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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
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 0-12362
Berger Holdings, Ltd
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Pennsylvania 23-2160077
-------------------------------------------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
805 Pennsylvania Boulevard, Feasterville, PA 19053
------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (215) 355-1200
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 ninety days.
YES X NO _____
---
Indicate by check mark whether the Registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
YES _____ NO X
---
As of November 14, 2002, the Registrant had outstanding 5,024,888
shares of its common stock, par value $0.01 per share (the "Common
Stock").
-1-
BERGER HOLDINGS, LTD.
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Balance
Sheets at September 30, 2002 (unaudited)
and December 31, 2001 3
Condensed Consolidated Statements of
Operations (unaudited) for the three-month
periods ended September 30, 2002 and 2001 4
Condensed Consolidated Statements of
Operations (unaudited) for the nine-month
periods ended September 30, 2002 and 2001 5
Condensed Consolidated Statements
of Cash Flows (unaudited) for the nine-month
periods ended September 30, 2002 and 2001 6
Notes to Condensed Consolidated
Financial Statements 7
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 14
Item 4. Controls and Procedures 14
PART II OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of
Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
CERTIFICATIONS 17
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BERGER HOLDINGS, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
ASSETS 2002 2001
(unaudited) (audited)
------------- --------------
Current assets
Cash and cash equivalents $ 58,667 $ 465,064
Accounts receivable, net of allowance for doubtful
accounts of $85,000 in 2002 and $97,000 in 2001 5,004,222 4,502,631
Inventories 6,912,199 6,496,091
Prepaid and other current assets 735,688 577,451
Deferred income taxes 398,090 398,090
------------- --------------
Total current assets 13,108,866 12,439,327
Property, plant and equipment, net 9,203,180 10,082,728
Other assets, net 2,819,833 2,951,985
Goodwill, net 10,087,476 10,165,850
------------- --------------
Total assets $ 35,219,355 $ 35,639,890
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long term debt $ 2,100,789 $ 2,825,785
Accounts payable 1,643,527 1,705,751
Accrued expenses 2,527,502 2,388,724
------------- --------------
Total current liabilities 6,271,818 6,920,260
Long term debt 14,788,318 15,148,108
Deferred income taxes 226,796 226,796
Commitments and contingencies - -
Stockholders' equity
Common stock $.01 par value
Authorized 20,000,000 shares in 2002 and 2001
Issued 5,993,513 and 5,989,736 shares in 2002 and 2001
Outstanding 5,024,888 and 5,087,261 shares in 2002 and 2001 59,935 59,897
Additional paid-in-capital 18,196,053 18,187,726
Accumulated deficit (1,425,689) (2,326,843)
------------- --------------
16,830,299 15,920,780
Less common stock subscribed (289,250) (289,250)
Less treasury stock at cost
968,625 shares in 2002 and 902,475 shares in 2001 (2,608,626) (2,286,804)
------------- --------------
Total stockholders' equity 13,932,423 13,344,726
------------- --------------
Total liabilities and stockholders' equity $ 35,219,355 $ 35,639,890
============= ==============
See accompanying notes to condensed consolidated financial statements
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BERGER HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended September 30,
2002 2001
------------- -------------
Net sales $ 12,026,345 $ 14,203,824
Cost of sales 9,624,948 10,481,487
------------- -------------
Gross profit 2,401,397 3,722,337
Selling, administrative and general expenses 1,427,947 1,835,629
------------- -------------
Income from operations 973,450 1,886,708
Interest expense (288,318) (386,405)
Other income (expense), net 8,682 (14,652)
------------- -------------
Income before income tax 693,814 1,485,651
Provision for income tax 274,204 653,686
------------- -------------
Net income $ 419,610 $ 831,965
============= =============
Basic earnings per share $ .08 $ .16
============= =============
Basic weighted average common shares outstanding 5,023,129 5,272,450
============= =============
Diluted earnings per share $ .06 $ .13
============= =============
Weighted average common shares outstanding 5,023,129 5,272,450
Add: effect of vested and non-vested dilutive securities 1,834,631 1,272,901
Add: effect of convertible debt and preferred stock - -
------------- -------------
Diluted weighted average common shares outstanding 6,857,760 6,545,351
============= =============
See accompanying notes to condensed consolidated financial statements
-4-
BERGER HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended September 30,
2002 2001
------------- ------------
Net sales $ 33,936,031 $ 38,299,095
Cost of sales 27,062,632 29,316,288
------------- ------------
Gross profit 6,873,399 8,982,807
Selling, administrative and general expenses 4,448,022 5,538,722
------------- ------------
Income from operations 2,425,377 3,444,085
Interest expense (892,614) (1,249,793)
Other income, net 20,951 1,539
------------- ------------
Income before income tax 1,553,714 2,195,831
Provision for income tax 652,560 966,166
------------- ------------
Net income $ 901,154 $ 1,229,665
============= ============
Basic earnings per share $ .18 $ .23
============= ============
Basic weighted average common shares outstanding 5,043,020 5,322,465
============= ============
Diluted earnings per share $ .13 $ .20
============= ============
Weighted average common shares outstanding 5,043,020 5,322,465
Add: effect of vested and non-vested dilutive securities 1,829,810 903,958
Add: effect of convertible debt and preferred stock - 11,604
------------- ------------
Diluted weighted average common shares outstanding 6,872,830 6,238,027
============= ============
See accompanying notes to condensed consolidated financial statements
-5-
BERGER HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September 30,
2002 2001
----------- -------------
Cash flows from operating activities
Net income $ 901,154 $ 1,229,665
Adjustments to reconcile net income to net cash provided by
operating activities
Deferred income taxes - 779,381
Depreciation and amortization 1,712,275 2,070,186
(Decrease) increase in accounts receivable allowance (12,000) 52,000
Loss on disposition of assets 951 22,625
Change in operating assets and liabilities
Accounts receivable (489,591) (1,681,468)
Inventories (416,108) (4,251)
Other current and long-term assets (305,190) (185,009)
Accounts payable and accrued expenses 76,554 (344,462)
----------- -------------
Net cash provided by operating activities 1,468,045 1,938,667
----------- -------------
Cash flows from investing activities
Acquisition of property and equipment, net of retirements (476,199) (532,988)
----------- -------------
Net cash used in investing activities (476,199) (532,988)
----------- -------------
Cash flows from financing activities
Proceeds from working capital line 6,840,410 780,640
Repayments of working capital line (6,873,941) -
Proceeds from equipment term loan 4,800,000 -
Repayments of equipment term loan (2,544,796) (1,235,115)
Proceeds from long term debt 121,143 36,052
Repayments of long term debt (3,427,602) (412,849)
Repurchase of common stock (321,822) (588,066)
Proceeds from the exercise of common stock options 8,365 -
----------- -------------
Net cash used in financing activities (1,398,243) (1,419,338)
----------- -------------
Net decrease in cash and cash equivalents (406,397) (13,659)
Cash and cash equivalents, beginning of period 465,064 306,912
----------- -------------
Cash and cash equivalents, end of period $ 58,667 $ 293,253
=========== =============
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest $ 892,614 $ 1,249,793
=========== =============
Cash paid during the period for income taxes $ 297,433 $ 109,000
=========== =============
See accompanying notes to condensed consolidated financial statements
-6-
BERGER HOLDINGS, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Note 1. Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial information and the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements. In the opinion of management, all adjustments (consisting
solely of normal recurring adjustments) considered necessary for a fair
presentation have been included.
The financial statements include the accounts of Berger Holdings, Ltd.
(the "Company") and its wholly owned subsidiaries, Berger Financial Corp.,
Berger Bros Company, Copper Craft, Inc. and Walker Metal Products, Inc. All
inter-company transactions and balances have been eliminated.
The Company manufactures and distributes roof drainage systems for both
residential and commercial roofs. The Company's roof drainage product line,
consisting of gutters, downspouts, soffits, fascias, snow guards, trim coil,
custom metal architectural pieces, and other associated accessories and
fittings, is manufactured by the Company at its facilities located in
Pennsylvania, Texas and Georgia. The Company sells roof drainage and ancillary
products to wholesale distributors who sell directly to roofers and contractors
for use in the repair and replacement of roof drainage systems in existing
buildings or for use in new construction. The principal raw materials used in
manufacturing the Company's roof drainage and ancillary products are aluminum,
steel and copper.
Note 2. Inventories:
Inventories are valued at the lower of cost or market. Cost is
determined using the weighted average method.
Components of inventories consist of the following:
September 30, 2002 December 31, 2001
------------------ -----------------
Raw materials and packaging $ 3,941,522 $ 3,633,886
Finished goods 2,970,677 2,862,205
------------ --------------
Total inventories $ 6,912,199 $ 6,496,091
============ ==============
Note 3. Income Taxes:
Consolidated income tax expense for the nine-month period ended
September 30, 2002 results in an effective tax rate of 42%, while the nine-month
period ended September 30, 2001 results in an effective rate of 44%. This change
in the effective rate is due to changes in the Company's goodwill amortization
expense and assumed federal tax rate. The Company had no federal income tax net
operating loss carryforward available at September 30, 2002.
Note 4. Treasury Stock:
In May 1999, the Company received approval from its Board of Directors
to begin an open market stock repurchase program under which the aggregate
number of shares currently authorized for repurchase is 1,560,000. Of this
amount, the Company has repurchased a total of 814,625 shares, of which 66,150
shares were repurchased
-7-
during the nine months ended September 30, 2002, excluding the private purchase
of 154,000 shares from various investors. The repurchases may continue to be
made from time to time through open market purchases or privately negotiated
transactions at the discretion of the Company. The amount and timing of the
repurchases will depend on market conditions and other factors.
Note 5. Goodwill and Other Intangible Assets:
Effective January 1, 2002, the Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other
Intangible Assets." The Company has tested for goodwill impairment and
determined that there are no material adjustments related to the Company's prior
acquisitions. The Company has ceased amortizing goodwill that relates to these
acquisitions. As of September 30, 2002, the Company has unamortized goodwill of
$10,087,476. The Company will perform its annual assessment for impairment
during the fourth quarter of 2002. The following table adjusts the operating
results for the three and nine months ended September 30, 2001 to compare it to
the same periods in 2002.
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
-------------------------------------------------------------------
Net income $ 419,610 $ 831,965 $ 901,154 $ 1,229,665
Add back: Goodwill amortization - 88,499 - 264,765
-------------------------------------------------------------------
Adjusted net income $ 419,610 $ 920,464 $ 901,154 $ 1,494,430
===================================================================
Basic earnings per share:
Net income $ .08 $ .16 $ .18 $ .23
Goodwill amortization - .02 - .05
-------------------------------------------------------------------
Adjusted net income $ .08 $ .18 $ .18 $ .28
===================================================================
Diluted earnings per share:
Net income $ .06 $ .13 $ .13 $ .20
Goodwill amortization - .01 - .04
-------------------------------------------------------------------
Adjusted net income $ .06 $ .14 $ .13 $ .24
===================================================================
Note 6. New Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, "Business Combinations"
("SFAS 141"). This statement requires all business combinations initiated after
June 30, 2001 to be accounted for using the purchase method and supersedes APB
Opinion No. 16, "Business Combinations," and Statement of Financial Accounting
Standards No. 38, "Accounting for Preacquisition Contingencies of Purchased
Enterprises."
In July 2001, the FASB issued Statement of Financial Accounting
Standards No. 143, "Accounting for Asset Retirement Obligations," ("SFAS 143")
which addresses financial accounting and reporting for obligations associated
with the retirement of tangible long-lived assets and the associated asset
retirement costs. The standard applies to legal obligations with the retirement
of long-lived assets that result from the acquisition, construction, development
and (or) normal use of the asset. Adoption is required for fiscal years
beginning after June 15, 2002, with earlier adoption encouraged. The Company is
in the process of analyzing the implications of SFAS 143 and
-8-
does not believe that the adoption of this Statement will have a material impact
on the consolidated financial statements.
In October 2001, the FASB issued Statement of Financial Accounting
Standard No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets," ("SFAS 144") which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. While SFAS 144 supersedes Statement
of Financial Accounting Standard No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," it retains many
of the fundamental provisions of that Statement. SFAS 144 also supersedes the
accounting and reporting provisions of APB Opinion No. 30, "Reporting the
Results of Operations--Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," for the disposal of a segment of a business. However, it retains
the requirement in Opinion No. 30 to report separately discontinued operations
and extends that reporting to a component of an entity that either has been
disposed of (by sale, abandonment, or in a distribution to owners) or is
classified as held for sale. SFAS 144 is effective for fiscal years beginning
after December 15, 2001. Effective January 1, 2002, the Company adopted the
provisions of SFAS 144. The Company has tested for long-lived asset impairment
and determined that there is no material impact to the Company's consolidated
financial statements.
In April 2002, the FASB issued Statement of Financial Accounting
Standard No. 145, "Rescission of SFAS No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections." This Statement rescinds SFAS No.
4, "Reporting Gains and Losses from Extinguishment of Debt" and SFAS No. 64,
"Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements." The
Statement requires gains and losses from debt extinguishments that are used as
part of the Company's risk management strategy to be classified as income from
operations rather than as extraordinary items, net of tax. The Company adopted
this Statement as of July 1, 2002 and the adoption did not have an impact on the
consolidated financial statements.
In June 2002, the FASB issued Statement of Financial Accounting
Standard No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities." This Statement addresses the accounting for costs associated with
disposal activities covered by SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," and with exit (restructuring) activities
previously covered by Emerging Issues Task Force Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity." This Statement nullifies EITF 94-3 in its entirety and requires that
a liability for all costs to be recognized when the liability is incurred. This
Statement also establishes a fair value objective for initial measurement of the
liability. The Statement will be applied prospectively to exit or disposal
activities initiated after December 31, 2002. The Company is reviewing the
provisions of the Statement.
Note 7. Refinancing:
Effective June 13, 2002, the Company replaced its credit facility from
Fleet Bank, N.A., formerly Summit Bank, N.A., with a credit facility from
Wachovia Bank, National Association (the "Bank"). The working capital loan
obtained from the Bank provides $9,500,000 of financing for a three year term
with the borrowings bearing interest at LIBOR plus 2.75 basis points due
monthly, not to exceed the Bank's prime rate. The term loan obtained from the
Bank provides $2,400,000 of financing with the borrowings bearing interest at
LIBOR plus 2.60 basis points, not to exceed the Bank's prime rate, with monthly
principal payments of approximately $29,000. This term loan is due June 1, 2009.
The Company obtained an additional term loan from the Bank on August 19, 2002,
which provides $2,400,000 of financing with the borrowings bearing interest at
LIBOR plus 2.25 basis points, not to exceed the Bank's prime rate, with monthly
principal payments of $100,000. This second term loan was used to redeem the
Company's 11% Subordinated Debenture of $2,500,000. This second term loan is due
August 1, 2004. The LIBOR at September 30, 2002 was 1.81%. All of the Company's
loans with the Bank are predicated upon
-9-
certain financial covenants, which will be monitored on a quarterly basis. The
working capital loan and term loans are secured by all of the Company's assets.
At September 30, 2002, the Company met all of the financial covenants.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Results of Operations
Sales for the three-month period ended September 30, 2002 (the "Current
Quarter") were $12,026,345, a decrease of 15.3%, or $2,177,479, as compared to
$14,203,824 for the three-month period ended September 30, 2001 (the "Comparable
Quarter"). This decrease in sales is attributable to an extremely hot and dry
summer, a soft economy and increased competition.
Cost of sales was $9,624,948 in the Current Quarter, as compared to
$10,481,487 in the Comparable Quarter. As a percentage of net sales, cost of
sales increased to 80.0% in the Current Quarter from 73.8% in the Comparable
Quarter. This percentage increase is mainly attributable to increases in
aluminum and other raw material costs during the Current Quarter as compared to
the Comparable Quarter and reductions in sales prices on certain products due to
increased competition as referred to above.
Selling, administrative and general expenses were $1,427,947 in the
Current Quarter as compared to $1,835,629 in the Comparable Quarter. As a
percentage of net sales, selling, administrative and general expenses decreased
to 11.9% in the Current Quarter, compared to 12.9% in the Comparable Quarter.
This decrease in expenses is primarily the result of a reduction in ongoing
operational expenses and the adoption of SFAS 142, which eliminated the
amortization of $158,034 of goodwill.
Income from operations in the Current Quarter was $973,450, a decrease
of $913,258 or 48.4%, versus $1,886,708 in the Comparable Quarter. This decrease
in income from operations during the Current Quarter is the result of the
decrease in sales referred to above, as well as incurring increases in aluminum
and other raw material costs and reductions in sales prices on certain products.
Interest expense for Current Quarter was $288,318, a decrease of
$98,087 or 25.4%, verses $386,405 for the Comparable Quarter. The decrease in
interest expense is due to reduced principal balances and reduced interest
rates.
Provision for income tax for the Current Quarter was $274,204 verses
$653,686 for the Comparable Quarter. This decrease is due to the reduced income
from operations as described above and an adjustment made during the Current
Quarter to reduce the provision for income tax to an annual effective rate of
42.0%. The effective rate changed due to reductions in the Company's goodwill
amortization expense and assumed federal tax rate.
During the Current Quarter, the Company reported net income of
$419,610, a decrease of $412,355 or 49.6%, as compared to net income of $831,965
for the Comparable Quarter. This decrease in net income is a result of lower
income from operations as described above, partially offset by reductions in
interest expense and the provision for income tax as described above.
Sales for the nine-month period ended September 30, 2002 (the "Current
Nine Months") were $33,936,031, a decrease of 11.4%, or $4,363,064, as compared
to $38,299,095 for the nine-month period ended September 30, 2001 (the
"Comparable Nine Months"). This decrease in sales is attributable to an
extremely hot and dry summer, the mild winter, a soft economy and increased
competition as referred to above.
Cost of sales was $27,062,632 in the Current Nine Months, as compared
to $29,316,288 in the Comparable
-10-
Nine Months. As a percentage of net sales, cost of sales increased to 79.8% in
the Current Nine Months from 76.6% in the Comparable Nine Months. This
percentage increase is mainly attributable to increases in aluminum and other
raw material costs during the Current Nine Months as compared to the Comparable
Nine Months and lowering sales prices on certain products due to increased
competition as explained above.
Selling, administrative and general expenses were $4,448,022 in the
Current Nine Months as compared to $5,538,722 in the Comparable Nine Months. As
a percentage of net sales, selling, administrative and general expenses
decreased to 13.1% in the Current Nine Months, compared to 14.5% in the
Comparable Nine Months. This decrease in expenses is primarily the result of a
reduction in ongoing operational expenses and the adoption of SFAS 142, which
eliminated the amortization of $472,795 of goodwill.
Income from operations in the Current Nine Months was $2,425,377, a
decrease of $1,018,708 or 29.6%, versus $3,444,085 in the Comparable Nine
Months. This decrease in income from operations during the Current Nine Months
is due to the decrease in sales referred to above, as well as incurring
increases in aluminum and other raw material costs and reduction in sales prices
on certain products.
Interest expense for Current Nine Months was $892,614, a decrease of
$357,179 or 28.6%, verses $1,249,793 for the Comparable Nine Months. The
decrease in interest expense is due to reduced principal balances and reduced
interest rates.
Provision for income tax for the Current Nine Months was $652,560
verses $966,166 for the Comparable Nine Months. The decrease is due to the
reduced income from operations as described above and an adjustment made during
the Current Nine Months to reduce the provision for income tax from 44% to an
effective rate of 42.0%. The change to the effective rate is due to reductions
in the Company's goodwill amortization expense and assumed federal tax rate.
During the Current Nine Months, the Company reported net income of
$901,154, a decrease of $328,511, as compared to net income of $1,229,665 for
the Comparable Nine Months. This decrease is a result the reduction in income
from operations as described above, which was partially offset by a reduction in
both interest expense and income tax provision.
Liquidity and Capital Resources
At September 30, 2002, the Company had long-term debt consisting of
working capital loans of $6,840,410, term loans of $4,614,286, a 10%
Subordinated Debenture of $1,500,000, a note payable of $800,000 from a prior
acquisition, capital leases of $685,635 and a mortgage for $2,448,776, resulting
in total debt outstanding of $16,889,107.
At September 30, 2002, working capital was $6,837,048, resulting in a
current ratio of 2.1 to 1, as compared to working capital of $5,519,067 and a
ratio of 1.8 to 1 at December 31, 2001. This change in working capital is
primarily the result of the Company obtaining a new credit facility from
Wachovia Bank, National Association on June 13, 2002 to replace the prior
facility from Fleet Bank, N.A., formerly Summit Bank, N.A., which was due on
January 2, 2003, and the redemption of the Company's 11% Subordinated Debenture
of $2,500,000 on August 19, 2002. This reduction in debt was offset by increases
in accounts receivable and inventories due to the seasonality of the Company's
business.
Current liabilities at September 30, 2002 totaled $6,271,818,
consisting primarily of $4,171,029 in accounts payable and accrued expenses and
$2,100,789 in current maturities of long-term debt. At December 31, 2001, total
current liabilities were $6,920,260, consisting primarily of $4,094,475 in
accounts payable and accrued expenses and $2,825,785 in current maturities of
long-term debt. The decrease in current liabilities is primarily due to the
-11-
refinancing of the Company's credit facility and the payment of a note payable
from a prior acquisition.
At September 30, 2002, the Company had stockholders' equity of
$13,932,423, as compared to $13,344,726 at December 31, 2001. This change is
primarily attributable to the purchases of Common Stock pursuant to the
Company's stock repurchase program and the net income for the Current Nine
Months.
Cash provided by operating activities for the Current Nine Months was
$1,468,045, as compared to $1,938,667 in the Comparable Nine Months. This
decrease is due to the reduction in the Current Nine Month's net income and
deferred income taxes, which were partially offset by smaller net increases in
accounts receivable, inventory and other current and long-term assets.
Net cash used in investing activities was $476,199 in the Current Nine
Months, as compared to $532,988 in the Comparable Nine Months. Net cash used in
investing activities in both the Current and Comparable Nine Months was used to
upgrade facilities and purchase new equipment.
Net cash used in financing activities totaled $1,398,243 in the Current
Nine Months, as compared to $1,419,338 in the Comparable Nine Months. Net cash
used in financing activities in both the Current and Comparable Nine Months was
related to payments of long-term debt and the repurchase of Common Stock.
The Company's contractual obligations and commercial commitments over
the next five years and beyond are as follows:
Expected Cash Payments by Year (in thousands)
---------------------------------------------
Remainder 2007 &
Contractual Commitments of 2002 2003 2004 2005 2006 Beyond Total
- ----------------------- ------- ---- ---- ---- ---- ------ -----
Revolving credit $ - $ - $ - $6,840 $ - $ - $ 6,840
Long term debt 424 3,202 2,114 1,727 198 1,699 9,364
Capital lease obligations 101 376 126 44 27 12 686
Operating lease obligations 215 772 717 666 453 475 3,298
-------------------------------------------------------------------------
Total $740 $4,350 $2,957 $9,277 $678 $2,186 $20,188
=========================================================================
The Company's management believes that cash flows from operations and
available sources of financing are adequate for the Company's anticipated
financing needs in the near term. As described above, the Company obtained a new
credit facility on June 13, 2002 from Wachovia Bank, National Association. The
cost and terms of any future financing arrangements will depend on market
conditions and the Company's financial position at that time.
New Accounting Pronouncements
The Company's new accounting pronouncements are discussed in detail in
Note 6 on the consolidated financial statements.
Forward-Looking Statements
The information presented herein contains predictions, estimates and
other forward-looking statements
-12-
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Such forward looking statements involve
known and unknown risks, uncertainties and other factors that may cause actual
results, performance and achievements of the Company to differ materially from
those expressed or implied by such forward-looking statements. Although the
Company believes its plans, intentions and expectations reflected in such
forward-looking statements are based on reasonable assumptions, it can give no
assurance that such plans, intentions, expectations, objects or goals will be
achieved. Important factors that could cause actual results to differ materially
from those included in the forward-looking statements include but are not
limited to: increases in the cost of raw materials; fluctuations in demand for
the Company's products; weather conditions; future acquisitions; attempts to
expand the Company's operations; integration of acquired businesses; need for
additional financing; competition; and dependence on key personnel.
-13-
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
For information regarding the Company's exposure to certain market
risks, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk,
in the Company's Annual Report on Form 10-K for the year ended December 31,
2001. Even though the Company refinanced it credit facility during 2002, the
Company's portfolio of financial instruments or market risk exposures has not
changed since December 31, 2001.
ITEM 4. Controls and Procedures.
Evaluation of disclosure controls and procedures
Within 90 days prior to the date of this report (the "Evaluation
Date"), the Company's Chief Executive Officer and Chief Financial Officer
evaluated the effectiveness of the Company's disclosure controls and procedures
(as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and
15d-14(c)). Based on that evaluation, these officers have concluded that, as of
the Evaluation Date, the Company's disclosure controls and procedures were
effective.
Changes in internal controls
There were no significant changes in the Company's internal controls or
in the other factors that could significantly affect these controls subsequent
to the Evaluation Date.
-14-
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None.
Item 2 - Changes in Securities and Use of Proceeds.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
Item 3 - Defaults Upon Senior Securities.
None.
Item 4 - Submission of Matters to a Vote of Securities Holders.
None.
Item 5 - Other Information.
None.
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibit 10 Amendment and Modification to Loan Agreement, dated
August 19, 2002, among Berger Holdings, Ltd., Berger Financial Corp., Berger
Bros Company, Copper Craft, Inc., Walker Metal Products, Inc., and Wachovia
Bank, National Association.
Exhibit 99.1 Statement of Chief Executive Officer of the Company
pursuant to 18 U.S.C. Section 1350.
Exhibit 99.2 Statement of Chief Financial Officer of the Company
pursuant to 18 U.S.C. Section 1350.
(b) None.
-15-
Signatures
Pursuant to the requirements 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.
BERGER HOLDINGS, LTD.
By:/s/ JOSEPH F. WEIDERMAN
--------------------------
Joseph F. Weiderman
President and
Chief Operating Officer
By:/s/ FRANCIS E. WELLOCK, JR.
------------------------------
Francis E. Wellock, Jr.
Chief Financial Officer
Date: November 14, 2002
-16-
Certifications
I, Theodore A. Schwartz, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Berger Holdings,
Ltd.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Dated: November 14, 2002 By: /s/ Theodore A. Schwartz
----------------------------
Theodore A. Schwartz
Chief Executive Officer
-17-
Certifications
I, Francis E. Wellock, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Berger Holdings,
Ltd.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a. Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c. Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a. All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Dated: November 14, 2002 By: /s/ Francis E. Wellock, Jr.
-------------------------------
Francis E. Wellock, Jr.
Chief Financial Officer
-18-