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, 2001,
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO .
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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 Identification No.)
incorporation or organization)
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 9,
2001: 7,612,664
The Exhibit Index appears on page 13.
BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
Sept. 30, December 31,
2001 2000
-------- --------
(unaudited)
Assets (Note 4)
Current assets:
Cash ....................................................................... $ 1,077 $ 363
Accounts receivable, net of allowance for doubtful
accounts of $1,744 and $1,424, respectively ................................ 9,574 7,125
Inventories (Note 3) ....................................................... 29,358 26,333
Other current assets ....................................................... 1,564 3,264
Deferred income taxes ...................................................... 1,750 1,804
-------- --------
Total current assets ................................................... 43,323 38,889
Property, plant and equipment, net of accumulated
depreciation and amortization ............................................... 7,253 7,644
Patents, net .................................................................... 3,577 3,943
Goodwill, net ................................................................... 11,003 11,730
Other assets .................................................................... 594 628
-------- --------
$ 65,750 $ 62,834
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Revolving line of credit (Note 4) .......................................... $ 4,331 $ 2,250
Current portion of long-term debt .......................................... 10,635 4,382
Accounts payable ........................................................... 5,492 2,833
Accrued compensation ....................................................... 1,018 1,143
Other accrued expenses ..................................................... 832 659
Income taxes ............................................................... 603 468
-------- --------
Total current liabilities .............................................. 22,911 11,735
-------- --------
Deferred income taxes ........................................................... 135 201
Long-term debt (Note 4) ......................................................... 2,282 11,802
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, 8,444 shares issued 8 8
Paid-in capital ............................................................ 24,143 24,143
Retained earnings .......................................................... 22,557 21,231
Treasury stock at cost, 831 shares ......................................... (6,286) (6,286)
-------- --------
Total stockholders' equity ............................................. 40,422 39,096
-------- --------
$ 65,750 $ 62,834
======== ========
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,
-------------------------- --------------------------
2001 2000 2001 2000
-------- -------- -------- --------
Net sales .................................. $ 16,064 $ 18,937 $ 39,561 $ 58,179
Cost of goods sold ......................... 10,813 13,286 26,087 38,510
-------- -------- -------- --------
Gross profit ............................. 5,251 5,651 13,474 19,669
-------- -------- -------- --------
Operating expenses:
Selling .................................. 1,209 1,517 3,883 4,628
General and administrative ............... 1,514 1,842 4,720 5,420
Research and development ................. 530 589 1,662 1,641
-------- -------- -------- --------
3,253 3,948 10,265 11,689
-------- -------- -------- --------
Earnings from operations ................... 1,998 1,703 3,209 7,980
-------- -------- -------- --------
Other income (expense):
Interest expense ......................... (391) (423) (1,133) (1,529)
Other income ............................. -- 10 -- 10
-------- -------- -------- --------
(391) (413) (1,133) (1,519)
-------- -------- -------- --------
Earnings before income taxes ............... 1,607 1,290 2,076 6,461
Provision for income taxes ................. 573 462 750 2,300
-------- -------- -------- --------
Net earnings ............................. $ 1,034 $ 828 $ 1,326 $ 4,161
======== ======== ======== ========
Basic earnings per share ................... $ 0.14 $ 0.11 $ 0.17 $ 0.55
======== ======== ======== ========
Basic weighted average shares outstanding .. 7,613 7,612 7,613 7,622
======== ======== ======== ========
Diluted earnings per share ................. $ 0.14 $ 0.11 $ 0.17 $ 0.54
======== ======== ======== ========
Diluted weighted average shares outstanding 7,650 7,648 7,633 7,671
======== ======== ======== ========
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,
----------------------------
2001 2000
------- -------
Cash Flows From Operating Activities:
Net earnings ........................................ $ 1,326 $ 4,161
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation and amortization ..................... 2,103 2,331
Provision for doubtful accounts ................... 320 417
Deferred income taxes ............................. (12) (22)
Changes in operating assets and liabilities .........
Accounts receivable ............................... (2,769) (3,135)
Inventories ....................................... (3,025) (602)
Other current assets .............................. 1,700 287
Income taxes ...................................... 135 2,326
Accounts payable, accrued compensation and expenses (2,707) (2,457)
------- -------
Net cash provided by operating activities ....... 2,485 3,306
------- -------
Cash Flows From Investing Activities:
Capital expenditures ................................ (585) (117)
Acquisition of licensing agreements ................. -- (388)
------- -------
Net cash used in investing activities ............. (585) (505)
------- -------
Cash Flows From Financing Activities:
Net borrowings under revolving line of credit ....... 2,081 321
Repayments of long-term debt ........................ (3,267) (3,301)
Proceeds from exercise of stock options ............. -- 273
------- -------
Net cash used in financing activities ............. (1,186) (2,707)
------- -------
Net Increase in Cash .................................. 714 94
Cash, beginning of period ............................. 363 48
------- -------
Cash, end of period ................................... $ 1,077 $ 142
======= =======
Supplemental Cash Flow Information:
Cash paid for interest .............................. $ 1,194 $ 1,515
Cash paid for income taxes .......................... 628 40
See accompanying notes to consolidated financial statements.
4
Blonder Tongue Laboratories, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited) (in thousands)
Note 1 - Company and Basis of Presentation
Blonder Tongue Laboratories, Inc. (the "Company") is a designer,
manufacturer and supplier of electronics and systems equipment for the cable
television industry, primarily throughout the United States. The consolidated
financial statements include the accounts of Blonder Tongue Laboratories, Inc.
and subsidiaries. Significant inter-company accounts and transactions have been
eliminated in consolidation.
The results for the third quarter of 2001 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 adjustments necessary for a fair statement of the results of
operations for the period presented and the consolidated balance sheet at
September 30, 2001. 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 for the year ended December 31, 2000.
Note 2 - Effect of New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS 133 was adopted by the
Company on January 1, 2001. SFAS 133 requires that all derivative instruments be
recorded on the balance sheet at fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of the hedge
transaction and the type of hedge transaction. The adoption of this
pronouncement did not have a material effect on the Company's financial position
or results of operations.
In July 2001, the FASB issued SFAS No. 141, Business Combinations and
No. 142, Goodwill and Other Intangible Assets. SFAS 141 requires the use of the
purchase method of accounting and prohibits the use of the pooling-of-interests
method of accounting for business combinations initiated after June 30, 2001.
SFAS 142 addresses financial accounting and reporting for acquired goodwill and
other intangible assets. SFAS requires, among other things, that companies no
longer amortize goodwill, but instead test goodwill for impairment at least
annually. SFAS 142 is required to be applied for fiscal years beginning after
December 15, 2001. The Company's previous business combinations were accounted
for using the purchase method. As of September 30, 2001, the net carrying amount
of goodwill is $11,003 and other intangible assets is $4,171. Amortization
expense during the nine-month period ended September 30, 2001 was $1,127.
Currently, the Company is assessing but has not yet determined how the adoption
of SFAS 141 and SFAS 142 may impact its financial position and results of
operations.
In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. The new guidance resolves
significant implementation issues related to SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.
SFAS 144 supersedes SFAS 121, but it retains its fundamental provisions. It also
amends Accounting Research Bulletin No. 51, Consolidated Financial Statements,
to eliminate the exception to consolidate a subsidiary for which control is
likely to be temporary. SFAS 144 retains the requirement of SFAS 121 to
recognize an impairment loss only if the carrying amount of a long-lived asset
within the scope of SFAS 144 is not recoverable from its undiscounted cash flows
and exceeds its fair value.
SFAS 144 is effective for fiscal years beginning after December 15,
2001, and interim periods within those fiscal years, with early application
encouraged. The provisions of SFAS 144 generally are to be applied
prospectively. The Company believes that the adoption of SFAS 144 will not have
a material impact on the Company's financial position or results of operations.
5
Blonder Tongue Laboratories, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited) (in thousands)
Note 3 - Inventories
Inventories net of reserves, are summarized as follows:
Sept. 30, Dec. 31,
2001 2000
-------- --------
Raw Materials....................................... 13,162 $ 11,346
Work in process..................................... 2,780 3,261
Finished Goods...................................... 13,416 11,726
-------- --------
29,358 $ 26,333
======== ========
Note 4 - Line of Credit
The Company has a $5,500 revolving line of credit with its bank 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 (7.0% at
September 30, 2001). At September 30, 2001, the Company had $4,331 outstanding
under the line of credit. Borrowings under the line of credit are limited to
certain percentages of eligible accounts receivable and inventory as defined in
the credit agreement. The agreement also contains restrictions that require the
Company to maintain certain financial ratios as well as restrictions on the
payment of dividends.
In March, 2001, the Company's credit agreement with its bank was
amended to retroactively modify certain financial covenants effective as of
December 31, 2000 and thereafter, as well as to extend the maturity date of the
line of credit until November 30, 2001. At June 30, 2001 and September 30, 2001,
the Company was unable to meet one of its financial covenants, compliance with
which was waived by the bank as of each such date. Also, in November 2001, the
maturity date of the Company's line of credit was extended until March 31, 2002
and the Company agreed that one of the financial covenants which had previously
been deleted from the credit agreement would again become effective as of
December 31, 2001. The Company anticipates that it will either conclude
negotiations with its bank and obtain a further renewal of its current credit
facilities, or enter into new credit facilities with another bank, prior to
March 31, 2002.
The Company has two term loans with its bank (hereinafter referred to
respectively as "Term Loan A and Term Loan B"). Term Loan A accrues 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 (5.9875% at September 30, 2001). At
September 30, 2001, there was $10,133 outstanding under Term Loan A. The
principal balance of Term Loan A is being amortized in monthly installments of
$317 with a final balloon payment of all remaining unpaid principal and accrued
interest due on June 30, 2002.
Term Loan B, which is primarily secured by a mortgage against the
Company's facility in Old Bridge, New Jersey, accrues interest at a variable
interest rate based upon the bank's base rate (6.0% at September 30, 2001). At
September 30, 2001 there was $1,804 outstanding under the Term Loan B. The
principal balance of Term Loan B is being amortized in monthly installments of
$16 with a final payment of all remaining unpaid principal and accrued interest
due in April, 2006.
All obligations of the Company to its bank are collateralized by a
security interest in all of the Company's assets.
6
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 section entitled 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, 2000 (See Item 1:
Business and Item 7: Management's Discussion and Analysis of Financial Condition
and Results of Operations).
Third three months of 2001 Compared with third three months of 2000
Net Sales. Net sales decreased $2,873,000, or 15.1%, to $16,064,000 in
the third three months of 2001 from $18,937,000 in the third three months of
2000. The decrease in sales is primarily attributed to a decrease in sales of
interdiction products. Net sales included approximately $1,621,000 of
interdiction equipment for the third three months of 2001, compared to
approximately $7,113,000 for the third three months of 2000.
Cost of Goods Sold. Cost of goods sold decreased to $10,813,000 for the
third three months of 2001 from $13,286,000 for the third three months of 2000
and decreased as a percentage of sales to 67.3% from 70.2%. The decrease as a
percentage of sales was caused primarily by a higher proportion of sales during
the period being comprised of higher margin products, including the Company's
new QQQT transcoder products.
Selling Expenses. Selling expenses decreased to $1,209,000 for the
third three months of 2001 from $1,517,000 in the third three months of 2000
primarily due to a reduction in departmental supplies and decreased as a
percentage of sales to 7.5% for the third three months of 2001 from 8.0% for the
third three months of 2000.
General and Administrative Expenses. General and administrative
expenses decreased to $1,514,000 for the third three months of 2001 from
$1,842,000 for the third three months of 2000 and decreased as a percentage of
sales to 9.4% for the third three months of 2001 from 9.7% for the third three
months of 2000. The $328,000 decrease can be primarily attributed to a decrease
in bad debt expense.
Research and Development Expenses. Research and development expenses
decreased to $530,000 in the third three months of 2001 from $589,000 in the
third three months of 2000, primarily due to a decrease in departmental
supplies. Research and development expenses, as a percentage of sales, increased
to 3.3% in the third three months of 2001 from 3.1% in the third three months of
2000.
Operating Income. Operating income increased 17.3% to $1,998,000 for
the third three months of 2001 from $1,703,000 for the third three months of
2000. Operating income as a percentage of sales increased to 12.4% in the third
three months of 2001 from 9.0% in the third three months of 2000.
Interest Expense. Interest expense decreased to $391,000 in the third
three months of 2001 from $423,000 in the third three months of 2000. The
decrease is the result of lower average borrowings and lower average interest
rates offset by $82,000 as a result of the termination of an interest rate swap
agreement.
7
Income Taxes. The provision for income taxes for the third three months
of 2001 increased to $573,000 from $462,000 in the third three months of 2000 as
a result of an increase in taxable income.
First nine months of 2001 Compared with first nine months of 2000
Net Sales. Net sales decreased $18,618,000 or 32.0%, to $39,561,000 in
the first nine months of 2001 from $58,179,000 in the first nine months of 2000.
The decrease in sales is primarily attributed to a decrease in sales of
interdiction products. Net sales included approximately $6,930,000 of
interdiction equipment for the first nine months of 2001 compared to
approximately $25,443,000 for the first nine months of 2000.
Cost of Goods Sold. Cost of goods sold decreased to $26,087,000 for the
first nine months of 2001 from $38,510,000 for the first nine months of 2000 and
decreased as a percentage of sales to 65.9% from 66.2%. The decrease as a
percentage of sales was caused primarily by a higher proportion of sales during
the period being comprised of higher margin products, including the Company's
new QQQT transcoder products.
Selling Expenses. Selling expenses decreased to $3,883,000 for the
first nine months of 2001 from $4,628,000 in the first nine months of 2000, but
increased as a percentage of sales to 9.8% for the first nine months of 2001
from 8.0% for the first nine months of 2000. The $745,000 decrease is primarily
due to a decrease in wages related to the decrease in headcount along with a
decrease in commissions and freight expense as a result of reduced sales.
General and Administrative Expenses. General and administrative
expenses decreased to $4,720,000 for the first nine months of 2001 from
$5,420,000 for the first nine months of 2000, but increased as a percentage of
sales to 11.9% for the first nine months of 2001 from 9.3% for the first nine
months of 2000. The $700,000 decrease can be primarily attributed to a decrease
in departmental supplies, consulting fees and reporting fees.
Research and Development Expenses. Research and development expenses
increased to $1,662,000 in the first nine months of 2001 from $1,641,000 in the
first nine months of 2000, primarily due to a increase in consulting expenses.
Research and development expenses, as a percentage of sales, increased to 4.2%
in the first nine months of 2001 from 2.8% in the first nine months of 2000.
Operating Income. Operating income decreased 59.8% to $3,209,000 for
the first nine months of 2001 from $7,980,000 for the first nine months of 2000.
Operating income as a percentage of sales decreased to 8.1% in the first nine
months of 2001 from 13.7% in the first nine months of 2000.
Interest Expense. Interest expense decreased to $1,133,000 in the first
nine months of 2001 from $1,529,000 in the first nine months of 2000, due
primarily to lower average borrowing and lower average interest rates.
Income Taxes. The provision for income taxes for the first nine months
of 2001 decreased to $750,000 from $2,300,000 for the first nine months of 2000
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, 2001 was $2,485,000 compared to $3,306,000
for the nine-month period ended September 30, 2000 due to a decrease in
earnings.
Cash used in investing activities was $585,000, which was attributable
to capital expenditures for new equipment.
Cash used in financing activities was $1,186,000 for the first nine
months of 2001 primarily comprised of $2,081,000 of net borrowings under the
revolving line of credit offset by $3,267,000 of repayments of long-term debt.
8
The Company has a $5,500,000 revolving line of credit with its bank 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 (7.0% at
September 30, 2001). At September 30, 2001, the Company had $4,331,000
outstanding under the line of credit. Borrowings under the line of credit are
limited to certain percentages of eligible accounts receivable and inventory as
defined in the credit agreement. The agreement also contains restrictions that
require the Company to maintain certain financial ratios as well as restrictions
on the payment of dividends.
In March, 2001, the Company's credit agreement with its bank was
amended to retroactively modify certain financial covenants effective as of
December 31, 2000 and thereafter, as well as to extend the maturity date of the
line of credit until November 30, 2001. At June 30, 2001 and September 30, 2001,
the Company was unable to meet one of its financial covenants, compliance with
which was waived by the bank as of each such date. Also, in November 2001, the
maturity date of the Company's line of credit was extended until March 31, 2002
and the Company agreed that one of the financial covenants which had previously
been deleted from the credit agreement would again become effective as of
December 31, 2001. The Company anticipates that it will either conclude
negotiations with its bank and obtain a further renewal of its current credit
facilities, or enter into new credit facilities with another bank, prior to
March 31, 2002.
The Company has two term loans with its bank (hereinafter referred to
respectively as "Term Loan A and Term Loan B"). Term Loan A accrues 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 (5.9875% at September 30, 2001). At
September 30, 2001, there was $10,133,000 outstanding under Term Loan A. The
principal balance of Term Loan A is being amortized in monthly installments of
$317,000 with a final balloon payment of all remaining unpaid principal and
accrued interest due on June 30, 2002.
Term Loan B, which is primarily secured by a mortgage against the
Company's facility in Old Bridge, New Jersey, accrues interest at a variable
interest rate based upon the bank's base rate (6.0 % at September 30, 2001). At
September 30, 2001, there was $1,804,000 outstanding under Term Loan B. The
principal balance of Term Loan B is being amortized in monthly installments of
$16,000, with a final payment of all remaining unpaid principal and accrued
interest due in April, 2006.
All obligations of the Company to its bank are collateralized by a
security interest in all of the Company's assets.
On February 3, 1999, the Company entered into an interest rate swap
agreement with a notional amount of $10,000,000. The swap agreement had a
maturity date of June 3, 2002 and required the Company to make fixed rate
interest payments on the notional amount of 8.01% per annum in exchange for
floating rate payments equal to LIBOR plus 2.55%. The Company was exposed to
credit risk in the unlikely event of the nonperformance by the counterparties.
Interest to be paid or received was accrued over the life of the agreement at
the net effective interest rate for the swap and corresponding debt instrument.
In August 2001, the Company terminated the Swap agreement and recorded $82,000
in additional interest expense.
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.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS 133 was adopted by the
Company on January 1, 2001. SFAS 133 requires that all derivative instruments be
recorded on the balance sheet at fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of the hedge
transaction and the type of hedge transaction. The adoption of this
pronouncement did not have a material effect on the Company's financial position
or results of operations.
9
In July 2001, the FASB issued SFAS No. 141, Business Combinations and
SFAS No. 142, Goodwill and Other Intangible Assets. SFAS 141 requires the use of
the purchase method of accounting and prohibits the use of the
pooling-of-interests method of accounting for business combinations initiated
after June 30, 2001. SFAS 142 addresses financial accounting and reporting for
acquired goodwill and other intangible assets. SFAS requires, among other
things, that companies no longer amortize goodwill, but instead test goodwill
for impairment at least annually. SFAS 142 is required to be applied for fiscal
years beginning after December 15, 2001. The Company's previous business
combinations were accounted for using the purchase method. As of September 30,
2001, net carrying amount of goodwill is $11,003,000 and other intangible assets
is $4,171,000. Amortization expense during the nine-month period ended September
30, 2001 was $1,127,000. Currently, the Company is assessing but has not yet
determined how the adoption of SFAS 141 and SFAS 142 may impact its financial
position and results of operations.
In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. The new guidance resolves
significant implementation issues related to SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.
SFAS 144 supersedes SFAS 121, but it retains its fundamental provisions. It also
amends Accounting Research Bulletin No. 51, Consolidated Financial Statements,
to eliminate the exception to consolidate a subsidiary for which control is
likely to be temporary. SFAS 144 retains the requirement of SFAS 121 to
recognize an impairment loss only if the carrying amount of a long-lived asset
within the scope of SFAS 144 is not recoverable from its undiscounted cash flows
and exceeds its fair value.
SFAS 144 is effective for fiscal years beginning after December 15,
2001, and interim periods within those fiscal years, with early application
encouraged. The provisions of SFAS 144 generally are to be applied
prospectively. The Company believes that the adoption of SFAS 144 will not have
a material impact on the Company's financial position or results of operations.
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, 2001 and 2000 the principal amount of the Company's
aggregate outstanding variable rate indebtedness was $16,268,000 and
$19,464,000, respectively. A hypothetical 1% adverse change in interest rates
would have had an annualized unfavorable impact of approximately $10,000 and
$18,000, respectively, on the Company's earnings and cash flows based upon these
quarter-end debt levels.
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 2002 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 Chief Financial Officer at One Jake Brown Road, Old
Bridge, New Jersey 08857 on or before December 3, 2001, to be eligible for
inclusion in such proxy statement.
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If notice of a stockholder proposal intended to be presented at the
2002 Annual Meeting of Stockholders is not received by the Company on or before
February 17, 2002 (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 13
herein.
(b) No reports on Form 8-K were filed in the quarter ended September
30, 2001.
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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: November 14, 2001
By: /s/ James A Luksch
----------------------------------------------
James A. Luksch
President and Chief Executive Officer
By: /s/ Eric Skolnik
----------------------------------------------
Eric Skolnik,
Vice President and Chief Financial Officer
(Principal Financial Officer)
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EXHIBIT INDEX
Exhibit # Description Location
--------- ----------- --------
3.1 Restated Certificate of Incorporation of Blonder Incorporated by reference from Exhibit 3.1
Tongue Laboratories, Inc. 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 3.2
Inc. to S-1 Registration Statement No. 33-98070
originally filed October 12, 1995, as
amended.
10.1 Waiver dated August 13, 2001, to Fifth Amended and Filed herewith
Restated Loan Agreement between Blonder Tongue
Laboratories, Inc. and First Union National Bank.
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