UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 4, 2003
SELAS CORPORATION OF AMERICA
(Exact name of registrant as specified in its charter)
Pennsylvania
(State or other jurisdiction or Incorporation)
1-5005 23-1069060
(Commission File Number) (IRS Employer Identification No.)
1260 Red Fox Road Arden Hills, Minnesota 55112
(Address of principal executive offices) (Zip Code)
651-636-9770
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report)
ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE
On August 4, 2003 the Company's wholly owned subsidiary, Selas SAS, filed
insolvency in France. At June 30, 2003, Selas SAS had total assets of $18.5
million and $29.0 million of liabilities. A portion of the liabilities,
including approximately $7.5 million in bank debt and approximately $3.0
million of other liabilities are either guaranteed by the parent or are a
joint liability. The Company expects to take a minimum pre-tax charge of
approximately $1.6 million in the third quarter. In addition, the Company may
be subject to additional litigation as a result of the subsidiary's
insolvency filing. See the Company's press release attached as Exhibit 99.1.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(c) EXHIBITS
Exhibit 99.1 Press Release dated August 5, 2003
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On August 5, 2003 the Company reported its results for the three and six
months ended June 30, 2003. The earnings release is attached as Exhibit 99.1.
SIGNATURE
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.
Selas Corporation of America
By: /s/ Robert F. Gallagher
------------------------------
Robert F. Gallagher
Vice President and Chief Financial Officer
Date: August 5, 2003
Exhibit 99.1
FROM: SELAS CORPORATION OF AMERICA SCA-444
CONTACT: Robert F. Gallagher 651-604-9638
FOR IMMEDIATE RELEASE
SELAS CORPORATION OF AMERICA REPORTS
SECOND-QUARTER RESULTS; FRENCH SUBSIDIARY FILES INSOLVENCY
Precision Miniature Medical and Electronic Products Business
Grows from Year-Ago Period
ST. PAUL, Minn. - August 5, 2003 - Selas Corporation of America (AMEX: SLS)
today reported results for the second quarter and six months ended June 30,
2003.
For the second quarter, the Company had a net loss from continuing
operations of $649,000, or $.13 per share, on sales of $17.2 million. This
compares with continuing operations net income of $74,000, or $.01 per share,
on sales of $18.0 million for the second quarter of 2002. For the six-month
period, the Company reported a net loss from continuing operations of
$1,078,000, or $.21 per share, on sales of $31.9 million, versus net income
of $93,000, or $.02 per share, on sales of $34.7 million for the year-ago six
months.
Selas recognized a net loss of $682,000, or $.13 per share, from
discontinued operations for the second quarter, compared with net income from
discontinued operations in the comparable year-earlier period of $157,000, or
$.03 per share. Second-quarter 2002 discontinued operations include: Selas'
large furnace operation, which was sold in December 2002, and Deuer
Manufacturing, which was sold in July 2003.
For the second quarter of 2003, Selas reported a total net loss of
$1,331,000, or $.26 per share, compared with net income of $231,000, or $.04
per share, in 2002. For the six months ended June 30, 2003, the total net
loss was $1,567,000, or $.31 per share, compared with a net loss of
$10,459,000, or $2.04 per share, for the year-ago period. 2002 six-month
results included a $10.6 million, or $2.06 per share loss, due to a goodwill
change in accounting.
Mark S. Gorder, president and chief executive officer of Selas,
reiterated that the Company's long-term strategy is to create accelerated
growth for its Precision Miniature Medical and Electronic Products business.
Selas' core competencies position it well to expand its line of medical
products to capture significantly more business. 'With our expertise in the
robotic manufacture of miniature and micro-miniature electronic products, we
believe we are well-suited to compete in a medical device market,' Gorder
said.
For the six months ended June 30, 2003, Precision Miniature Medical and
Electronic Products sales increased 6 percent to $18.7 million, from $17.5
million in the comparable 2002 period. Net income rose to $626,000 from
$432,000 in the prior year. Results for this business were buoyed by Selas'
small, but growing medical component business that saw year-over-year revenue
growth of 98 percent. The medical component increase was primarily due to
components within third-party medical products to detect air bubbles in IV
lines and for safety needles included as part of implanted drug delivery
systems. However, income from this segment was more than offset by losses in
the company's Heat Technology segment and by corporate expenses.
Selas SAS
After four consecutive quarters of substantial losses together with a
$1.3 million adverse judgment in the French Courts related to a subcontractor
lawsuit, Selas' wholly owned French subsidiary, Selas SAS, filed for
insolvency yesterday. Under French law, Selas SAS will be put in the hands of
a government court administrator.
Gorder stated: "Our Heat Technology business in Europe has suffered from
the weak global capital-goods markets and the strengthening of the Euro.
Deterioration of the business over the past four quarters and an uncertain
future required Selas SAS to take this action."
As a result of the filing, Selas Corporation of America will take a
minimum pre-tax charge of $1.6 million in the third quarter. In addition, the
Company may incur additional liabilities related to corporate guarantees and
joint obligations or possible legal action against Selas in French courts;
however, the Company cannot predict the impact of any such liabilities or
actions on Selas.
"We regret Selas SAS filing for insolvency; however, we believe without
substantial additional investment, Selas SAS would be difficult to turn
around. We believe this action is in the best long-term interest of Selas
Corporation of America and its shareholders," Gorder said.
As a result of the losses incurred to date and the insolvency of Selas
SAS, the Company is out of compliance with certain covenants with its bank
lenders. Management is currently in discussions with its banks to obtain the
appropriate waivers.
Gorder concluded, "Strong second-quarter performance for our
Precision Miniature Medical and Electronic Products shows that we're on track
for the future. We're building the company around these core product lines
and divesting ourselves of our non-core assets."
About Selas
Headquartered in St. Paul, Minn., Selas Corporation of America designs,
develops, engineers and manufactures microminiaturized medical and electronic
products. The company's core business segment, Precision Miniature Medical
and Electronic Products, supplies microminiaturized components, systems and
molded plastic parts, primarily to the hearing instrument manufacturing
industry, as well as the computer, electronics, telecommunications and
medical equipment industries. Through its core competencies and robotic
manufacturing expertise, Selas is well-positioned to compete in the hearing
health market and a medical device market that increasingly demands products
with increased miniaturization, better cost containment, more reliability and
high customer satisfaction. The company has facilities throughout the United
States, Asia and Europe. Selas' common stock is traded on the American Stock
Exchange under the symbol "SLS."
Forward-Looking Statements
Statements as to the company's long-term strategy and other statements herein
that include forward-looking terminology such as "may", "will", "believe",
"expect", "optimistic" or "continue" or the negative thereof or other
variations thereon are "forward-looking statements" within the meaning of
the Securities Exchange Act of 1934 as amended. These forward-looking
statements are affected by known and unknown risks, uncertainties and other
factors that may cause Selas' actual results, performance or achievements to
differ materially from the results, performance and achievements expressed or
implied in the company's forward-looking statements. These risks,
uncertainties and factors include the risk that the company may not be able
to achieve its long-term strategy, risks arising in connection with the
insolvency of Selas SAS, competition by competitors with more resources than
the company, foreign currency risks arising from the company's foreign
operations, the cyclical nature of the market for large custom engineered
contracts, weakening demand for products of the company's other business
segments due to general economic conditions, and possible non- performance of
developing technological products.
Selas Corporation of America
Consolidated Statements of Operations
Three Months Ended
June 30, June 30,
2003 2002
------------ -------------
(Unaudited) (Unaudited)
Sales, net $17,244,911 $17,983,975
Operating costs and expenses
cost of sales 13,841,161 14,118,475
Gross margin 3,403,750 3,865,500
Selling, general and administrative
expenses 4,129,269 3,891,738
Operating loss (725,519) (26,238)
Interest expense
(215,273) (117,256)
Interest income 6,714 7,902
Other income, net 165,329 159,093
Income (loss) from continuing operations
before income taxes (768,749) 23,501
Income tax (benefit) (119,838) (50,861)
Income (loss) from continuing operations (648,911) 74,362
Income (loss) from discontinued
operations, net of (682,268) 156,853
income taxes (benefit)
Net income (loss) $(1,331,179) $231,215
Income (loss) per share
Basic
Continuing operations $(.13) $ .01
Discontinued operations (.13) .03
$ (.26) $.04
Diluted
Continuing operations $(.13) $ .01
Discontinued operations (.13) .03
$ (.26) $.04
Selas Corporation of America
Consolidated Statements of Operations
Six Months Ended
June 30, June 30,
2003 2002
------------ -------------
(Unaudited) (Unaudited)
Sales, net $31,880,927 $34,678,725
Operating costs and expenses
Cost of sales 24,577,292 27,200,264
Gross margin 7,303,635 7,478,461
Selling, general and administrative
expenses 8,349,720 7,575,704
Operating loss (1,046,085) (97,243)
Interest expense (406,184) (199,894)
Interest income 9,136 23,183
Other income, net 248,915 253,029
Loss from continuing operations
before income taxes (1,194,218) (20,925)
Income tax (benefit) (116,463) (114,266)
Income (loss) from continuing operations(1,077,755) 93,341
Income (loss) from discontinued
operations, net of (489,686) (524)
income taxes (benefit)
Net income (loss) before change in
accounting principle (1,567,441) 92,817
Cumulative effect of change in
accounting principle (10,551,926)
Net loss $(1,567,441) $(10,459,109)
Income (loss) per share
Basic
Continuing operations $(.21) $ .02
Discontinued operations (.10) (.00)
Accounting principle change -- (2.06)
$ (.31) $(2.04)
Diluted
Continuing operations $(.21) $ .02
Discontinued operations (.10) (.00)
Accounting principle change -- (2.06)
$ (.31) $(2.04)
Selas Corporation of America
Consolidated Balance Sheets
June 30, December 31,
2003 2002
(Unaudited) (Audited)
Current assets
Cash, including cash equivalents of
$415,000 in 2003 and $418,000 in 2002 $ 1,293,127 $ 2,039,044
and restricted cash of $415,000 in 2003
and $418,000 in 2002.
Accounts receivable (including unbilled
receivables of $2,404,000 in 2003
and $1,447,000 in 2002) 16,740,672 15,627,864
Inventories 9,332,828 9,393,802
Refundable income tax -- 336,758
Deferred income taxes 2,160,830 1,818,384
Other current assets 1,767,746 1,064,829
Assets of discontinued operations 12,146,281 13,610,601
Total current assets 43,441,484 43,891,282
Property, plant and equipment
Land 231,943 231,943
Buildings 5,149,415 5,149,415
Machinery and equipment 32,128,149 29,903,795
37,509,507 35,285,153
Less: Accumulated depreciation 25,324,378 22,921,608
Net property, plant and equipment 12,185,129 12,363,545
Goodwill 5,376,317 5,376,317
Deferred income taxes 373,601 348,712
Other assets, less amortization 1,706,172 1,575,539
$63,082,703 $63,555,395
Liabilities and Shareholders' Equity
June 30, December
2003 31,
Current liabilities (Unaudited) 2002
(Audited)
Notes payable $12,404,543 $10,920,984
Current maturities of long-term debt 3,246,692 1,573,716
Accounts payable 11,686,286 11,046,373
Customers' advance payments on contracts 2,686,761 2,457,499
Guarantee obligations and estimated costs
of service 1,281,242 1,188,361
Other accrued liabilities 8,051,112 6,194,679
Liabilities of discontinued operations 4,982,840 6,955,654
Total current liabilities 44,339,476 40,337,266
Long-term debt 382,406 2,736,236
Other postretirement benefit obligations 4,068,787 3,866,154
Contingencies and commitments
Shareholders' equity
Common shares, $1 par; 10,000,000 shares
authorized; 5,634,968 shares issued 5,634,968 5,634,968
Additional paid-in capital 12,008,915 12,012,541
Retained earnings 179,442 1,743,256
Accumulated other comprehensive loss (2,266,213) (1,509,948)
Less: 515,754 common shares held
in treasury, at cost (1,265,078) (1,265,078)
Total shareholders' equity 14,292,034 16,615,739
$63,082,703 $63,555,395