SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 1999,
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 (I.R.S. Employer
incorporation or organization) 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: (732) 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 8, 1999: 7,561,809
The Exhibit Index appears on page 12.
BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
Sept. 30, December 31,
1999 1998
-------- --------
(unaudited)
Assets (Note 4)
Current assets:
Cash ....................................................................... $ 221 $ 542
Accounts receivable, net of allowance for doubtful
accounts of $1,274 and $1,201, respectively ................................ 13,758 15,988
Inventories (Note 2) ....................................................... 23,416 24,540
Other current assets ....................................................... 1,605 597
Deferred income taxes ...................................................... 1,692 1,445
-------- --------
Total current assets .................................................. 40,692 43,112
Property, plant and equipment, net of accumulated
depreciation and amortization .............................................. 8,382 7,968
Patents, net ................................................................... 3,859 4,115
Goodwill, net .................................................................. 12,674 13,157
Other assets ................................................................... 1,631 1,299
-------- --------
$ 67,238 $ 69,651
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Revolving line of credit (Note 4) .......................................... $ 1,394 $ 1,827
Current portion of long-term debt (Note 4) ................................. 4,445 19,494
Accounts payable ........................................................... 4,328 2,134
Accrued compensation ....................................................... 1,708 1,287
Other accrued expenses ..................................................... 432 933
Income taxes ............................................................... 1,003 388
-------- --------
Total current liabilities ............................................. 13,310 26,063
-------- --------
Deferred income taxes .......................................................... 177 227
Long-term debt (Note 4) ........................................................ 17,100 2,865
Commitments and contingencies .................................................. -- --
Stockholders' equity:
Preferred stock, $.001 par value; authorized 5,000 shares;
no shares outstanding ................................................... -- --
Common stock, $.001 par value; authorized 25,000 shares, 8,391 shares issued
at September 30, 1999 and 8,370 shares issued at December 31, 1998 ...... 8 8
Paid-in capital ............................................................ 23,866 23,743
Retained earnings .......................................................... 19,063 17,596
Treasury stock at cost, 831 shares at September 30, 1999 and 81 shares at
December 31, 1998 .......................................................... (6,286) (851)
-------- --------
Total stockholders' equity ............................................ 36,651 40,496
-------- --------
$ 67,238 $ 69,651
======== ========
See accompanying notes to consolidated financial statements.
2
BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
1999 1998 1999 1998
-------- -------- -------- --------
Net sales .................................. $ 17,307 $ 18,929 $ 45,719 $ 54,573
Cost of goods sold ......................... 11,687 11,567 30,567 35,377
-------- -------- -------- --------
Gross profit ............................. 5,620 7,362 15,152 19,196
-------- -------- -------- --------
Operating expenses:
Selling expenses ......................... 1,653 1,284 4,538 3,692
General and administrative ............... 1,800 1,944 5,201 5,046
Research and development ................. 468 540 1,549 1,667
-------- -------- -------- --------
3,921 3,768 11,288 10,405
-------- -------- -------- --------
Earnings from operations ................... 1,699 3,594 3,864 8,791
-------- -------- -------- --------
Other income (expense):
Interest expense ......................... (565) (578) (1,465) (1,140)
Other income ............................. -- 9 6 10
-------- -------- -------- --------
(565) (569) (1,459) (1,130)
-------- -------- -------- --------
Earnings before income taxes ............... 1,134 3,025 2,405 7,661
Provision for income taxes ................. 443 751 938 2,606
-------- -------- -------- --------
Net earnings ............................. $ 691 $ 2,274 $ 1,467 $ 5,055
======== ======== ======== ========
Basic net earnings per share ............... $ .09 $ 0.27 $ .18 $ 0.61
======== ======== ======== ========
Basic weighted average shares outstanding .. 7,545 8,330 8,036 8,298
======== ======== ======== ========
Diluted net earnings per share ............. $ .09 $ 0.27 $ .18 $ 0.60
======== ======== ======== ========
Diluted weighted average shares outstanding 7,610 8,416 8,079 8,493
======== ======== ======== ========
See accompanying notes to consolidated financial statements.
3
BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Nine Months Ended September 30,
-------------------------------
1999 1998
-------- --------
Cash Flows From Operating Activities:
Net earnings ................................................... $ 1,467 $ 5,055
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation and amortization ................................ 2,244 1,686
Provision for doubtful accounts .............................. 395 1,087
Deferred income taxes ........................................ (297) (704)
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable .......................................... 1,835 (4,525)
Inventories .................................................. 1,124 (1,024)
Other current assets ......................................... (1,008) (2,083)
Other assets ................................................. (896) (422)
Income taxes ................................................. 615 625
Accounts payable and accrued expenses ........................ 2,114 4,064
-------- --------
Net cash provided by operating activities .................. 7,593 3,759
-------- --------
Cash Flows From Investing Activities:
Capital expenditures ........................................... (1,355) (582)
Acquisition of business ........................................ -- (19,000)
-------- --------
Net cash used in investing activities ........................ (1,355) (19,582)
-------- --------
Cash Flows From Financing Activities:
Net borrowings under revolving line of credit .................. (433) --
Proceeds from long-term debt ................................... 842 19,199
Repayments of long-term debt ................................... (1,656) (1,773)
Acquisition of treasury stock .................................. (5,435) (353)
Proceeds from exercise of stock options ........................ 123 166
-------- --------
Net cash (used in) provided by financing activities .......... (6,559) 17,239
-------- --------
Net (Decrease) Increase in Cash .................................. (321) 1,416
Cash, beginning of period ........................................ 542 555
-------- --------
Cash, end of period .............................................. $ 221 $ 1,971
======== ========
Supplemental Cash Flow Information:
Cash paid for interest ......................................... $ 1,489 $ 804
Cash paid for income taxes ..................................... 598 3,052
======== ========
Schedule of noncash investing and financing activities:
Common stock issued for acquired business ...................... $ -- $ 1,000
Fair value of warrants issued for acquired business ............ $ -- $ 775
======== ========
See accompanying notes to consolidated financial statements.
4
BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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 third quarter of 1999 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, 1999.
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 Pronouncements
In June 1998, SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued. SFAS 133 standardizes accounting and reporting for
derivative instruments and for hedging activities. This statement is effective
in the year 2001. The Company will be reviewing this pronouncement to determine
its applicability to the Company, if any.
Note 3 - Inventories
Inventories are summarized as follows:
Sept. 30, Dec. 31,
1999 1998
(In thousands)
--------------- ---------------
Raw Materials................................ $8,613 $9,550
Work in process.............................. 5,234 2,463
Finished Goods............................... 9,569 12,527
--------------- ---------------
$23,416 $24,540
=============== ===============
Note 4 - Line of Credit and Term Loan
As of September 30, 1999, the Company had $1,394,000 outstanding under a $5
million revolving line of credit with its bank (the "Former Credit Line"). Funds
could be borrowed under the Former Credit Line at LIBOR plus a margin ranging
from .75% to 2.25%, depending upon the calculation of certain financial
covenants (7.9375% at September 30, 1999). The Former Credit Line was
collateralized by a security interest in all of the Company's assets. The
agreement contained restrictions that required the Company to maintain certain
financial ratios as well as restrictions on the payment of dividends. The
Company also had a $20 million acquisition loan commitment from its bank as of
September 30, 1999 which could be drawn upon by the Company to finance
acquisitions in accordance with certain terms. Funds could be borrowed under the
acquisition loan commitment at LIBOR plus a margin ranging from 1.05% to 2.55%,
depending upon the calculation of certain financial covenants (8.2375% at
September 30, 1999). At September 30, 1999, there was $17,733,333 outstanding
under the acquisition loan commitment related to the acquisition of the
interdiction business of Scientific-Atlanta, Inc. The Former Credit Line and
acquisition loan commitment were to expire on November 15, 1999.
On November 12, 1999, the Company entered into a new $7.5 million revolving
line of credit with its bank replacing the Former Credit Line, on which funds
may be borrowed at either the bank's base rate plus a margin ranging from 0% to
.625%, or LIBOR plus a margin ranging from 1.50% to 2.625%, in each case
depending upon the calculation of certain financial covenants. Borrowings under
the new line of credit are limited to certain
5
BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
percentages of eligible accounts receivable and inventory as determined by the
bank. The new line of credit is collateralized by a security interest in all of
the Company's assets. The agreement also contains restrictions that require the
Company to maintain certain financial ratios as well as restrictions on the
payment of dividends. As of November 12, 1999, the Company's acquisition loan
commitment under its Former Credit Line was converted to a term loan with its
bank (the "S-A Term Loan"). The S-A Term Loan bears interest at either the
bank's base rate plus a margin ranging from 0% to .875%, or LIBOR plus a margin
ranging from 1.75% to 2.875%, in each case depending upon the calculation of
certain financial covenants. The principal balance of the S-A Term Loan is being
amortized in monthly installments of $366,667 with a final balloon payment of
all remaining unpaid principal and accrued interest due on June 30, 2002.
Note 5 - Stockholders' Equity
On May 17, 1999, the Company commenced a self tender offer to purchase
750,000 shares of its common stock at a purchase price ranging from $6.00 to
$8.00 per share. As of June 22, 1999, approximately 1,600,000 shares were
tendered and the Company accepted 750,000 shares for purchase at a price of
$7.00 per share. The stock repurchase was funded by a combination of the
Company's cash on hand and borrowings against its revolving line of credit.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-Looking Statements
In addition to historical information, this Quarterly Report contains
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 factors 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 operation, performance, development and
results of the Company's business include, but are not limited to, those matters
discussed herein in the sections entitled Part I, Item 2 - Management's
Discussion and Analysis of Financial Condition and Results of Operations. The
words "believe", "expect", "anticipate", "project" and similar expressions
identify forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements, which reflect management's
analysis only as of the date hereof. Blonder Tongue undertakes no obligation to
publicly revise these forward-looking statements to reflect events or
circumstances that arise after the date hereof. Readers should carefully review
the risk factors described in other documents the Company files from time to
time with the Securities and Exchange Commission, including without limitation,
the Company's Annual Report on Form 10-K for the year ended December 31, 1998
(See Item 1: Business, and Item 7: Management's Discussion and Analysis of
Financial Condition and Results of Operations).
Third three months of 1999 Compared with third three months of 1998
Net Sales. Net sales decreased $1,622,000, or 8.6%, to $17,307,000 in the
third three months of 1999 from $18,929,000 in the third three months of 1998.
The decrease in sales is primarily attributed to a general decrease in demand
for the Company's products in the non-franchised cable market, as well as a
decrease in sales of interdiction equipment to both the franchised and
non-franchised cable markets. Net sales included approximately $3,171,000 of
interdiction equipment for the third three months of 1999 compared to
approximately $3,631,000 for the third three months of 1998.
Cost of Goods Sold. Cost of goods sold increased to $11,687,000 for the
third three months of 1999 from $11,567,000 for the third three months of 1998
and also increased as a percentage of sales to 67.5% from 61.1%. 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.
6
Selling Expenses. Selling expenses increased to $1,653,000 in the third
three months of 1999 from $1,284,000 in the third three months of 1998,
primarily due to an increase in costs incurred for advertising, marketing
materials and trade shows and an increase in salaries and employee benefit
expenses as a result of an increase in headcount.
General and Administrative Expenses. General and administrative expenses
decreased to $1,800,000 in the third three months of 1999 from $1,944,000 for
the third three months of 1998 but increased as a percentage of sales to 10.4%
in the third three months of 1999 from 10.3% for the third three months of 1998.
The $144,000 decrease can be attributed to a decrease in the accrual for the
allowance for doubtful accounts, offset by an increase in the amortization of
intangibles related to the acquisition of the interdiction business of
Scientific-Atlanta, Inc. and expenditures for professional services.
Research and Development Expenses. Research and development expenses
decreased to $468,000 in the third three months of 1999 from $540,000 in the
third three months of 1998, primarily due to the reduction of the amortization
of licenses and a decrease in purchased materials for research and development.
Research and development expenses also decreased as a percentage of sales to
2.7% from 2.9%.
Operating Income. Operating income decreased 52.7% to $1,699,000 for the
third three months of 1999 from $3,594,000 for the third three months of 1998.
Operating income as a percentage of sales decreased to 9.8% in the third three
months of 1999 from 19.0% in the third three months of 1998.
Interest and Other Expenses. Other expense in the third three months of
1999 consisted of interest expense of $565,000. Other expense in the third three
months of 1998 consisted of interest expense of $578,000, offset by $9,000 of
interest income.
Income Taxes. The provision for income taxes for the third three months of
1999 decreased to $443,000 from $751,000 for the third three months of 1998 as a
result of a decrease in taxable income.
First nine months of 1999 Compared with first nine months of 1998
Net Sales. Net sales decreased $8,854,000, or 16.2%, to $45,719,000 in the
first nine months of 1999 from $54,573,000 in the first nine months of 1998. The
decrease in sales is primarily attributed to a general decrease in demand for
the Company's products in the non-franchised cable market, as well as a decrease
in sales of interdiction equipment to both the franchised and non-franchised
cable markets. Net sales included approximately $8,218,000 of interdiction
equipment for the first nine months of 1999 compared to approximately
$13,638,000 for the first nine months of 1998.
Cost of Goods Sold. Cost of goods sold decreased to $30,567,000 for the
first nine months of 1999 from $35,377,000 for the first nine months of 1998 but
increased as a percentage of sales to 66.9% from 64.8%. The increase as a
percentage of sales was caused primarily by a greater proportion of sales being
comprised of lower margin products.
Selling Expenses. Selling expenses increased to $4,538,000 in the first
nine months of 1999 from $3,692,000 in the first nine months of 1998, primarily
due to an increase in costs incurred for advertising, marketing materials and
trade shows and an increase in salaries and employee benefit expenses as a
result of an increase in headcount.
General and Administrative Expenses. General and administrative expenses
increased to $5,201,000 in the first nine months of 1999 from $5,046,000 for the
first nine months of 1998 and increased as a percentage of sales to 11.4% in the
first nine months of 1999 from 9.2% for the first nine months of 1998. The
$155,000 increase can be attributed to an increase in the amortization of
intangibles related to the acquisition of the interdiction business of
Scientific-Atlanta, Inc. and expenditures for professional services offset by a
decrease in the accrual for the allowance for doubtful accounts.
Research and Development Expenses. Research and development expenses
decreased 7.1% to $1,549,000 in the first nine months of 1999 from $1,667,000 in
the first nine months of 1998, primarily due to a decrease in the amortization
of licenses and a decrease in purchased materials for research and development.
7
Operating Income. Operating income decreased 56.1% to $3,864,000 for the
first nine months of 1999 from $8,791,000 for the first nine months of 1998.
Operating income as a percentage of sales decreased to 8.5% in the first nine
months of 1999 from 16.1% in the first nine months of 1998.
Interest and Other Expenses. Other expense in the first nine months of 1999
consisted of interest expense of $1,465,000 offset by $6,000 of interest income.
Other expense in the first nine months of 1998 consisted of interest expense of
$1,140,000 offset by $10,000 of interest income.
Income Taxes. The provision for income taxes for the first nine months of
1999 decreased to $938,000 from $2,606,000 for the first nine months of 1998 as
a result of a decrease in taxable income.
Liquidity and Capital Resources
The Company's net cash provided by operating activities for the nine-month
period ended September 30, 1999 was $7,593,000, compared to cash provided by
operating activities for the nine-month period ended September 30, 1998, which
was $3,759,000. Cash flows from operating activities have been positive, due
primarily to net earnings of $1,467,000, a $1,835,000 decrease in accounts
receivable.
Cash used in investing activities was $1,355,000, which was attributable to
capital expenditures for new equipment. The Company anticipates additional
capital expenditures during calendar year 1999 aggregating approximately
$100,000, which will be used for the purchase of automated assembly and test
equipment.
Cash used in financing activities was $6,559,000 for the first nine months
of 1999, primarily comprised of $5,435,000 related to the acquisition of
treasury stock in connection with the Company's self tender and $1,656,000 of
repayments of long-term debt.
As of September 30, 1999, the Company had $1,394,000 outstanding under a $5
million revolving line of credit with its bank (the "Former Credit Line"). Funds
could be borrowed under the Former Credit Line at LIBOR plus a margin ranging
from .75% to 2.25%, depending upon the calculation of certain financial
covenants (7.9375% at September 30, 1999). The Former Credit Line was
collateralized by a security interest in all of the Company's assets. The
agreement contained restrictions that required the Company to maintain certain
financial ratios as well as restrictions on the payment of dividends. The
Company also had a $20 million acquisition loan commitment from its bank as of
September 30, 1999 which could be drawn upon by the Company to finance
acquisitions in accordance with certain terms. Funds could be borrowed under the
acquisition loan commitment at LIBOR plus a margin ranging from 1.05% to 2.55%,
depending upon the calculation of certain financial covenants (8.2375% at
September 30, 1999). At September 30, 1999, there was $17,733,333 outstanding
under the acquisition loan commitment related to the acquisition of the
interdiction business of Scientific-Atlanta, Inc. The Former Credit Line and
acquisition loan commitment were to expire on November 15, 1999.
On November 12, 1999, the Company entered into a new $7.5 million revolving
line of credit with its bank replacing the Former Credit Line, on which funds
may be borrowed at either the bank's base rate plus a margin ranging from 0% to
.625%, or LIBOR plus a margin ranging from 1.50% to 2.625%, in each case
depending upon the calculation of certain financial covenants. Borrowings under
the new line of credit are limited to certain percentages of eligible accounts
receivable and inventory as determined by the bank. The new line of credit is
collateralized by a security interest in all of the Company's assets. The
agreement also contains restrictions that require the Company to maintain
certain financial ratios as well as restrictions on the payment of dividends. As
of November 12, 1999, the Company's acquisition loan commitment under its Former
Credit Line was converted to a term loan with its bank (the "S-A Term Loan").
The S-A Term Loan bears interest at either the bank's base rate plus a margin
ranging from 0% to .875%, or LIBOR plus a margin ranging from 1.75% to 2.875%,
in each case depending upon the calculation of certain financial covenants. The
principal balance of the S-A Term Loan is being amortized in monthly
installments of $366,667 with a final balloon payment of all remaining unpaid
principal and accrued interest due on June 30, 2002.
The Company currently anticipates that the cash generated from operations,
existing cash balances and amounts available under its 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.
8
New Accounting Pronouncement
In June 1998, SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued. SFAS 133 standardizes accounting and reporting for
derivative instruments and for hedging activities. This statement is effective
in the year 2001. The Company will be reviewing this pronouncement to determine
its applicability to the Company, if any.
Year 2000
The Company has designated certain individuals as responsible for
identification and correction of Year 2000 compliance issues. Since 1998,
information technology ("IT") systems with non-compliant code have been modified
or replaced with systems that are Year 2000 compliant. Similar actions have been
taken with respect to non-IT systems, primarily systems embedded in
manufacturing equipment and the Company's products. The Company has also
investigated the readiness of suppliers, customers and other third parties and
developed contingency plans where necessary.
As of June 30, 1999, all IT systems were inventoried and assessed for
compliance, and detailed plans were implemented for required system
modifications or replacements. Remediation and testing activities have been
completed with 100% of the systems in compliance. Inventories and assessments of
non-IT systems have also been completed.
The Company has identified critical suppliers, customers and other third
parties and has surveyed their Year 2000 remediation programs. Risk assessments
and contingency plans were finalized in the first quarter of 1999.
Incremental costs directly related to Year 2000 issues were approximately
$300,000 between 1998 and the end of the second quarter of 1999. Approximately
90% of the total estimated spending represents costs to modify existing systems.
Costs incurred prior to 1998 were immaterial. This estimate assumes that the
Company will not incur significant Year 2000 related costs on behalf of
suppliers, customers or other third parties.
The Company's most likely potential risk resulting from Year 2000 issues is
the inability of some customers to order and pay on a timely basis. In addition,
the Company has several foreign suppliers, which, if not in compliance, would
cause the Company to utilize more expensive suppliers resulting in reduced
margins. The Company's contingency plans for Year 2000-related interruptions
include, but are not limited to, the development of emergency backup and
recovery procedures, remediation of existing systems parallel with installation
of new systems and identification of alternate suppliers. All plans were
completed by the end of the second quarter of 1999.
The Company's Year 2000 efforts are ongoing and its overall plan, as well
as the consideration of contingency plans, will continue to evolve as new
information becomes available. While the Company anticipates no major
interruption of its business activities, that will be dependent in part upon the
ability of third parties to properly remediate their IT and non-IT systems in a
timely manner. Although the Company has implemented the actions described above
to address third party issues, it has no ability to influence the compliance
actions of such parties. Accordingly, while the Company believes its actions in
this regard should have the effect of reducing Year 2000 risks, it is unable to
eliminate them or estimate the ultimate effect Year 2000 risks will have on the
Company's operating results.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk inherent in the Company's financial instruments and
positions represents the potential loss arising from adverse changes in interest
rates. At September 30, 1999 and 1998, the principal amount of the Company's
aggregate outstanding variable rate indebtedness was $18,727,333 and
$19,000,000, respectively. Without giving effect to the swap agreement described
below, a hypothetical 10% adverse change in the interest rate in effect during
the relevant time period would have had an annualized unfavorable impact of
approximately $154,000 and $164,000, respectively, on the Company's earnings and
cash flows based upon these quarter-end debt levels.
To ameliorate these risks, in February, 1999, the Company entered into an
interest rate swap agreement with a notional amount of $10,000,000. The swap
agreement has a maturity date of June 3, 2002 and requires the Company to make
fixed rate interest payments on the notional amount of 8.01% per annum in
exchange for its receipt from the swap counterparties of floating rate payments
equal to LIBOR plus 2.55%. The Company is
9
exposed to credit risk in the unlikely event that the swap counterparties
default on their payment obligations to the Company under the swap agreement.
Interest to be paid or received is accrued over the life of the agreement at the
net effective interest rate for the swap agreement and corresponding debt
instrument.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to certain proceedings incidental to the ordinary
course of its business, none of which, in the current opinion of management, is
likely to have a material adverse effect on the Company's business, financial
condition, or results of operations.
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
Stockholder proposals intended to be included in the Company's proxy
statement for presentation at the 2000 Annual Meeting of Stockholders pursuant
to Rule 14a-8 of the Securities Exchange Act of 1934, as amended, must be
received by the Company's Controller at One Jake Brown Road, Old Bridge, New
Jersey 08857 on or before January 6, 2000, to be eligible for inclusion in such
proxy statement.
If notice of a stockholder proposal intended to be presented at the 2000
Annual Meeting of Stockholders is not received by the Company on or before
February 19, 2000 (whether or not the stockholder wishes the proposal to be
included in the proxy statement for such annual meeting), the Company (through
management proxy holders) may exercise discretionary voting authority on such
proposal when and if the proposal is raised at the annual meeting without any
reference to the matter in the proxy statement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits are listed in the Exhibit Index appearing at
page 12 herein.
(b) No reports on Form 8-K were filed in the quarter ended
September 30, 1999.
10
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 12, 1999
By: /s/ James A. Luksch
-------------------------------------
James A. Luksch
President and Chief Executive Officer
By: /s/ Peter Pugielli
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Peter Pugielli, Senior Vice President
- Finance (Principal Financial Officer)
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EXHIBIT INDEX
Exhibit # Description Location
--------- ----------- --------
3.1 Restated Certificate Incorporated by
of Incorporation of reference from
Blonder Tongue Exhibit 3.1 to S-1
Laboratories, Inc. Registration
Statement No.
33-98070 originally
filed October 12,
1995, as amended.
3.2 Restated Bylaws of Incorporated by
Blonder Tongue reference from
Laboratories, Inc. Exhibit 3.2 to S-1
Registration
Statement No.
33-98070 originally
filed October 12,
1995, as amended.
27 Financial Data Schedule Electronic Filing only.
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