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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 MARCH 31, 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 1-14120
BLONDER TONGUE LABORATORIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
52-1611421
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(I.R.S. Employer Identification No.)
One Jake Brown Road, Old Bridge, New Jersey 08857
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(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
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Number of shares of common stock, par value $.001, outstanding as of May 9,
1997: 8,229,317.
The Exhibit Index appears on page 10.
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BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, Dec. 31,
1997 1996
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(unaudited)
Assets (Note 4)
Current assets:
Cash and cash equivalents .................................................................... $ 2,249 $ 1,340
Accounts receivable, net of allowance for doubtful
accounts of $310 and $280, respectively .................................................... 9,759 8,987
Inventories (Note 3) ......................................................................... 15,776 16,028
Other current assets ......................................................................... 476 403
Deferred income taxes ........................................................................ 671 534
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Total current assets ............................................................. 28,931 27,292
Property, plant and equipment, net of accumulated
depreciation and amortization .............................................................. 7,056 7,161
Other assets ................................................................................... 1,682 1,712
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$37,669 $36,165
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Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt ............................................................ $ 451 $ 445
Accounts payable ............................................................................. 2,031 1,627
Accrued compensation ......................................................................... 1,439 993
Other accrued expenses ....................................................................... 679 589
Income taxes ................................................................................. 1,244 623
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Total current liabilities ........................................................ 5,844 4,277
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Deferred income taxes .......................................................................... 438 410
Revolving line of credit (Note 4) .............................................................. -- 1,176
Long-term debt, including related party debt of $1,591 at March 31, 1997 and
December 31, 1996 ............................................................................ 4,635 4,726
Commitments and contingencies (Note 5) ......................................................... -- --
Stockholders' equity:
Preferred stock, $.001 par value; authorized 5,000,000 shares;
no shares outstanding ...................................................................... -- --
Common stock, $.001 par value; authorized 25,000,000 shares,
8,211,608 shares issued and outstanding at March 31, 1997 and
8,193,509 shares issued and outstanding at December 31, 1996 ............................... 8 8
Paid-in capital .............................................................................. 21,545 21,499
Retained earnings ............................................................................ 5,199 4,069
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Total stockholders' equity ....................................................... 26,752 25,576
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$37,669 $36,165
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See accompanying notes to consolidated financial statements.
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BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(unaudited)
Three Months Ended March 31,
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1997 1996
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Net sales ...................................... $ 14,041 $ 11,572
Cost of goods sold ............................. 9,296 7,615
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Gross profit ............................... 4,745 3,957
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Operating expenses:
Selling expenses ........................... 1,131 1,215
General and administrative ................. 1,124 1,070
Research and development ................... 518 523
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2,773 2,808
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Earnings from operations ....................... 1,972 1,149
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Other income (expense):
Interest expense ........................... (101) (165)
Interest income ............................ 12 --
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(89) (165)
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Earnings before income taxes ................... 1,883 984
Provision for income taxes ..................... 753 394
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Net earnings ............................... $ 1,130 $ 590
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Net earnings per share ......................... $ 0.14 $ 0.07
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Weighted average shares outstanding ............ 8,310 8,266
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See accompanying notes to consolidated financial statements.
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BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Three Months Ended
March 31,
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1997 1996
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Cash Flows From Operating Activities:
Net earnings ........................................................................... $ 1,130 $ 590
Adjustments to reconcile net earnings to cash
provided by (used in) operating activities:
Depreciation and amortization .................................................... 264 281
Provision for doubtful accounts .................................................. 30 (33)
Deferred income taxes ............................................................ (109) (101)
Changes in operating assets and liabilities:
Accounts receivable ........................................................... (802) (1,135)
Inventories ................................................................... 252 (2,556)
Other current assets .......................................................... (74) 515
Other assets .................................................................. 116 54
Income taxes .................................................................. 621 (57)
Accounts payable and accrued expenses ......................................... 940 (1,148)
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Net cash provided by (used in) operating activities ........................ 2,368 (3,590)
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Cash Flows From Investing Activities:
Capital expenditures ................................................................... (81) (535)
Acquisitions of licenses ............................................................... (163) --
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Net cash used in investing activities ......................................... (244) (535)
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Cash Flows From Financing Activities:
Net borrowings under revolving line of credit .......................................... (1,176) 1,735
Proceeds from long-term debt ........................................................... 26 412
Repayments of long-term debt ........................................................... (111) (108)
Proceeds from sale of common stock ..................................................... -- 1,606
Proceeds from exercise of stock options ................................................ 46 82
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Net cash (used in) provided by financing activities ........................... (1,215) 3,727
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Net Increase (Decrease) In Cash .......................................................... 909 (398)
Cash, beginning of period ................................................................ 1,340 477
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Cash, end of period ...................................................................... $ 2,249 $ 79
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Supplemental Cash Flow Information:
Cash paid for interest ................................................................. $ 107 $ 154
Cash paid for income taxes ............................................................. 241 305
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See accompanying notes to consolidated financial statements.
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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.
Significant intercompany accounts and transactions have been eliminated in
consolidation.
The results for the first quarter of 1997 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 March 31, 1997.
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 - Effect of New Accounting Pronouncement
In February 1997, the FASB issued SFAS No. 128 "Earnings Per Share." In
accordance with this statement, basic earnings per share are based on the
weighted average shares outstanding during the period and diluted earnings per
share are based on the weighted average number of common shares and all dilutive
potential common shares that were outstanding during the period. In addition,
prior period financial statements have to be restated to reflect the change in
accounting principle. Effective December 15, 1997, the Company will adopt this
statement. The effect of the adoption will not have a material impact on the
Company's net earnings per share.
Note 3 - Inventories
Inventories are summarized as follows:
March 31, Dec. 31,
1997 1996
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Raw Materials.......................................... $ 7,023 $ 7,746
Work in process........................................ 2,706 2,451
Finished Goods......................................... 6,047 5,831
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$15,776 $16,028
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Note 4 - Line of Credit
The Company has a $15 million line of credit with a bank on which funds
may be borrowed at the bank's prime rate (8.50% at March 31, 1997) or at LIBOR
plus .95% (6.64% at March 31, 1997) for a specified period of time at the
election of the Company. As of March 31, 1997, the Company had no balance
outstanding under the line of credit. 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 has a $10 million acquisition loan commitment which may be
tendered to the bank to finance acquisitions in accordance with certain terms.
At March 31, 1997, there was no balance outstanding under the acquisition loan
commitment. The line of credit and the acquisition loan commitment expire on
June 30, 1998.
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BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
(unaudited)
Note 5 - Commitments and Contingencies
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(Trademark) interdiction product. The complaint requests an
unspecified amount of damages and injunctive relief. On November 13, 1996, a
procedural default (unrelated to the merits of the case) was entered against the
Company due to the late filing of the Company's answer. Motions have been made
and briefed regarding the setting aside of that entry and the Company is
presently awaiting the Court's ruling. The Company's outside patent counsel has
advised the Company that the equities of the case, public policy and multiple
meritorious defenses weigh in favor of setting the entry aside. 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 effect on the Company's business.
Accordingly, no provision for this matter has been recorded in the financial
statements.
ITEM 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
First three months of 1997 Compared with first three months of 1996
Net Sales. Net sales increased $2,469,000, or 21.3%, to $14,041,000 in
the first three months of 1997 from $11,572,000 in the first three months of
1996. International sales accounted for $366,000 (2.6% of total sales) for the
first three months of 1997 compared to $789,000 (6.8% of total sales) for the
first three months of 1996. Net sales did not include any milestone billings
under the Company's agreement with Pacific Bell for the first three months of
1997 compared to $300,000 for the first three months of 1996.
The increase in sales is primarily attributed to an increase in demand
for products in the MDU market and the continued growth in the Lodging market.
In addition, the significant increase in sales of VideoMask(Trademark)
interdiction equipment also had a favorable impact. Net sales included
approximately $1,526,000 of VideoMask(Trademark) interdiction equipment for the
first three months of 1997 compared to approximately $270,000 for the first
three months of 1996.
Cost of Goods Sold. Cost of goods sold increased to $9,296,000 for the
first three months of 1997 from $7,615,000 for the first three months of 1996
and also increased as a percentage of sales to 66.2% from 65.8%. The increase
was caused primarily by a higher proportion of sales during the period being
comprised of lower margin products.
Selling Expenses. Selling expenses decreased to $1,131,000 for the first
three months of 1997 from $1,215,000 in the first three months of 1996,
primarily due to a reduction in costs incurred for trade shows and a decrease in
expenses related to BTI as a result of the closure of this office in 1996. These
decreases were offset by an increase in marketing materials.
General and Administrative Expenses. General and administrative expenses
increased to $1,124,000 for the first three months of 1997 from $1,070,000 for
the first three months of 1996 but decreased as a percentage of sales to 8% for
the first three months of 1997 from 9.2% for the first three months of 1996. The
$54,000 increase can be attributed to an increase in executive compensation as a
result of the termination of the 1989 Bonus Plan, along with an accrual for
executive bonuses under the newly adopted executive officer bonus plan offset by
a reduction in expenditures for professional services.
Research and Development Expenses. Research and development expenses
decreased to $518,000 in the first three months of 1997 from $523,000 in the
first three months of 1996, primarily due to a decrease in
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consulting services that were incurred with respect to the VideoMask(Trademark)
product line in 1996 offset by an increase in wages related to the hiring of
personnel with higher qualifications. Research and development expenses also
decreased as a percentage of sales to 3.7% from 4.5% and the Company anticipates
continuing to increase its research and development expenditures.
Operating Income. Operating income increased 72% to $1,972,000 for the
first three months of 1997 from $1,149,000 for the first three months of 1996.
Operating income as a percentage of sales increased to 14% in the first three
months of 1997 from 9.9% in the first three months of 1996.
Interest and Other Expenses. Other expense, decreased to $89,000 in the
first three months of 1997 from $165,000 in the first three months of 1996.
These expenses in the first three months of 1997 consisted of interest expense
in the amount of $101,000 offset by $12,000 of interest income. These expenses
in the first three months of 1996 consisted of interest expense in the amount of
$165,000.
Income Taxes. The provision for income taxes for the first three months
of 1997 increased to $753,000 from $394,000 for the first three months of 1996
as a result of increased taxable income.
Liquidity and Capital Resources
The Company's net cash provided by operating activities for the
three-month period ended March 31, 1997 was $2,368,000, compared to cash used in
operating activities for the three-month period ended March 31, 1996, which was
$3,590,000. Cash flows from operating activities have been positive, due
primarily to an increase in net earnings of $540,000, a decrease in inventory,
an increase in accounts payable and accrued expenses and an increase in income
taxes payable, offset by an increase in accounts receivable.
Cash used in investing activities was $244,000, of which $163,000 was
utilized for fees associated with certain license agreements and $81,000 was
attributable to capital expenditures for new equipment. The Company anticipates
additional capital expenditures during calendar year 1997 aggregating,
approximately $1,400,000, which will be used for the purchase of automated
assembly and test equipment. The Company does not have any present plans or
commitments for material capital expenditures for fiscal year 1998.
Cash used in financing activities was $1,215,000 for the first three
months of 1997, comprised primarily of $1,176,000 of payments on the line of
credit.
The Company has a $15 million line of credit with a bank on which funds
may be borrowed at the bank's prime rate (8.50% at March 31, 1997) or at LIBOR
plus .95% (6.64% at March 31, 1997) for a specified period of time at the
election of the Company. As of March 31, 1997, the Company had no balance
outstanding under the line of credit. 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 has a $10 million acquisition loan commitment which may be
tendered to the bank to finance acquisitions in accordance with certain terms.
At March 31, 1997, there was no balance outstanding under the acquisition loan
commitment. The line of credit and the acquisition loan commitment expire on
June 30, 1998.
The Company currently anticipates that the cash generated from
operations, existing cash balances and amounts available under its existing line
of credit, will be sufficient to satisfy its foreseeable working capital needs.
Historically, the Company has satisfied its cash requirements primarily from net
cash provided by operating activities and from borrowings under its line of
credit.
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New Accounting Pronouncement
In February 1997, the FASB issued SFAS No. 128 "Earnings Per Share." In
accordance with this statement, basic earnings per share are based on the
weighted average shares outstanding during the period and diluted earnings per
share are based on the weighted average number of common shares and all dilutive
potential common shares that were outstanding during the period. In addition,
prior period financial statements have to be restated to reflect the change in
accounting principle. Effective December 15, 1997, the Company will adopt this
statement. The effect of the adoption will not have a material impact on the
Company's net earnings per share.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 18, 1996, the Company was served with a complaint in a patent
infringement lawsuit filed by Scientific-Atlanta, Inc. This lawsuit is more
fully discussed in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the first
quarter ended March 31, 1997 through the solicitation of proxies or otherwise.
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 10
herein.
(b) No reports on Form 8-K were filed in the quarter ended March 31, 1997.
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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: May 13, 1997 By: /s/ JAMES A. LUKSCH
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James A. Luksch
President and Chief Executive Officer
By: /s/ PETER PUGIELLI
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Peter Pugielli, Senior Vice President - Finance
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EXHIBIT INDEX
Exhibit # Description Sequential Page Number
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3.1 Restated Certificate of Incorporation of Blonder Incorporated by reference from Exhibit
Tongue Laboratories, Inc. 3.1 to S-1 Registration Statement No. 33-
98070 originally filed October 12, 1995,
as amended.
3.2 Restated Bylaws of Blonder Tongue Laboratories, Incorporated by reference from Exhibit
Inc. 3.2 to S-1 Registration Statement No. 33-
98070 originally filed October 12, 1995,
as amended.
10.3 Executive Officer Bonus Plan Filed on Page 11 herein.
10.5(a) First Amendment to 1995 Long Term Incentive Filed on Page 13 herein.
Plan
27 Financial Data Schedule Electronic Filing only.
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