 and $205, respectively.................................... 9,984 9,155
Inventories (Note 4)......................................................... 16,239 13,390
Other current assets ........................................................ 272 906
Deferred income taxes........................................................ 449 137
------- -------
Total current assets............................................. 27,166 24,065
Property, plant and equipment, net of accumulated
depreciation and amortization.............................................. 7,058 6,486
Other assets................................................................... 1,348 1,253
------- -------
$35,572 $31,804
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Revolving line of credit (Note 5)............................................ $ -- $2,709
Current portion of long-term debt............................................ 445 221
Accounts payable............................................................. 1,424 4,630
Accrued compensation......................................................... 999 843
Other accrued expenses....................................................... 957 729
Income taxes................................................................. 644 526
------- -------
Total current liabilities........................................ 4,469 9,658
------- -------
Deferred income taxes.......................................................... 455 482
Revolving line of credit (Note 5).............................................. 1,555 --
Long-term debt, including related party debt of $1,591......................... 4,837 1,924
Commitments and contingencies (Note 7)......................................... -- --
Stockholders' equity (Note 8):
Preferred stock, $.001 par value; authorized 5,000,000 shares;
no shares outstanding...................................................... -- --
Common stock, $.001 par value; authorized 25,000,000 shares,
7,919,285 shares issued and outstanding at December 31, 1995 and
8,166,685 shares issued and outstanding at September 30, 1996.............. 8 8
Paid-in capital.............................................................. 21,412 19,546
Retained earnings............................................................ 2,836 186
------- -------
Total stockholders' equity....................................... 24,256 19,740
------- -------
$35,572 $31,804
======= =======
See accompanying notes to consolidated financial statements.
-2-
BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------------- ------------------------------------
1996 1995 1996 1995
------------------ ---------------- ------------------ ---------------
(unaudited) (unaudited) (unaudited)
Net sales................................... $13,154 $11,328 $36,419 $38,586
Cost of goods sold.......................... 8,134 7,375 22,902 24,231
------- ------- ------- -------
Gross profit.............................. 5,020 3,953 13,517 14,355
------- ------- ------- -------
Operating expenses:
Selling expenses.......................... 1,191 892 3,729 3,253
General and administrative................ 1,044 1,249 3,358 3,783
Research and development.................. 534 537 1,488 1,425
------- ------- ------- -------
2,769 2,678 8,575 8,461
------- ------- ------- -------
Earnings from operations.................... 2,251 1,275 4,942 5,894
------- ------- ------- -------
Other income (expense):
Interest expense.......................... (159) (365) (526) (919)
Other income.............................. -- 9 -- 40
------- ------- ------- -------
(159) (356) (526) (879)
------- ------- ------- -------
Earnings before income taxes................ 2,092 919 4,416 5,015
Provision for income taxes.................. 839 (53) 1,766 156
------- ------- ------- -------
Net earnings.............................. $ 1,253 $ 972 $ 2,650 $ 4,859
======= ======= ======= =======
Net earnings per share...................... $ 0.15 $ 0.32
======= =======
Weighted average shares outstanding......... 8,308 8,298
======= =======
Pro forma data (Note 3):
Historical earnings before income taxes... $ 919 $ 5,015
Pro forma provision for income taxes...... 368 2,006
------- -------
Net earnings............................ $ 551 $ 3,009
======= =======
Pro forma net earnings per share............ $ 0.09 $ 0.50
======= =======
Weighted average shares outstanding......... 5,967 5,967
======= =======
See accompanying notes to consolidated financial statements.
-3-
BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended
September 30,
----------------------------
1996 1995
------------- -----------
(unaudited)
Cash Flows From Operating Activities:
Net earnings............................................................................ $2,650 $4,859
Adjustments to reconcile net earnings to cash
used in operating activities:
Depreciation and amortization....................................................... 827 229
Provision for doubtful accounts..................................................... 135 75
Deferred income taxes............................................................... (339) --
Noncash compensation expense....................................................... -- 304
Changes in operating assets and liabilities:
Accounts receivable............................................................... (964) (6,616)
Inventories....................................................................... (2,849) (3,653)
Other current assets.............................................................. 634 (10)
Other assets...................................................................... (241) (878)
Income taxes...................................................................... 118 142
Accounts payable and accrued expenses............................................. (2,822) 3,433
------ ------
Net cash used in operating activities............................................ (2,851) (2,115)
------ ------
Cash Flows From Investing Activities:
Capital expenditures.................................................................... (1,167) (701)
------ ------
Net cash used in investing activities............................................ (1,167) (701)
------ ------
Cash Flows From Financing Activities:
Net borrowings under revolving line of credit........................................... (1,154) 6,345
Proceeds from long-term debt............................................................ 3,424 --
Repayments of long-term debt............................................................ (287) (644)
Proceeds from sale of common stock...................................................... 1,780 --
Distributions paid to stockholders...................................................... -- (3,231)
------ ------
Net cash provided by financing activities........................................ 3,763 2,470
------ ------
Net Decrease In Cash...................................................................... (255) (346)
Cash, beginning of period................................................................. 477 502
------ ------
Cash, end of period....................................................................... $ 222 $ 156
====== ======
Supplemental Cash Flow Information:
Cash paid for interest.................................................................. $ 492 $ 848
------ ------
Cash paid for income taxes.............................................................. 1,713 29
====== ======
Non-cash transactions:
Accrued dividends....................................................................... -- 4,795
====== ======
See accompanying notes to consolidated financial statements.
-4-
BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
(unaudited)
Note 1 - Company and Basis of Presentation
Blonder Tongue Laboratories, Inc. (the "Company") is a manufacturer of
television and satellite signal distribution equipment supplied to the private
cable television and broadcast industries. The consolidated financial statements
include the accounts of Blonder Tongue Laboratories, Inc. and subsidiaries as
discussed below. Significant intercompany accounts and transactions have been
eliminated in consolidation.
The results for the nine months ended September 30, 1996 are not
necessarily indicative of the results to be expected for the full fiscal year
and have not been audited. In the opinion of management, the accompanying
unaudited consolidated financial statements contain all adjustments, consisting
only of normal recurring accruals, necessary for a fair statement of the results
of operations for the period presented and the consolidated balance sheet at
September 30, 1996. Certain information and footnote disclosure normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the SEC rules
and regulations. These financial statements should be read in conjunction with
the financial statements and notes thereto that were included in the Company's
latest annual report on Form 10-K.
Note 2 - Reorganization and Recapitalization
On December 11, 1995, the Company acquired Blonder Tongue International,
Inc. (BTI). BTI was an S Corporation formed in 1994 by the stockholders of the
Company. The acquisition was consummated by contribution of BTI's shares to the
Company. The acquisition was accounted for at historical cost similar to a
pooling of interests, due to the common control exercised over the entities by
related parties. The accompanying consolidated statements of earnings and of
cash flows have been restated for the period ended September 30, 1995. As a
result of the acquisition of BTI, the S Corporation elections for both BTI and
the Company automatically terminated on December 11, 1995.
In September 1996, BTI closed its sales office located in Barcelona, Spain.
The closure is not expected to have a material impact on the Company's operating
results.
On October 3, 1995, the Board of Directors and stockholders approved the
following actions in connection with the Company's initial public offering,
which actions were implemented on December 11, 1995:
Authorized capital consisting of 25 million shares of $.001 par value
common stock and 5 million shares of $.001 par value preferred stock. The
preferred stock may be issued in one or more series with such rights,
preferences and limitations as the Board of Directors of the Company may
determine.
Declared a 2,011 for 1 stock split for the common stock. The consolidated
financial statements reflect the impact of the stock split for all periods
presented.
Note 3 - Pro Forma Presentations
The income tax provision for the period ended September 30, 1995 has been
calculated as if the Company were taxable as a C Corporation under the Internal
Revenue Code.
Pro forma net earnings per share is based on the weighted average number of
common stock shares and common stock equivalent shares outstanding during each
period, as adjusted for the effects of the application of Securities and
Exchange Commission Staff Accounting Bulletin ("SAB") No. 83 (53 for September
30, 1995). Pursuant to SAB No. 83, options granted within one year of the
initial public offering which have an exercise price less than the initial
public offering price are treated as outstanding for all periods presented. Pro
forma
-5-
BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
(unaudited)
net earnings per share is computed using the treasury stock method, under which
the number of shares outstanding reflects an assumed use of the proceeds from
the assumed exercise of such options to repurchase shares of the Company's
common stock at the initial public offering price.
Note 4 - Inventories
Inventories are summarized as follows:
September 30, December 31,
1996 1995
--------------- ---------------
Raw Materials........................... $ 8,031 $ 7,293
Work in process......................... 3,621 2,786
Finished Goods.......................... 4,587 3,311
------- -------
$16,239 $13,390
======= =======
Note 5 - Line of Credit
On September 26, 1996, the Company executed a new $15 million revolving line
of credit with a bank on which funds may be borrowed at the bank's prime rate
(8.25% at September 30, 1996) or LIBOR plus .95% (6.39% at September 30, 1996)
for a specified period of time at the election of the Company. As of September
30, 1996, the Company had drawn down $1,555 at the bank's prime rate under the
line of credit for working capital needs. The line of credit is collateralized
by a security interest in all of the Company's assets. The agreement contains
restrictions that require the Company to maintain certain financial ratios. In
addition, the Company obtained a $10 million acquisition loan commitment which
may be drawn upon by the Company to finance acquisitions in accordance with
certain terms. At September 30, 1996, there was no balance outstanding under the
acquisition loan commitment. The line of credit and the acquisition loan
commitment expire on June 30, 1998.
Note 6 - Debt
On May 24, 1996, the Company borrowed $2.8 million for a 10-year term secured
by a mortgage against the Company's manufacturing and administrative facility
located in Old Bridge, New Jersey. The interest rate is fixed at 7.25% for three
years and may be negotiated to another fixed rate or remain variable for the
remaining seven years of the mortgage.
Note 7 - Commitments and Contingencies
In the first quarter of 1996, the Company entered into three five-year
capital lease agreements for certain machinery and equipment totaling $929. As
of September 30, 1996, two leases have commenced and one lease in the amount of
$577 remains to be completed with advances of $279 being made.
On October 18, 1996, the Company was served with a complaint alleging
patent infringement by Scientific-Atlanta, Inc., relating to the Company's
VideoMask(TM) interdiction product. Based on consultation with its outside
patent counsel, the Company believes the complaint is without merit and that the
ultimate disposition of this matter will not have a material effect on the
Company's results of operations or financial condition. Accordingly, no
provision for this matter has been recorded in the financial statements.
-6-
BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
(unaudited)
Note 8 - Stockholders' Equity
In January 1996, 182 shares of Common Stock were sold at a price of $9.50
per share pursuant to the exercise of the underwriters' over-allotment option
which generated net proceeds of approximately $1,606. The proceeds were used for
working capital.
On July 30, 1996, the Company's Board of Directors granted options to
purchase 225 shares of common stock under the 1995 Long Term Incentive Plan and
options to purchase 28 shares of common stock under the 1994 Incentive Stock
Option Plan. 205 of the options were granted at $9.63 per share, representing
100% of the fair market value thereof as of the date of grant. 48 of the options
were granted to individuals who own more than 10% of the voting stock of the
Company at $10.59 per share, representing 110% of the fair market value thereof
as of the date of grant. The options granted under both plans expire 10 years
from the date of grant and vest one-third each year commencing on the first
anniversary of the date of grant.
-7-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third three months of 1996 Compared with third three months of 1995
Net Sales. Net sales increased $1,826,000, or 16.1%, to $13,154,000 in the
third three months of 1996 from $11,328,000 in the third three months of 1995.
International sales accounted for $826,000 (6.3% of total sales) for the third
three months of 1996 compared to $1,006,000 (8.9% of total sales) for the third
three months of 1995. Net sales included approximately $536,000 of VideoMask(TM)
interdiction equipment. Net sales also included $420,000 under the Company's
agreement to supply interdiction equipment to Pacific Bell.
Sales in the lodging market remained strong during the period but MDU sales
continued to be impacted by the uncertainty surrounding the installation of
private cable systems in properties under contract to Interactive Cable Systems,
Inc. ("ICS"), one of the Company's largest customers in 1995. Net sales to ICS
were approximately $2,000 in the third three months of 1996 compared to
approximately $15,000 in the third three months of 1995. It is anticipated that
these properties will be upgraded in future time periods either by ICS or by
other private cable operators, although no assurances in this regard can be
given. Approximately $819,000 of accounts receivable outstanding at September
30, 1996 was due from ICS for more than 60 days.
Volume interdiction sales have continued to be delayed due to the inability
of ICS to complete the installation of private cable systems in properties under
contract to them and the shift in demand to other users of Interdiction whose
requirements were for product configurations not yet in production.
Cost of Goods Sold. Cost of goods sold increased to $8,134,000 for the
third three months of 1996 from $7,375,000 for the third three months of 1995
but decreased as a percentage of sales to 61.8% from 65.1%. The decrease as a
percentage of sales was caused primarily by a greater proportion of sales during
the period being comprised of higher margin products.
Selling Expenses. Selling expenses increased to $1,191,000 in the third
three months of 1996 from $892,000 in the third three months of 1995, primarily
due to increased costs incurred for advertising, marketing materials and trade
shows and to costs incurred in connection with the closure of BTI's sales office
located in Spain.
General and Administrative Expenses. General and administrative expenses
decreased to $1,044,000 in the third three months of 1996 from $1,249,000 for
the third three months of 1995 and also decreased as a percentage of sales to
7.9% in the third three months of 1996 from 11.0% for the third three months of
1995. The $205,000 decrease can be attributed to a reduction in rent expense,
net of increased depreciation, as a result of the purchase of the manufacturing
facility and a decline in salaries due to a reduction in personnel, offset by an
increase in expenditures for professional services and insurance.
Research and Development Expenses. Research and development expenses
decreased to $534,000 in the third three months of 1996 from $537,000 in the
third three months of 1995, primarily due to a decrease in consulting services
offset by an increase in purchased materials for research and development and
increased expenditures related to the VideoMask(TM) interdiction product line.
Research and development expenses also decreased as a percentage of sales to
4.1% from 4.7%.
Operating Income. Operating income increased 77% to $2,251,000 for the
third three months of 1996 from $1,275,000 for the third three months of 1995.
Operating income as a percentage of sales increased to 17.1% in the third three
months of 1996 from 11.3% in the third three months of 1995.
Interest and Other Expenses. Other expenses, net, decreased to $159,000 in
the third three months of 1996 from $365,000 in the third three months of 1995.
These expenses in the third three months of 1996 consisted of interest expense
in the amount of $159,000. Other expenses in the third three months of 1995
consisted of interest expense of $365,000, offset by $9,000 of other income. The
reduction in interest expense is primarily attributed to reduced borrowings
under the Company's credit line.
-8-
Income Taxes. The Company with the consent of its stockholders elected to
be taxed as an S Corporation for federal income tax purposes since its
organization. As a consequence, the taxable net earnings of the Company were
taxed as income to the Company's stockholders in proportion to their individual
stockholdings, and the payment of federal income taxes on such proportionate
share of the Company's taxable earnings is the personal obligation of each
stockholder. The Company's status as an S Corporation terminated on December 11,
1995, and as a result the Company is now a C Corporation for income tax
purposes. As a C Corporation, the Company is currently taxed at a combined
effective rate of 40% based upon current federal and state income tax
regulations. Had the Company been taxable as a C Corporation for the third
quarter of 1995, pro forma income taxes and pro forma net earnings after taxes
would have been $368,000 and $551,000, respectively, for the quarter ended
September 30, 1995.
First nine months of 1996 Compared with first nine months of 1995
Net Sales. Net sales decreased $2,167,000, or 5.6%, to $36,419,000 in the
first nine months of 1996 from $38,586,000 in the first nine months of 1995.
International sales accounted for $2,251,000 (6.2% of total sales) for the first
nine months of 1996 compared to $3,705,000 (9.6% of total sales) for the first
nine months of 1995. Net sales included approximately $1,342,000 of
VideoMask(TM) interdiction equipment. Net sales also included $1,245,000 under
the Company's agreement to supply interdiction equipment to Pacific Bell.
Sales in the lodging market remained strong during the period but MDU sales
were impacted by the uncertainty surrounding the installation of private cable
systems in properties under contract to Interactive Cable Systems, Inc. ("ICS"),
one of the Company's largest customers in 1995. Net sales to ICS were
approximately $661,000 in the first nine months of 1996 compared to
approximately $7,915,000 in the first nine months of 1995. It is anticipated
that these properties will be upgraded in future time periods either by ICS or
by other private cable operators, although no assurances in this regard can be
given. Approximately $819,000 of accounts receivable outstanding at September
30, 1996 was due from ICS for more than 60 days.
Volume interdiction sales have been delayed due to the inability of ICS to
complete the installation of private cable systems in properties under contract
to them and the shift in demand to other users of Interdiction whose
requirements were for product configurations not yet in production.
Cost of Goods Sold. Cost of goods sold decreased to $22,902,000 for the
first nine months of 1996 from $24,231,000 for the first nine months of 1995 but
increased as a percentage of sales to 62.9% from 62.8%. The increase as a
percentage of sales was caused primarily by a greater proportion of sales during
the period being comprised of lower margin products.
Selling Expenses. Selling expenses increased to $3,729,000 in the first
nine months of 1996 from $3,253,000 in the first nine months of 1995, primarily
due to increased costs incurred for advertising, marketing materials and trade
shows as well as increased operational costs of the BTI sales office and
additional costs incurred in connection with the closure of such office.
General and Administrative Expenses. General and administrative expenses
decreased to $3,358,000 in the first nine months of 1996 from $3,783,000 for the
first nine months of 1995 and also decreased as a percentage of sales to 9.2% in
the first nine months of 1996 from 9.8% for the first nine months of 1995. The
$425,000 decrease can be attributed to a reduction in rent expense, net of
increased depreciation, as a result of the purchase of the manufacturing
facility and a decline in salaries due to a reduction in personnel, offset by an
increase in expenditures for professional services and insurance.
Research and Development Expenses. Research and development expenses
increased 4.4% to $1,488,000 in the first nine months of 1996 from $1,425,000 in
the first nine months of 1995, primarily due to an increase in purchased
materials for research and development and increased expenditures related to the
VideoMask(TM) interdiction product line. Research and development expenses also
increased as a percentage of sales to 4.1% from 3.7%.
Operating Income. Operating income decreased 16% to $4,942,000 for the
first nine months of 1996 from $5,894,000 for the first nine months of 1995.
Operating income as a percentage of sales decreased to 13.6% in the first nine
months of 1996 from 15.3% in the first nine months of 1995.
-9-
Interest and Other Expenses. Other expenses, net, decreased to $526,000 in
the first nine months of 1996 from $879,000 in the first nine months of 1995.
These expenses in the first nine months of 1996 consisted of interest expense in
the amount of $526,000. Other expenses in the first nine months of 1995
consisted of interest expense of $919,000, offset by $40,000 of other income.
The reduction in interest expense is primarily attributed to reduced borrowings
under the Company's credit line.
Income Taxes. The Company with the consent of its stockholders elected to
be taxed as an S Corporation for federal income tax purposes since its
organization. As a consequence, the taxable net earnings of the Company were
taxed as income to the Company's stockholders in proportion to their individual
stockholdings, and the payment of federal income taxes on such proportionate
share of the Company's taxable earnings is the personal obligation of each
stockholder. The Company's status as an S Corporation terminated on December 11,
1995, and as a result the Company is now a C Corporation for income tax
purposes. As a C Corporation, the Company is currently taxed at a combined
effective rate of 40% based upon current federal and state income tax
regulations. Had the Company been taxable as a C Corporation for the first three
quarters of 1995, pro forma income taxes and pro forma net earnings after taxes
would have been $2,006,000 and $3,009,000, respectively, for the nine-month
period ended September 30, 1995.
Liquidity and Capital Resources
As of September 30, 1996, the Company's working capital was $22,697,000,
compared to $14,407,000 as of December 31, 1995. The increase in working capital
is primarily attributable to a $2,849,000 increase in inventory, a $3,206,000
decrease in accounts payable and a $1,555,000 reclassification of the revolving
line of credit as a long-term liability due to its maturity date extending
beyond one year. In addition, the Company received a $1,606,000 equity capital
infusion as a result of the exercise by the Company's underwriters of their
over-allotment option in connection with the Company's initial public offering
of Common Stock and proceeds from a $2,800,000 loan secured by a mortgage
against the Company's principal office/manufacturing facility located in Old
Bridge, New Jersey. These additional proceeds were applied against the
outstanding balance under the Company's revolving line of credit. Historically,
the Company has satisfied its cash requirements primarily from net cash provided
by operating activities and from borrowings under its line of credit.
The Company's net cash used in operating activities for the nine-month
period ended September 30, 1996 was $2,851,000, including $2,849,000 to fund the
increase in inventory, compared to cash used in operating activities for the
nine-month period ended September 30, 1995, which was $2,115,000. Cash flows
from operating activities have been negative, due primarily to the increase in
inventory and accounts receivable of $2,849,000 and 964,000, respectively, and a
reduction in accounts payable of $3,206,000 offset by an increase of $384,000 in
accrued expenses.
Cash used in investing activities was $1,167,000, substantially all of
which is attributable to capital expenditures for new equipment. The Company
anticipates capital expenditures during calendar year 1996 aggregating,
approximately $1,500,000, $560,000 of which will be used for the purchase of
several high speed robotic insertion machines to be used primarily in the
manufacture of circuit boards for the Company's new VideoMask(TM) product line
and the balance of which will be used for the purchase of other automated
assembly and test equipment. The Company does not have any present plans or
commitments for material capital expenditures for fiscal year 1997.
Cash provided by financing activities was $3,763,000 for the nine-month
period ended September 30, 1996, comprised primarily of debt proceeds, net of
repayments, of $3,137,000, net proceeds from the Company's sale of an additional
181,735 shares of Common Stock pursuant to an over-allotment option relating to
the Company's initial public offering of $1,606,000 and an additional $174,000
relating to the exercise of stock options.
On September 26, 1996, the Company executed a new $15 million revolving
line of credit with a bank on which funds may be borrowed at the bank's prime
rate (8.25% at September 30, 1996) or LIBOR plus .95% (6.39% at September 30,
1996) for a specified period of time at the election of the Company. As of
September 30, 1996, the Company had drawn down $1,555 at the bank's prime rate
under the line of credit for working capital needs. The line of credit is
collateralized by a security interest in all of the Company's assets. The
agreement contains restrictions that require the Company to maintain certain
financial ratios. In addition, the Company obtained a $10 million acquisition
loan commitment which may be drawn upon by the Company to
-10-
finance acquisitions in accordance with certain terms. At September 30, 1996,
there was no balance outstanding under the acquisition loan commitment. The line
of credit and the acquisition loan commitment expire on June 30, 1998.
On May 24, 1996, the Company borrowed $2.8 million from its bank for a
ten-year term. The loan bears interest at the fixed rate of 7.25% through May
1999 and may be negotiated to another fixed rate or remain variable for the
remaining seven years of the loan. The term loan is secured by a mortgage
against the Company's manufacturing and administrative facility located in Old
Bridge, New Jersey.
The Company currently anticipates that the cash generated from operations,
existing cash balances and amounts available under its existing or a replacement
line of credit, will be sufficient to satisfy its foreseeable working capital
needs.
Forward-Looking Statements
From time to time, the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products, research and development
activities and similar matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of risks and
uncertainties could cause the Company's actual results and experience to differ
materially from the anticipated results or other expectations expressed in the
Company's forward-looking statements. The risks and uncertainties that may
affect the operations, performance, development and results of the Company's
business include the timely completion of development and market acceptance of
new products, the effect of economic conditions, the availability of components
from suppliers, the impact of competitive products and pricing, the dynamics of
the private cable industry generally, the financial condition of the Company's
large customers, and other factors beyond the Company's control.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 18, 1996, the Company was served with a complaint in a lawsuit
filed by Scientific-Atlanta, Inc., in the United States District Court for the
Northern District of Georgia alleging patent infringement by the Company's
VideoMask(TM) interdiction product. The complaint requests an unspecified amount
of damages and injunctive relief. Although the outcome of any litigation cannot
be predicted with certainty, the Company believes the complaint is without merit
and that the ultimate disposition of this matter will not have a material
adverse effect on the Company's business.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits are listed in the Exhibit Index appearing at page 13 herein.
(b) No reports on Form 8-K were filed in the quarter ended September 30, 1996.
-11-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BLONDER TONGUE LABORATORIES, INC.,
Date: November 14, 1996
By: /s/ JAMES A. LUKSCH
--------------------------
James A. Luksch
President and Chief Executive Officer
By: /s/ PETER PUGIELLI
-------------------------
Peter Pugielli, Senior Vice President - Finance
(Principal Financial Officer)
-12-
EXHIBIT INDEX
Exhibit # Description Sequential Page Number
- --------- ----------- ----------------------
3.1 Restated Certificate of Incorporation of Blonder
Tongue Laboratories, Inc.*
3.2 Restated Bylaws of Blonder Tongue Laboratories,
Inc.**
10.1 Second Amended and Restated Loan
Agreement dated as of September 26, 1996,
between the Blonder Tongue Laboratories,
Inc. and Meridian Bank.
10.2 Second Amended and Restated Line of Credit Note dated
September 26, 1996 from Blonder Tongue Laboratories,
Inc. in favor of Meridian Bank.
10.3 Allonge to Real Estate Loan Note, dated September 26,
1996 from Blonder Tongue Laboratories, Inc., in favor of
Meridian Bank.
27 Financial Data Schedule
- -----------------------------
* Incorporated by reference from Exhibit 3.1 to S-1 Registration Statement
No. 33-98070 originally filed October 12, 1995, as amended.
** Incorporated by reference from Exhibit 3.2 to S-1 Registration Statement
No. 33-98070 originally filed October 12, 1995, as amended.
-13-