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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
Securities Exchange Act of 1934
For the fiscal year ended Commission File Number
December 31, 1999 2-44764
BALTEK CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-2646117
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Fairway Court
P.O. Box 195 07647
Northvale, New Jersey (Zip Code)
(Address of principal executive offices)
Registrant's telephone number: (201) 767-1400
Securities Registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 Par Value
-----------------------------
(Title of Class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates on
March 2, 2000 amounted to $7,355,000
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date, March 2, 2000: 2,523,261
shares, Common Stock, $1.00 par value.
Documents incorporated by reference: Portions of the registrant's proxy
statement dated April 27, 2000 for use in connection with its 1999 annual
meeting of stockholders are incorporated by reference in Part II of this Annual
Report on Form 10-K to the extent set forth in items 10, 11, and 12 hereof.
PART I
Item 1. BUSINESS
Principal Products
The registrant and its subsidiaries (hereinafter collectively referred
to as the "Company") is a multinational manufacturing and marketing company. The
Company operates in two lines of business: 1) supplying core materials,
primarily balsa wood and balsa wood products, linear and cross-linked PVC foam
products, and non-woven polyester mat, and 2) seafood, including aquaculture,
the farming and processing of shrimp, and as an importer. The foam and mat
products, together with the Company's balsa products, position the Company as a
complete supplier to the composite structural core market. The core materials
are typically used by the Company's customers to manufacture a variety of
products by laminating metal or fiberglass reinforced plastic skins to both
sides of the core material, thereby creating a sandwich structure. The products
manufactured by the Company's customers include fiberglass boats, aircraft cargo
pallets, aircraft flooring, fiberglass storage and processing tanks and
fiberglass tub and shower bottoms. Balsa lumber is used mostly by the hobby
industry to manufacture model airplanes.
The Company mills and sells graded and finished balsa lumber in standard
sizes and balsa wood strips and blocks. "Standard sizes" of balsa lumber are
measured in boardfeet (12" x 12" x 1") for the English system of measure or in
cubic meters for the metric system of measure. Shipments to Europe (except the
U.K.) and Japan are made in cubic meters while shipments to the U.S. and the
U.K. are in boardfeet. The Company, for production and statistical purposes,
converts all metric measurements into boardfeet, thus the Company's "standard"
is boardfeet. The Company also manufactures and sells custom-made bonded panels,
bonded blocks of balsa wood, and a flexible balsa wood block mat called
"Contourkore." Glued-up balsa blocks are marketed in two ways. Part is sold
directly to customers in block or panel form, the balance is shipped to the
Company's factory in Northvale, NJ for further processing into Contourkore and
other products.
The Company's mat products are imported from Holland and Japan and
resold without further manufacturing. These products are marketed as "Coremat"
and "BaltekMat," principally to the pleasure boat industry.
The Company is the sole North American source and nonexclusive
distributor in Central and South America of Airex(R) (a registered trademark of
Alusuisse Airex AG) and Airlite(TM), structural PVC foam products. The foam is
purchased from Airex for further processing in the U.S. and is sold to customers
as rigid or flexible panels in various thicknesses.
The Company is also in the seafood business, including aquaculture and
as an importer. The aquaculture business, specifically shrimp farming in
Ecuador, South America, consists of a hatchery, two farms and a packing plant.
Shrimp larvae are supplied by the hatchery to the farms, and after harvest,
transferred to the packing plant for processing and shipment. The Company
supplies frozen blocks that are purchased in wholesale quantities by importers
and/or large processors. Typically these companies buy container loads of shrimp
and then either distribute them to other users or process and redistribute them
as cooked, breaded or repacked products. They are sold under their own brand
names and to a very large network of smaller specialized users and retailers
(supermarkets, restaurants, etc.). The Company also operates as a seafood
importer, purchasing various types of seafood products such as shrimp, salmon
and lobster from independent producers located throughout the world and shrimp
from the Company's own farms. The products are then sold to customers, such as
seafood distributors, primarily in the United States. The Company maintains a
variety of products in inventory for the convenience of its customers in
addition to arranging simultaneous shipments (purchases) from producers and
sales to customers, commonly called "back-to-back" transactions. The import
business is located in Northvale, New Jersey.
All of the Company's balsa and shrimp are produced in Ecuador. The
dependence on foreign countries for raw materials represents some inherent
risks. However, the Company, or its predecessors, has operated without
interruption in Ecuador since 1940. Operating in Ecuador has enabled the Company
to produce raw materials at a reasonable cost in an atmosphere that has been
favorable to exporters such as the Company. To mitigate the risk of operating in
Ecuador, in 1999 the Company obtained a five-year expropriation insurance
policy. This policy provides the Company coverage for its assets in Ecuador
against expropriatory conduct (as defined in the policy) by the government of
Ecuador. The amount of the recoverable loss is governed by the terms of the
policy. Recent economic and political developments in Ecuador caused significant
volatility in the value of the sucre in 1999, which continues into 2000. The
value of the sucre was approximately 8,000 sucre to the U.S. dollar at January
1, 1999, and decreased to 25,000 sucre per dollar early in 2000. In 2000 the
Ecuadorian government has announced plans to adopt the U.S. dollar as its
national currency, a plan commonly being called "Dollarization". This plan
requires government approval in Ecuador and the U.S. in addition to major
operational changes in the Ecuadorian economy. It is not clear at this time if
the plan will be implemented or precisely how certain aspects of Dollarization
will be introduced. With the exception of Panama, no other country in Latin
America has adopted the U.S. dollar as its national currency. Due to the
significant uncertainty surrounding the plan, the effects of Dollarization on
the Company, if implemented, cannot be determined at this time.
Principal Markets and Methods of Distribution
The Company's balsa products are sold throughout the United States,
Canada, Europe, Japan, Australia and Latin America to approximately 1,600
ultimate users. The foam and mat products are sold primarily in North America.
The Company's salesmen are used extensively in the sale of its core material
products. The Company makes approximately 30% of its domestic core material
product sales directly. The remainder of the sales is handled through regional
distributors in the United States, Europe, Canada and the Pacific Rim. Sales of
Contourkore to customers outside the United States are handled through a wholly-
owned Foreign Sales Corporation.
The Company's shrimp is sold in the United States, Europe and Canada.
In 1999, approximately 79% of the shrimp production was sold to the European
market; the balance was sold to the U.S. and Canadian markets.
Competitive Conditions
As part of their overall business, other companies, with aggregate
facilities and financial resources substantially greater than those of the
Company, manufacture and sell various natural and synthetic products for nearly
all the purposes for which balsa, foam and mat products are sold by the Company.
Some of these competitive products are produced and sold at a lower price than
the Company's products, and sales of these competing products are substantially
greater than the Company's sales of core materials.
In North America and Europe, the Company also directly competes with
companies, some with greater resources than the Company, that manufacture and
sell balsa and foam products at prices which may be lower than those offered by
the Company.
The Company's shrimp business competes against many larger companies
that produce shrimp through similar methods in addition to fishing for shrimp in
the traditional method of trawling.
The importing business competes against other companies, some
substantially larger than the Company, which also import seafood products.
Additionally, certain of these companies also act as their own processors,
wholesalers or distributors, thus providing more services to the customer than
the Company.
Material Customer
No customer accounted for more than 10% of revenues in 1999, 1998 or
1997.
Backlog
As of December 31, 1999 and 1998, the Company had a backlog of orders
believed to be firm in the amounts of $9,607,000 and $12,488,000, respectively.
The 1999 backlog is reasonably expected to be filled within the current fiscal
year.
Sources and Availability of Raw Materials
The Company acquires, partly from its own plantations and partly from
others, substantially all of its balsa wood from western and coastal Ecuador,
accessible by roads so that the balsa lumber can be transported by truck to its
sawmills. The Company presently considers the timber standing in this area to be
ample to supply all the Company's requirements in the foreseeable future. The
Company may, however, make periodic purchases of land to supplement its existing
plantations and provide for future growth. The Company also receives small
quantities of balsa from other Latin American countries. The Company has
experienced no difficulties in purchasing its foam and mat materials and
anticipates that the manufacturers will be able to produce adequate quantities
to meet demand. The resins, fiberglass and other materials used in the Company's
manufacturing processes are available from numerous commercial sources. To date,
the Company has experienced no difficulty in obtaining such materials needed for
its operations.
The Company owns and operates two shrimp farms and a shrimp hatchery in
Ecuador for the production of a steady and plentiful supply of shrimp. The
hatchery supplies substantially all the larvae required by the Company's ponds.
The Company also owns a shrimp packing plant in Ecuador, thereby achieving
complete vertical integration of the shrimp business. The import operations are
able to purchase its products from a variety of producers and, with the
exception of shrimp, are expected to have an adequate supply of seafood.
Patents, Trademarks and Licenses
The Company features its registered trademark "Belcobalsa(R)" for
lumber, dimension stock, and bonded panels and blocks, "Contourkore(R)",
"LamPrep(R)" and "AL-600/10(R)" for the flexible wood block mat, "Durakore(R)",
a balsa hardwood composite, "D100(R)" for end-grain panels and "Decolite(R)" a
balsa composite panel used as an alternative to plywood, and low-density
laminate bulkers, marketed as "BaltekMat(R)".
The Company also features "Airlite(TM)", a cross-linked PVC foam,
"AIREX(R)"(registered trademark of Alusuisse Airex AG), a linear foam and "Firet
Coremat(R)", also a low-density laminate bulker.
Estimated Research Costs
The Company has incurred approximately $597,000 during 1999 for
research and development, compared to expenditures of $609,000 in 1998 and
$331,000 in 1997. All expenditures are related to the core materials segment.
The Company continues to actively explore possible new applications of its core
materials and new processes to improve the manufacturing of those products.
Environmental Impact
The Company has experienced no material impact upon its capital
expenditures, earnings or competitive position as a result of its compliance
with federal, state or local provisions relating to the protection of the
environment. Balsa is not a rainforest species, nor does it grow in the
rainforest. It is usually harvested within five years. The fast growth rate
makes balsa similar to short-cycle agricultural crops and an ideal tree species
for forest plantations.
Employees
The Company has 1,174 employees in Ecuador, 173 in the United States
and 10 in Europe, aggregating 1,357 employees.
Seasonality
The Company's business is not seasonal.
Classes of Products
The following table sets forth the amount and percentage of net sales
represented by each of the Company's product classes in each of the three years
in the period ended December 31, 1999 (dollars in thousands):
Year Core Materials Seafood Total
1999 $58,938 $27,089 $86,027
69% 31% 100%
1998 $53,600 $14,095 $67,695
79% 21% 100%
1997 $44,004 $12,136 $56,140
78% 22% 100%
Segment Information
The Company is engaged in two lines of business, that of manufacturing
and supplying products which are used principally as the structural core
material in composite applications in various industries, and in the seafood
business, as a shrimp producer in Ecuador and as an importer.
Reference is made to the information set forth in Note 11 to the Notes
to Consolidated Financial Statements, Part II, Item 8 hereof, with respect to
assets and operating results for different business segments.
Foreign Operations
The Company, through its Ecuadorian subsidiaries, owns and operates
five woodworking plants and approximately 14,510 acres of forest land in
Ecuador. In addition, the Company owns and operates two shrimp farms on
approximately 2,500 acres, a shrimp hatchery and a shrimp packing plant.
At the Company's woodworking plants, rough balsa lumber is received
from plantations or independent loggers and then processed into finished lumber
and other manufactured products.
The Company's shrimp ponds are stocked with larvae. After feeding,
controlling the pond environment and monitoring the growth of the shrimp for a
period of approximately six months, the shrimp are harvested, frozen, packed and
sold for export.
The Company, through its European subsidiaries, operates sales offices
in France, the United Kingdom and Denmark.
Reference is made to the information set forth in Note 11 to the Notes
to Consolidated Financial Statements, Part II, Item 8 hereof, with respect to
assets and operating results by geographic areas.
No prediction can be made as to any future increase or decrease of the
Company's foreign business. The Company has experienced differences in
profitability between foreign and domestic sales due to the changing value of
the U.S. dollar in relation to the foreign currencies of countries where its
products are sold.
Item 2. PROPERTIES
The Company owns or leases the properties indicated in the following table:
Property and Location Status
One-story concrete and steel building containing the Company's principal Leased
offices, manufacturing plant and warehouse space, approximately 85,000 square
feet on 4-1/2 acres. (Northvale, New Jersey)
Approximately 94,000 square feet of warehouse and office space in three Leased
buildings. (Norwood and Northvale, New Jersey)
Woodworking plant housed in several wood, concrete and steel buildings, Owned
approximately 180,000 square feet. (Guayaquil, Ecuador)
Woodworking plant housed in several wood, concrete and steel buildings, Owned
approximately 30,000 square feet on 7 acres of land. (Guayaquil, Ecuador)
14,510 acres of timberland in Ecuador. Owned
2,000 acres of land for shrimp farming in Ecuador, including 10 wood buildings Owned
and one concrete building totaling approximately 11,000 square feet.
444 acres of land for shrimp farming in Ecuador, including 4 concrete buildings Leased
and 4 wood buildings totaling 4,357 square feet.
Shrimp hatchery housed in several concrete buildings on 3.7 acres of land. (San Owned
Pablo, Ecuador)
Shrimp packing plant housed in three concrete and steel buildings on 2.6 acres Owned
of land. (Duran, Ecuador)
Woodworking plant housed in four concrete and steel buildings, 165,000 square Owned
feet on approximately 28 acres of land. (Santo Domingo de los Colorados,
Ecuador)
Woodworking plant housed in four concrete and steel buildings, 62,000 square Owned
feet on approximately 7 acres of land. (Manta, Ecuador)
Woodworking plant housed in one wood building, 26,000 square feet on Owned
approximately 8 acres of land. (Quevedo, Ecuador)
Maintenance facilities for the Balsa Raw Material Department in a concrete and Owned
wood building, 16,875 square feet. (Quevedo, Ecuador)
Office space in concrete building, 8,489 square feet. (Guayaquil, Ecuador) Owned
Office space in concrete building, 1,000 square feet. (Croydon, U.K.). Leased
Office space in stone and wood building, 2,000 square feet. (Paris, France) Lease
All of the above properties, except the shrimp farming land, hatchery
and packing plant and approximately 2,000 square feet of office space in
Northvale, New Jersey, are used in the core materials business.
All of the Company's properties, plants and equipment are considered to
be presently sufficient for their respective purposes.
Item 3. LEGAL PROCEEDINGS
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There was no submission of matters to a vote of security holders during
the fourth quarter of 1999.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock is traded on the Nasdaq National Market
under the Symbol: BTEK. The following is the range of high and low prices for
the last two years.
1999 1998
--------------------- --------------------
HIGH LOW HIGH LOW
1st Quarter $10.44 $8.00 $10.50 $7.63
2nd Quarter 10.00 7.63 12.00 8.75
3rd Quarter 10.00 7.75 10.81 8.53
4th Quarter 8.25 7.00 11.75 9.75
The Company had approximately 143 stockholders of record as of March 2,
2000.
No cash dividends were paid during the past two years.
Item 6. SELECTED FINANCIAL DATA
(Dollars in thousands except per share amounts)
YEARS ENDED DECEMBER 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Net sales $ 86,027 $ 67,695 $ 56,140 $ 48,366 $ 45,784
Net income 2,816 3,259 1,841 450 1,962
Earnings per common share 1.12 1.29 .73 .18 .78
Total assets 52,905 46,077 41,755 39,315 38,816
Long-term obligations 591 1,581 3,015 1,957 1,993
Cash dividends declared per common
share -- -- -- -- --
Average shares outstanding 2,523,261 2,523,261 2,523,261 2,523,261 2,523,261
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of liquidity historically have been and are
expected to continue to be cash flow generated from operations and available
borrowings under short-term lines of credit. The Company increased its borrowing
capacity under its domestic line of credit to $12.5 million in 1999. The Company
also continues to have lines of credit in Ecuador and Europe totaling
approximately $4.7 million. Working capital and borrowing requirements increased
in 1999 and are expected to continue to increase as a result of the Company's
expanded operations as a seafood importer as well as organic growth in its core
material business. Capital expenditures are expected to be funded by a
combination of cash generated from operations and outside financing, if
necessary.
The Company's financial position remains strong. At December 31, 1999,
the Company had working capital of $14.8 million compared to $13.8 million at
December 31, 1998. Cash was provided and used in varying amounts during the
two-year period, principally as a result of changes in the elements of current
assets and current liabilities and in the amount of cash provided by net income.
Inventories and accounts receivable increased in 1999 due to the Company's
expansion into the seafood import business. The Company's short-term borrowings,
which were used to finance higher working capital requirements, also increased
in 1999.
Cash used in investing activities for the three-year period was due to
investments in balsa plantations, purchase of new equipment in addition to
replacement of old equipment and structural improvements of the shrimp ponds.
The Company has no material commitments for capital expenditures.
The Company had unused lines of credit of approximately $6.7 million
with a domestic bank, approximately $1.6 million with Ecuadorian banks and
approximately $0.7 million with European banks for working capital purposes. The
Company expects that future operations and its unused lines of credit will
provide sufficient resources to support its planned expansion and maintain its
favorable liquid position.
RESULTS OF OPERATIONS FOR THE YEARS
ENDED DECEMBER 31, 1999, 1998 AND 1997
Total sales increased 27%, 21% and 16% in 1999, 1998 and 1997,
respectively. The gains in all three years were due to increased core materials
and seafood sales.
Core material sales were $58,938,000, $53,600,000 and $44,004,000 in
1999, 1998 and 1997, respectively. The continued robust economy has resulted in
strong demand in all industries that use core materials, including the Company's
largest customer group, the boating industry. Many of the Company's end user
markets, including boating, are highly cyclical. Demand within those industries
is dependent upon, among other factors, discretionary income, inflation,
interest rates and consumer confidence. Fluctuating interest rates and other
changes in economic conditions make it difficult to forecast short or long range
trends. The increase in core material sales in 1999 compared to 1998 was
attributable to higher pricing and volume.
Seafood sales were $27,089,000, $14,095,000 and $12,136,000 in 1999,
1998 and 1997, respectively. The increase in 1999 was the result of sales of
seafood products from the Company's import business, which began in the first
quarter. The increases in 1998 and 1997 were the result of higher volume of
shrimp shipped.
The overall gross margin as a percentage of sales decreased in 1999 and
increased in 1998 and 1997. The typical margin in the seafood import business is
lower than the company's historical margins realized as a core materials
producer/distributor and shrimp producer. The overall margin was therefore
expected to decline in 1999 as a result of the Company's importing activities.
The margin for the Company's core products remained approximately the same in
1999 after increasing in 1998 and 1997. The margins primarily improved due to
improved pricing. The margins from shrimp sales decreased in 1999, 1998 and
1997. A virus, commonly called "White Spot" disease, has affected shrimp farms
in South America and other parts of the world. This disease has resulted in
lower revenues in 1999 because of 1) lower production at the Company's farms and
2) the Company is harvesting its production earlier (smaller sizes sell for less
per pound than larger sizes). There has also been increased volatility in shrimp
prices in 1999 as compared to 1998. Lower revenues have resulted in a lower
gross margin for 1999 as compared to 1998. The Company is taking all possible
steps to mitigate the effect of this disease on its farms, but since other farms
in South America are effected, no determination can be made as to its longevity
and effect on shrimp prices in the marketplace. The gross margin from shrimp
sales decreased in 1998 and 1997. The decrease in margins in 1998 and 1997 is
attributable to a higher volume of shrimp purchased from outside suppliers,
which have lower margins than shrimp grown at the Company's own farms.
Selling, general and administrative expenses as a percentage of sales
declined in 1999, 1998 and 1997. The seafood import business, which began during
the first quarter of 1999, has a lower percentage of S,G&A expenses to revenues
as compared to the Company's historical relationship. This, as expected, reduced
S,G&A expenses as a percentage of sales. The decline in all years, but primarily
1998 and 1997, was due to a better absorption of fixed expenses, primarily
general and administrative expenses, as a result of increased sales.
Sales and expenses were affected in all three years by the different
exchange rates applied in translating the books of accounts of the Company's
foreign subsidiaries.
Interest expense decreased in 1999 after increasing in 1998 and 1997.
In 1999, the Company's short-term borrowings for working capital purposes in
Ecuador were primarily U.S. dollar denominated loans. Sucre-based loans were
available on a limited basis during much of 1999. In 1998, the Company borrowed
money for working capital purposes in Ecuador in local currency (sucre)
denominated loans. The sucre-based loans bear higher interest rates than U.S.
dollar loans, which was partially offset by gains resulting from the devaluation
of the sucre. This practice increased interest expense in 1998 as compared to
1997 but created a corresponding foreign exchange gain. The Company's interest
rate on U.S. loans was lower in 1999 and its average borrowings were
significantly higher in 1999 as compared to 1998. The level of borrowing in all
periods is related to the Company's working capital needs and cash flows
generated from operations.
The Company had a foreign exchange loss of $336,000 in 1999 compared to
a gain in 1998 of $814,000 and a loss of $84,000 in 1997. Gains were lower in
1999 due mainly to the Company's shift from sucre based to dollar denominated
loans described above. Translation gains and losses are mainly caused by the
relationship of the U.S. dollar to the foreign currencies in the countries where
the Company operates, and arise when translating foreign currency balance sheets
into U.S. dollars. The Company utilizes foreign exchange contracts to hedge
certain inventory purchases and may also employ certain strategies whose
objective is to reduce earnings and cash flow volatility associated with foreign
exchange rate changes. The Company has not and does not intend to enter into
foreign currency transactions for speculative purposes.
Management is unable to forecast the impact of translation gains or losses on
future periods due to the unpredictability in the fluctuation of foreign
exchange.
The effective income tax rate amounted to 32% in 1999, 26% in 1998 and
28% in 1997. Reconciliation of the effective rate with the U.S. statutory rate
is detailed in Note 8 to the Notes to Consolidated Financial Statements.
Year 2000
The Company experienced no major problems with its internal information
technology ("IT") systems and non-IT systems, nor did it experience any problems
with critical suppliers, customers and other third parties the Company utilizes
for various processing functions. The costs of Year 2000 compliance did not have
a material effect on its financial position or results of operations. There can
be no assurance, however, that the Company or its' suppliers may not face future
problems as a result of Year 2000 issues.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," which was
amended by SFAS No. 137. The statement establishes accounting and reporting
standards for derivative instruments and hedging activities and requires that an
entity recognize all derivatives as either assets or liabilities in the balance
sheet and measure those instruments at fair value. Provisions of the statement
are required to be adopted for years beginning after June 15, 2000. The Company
is currently evaluating the impact of this statement on its financial position
and results of operations.
* * * * *
Forward Looking Statements - Cautionary Factors
The foregoing discussion and analysis contains forward-looking
statements regarding the Company. Because such statements include risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause actual
results to differ materially include, but are not limited to, economic
conditions in the United States, Europe and Ecuador that affect relative
interest rates, foreign exchange rates and other costs and prices related to the
Company's business.
Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to various market risks, including changes in
commodity prices, foreign currency fluctuations and interest rates. To manage
the volatility associated with foreign currency purchases of materials created
in the normal course of business, the Company enters into a limited number of
derivative hedging transactions. Gains and losses related to qualifying hedges
of foreign currency firm commitments are deferred and included in the basis of
the underlying transactions. The deferred gains and losses on these instruments
at December 31, 1999 were not material. The Company does not hold or issue
derivative financial instruments for speculative purposes.
In addition, in order to hedge currency exposures related to the net
investments in foreign subsidiaries, the Company utilizes local currency and
U.S. dollar denominated financing entered into by the subsidiaries. The Company
manages interest rate cost relating to these financings by using variable
interest rates. Although the use of variable interest rate bearing debt
instruments has the potential for market risk, the Company's overall interest
rate exposure as of and during the year ended December 31, 1999 would not be
materially affected by a near-term change in interest rates.
For quantitative disclosure regarding the Company's derivative
instruments see Note 12 to the Consolidated Financial Statements.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the registrant and
subsidiaries, and supplemental schedule are annexed hereto and made part hereof.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Omitted from this Report since a definitive Proxy Statement, pursuant
to Regulation 14A containing the required information, will be filed with the
Commission not later than 120 days after the close of registrant's fiscal year.
Item 11. EXECUTIVE COMPENSATION
Omitted from this Report since a definitive Proxy Statement, pursuant
to Regulation 14A containing the required information, will be filed with the
Commission not later than 120 days after the close of registrant's fiscal year.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Omitted from this Report since a definitive Proxy Statement, pursuant
to Regulation 14A containing the required information, will be filed with the
Commission not later than 120 days after the close of registrant's fiscal year.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Inapplicable.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a)(1) and (2) Consolidated Financial
Statements and Financial
Statement Schedule See Index
to Consolidated Financial
Statements and Financial
Statement Schedule annexed
hereto and made part hereof.
(b) Reports on Form 8-K
No reports on Form 8-K were
filed by or on behalf of the
registrant for the quarter
ended December 31, 1999, the
last quarter in the period
covered by this Annual Report
on Form 10-K.
(c) List of Exhibits
Exhibit No. Item
3.2 Articles of Incorporation
(By-laws), filed as Exhibit
3.2 to Registration Statement
on Form S-1(Reg. No. 2-44764)
is incorporated herein by
reference
10.1 Revolving Loan and Security
Agreement between the Company
and Summit Bank, dated
December 21, 1999 *
21 Subsidiaries of Registrant *
27 Financial Data Schedule *
* Filed herewith
SIGNATURES
Pursuant to the requirements of Section 13 of 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.
BALTEK CORPORATION
Registrant
By /s/ Jacques Kohn
-----------------
Jacques Kohn,
President
Director
By /s/ Ronald Tassello
-------------------
Ronald Tassello,
Controller (Principal
Financial Officer and
Principal Accounting
Officer)
Dated: March 22, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated:
By /s/ Jacques Kohn By /s/ Benson J. Zeikowitz
----------------- -----------------------
Jacques Kohn, Benson J. Zeikowitz
Director Director
By /s/ Margot W. Kohn By /s/ William F. Nicklin
------------------- ----------------------
Margot W. Kohn, William F. Nicklin
Director Director
By /s/ Henri-Armand Kohn By /s/ Jean J. Kohn
---------------------- ----------------
Henri-Armand Kohn, Jean J. Kohn
Director Director
By /s/ Bernard J. Wald
--------------------
Bernard J. Wald
Director
Dated March 22, 2000