-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HRh8GWDr+M0j4YG3j+PBosvW19+2D2WuBJcPgYiRJXyM8rfWDhEl8UPXrLyrOASI 3LJmxSaT/J5wF4soootWAQ== 0000950115-96-001149.txt : 19960816 0000950115-96-001149.hdr.sgml : 19960816 ACCESSION NUMBER: 0000950115-96-001149 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADAGE INC CENTRAL INDEX KEY: 0000002186 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC & OTHER ELECTRICAL EQUIPMENT (NO COMPUTER EQUIP) [3600] IRS NUMBER: 042225121 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-07336 FILM NUMBER: 96614037 BUSINESS ADDRESS: STREET 1: 625 WILLOWBROOK LANE CITY: WEST CHESTER STATE: PA ZIP: 19382 BUSINESS PHONE: 2154303900 MAIL ADDRESS: STREET 1: 625 WILLOWBROOK LANE STREET 2: 625 WILLOWBROOK LANE CITY: WEST CHESTER STATE: PA ZIP: 19382 10-Q 1 QUARTERLY REPORT FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended June 30, 1996 Commission file number 33-31797 ADAGE, INC. (Exchange name of registrant as specified in its charter) Pennsylvania 04-2225121 (State or other jurisdiction of I.R.S. Employer Identification Incorporation or organization) Number 400 Willowbrook Lane, West Chester, PA 19382 (Address of principal executive officers) (Zip Codes) (215) 430-3900 (Registrant's telephone number, including area code) 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date of August 8, 1996 5,125,355 shares of Common Stock, par value $ .60 per share. PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS ADAGE, INC. Condensed Consolidated Balance Sheets
JUNE 30, 1996 DECEMBER 31, 1995 ------------- ----------------- (Unaudited) (Unaudited) ASSETS 000's Omitted - ------ ------------- Current Assets Cash $ 85 $ 134 Accounts receivable, net 10,833 10,853 Inventories 21,352 21,261 Marketable securities 229 177 Other current assets 1,668 2,114 -------- -------- Total Current Assets 34,167 34,539 Property, plant and equipment, net 12,860 13,562 Investments and long-term receivable 761 980 Net assets of discontinued segments 4,817 5,376 Intangible and other assets 4,589 3,080 -------- -------- Total Assets $ 57,194 $ 57,537 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current Liabilities Current maturities of long-term debt $ 893 $ 1,403 Accounts payable 5,482 6,838 Accrued expenses 3,172 3,221 Income taxes payable 1,347 301 -------- -------- Total Current Liabilities 10,894 11,763 Long-term debt 13,375 13,154 Stockholders' equity 32,925 32,620 -------- -------- $ 57,194 $ 57,537 ======== ========
Note 1. The consolidated balance sheet at December 31, 1995 has been condensed from the audited financial statements. See Notes to condensed consolidated financial statements. 2 ITEM 1 - FINANCIAL STATEMENTS - continued ADAGE, INC. Condensed Consolidated Statements of Income FOR THE THREE MONTHS ENDED -------------------------- JUNE 30, 1996 JUNE 30, 1995 ------------- ------------- (Unaudited) (Unaudited) 000's Omitted Income Sales $ 19,064 $ 22,606 Investment income (14) 188 Other 42 126 ----------- ----------- 19,092 22,920 Costs and Expenses Cost of sales 14,790 18,298 Selling, general & administrative 3,952 4,532 Interest 220 165 ----------- ----------- 18,962 22,995 Income (loss) from continuing operations before income taxes and minority interest 130 (75) Provision for income taxes (benefit) 55 (28) ----------- ----------- Net income (Loss) from continuing operations $ 75 $ (47) Income from discontinued operations net of applicable -- 449 ----------- ----------- taxes Net income $ 75 $ 402 =========== =========== Earnings Per Common Share Continuing operations $ .01 $ (.01) Discontinued operations . - .09 ----------- ----------- Net Income $ .01 $ .08 =========== =========== Weighted Average Common Shares Outstanding 5,123,445 5,098,595 =========== =========== 3 ITEM 1 - FINANCIAL STATEMENTS - continued ADAGE, INC. Condensed Consolidated Statements of Income FOR THE SIX MONTHS ENDED ------------------------ JUNE 30, 1996 JUNE 30, 1995 ------------- -------------- (Unaudited) (Unaudited) 000's Omitted Income Sales $ 40,466 $ 42,873 Investment income 62 194 Other 78 211 ----------- ----------- 40,606 43,278 Costs and Expenses Cost of sales 31,261 34,705 Selling, general and administrative 8,378 8,648 Interest 518 410 ----------- ----------- 40,157 43,763 Income (loss) before income taxes 449 (485) Provision for income taxes (benefit) 172 (184) ----------- ----------- Net income (loss) from continuing operations 277 (301) Income from discontinued operations net of applicable taxes -- 825 ----------- ----------- Net income $ 277 $ 524 =========== =========== Earnings Per Common Share Continuing operations $ .05 $ (.06) Discontinued operations . - .16 ----------- ----------- Net Income $ .05 $ .10 =========== =========== Weighted Average Common Share Outstanding 5,123,445 5,098,595 =========== =========== See Notes to Condensed Consolidated Financial Statements. 4 ITEM 1 - FINANCIAL STATEMENTS - continued ADAGE, INC. Condensed Consolidated Statements of Cash Flows FOR THE SIX MONTHS ENDED --------------------------- JUNE 30, 1996 JUNE 30,1995 ------------- ------------ (Unaudited) (Unaudited) 000's Omitted Operating activities: Net income (loss) $ 277 $ 524 Adjustments to reconcile net income to cash flows Depreciation and amortization 1,617 1,379 (Gain) Loss on sale of marketable securities (52) (35) Decrease (increase) in current assets Accounts receivable, net 20 (167) Inventory (91) (1,149) Other current assets (630) 103 Increase (decrease) in current liabilities Accounts payable (1,641) (301) Other current liabilities 868 153 Discontinued segment-noncash charges and working capital changes 614 1,306 ------- ------- Cash (used) provided from operations 982 1,813 Investing activities: Property, plant and equipment Purchases (450) (848) Long-term investments and receivables Additions and purchases (27) -- Investing activities of discontinued segment -- (441) Other items (518) (20) ------- ------- Cash (used) provided by investing activities (995) (1,309) Financing activities: Long-term debt Additions -- 361 Payments (1,590) (1,429) Changes in lines of credit 1,556 976 Financing activities of discontinued segment -- (134) ------- ------- Cash (used) by financing activities (36) (226) ------- ------- Increase in cash (49) 278 Cash at beginning of period 134 184 ------- ------- Cash at end of period $ 85 $ 462 ======= ======= See Notes to Condensed Consolidated Financial Statements 5 Notes to Condensed Consolidated Financial Statements (Unaudited) (000's Omitted) 1. Condensed Consolidated Financial Statements The condensed consolidated balance sheet as of June 30, 1995, the consolidated statements of operations and the consolidated statements of cash flows for the three months ended June 30, 1995 and 1994 have been prepared by the Company, without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in cash flows at June 30, 1995 and for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1994 Annual Report to Shareholders. The results of operations for the period ended June 30, 1995 are not necessarily indicative of the operating results for a full year. 2. Inventories June 30, December 31, 1996 1995 -------- ------------ Inventories consisted of: Raw Material $ 9,310 $ 8,688 Work in Process 2,302 3,884 Finished goods 9,740 8,689 -------- -------- $ 21,352 $ 21,261 ======== ======== 3. Stockholder's Equity Stockholder's Equity is comprised of the following: June 30, December 31, 1996 1995 -------- ------------ Common Stock $ 3,073 $ 3,073 Additional Capital 20,490 20,477 Retained Earnings 9,881 9,664 Net unrealized loss on marketable securities (519) (594) -------- -------- $ 32,925 $ 32,620 ======== ======== 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS Results of Operations As an aid to understanding the Company's operating results, the following table shows each item from the consolidated statement of income expressed as a percentage of net sales:
Percentage of Net Sales Quarter Ended Six Months Ended Year Ended June 30, June 30, December 31, 1996 1995 1996 1995 1995 ------ ------ ------ ------ ------- Sales 100.0% 100.0% 100.0% 100.0% 100.0% Cost of sales 77.5% 80.9% 77.3% 80.9% 78.2% Selling, general administrative 20.7% 20.0% 20.7% 20.1% 21.7% Interest expense 1.1% 0.7% 1.3% 0.9% 1.9% Income (loss) from continuing operations before income taxes .7% (.3%) 1.1% (1.1%) (1.6%) Net Income from continuing operations .4% (0.2%) .7% (0.7%) (1.0%)
Net Sales Net sales for the six months ended June 30, 1996 decreased $2,407 compared to sales for the same period in 1995. This decrease was made up of the following: Increase (Decrease) ---------- Wireless Communication Equipment $ 773 Paper Manufacturing (3,217) Specialty Manufacturing 191 Sales in the wireless communications equipment business segment increased due to increased demand and the ability to source raw materials compared to the prior year. Decreases in the paper manufacturing were due to decreased volume and prices. Cost of Sales Cost of sales as a percentage of net sales decreased 3.4% to 77.5% for the six months ended June 30, 1996 from 80.9% for the six months ended June 30, 1995. Cost of sales was 78.2% of net sales for the year ended December 31, 1995. Details of this cost of 7 sales as a percentage of net sales for each segment follows:
Quarter Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 ---- ---- ---- ---- Wireless Communication Equipment 74.6% 74.7% 74.1% 76.8% Paper Manufacturing 84.6% 85.1% 83.3% 88.0% Specialty Manufacturing 85.6% 88.1% 85.8% 85.0%
Material costs, primarily recycled paper fiber, have decreased since the end of 1995. Prices for paperboard have decreased also but have generally lagged price decreases in raw materials. The decrease in the specialty manufacturing segment is due to the absorption of a new product line in the last quarter of 1995 and first quarter of 1996. Costs decreased in the wireless equipment manufacturing segment due to increased efficiencies in the manufacturing process. Selling, General and Administrative Expenses Selling general and administrative expenses which consist primarily of commissions, marketing, salary and related costs, data processing, occupancy and product development costs increased to 20.7% for the six months ended June 30, 1996 from 20.1% for the six months ended June 30, 1995. Selling general and administrative expenses were 21.7% of net sales for the year ended December 31, 1995. Details of selling, general and administrative expense by segment follows: Quarter Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 ---- ---- ---- ---- Wireless Communication Equipment $2,637 $2,511 $5,452 $5,314 Paper Manufacturing 660 799 1,305 1,553 Specialty Manufacturing 592 488 1,202 982 Corporate 392 636 846 1,061 Increases in the wireless communications segment are related to increased product development expenses compared to the prior year. Decreases in the paper manufacturing segment are related to decreased variable selling costs of decreased sales compared to the prior year. Increased selling salaries and reallocation of corporate expenses caused the increase in the specialty manufacturing segment. Interest Expense Interest Expense decreased to 1.1% for the quarter ended June 30, 1996 and 1.3% for the six months ended June 30, 1996 from 1.9% for year ended December 31, 1995. This decrease is related to 8 decreased debt levels compared to 1995. Investment Income Investment income for the quarter ended June 30, 1995 was due to the settlement of a class action suit related to a security previous owned by the Company. Income Taxes Income taxes represented a 38.0% effective tax rate for the quarter and six months ended June 30, 1996. This rate is made up of a 34% federal tax rate and varying state tax rates. The effective tax rate for 1995 was 40.1%. Inflation and Changing Prices Inflation and changing prices for the six months ended June 30, 1996 and the six months ended June 30, 1995 have contributed to increases in wages, facility and raw material costs. The Company believes that it will be able to pass on most of its future inflationary increases to its customers. The wireless equipment manufacturing segment is also subject to changing foreign currency exchange rates in its purchases of raw materials. The Company employs several methods to protect against increases in costs due to currency fluctuations. It is not always possible to pass on the effects of currency fluctuations to customers. However, competition in these markets are subject to similar fluctuations in product cost. Liquidity and Capital Resources Working capital increased by $497,000 during the six months ended June 30, 1996. The Company has credit available under its existing lines of credit in excess of $1,000,000. Capital expenditures for the first six months of 1996 were $450,000 which was paid from operating cash flow and bank credit lines. Capital expenditures for 1996 for the combined entity are not expected to exceed $2.5 million. Management expects that capital expenditures will be funded through operating cash flow and financing sources available to the Company. Based on the anticipated replacement needs, and expected purchases of equipment for additional capacity, management expects that capital expenditures will continue at these levels for the foreseeable future. Inventories increased $91,000 from December 31, 1995. 9 Discontinued Operations In February, 1995 the Company decided to discontinue and dispose of its real estate development and management segment. Real estate inventories were written down to their estimated orderly liquidation value as of December 31, 1994. In August 1995, the Company sold its' steel processing subsidiary for $6.8 million in cash. Minority interests were decreased by $1.5 million and long-term debt was decreased by this segments debt of $6.0 and payments on the consolidated debt of the Company of $4.0 million. Management will consider disposal of subsidiaries that do not earn an adequate return or fit the long-term goals of the Company. 10 ITEM 6. Exhibits and Reports of From 8-K b.) Reports on Form 8-K The Registrant was not required to file reports on Form 8K during the quarter ended June 30, 1996. 11 Pursuant to the requirements of securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned there unto duly authorized. ADAGE, INC. \s\ Robert T. Holland ------------------------ Robert T. Holland Vice President - Finance Date: August 14, 1994 12 EX-27 2 FDS
5 1,000 3-MOS DEC-31-1996 APR-01-1996 JUN-30-1996 85 229 10,833 0 21,352 34,167 12,860 0 57,194 10,894 0 3,073 0 0 29,852 58,229 19,064 19,092 14,790 18,742 0 0 220 130 55 75 0 0 0 75 .01 .01
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